Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 10, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI Short Notes
Articles
News
Highlights / Catch Notes
GST
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Excess stock found during survey can't trigger proceedings u/s 130 of GST Act. Court ruled it should be u/ss 73/74, quashed orders against petitioner.
Excess stock found during survey at petitioner's business premises triggered initiation of proceedings u/s 130 of GST Act. Court held if excess stock is found, proceedings u/ss 73/74 of GST Act should be initiated, not Section 130. Citing precedent, Court ruled proceedings u/s 130 cannot be initiated for excess stock found during survey. Impugned orders initiating proceedings u/s 130 against petitioner quashed as unsustainable in law.
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Garnishee order upheld; refund contingent on appeal outcome. Court directs swift disposal within 2 months for justice.
Petition challenging garnishee order seeking refund of appropriated amounts dismissed as entitlement contingent on pending appeal's outcome. However, appellate authority directed to expeditiously dispose appeal within two months considering tax liability discharged and penalty recovered to ensure justice.
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Delayed GST appeal maintainable; revocation possible after paying dues. Time spent in wrong forum excluded.
Maintainability of appeal u/s 107 against cancellation of GST registration due to non-filing of returns discussed. Delay in filing appeal could have been condoned under sub-sections (3) and (4) as appeal filed within seven months from cancellation order. Appellate authority could alternatively grant opportunity to approach u/s 30 for revocation after paying applicable dues. Section 14 of Limitation Act, 1963 providing exclusion of time spent in prosecuting matter in wrong forum applicable. Order set aside, petitioner permitted to file application u/s 30 within 30 days after completing formalities.
Income Tax
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Karnataka State Natural Disaster Monitoring Centre exempted from income tax on specified income like govt grants, data sharing.
Karnataka State Natural Disaster Monitoring Centre (PAN: AAATD2434P), a body constituted by State Government of Karnataka, is exempted from income tax u/s 10(46) of Income Tax Act, 1961 on specified income comprising grants from State/Central Government, income from data sharing activities, and interest on bank deposits. Exemption is subject to conditions of non-engagement in commercial activities, unchanged nature of specified income and activities, and filing of income tax returns. Exemption is applicable retrospectively for assessment years 2021-2022 to 2023-2024 and prospectively for 2024-2025 and 2025-2026.
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Govt exempts specified income of Kalyan Karnataka Region Development Board from tax u/s 10(46) for FY22-23 & FY23-24. Conditions apply.
Notification exempting specified income of 'Kalyan Karnataka Region Development Board' (PAN AAAGH0732F), a Board constituted by Karnataka Government, from income tax u/s 10(46) of Income Tax Act, 1961. Exempted incomes: grants from Karnataka Government, interest on bank deposits. Conditions: no commercial activity, unchanged activities and income nature, filing return u/s 139(4C)(g). Retrospective application for assessment years 2022-23 and 2023-24. No adverse effect to any person.
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Reassessment grounds dropped, no additions permitted. Indelible link between 148A(b) & 148A(d). Validity check precedes Explanation 3.
Once the principal grounds on which reassessment was proposed are dropped, no further additions can be made even by taking recourse to Explanation 3. There is an indelible connection between Section 148A(b) and Section 148A(d) of the Act, which is not impacted by Explanation 3. The validity of initiation of reassessment must be independently evaluated and cannot be confused with the power ultimately available to the Assessing Officer once an assessment has been validly reopened. Explanation 3 comes into play only after it is found that the power to reassess has been validly invoked. It cannot be read as enabling the Assessing Officer to deviate from the original reasons for initiating action u/s 147/148, nor can it empower the officer to improve upon, supplement or supplant those reasons. Therefore, once the issue which formed the subject matter of the notice u/s 148 was dropped, no further additions could have been made thereafter.
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Compensation for diminished ESOPs value is a taxable perquisite, not capital receipt. Entire compensation qualifies as salary if no payment made for retained ESOPs.
The compensation received by the petitioner for diminution in value of ESOPs is a perquisite taxable under the Income-tax Act, 1961, not a capital receipt. To determine the value of the perquisite, the benefit received by the employee from the specified security should be ascertained. Since no payment was made by the petitioner towards ESOPs and the ESOPs continue to be retained, the entire compensation received qualifies as a perquisite liable to be taxed under the head "salaries". The petitioner is not entitled to a 'nil' certificate of deduction of tax at source. Although the basis for the conclusion in the impugned order is flawed, the rejection of the request for a 'nil' certificate is affirmed.
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Lack of valid satisfaction note before issuing notice under special provision rendered assessment null & void. AO lacked jurisdiction. Penalties quashed. Assessee's appeals allowed.
Absence of valid satisfaction recorded by AO before initiating assessment under special provision where search took place. Satisfaction note did not reveal AO's averment regarding satisfaction that money, bullion, jewellery or other valuables belong to assessee or seized documents pertain/relate to assessee, which is jurisdictional fact required to usurp jurisdiction under relevant section. AO did not record valid satisfaction before issuing notice to assessee under relevant section. Subsequent framing of assessment order under relevant sections is null and void. AO lacked jurisdiction to frame assessment under relevant sections for relevant assessment years. Penalties levied under relevant section pursuant to quantum assessment framed under relevant section quashed, as foundation removed and consequential orders fall automatically as per legal maxim and Supreme Court decision. Assessee's appeals allowed.
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Consideration for relinquishing sweat equity shares after job exit can't be 'profits in lieu of salary'. It's capital gains.
The settlement consideration received by the assessee for relinquishing the right to seek registration of sweat equity shares, after cessation of employment, cannot be treated as 'profits in lieu of salary' u/s 17(3) of the Income Tax Act. The consideration was for unconditional relinquishment of the right to enforce registration of shares and not connected with termination of employment or modification of service terms. The Tribunal erred in segregating the consideration into 'capital gains' and 'salaries' components. The entire consideration is to be treated as 'capital gains' and not 'profits in lieu of salary'. The High Court allowed the appeal, set aside the Tribunal's order, and answered the question of law in favor of the assessee.
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Non-receipt of notices plea rejected. Firm dissolved but proprietor continued transactions. Huge transactions observed. Orders u/s 144,147 upheld. Pre-deposit Rs. 50L for fresh consideration.
Petitioner argued non-receipt of notices preceding impugned assessment orders. Partnership firm discontinued business, carried on by proprietor. Court held petitioner neglected intimating firm's dissolution, surrendering PAN. Transactions made from firm's account despite alleged proprietorship. Returns filed from firm's address. Huge transactions observed. Respondent rightfully passed order u/s 144 read with 147 due to non-reply. Petitioner individually assessed requiring detailed consideration. Court quashed impugned orders, treating them as addenda to show-cause notices. Petitioner to pre-deposit Rs. 50,00,000 within eight weeks to Income Tax Department. Opportunity granted to file reply.
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Penalty u/s 271(1)(c) overturned: No hearing chance; No wilful omission; Doctor's plea accepted; Relief granted like Dr. R. Gopalakrishnan's case.
Review petition - Levy of penalty u/s 271(1)(c) - Tribunal sustaining the levy without providing an opportunity of hearing - Review applicant had paid entire tax amount for assessment years in question - Held that review applicant has not filed applications based on new facts - Materials collected during search never put to review applicant prior to filing voluntary revised returns - No deliberate or wilful omission on part of review applicant - Review applicant on same footing as Dr. R. Gopalakrishnan entitled to same relief - Plea of review applicant being professional doctor rendering service to downtrodden people and levying penalty would affect mental status and professional career appears bona fide and reasonable, merits acceptance - Judgment recalled, Tax Case Appeals disposed of by setting aside order.
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Validity of advocate's premises search upheld, seizure of client's pre-engagement docs barred. Authorities to segregate incriminating evidence judiciously.
The High Court upheld the validity of the search action u/s 132 carried out at the residential and office premises of the petitioner, an advocate. The court found the satisfaction recorded by the respondent authority for initiating the search proceedings justified and did not require interference. Regarding the seized materials in physical and digital form, the court held that the respondent authorities can consider documents found incriminating under Illustrations (b) and (c) of Section 126 of the Evidence Act. However, documents covered by Illustration (a), relating to the petitioner's clients before their employment, cannot be utilized or acted upon. The court directed the respondent authorities to exercise judicious discretion in determining incriminating documents falling under the two categories and abide by their averments. The court rejected the suggestion of appointing an independent agency, distinguishing the case from S.R. Batliboi, where the third party's documents were found during the search. The petition was disposed of, with the third parties' right to raise contentions against any action taken by the respondents remaining open.
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Assessment validity upheld despite secret office search. Digital data=books pre-amendment. Limitation period: 31.03.2024 for 153C, 31.03.2023 for 153B. Timely notices. Scrutiny orders valid. Income addition to directors quashed.
Validity of assessment framed u/s 153C - Search conducted at secret office of searched person - Definition of "Books and Books of Accounts" u/s 2(12A) includes electronic/digital form - Amendment clarificatory, retrospective - Printouts include PDF copies - Information stored in electromagnetic devices like pen drive, hard disk qualified as books of accounts even before amendment. Jurisdictional error invoking Section 153C rejected. Period of limitation - One year from date documents handed over/deemed handed over to assessing officer of other person, i.e., 31.03.2024. Satisfaction notes issued in time. Notices u/s 153C preceded satisfaction notes. No time lag between 31.03.2022 and satisfaction note dates. Incriminating material unearthed. Limitation under third proviso to Section 153B(1) - Twelve months from end of financial year documents handed over/deemed handed over to assessing officer of other person, i.e., 31.03.2023. Initiations against petitioners justified, in time. Transactions with searched person. Single satisfaction note by assessing officer of searched person sufficient. Arguments on limitation fallacious. Validity of scrutiny assessment orders u/s 143(3) - Validly initiated proceedings cannot abate. Orders within stipulated time. Mere same date not jurisdictional error. Addition of unexplained income to directors of company incorrect - Orders quashed, remanded to redo exercise by adding income to petitioner u/s 69A.
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Non-profit export promotion council granted tax exemption for facilitating trade fair participation of leather exporters.
The non-profit organization, sponsored by the Ministry of Commerce and registered u/s 25 of the Companies Act, was granted exemption u/s 10(23C)(iv) of the Income Tax Act. Its main activity is promoting exports of the leather industry by facilitating participation of members in trade fairs. The council serves as a bridge between exporters, overseas buyers, and the government. The exemption was granted in earlier years based on the ITAT order, which held that the council's activities do not constitute business, trade, or commerce, and the proviso to Section 2(15) does not apply. For applying the second proviso to Section 2(15), receipts from providing rental space in fairs and trade shows should be considered. Only the profit element, not the entire receipt, should be considered as the numerator for complying with the 20% limit under the second proviso. The council incurred a loss from trade fair activities, and the net surplus of Rs. 7.62 crores was less than 20% of the total receipts. Thus, the ITAT set aside the orders denying exemption u/s 10(23C)(iv).
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Income assessed in hands of Representative Assessee. No credit for prepaid taxes availed by beneficiaries. Interest levied.
Income assessed in hands of Appellant as Representative Assessee. No credit for prepaid taxes availed by beneficiaries. JCIT(A) directed AO to verify claim of prepaid taxes in beneficiaries' hands. Interest levied. Return filed by assessee as representative assessee. Tax position for onshore AIF funds. Assessee registered as AIF, representative of beneficiaries. CPC didn't consider advance tax paid by trustee. Assessee furnished income statement to beneficiaries indicating income share and taxes paid. Trustee paid tax on beneficiaries' income share under their PANs, gave declaration. TDS by investees under beneficiaries' PAN, advance tax paid by assessee for first quarter. Declaration withdrawn following CBDT Circular clarifying tax position for onshore AIFs. Assessee eligible for pass-through taxation. Assessee allowed credit for TDS and advance tax claimed in return as representative assessee. CIT(A) findings upheld, assessee's appeal dismissed.
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Notice u/s 148 barred if beyond limitation period under erstwhile s.149(1)(b), despite relaxation act (TOLA). First proviso ineffective post Apr 1, 2021.
Notice issued u/s 148 beyond the limitation period prescribed under erstwhile provisions of section 149(1)(b) is barred by limitation, even after considering the relaxation provided by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The first proviso to section 149 does not enable issuance of notice u/s 148 after April 1, 2021, if it could not have been issued under the erstwhile provisions on the date of impugned notice. The reassessment proceedings are invalid if the notice is issued beyond the extended time limit provided by the relaxation act.
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Penalty for excess claim nullified. Assessee's intent not malafide. ITAT favors deletion of penalty imposed u/s 270A(9).
Penalty u/s 270A(9) for mis-reporting of income due to excess claim of ineligible expenditure u/s 35(2AB) was imposed. The Dispute Resolution Panel (DSIR) certificate in Form 3CL disallowing part of the expenditure was received by the assessee after the Assessing Officer's inquiry regarding the deduction claim u/s 35(2AB). The Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre observed that the assessee cannot be alleged of mis-reporting income as it was not done with malafide intention. Therefore, the penalty restricted to 100% of tax payable was not justified. The Income Tax Appellate Tribunal held that the penalty deserves to be deleted, deciding in favor of the assessee.
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Deduction u/s 54 allowed even if new house bought before asset sale using other funds. Construction start date irrelevant.
Assessee is eligible for deduction u/s 54, even if new residential house is purchased within one year before transfer of capital asset, utilizing funds other than sale consideration of house sold. It is not mandatory to utilize only sale consideration for purchasing or constructing new residential house. Date of start of construction is irrelevant, only date of completion of constructed residential house habitable for residence is considered. Assessee is entitled to claim exemption u/s 54 where return is filed belatedly u/s 139(4), relying on cited judicial precedents. Appellate Tribunal directed Assessing Officer to grant deduction and delete addition made by him, allowing assessee's ground of appeal.
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AO disallowed professional fees; CIT(A) allowed based on evidence. Tribunal upheld CIT(A). No disallowance u/s 14A for investments. Tribunal deleted disallowance of admin expenses u/s 14A r/w Rule 8D.
AO disallowed professional fees paid to doctors citing lack of evidence regarding their role as consultants, researchers or advisors. CIT(A) deleted disallowance noting assessee provided logbook, agreements, summary sheets, brochures, manuals and research papers. Tribunal upheld CIT(A)'s order. Regarding disallowance u/s 14A for investments, assessee had sufficient funds as evident from bank statement showing share capital proceeds and mutual fund investments. Tribunal upheld CIT(A)'s deletion of disallowance. For administrative expenses disallowed u/s 14A read with Rule 8D, Tribunal opined AO and CIT(A) failed to record dissatisfaction before applying Rule 8D's third component relating to administrative expenses.
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Transfer of industrial unit to rural area by partnership firm qualifies for tax exemption. Partner eligible despite firm investing.
Transfer of an industrial undertaking from urban to rural area by a partnership firm qualifies for exemption u/s 54G of the Income Tax Act. The assessee, a partner in the firm, shifted the existing plant, machinery, and equipment to a rural area and invested further in the new undertaking. Despite the investment being made by the firm, the assessee is eligible for exemption as the partnership assets belong to the partners. The conditions for claiming exemption u/s 54G, such as shifting the undertaking, transferring assets, and making new investments within the stipulated period, have been fulfilled. The firm's name is merely a convenience, and partners have a specific interest in the firm's property. Supreme Court rulings support the principle that a partner's interest in the firm's assets constitutes their assets. Therefore, the assessee is entitled to the exemption u/s 54G, and the addition made by the assessing officer is deleted.
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Interest on enhanced land compensation from possession till judgment is non-taxable under Sec 145A & 56(2)(iii).
Interest granted u/s 28 of the Land Acquisition Act on enhanced compensation or compensation awarded by the reference court u/s 18, from the date of land possession till the High Court judgment, is part of compensation and cannot be taxed due to amendments by substitution of Section 145A read with clause (iii) of Section 56(2). The interest received u/s 28 would not fall within the expression 'interest' envisaged in Section 145A(b), and the amendments to Sections 145A and 56(2) are inapplicable. The Assessing Officer's order and CIT(A)'s confirmation were unjustified. The assessee's grounds were allowed.
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Purchase value vs. District Valuation Officer's value differed <10%. Transacted amount within tolerance limit. No addition warranted u/s 56(2)(x)(b)(B)(ii).
Difference between purchase value and value determined by District Valuation Officer though more than 5% but below 10% of purchase consideration, transacted amount within tolerance limit. Assessee eligible for benefit of 10% margin difference in valuation between value determined by stamp duty authority and declared sale consideration. If variation between two values within 10% range, no addition warranted u/s 56(2)(x)(b)(B)(ii). Since variation 9.14%, no addition tenable. Addition by Assessing Officer deleted. Ground allowed.
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Onus on Revenue to prove taxability of Form 26AS entries not in audited books. Assessee denied transaction & filed reconciliation. Revenue failed to establish income.
Onus on Revenue to establish taxability of alleged receipts reflected in Form 26AS but not recorded in assessee's audited books. Assessee denied transaction with deductor party. Assessee filed TDS reconciliation statement and audited books before Assessing Officer. Revenue failed to demonstrate assessee received or accrued impugned sum taxable as income. Following K.P. Varghese case, impugned amount not income of assessee. Addition deleted, but assessee ineligible for erroneous TDS credit claimed. Assessee's appeal allowed.
Customs
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Adjudication & prosecution under Customs Act independent. Parallel proceedings allowed. Exoneration in one doesn't preclude other.
Adjudication proceedings under the Customs Act and criminal prosecution under the Customs Act are independent, not alternate. They can be launched simultaneously with no legal impediment for parallel proceedings. If adjudication ends in exoneration, criminal prosecution's continuation depends on whether it's for the same facts and act/omission. Adjudication u/s 112 is an action in personam regarding smuggled property/article, while prosecution u/s 135 is an action in rem for offenses affecting the country's economy. One cannot substitute the other. The petition to quash the criminal case based on exoneration in adjudication proceedings lacks merit and is dismissed.
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Customs Broker's license revocation, security deposit forfeiture & penalty set aside as violations under Regs 10(a),(d),(e),(n) not established.
Customs Broker license revocation, security deposit forfeiture, and penalty imposition under Regulations 10(a), (d), (e), and (n) of CBLR challenged. Regulation 10(a) violation for filing Shipping Bills without authorization not established as omission of 'exports' in authorization letter deemed inadvertent. Regulation 10(d) violation for over-valuation of exports to avail undue drawback not established as Customs Broker has no role in determining assessable value. Regulation 10(e) violation for imparting incorrect information not established as Customs Broker does not provide goods' value. Regulation 10(n) violation for exporter's non-functioning at declared address not established as department also used same address. Findings of Regulations 10(a), (d), (e), and (n) violations incorrect. License revocation, security deposit forfeiture, and penalty imposition set aside. Appeal allowed by Appellate Tribunal.
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Customs license cancellation overturned - typographical error & non-operation not violations. Penalty reduced, license restored upon payment.
Cancellation of private bonded warehouse license u/s 58B of Customs Act, 1962 due to non-compliance with CBIC Circular No. 34/2019 regarding mentioning licensed premises as principal or additional place of business in GST registration, non-submission of documents on online portal, and non-importation or manufacturing activity for 9 months. Held: Typographical error in mentioning wrong address curable, not registering on portal due to ignorance curable, non-operation not a violation. Penalty on appellant reduced to Rs. 50,000, license restored upon payment, address corrected. Penalties on individuals set aside. Appeal allowed.
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Aluminum circles classified under CTH 76069110, not 7616 or 7615. Revenue failed to justify reclassification. Chartered engineer's report supported assessee's claim of raw materials.
The assessee-Respondent classified the aluminum circles under CTH 76069110 as raw materials, while the department proposed classification under CTH 7616, and the DRI suggested CTH 7615. The tribunal held that when revenue disputes classification, the burden is heavily on revenue to justify why the declared classification is wrong and why its proposed classification should be accepted. The revenue failed to provide evidence or dispute the assessee's contention and the chartered engineer's report that the articles were raw materials undergoing further processing. Rule 2(b) is applicable as heading 7616 does not require 'otherwise' for classification of material containing a combination of metals. Heading 7606 specifically mentions aluminum circles under 76069110, and since it is a composite product with predominant material being aluminum, by implication of Rule 2(b), it has to be classified as an aluminum circle. The department failed to make a case for interference with the First Appellate Authority's findings, and the classification of articles as confirmed in the impugned order was held to be in order. The appeal was dismissed.
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Non-Basmati Rice export Duty Drawback claim wrongly rejected. Tribunal upholds discretion to allow claim despite no drawback bill if uncontrollable reasons.
Duty Drawback claim rejected for non-Basmati Rice export, appellant argued not filing drawback shipping bill due to reasons beyond control. Tribunal held Commissioner has discretion to allow claim despite free shipping bill if exporter unable to file drawback bill for uncontrollable reasons. Appellant's counsel explained confusion caused by Notification listing Cereals, constituting valid ground for not filing drawback bill. Board Circular binding on Department. Commissioner erred in not exercising discretion judiciously. Impugned order set aside, appeal allowed.
Corporate Law
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Revival of company from register justified due to assets, business transition intent, revenue/ employment benefits.
Ld. NCLT possesses authority to restore companies from register where deemed just, equitable from commercial perspective. Considering appellant's assets, intent to transition business, restoration deemed appropriate, beneficial for state revenue, employment generation. Impugned order set aside, appeal allowed, appellant company restored to ROC record.
Indian Laws
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Blacklisting orders face rigorous scrutiny. Disability objective satisfaction required. Guidelines protect public interest from unethical contractors.
Blacklisting viewed as drastic remedy, orders subjected to rigorous scrutiny. Objective satisfaction required for disability created by blacklisting order. Comprehensive guidelines for debarment issued to protect public interest from non-responsible, dishonest, or illegal conduct contractors. Blacklisting debarment from dealings with concerned employer and other entities. Appellant paid Rs. 3,71,96,265 though outstanding Rs. 14,63,24,727 per Corporation. Issues between parties regarding reciprocal obligations in bid document from inception. Impugned judgment set aside, appeal allowed.
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Dishonoured cheque due to insufficient funds invokes presumption, rebuttable by preponderance of probabilities. NI Act amendment to curb harassment.
Dishonour of cheque - insufficient funds - presumption - standard of preponderance of probabilities - reasons to believe. Earlier, dishonour of cheque was dealt through IPC provisions. Amendment to NI Act introduced Chapter VIII to enhance acceptability of cheques and prevent harassment. Proceedings u/s 138 can be initiated even if cheque issued as security and subsequently dishonoured. Three conditions: cheque presented within validity, demand made, drawer failed to pay within 15 days. Limitation of 30 days to initiate proceedings. Presumption survives subject to contrary not proved regarding consideration or discharge of debt. Signature on blank cheque sufficient to trigger presumption u/s 139. Appellant established respondent's signature, presumption to arise. Respondent shifted weight through preponderance of probabilities. No perversity or lack of evidence against respondent. Concurrent findings backed by evidence appraisal. Appeal dismissed.
IBC
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NCLT resolution plan excludes personal guarantors, assignee NBFC can't recover from them. Debt liability survives between lenders & guarantors.
The Resolution Plan excludes personal guarantors, limiting the assignment of debt and security interests to the corporate debtor only. Consequently, the assignee NBFC cannot recover debt from guarantors, as they are excluded from the Resolution Plan and assignment process. The surviving liability for debt is retained by the original financial creditors, including the bank, to be exercised solely against the guarantors. The corporate debtor is absolved by law under the Resolution Plan, while the assignee never acquires the right to recover from guarantors. The debt survives only between financial creditors/bank and guarantors. Despite account classification as NPA, borrowers can regularize accounts by repaying loans. Conversely, failure to repay despite means can lead to Wilful Defaulter declaration under RBI guidelines. The HC allows the petition, setting aside the decision confirming the petitioner as a Wilful Defaulter.
SEBI
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AIFs can't leverage except short-term borrowing. Encumbrance on infra equity allowed. Large funds can extend tenure with unitholders' nod.
SEBI amended Alternative Investment Funds (AIF) Regulations: Category I and II AIFs can't leverage for investments except temporary borrowing up to 30 days, 4 times yearly, capped at 10% investable funds. Encumbrance on equity of infrastructure investees permitted for their borrowing. Large value funds for accredited investors can extend tenure up to 5 years with 2/3rd unitholders' approval. Existing schemes' tenure extension subject to conditions.
Central Excise
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CENVAT Credit: Depreciation deduction of 2.5% applies from date of availing credit, not from receiving/using capital goods. Rules 3(5), 3(5A), 4(2) interpreted.
CENVAT Credit - Removal of capital goods - Depreciation - Deduction of 2.5% to be applied from the date of availing credit, not from the date of receiving or putting to use the capital goods - Rule 3(5) and Rule 3(5A) and Rule 4(2) of CCR - Though capital goods received at the same time, Rule 4(2) restricts availment of credit to 50% of duty paid on capital goods in a financial year - Legislature conscious of Rule 4(2) while introducing Rule 3(5A) - Ordinary meaning of "from the date of availing the credit" to be followed - No ambiguity to be read into - Appellant's calculation applying deductions on 100% from date of availing initial credit incorrect - Time limitation - No wilful suppression of facts established - Appellant paid amount as per their calculation and filed ST3 returns reflecting reversal of credit - Show cause notice time-barred - Appeal allowed on ground of limitation.
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Refund claim initially rejected, later allowed. Duty not passed on. Interest payable after 3 months of exemption order, not from claim date.
Appellant filed refund claim which was initially rejected by original authority on grounds of ineligibility for exemption notification. Commissioner (Appeals) remanded matter to verify unjust enrichment after holding appellant eligible for exemption. Original authority determined duty element not passed on. Appellant ineligible for interest from date of original refund claim filing. For periods without show cause notice, refund claims filed later. Appellant eligible for interest on delayed refund payment from date after 3 months of Order-in-Appeal allowing exemption, as per Section 11BB of Central Excise Act.
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Health mix, Dia mix, Dia food, Ragi malt, Badam mix classification dispute. Valuation, extended period, penalties challenged. Revenue's classification rejected.
Classification of goods - Health mix, Dia Mix, Dia Food, Ragi Malt, Badam Mix as instant food preparations - Valuation u/s 4A of CEA 1944 - Non-clubbing of clearances by two entities from same factory - Extended period and penalties invoked. Health Mix classified under 1904 1090 by revenue, appellant contended it's a food substitute comprising cereals, pulses, nuts, sugar, and spices, not in flakes or grains, hence not classifiable under Chapter 1904. Dia Mix and Dia Food classification demands dropped by revenue. Ragi Malt and Badam Mix initially classified under 2106 1000, later changed to 2106 9099 and 1901 9090 respectively by revenue. Department failed to prove correct classification, demand and penalties set aside. Revised valuation and clubbing of clearances not sustainable. Appeal allowed by CESTAT.
Case Laws:
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GST
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2024 (8) TMI 514
Challenge to proceedings initiated u/s 130 of the GST Act - excess stock was found - proceedings under sections 73/74 of the GST Act ought to have been initiated - HELD THAT:- It is not in dispute that survey was conducted at the business premises of the petitioner on 26.6.2019. It is also not in dispute that excess stock was found, which triggered the initiation of the present proceedings against the petitioner. On various occasions, this Court has held that if excess stock is found, then proceedings under sections 73/74 of the GST Act should be pressed in service and not proceedings under section 130 of the GST Act, read with rule 120 of the Rules framed under the Act. Recently, this Court in S/s Dinesh Kumar Pradeep Kumar [ 2024 (8) TMI 71 - ALLAHABAD HIGH COURT] has held ' even if excess stock is found, the proceedings under section 130 of the UPGST Act cannot be initiated.' The law is clear on the subject that the proceedings under section 130 of the GST Act cannot be put to service if excess stock is found at the time of survey. The impugned order dated 30.11.2023 passed by the respondent no. 1, the first appellate authority, as well as the impugned order dated 7.3.2020 passed by the respondent no. 2 cannot be sustained in the eyes of law. The same are hereby quashed - petition allowed.
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2024 (8) TMI 513
Validity of proceedings initiated against petitioner under section 130 of the GST Act - excess stock found - initiation of proceedings - it is submitted that the proceedings under section 130 of the GST Act could not have been initiated against the petitioner, rather, proceedings under sections 73/74 of the GST Act should have been initiated - HELD THAT:- It is not in dispute that survey was conducted at the business premises of the petitioner on 23.11.2021. It is also not in dispute that excess stock was found, which triggered the initiation of the present proceedings against the petitioner. On various occasions, this Court has held that if excess stock is found, then proceedings under sections 73/74 of the GST Act should be pressed in service and not proceedings under section 130 of the GST Act, read with rule 120 of the Rules framed under the Act. This Court in S/s Dinesh Kumar Pradeep Kumar [ 2024 (8) TMI 71 - ALLAHABAD HIGH COURT] has held ' even if excess stock is found, the proceedings under section 130 of the UPGST Act cannot be initiated.' The law is clear on the subject that the proceedings under section 130 of the GST Act cannot be put to service if excess stock is found at the time of survey. The impugned order dated 11.05.2022 passed by the respondent no. 5 under section 130 read with section 122 of the UPGST Act as well as the impugned order dated 10.04.2023 passed by the first appellate authority, the respondent no. 4 cannot be sustained in the eyes of law - Petition allowed.
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2024 (8) TMI 512
Retrospective cancellation of the GST registration - SCN indicates that the demand was proposed to be raised from the petitioner on the ground that the Input Tax Credit (ITC) as claimed by the petitioner was greater than the amount declared by the petitioner s supplier - HELD THAT:- The impugned order does not indicate that any of the contentions advanced by the petitioner were considered. The petitioner s reply was rejected by the Adjudicating Authority by simply observing that it was not found satisfactory. The impugned order is, thus, unreasoned and is liable to be set aside. The impugned order is set aside and matter is remanded to the Adjudicating Authority for consideration afresh. The Adjudicating Authority shall pass the order after affording the petitioner an opportunity of personal hearing - Petition disposed off by way of remand.
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2024 (8) TMI 511
Violation of principles of natural justice - It is the petitioner s case that it had not received the SCN and therefore, was unable to respond to the same - cancellation of GST registartion of petitioner - HELD THAT:- The impugned order is set aside and the matter is remanded to the Adjudicating Authority to consider it afresh. Petition disposed off by way of remand.
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2024 (8) TMI 510
GST credit entry errors for the assessment year 2017-18 - Wrong entry in Form GST DRC 3B, while filing the Income Tax Credit in Serial No.4.A. (3) instead of Serial No.4.A.(5), as a result of which, the aforesaid credit of Rs. 15,386.37/- each towards the Central Tax and State Tax availed as Income Tax Credit, is sought to be denied. HELD THAT:- This Court is not really concerned with the correctness of the decision in the impugned order. However, the Court is only concerned with the decision making process. The petitioner has an alternative remedy to file an Appeal before the Appellate Deputy Commissioner (GST), Madurai and Tirunelveli against the impugned order. At best, the petitioner can be given a liberty to file statutory appeal before the Appellate Deputy Commissioner (GST), Madurai and Tirunelveli. Since the Appellate Deputy Commissioner (GST), Madurai and Tirunelveli is not a party to this proceedings, the Appellate Deputy Commissioner(GST), Madurai and Tirunelveli, is impleaded as sue moto as second respondent. The Court is inclined to dispose of this Writ Petition by permitting the petitioner to file statutory appeal before the Appellate Deputy Commissioner (GST), Madurai and Tirunelveli - Petition disposed off.
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2024 (8) TMI 509
Time Limitation - appeal had been filed belatedly - Cancellation of registration of the petitioner's proprietorship concern - petitioner not submitted any reply to the show cause notice - violation of principles of natural justice - HELD THAT:- Bar of limitation may bar the remedy of appeal but it does not bar the petitioner's right to seek his constitutional remedy under Article 226 of the Constitution of India, particularly when the impugned order affects valuable rights of the petitioner and the same has been passed without assigning any reason. The orders dated 23.03.2023 passed by the Assistant Commissioner, Sector 12, Lucknow (B) and 13.02.2024 passed by the Additional Commissioner, Grade-2 (Appeal) State Tax, Judicial Block-3, Lucknow are hereby set aside and the learned Assistant Commissioner, Lucknow Sector 12, is directed to pass a fresh order after taking into consideration the submissions made by the petitioner in the reply dated 17.03.2023 given in response to the show cause notice dated 04.03.2023. Petition allowed.
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2024 (8) TMI 508
Challenge to garnishee order - seeking to refund of amounts appropriated from the petitioner s bank account pursuant to such garnishee order - HELD THAT:- Since an appeal is pending before the appellate authority, the entitlement of the petitioner to refund of the penalty amount is dependent on the petitioner succeeding in such appeal. Therefore, at this juncture, refund of such amount cannot be ordered. However, by taking into account the fact that the entire tax liability was discharged and even the penalty amount was recovered by the respondent, it is just and necessary that the appeal be disposed of expeditiously. The appellate authority is directed to dispose of the petitioner s appeal against the order dated 11-12-2023 within two months from the date of receipt of a copy of this order - Petition disposed off.
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2024 (8) TMI 507
Maintainability of appeal - time limitation - Cancellation of GST registration due to non-filing of returns - HELD THAT:- A glance at the provisions under Section 107 would reveal that in the conditions mentioned under sub-sections (3) and (4) the appellate authority may extend the period of three months by another three months and also by another one month. This is thus quite apparent that in appropriate cases an appeal under Section 107 can be filed within a period of seven months. Therefore, having regard to the provisions under sub-sections (3) and (4) of Section 107, the delay in filing the appeal by the petitioner-firm could have been extended by the appellate authority and the appeal filed on 26th August, 2023 which was within seven months from the date of order of cancellation was maintainable and could not have been rejected on the ground of delay. The appellate authority could have alternatively granted opportunity to the petitioner-firm to approach the appropriate authority under Section 30 for revocation of the cancellation of licence after paying the applicable penalty, fines, interest etc. Section 14 of the Limitation Act, 1963 provides exclusion of time spent in prosecuting the matter in wrong forum. This is admitted at the bar that the application of the Limitation Act is not excluded in the GST Act and, therefore, the benefit under Section 14 shall be available to the petitioner-firm, if necessary. The order dated 8th September, 2023 is set aside and this writ petition is allowed to the extent that the petitioner-firm shall be permitted to file an application under Section 30 after completing all the formalities within 30 days and that application shall be dealt with in accordance with law. Petition allowed.
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Income Tax
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2024 (8) TMI 517
Reopening of assessment u/s 147 - Addition u/s 68 -addition on some other grounds which did not form part of the reasons recorded - Scope of explanation 3 of section 147 - Tribunal rested its conclusions that once the principal grounds on which reassessment was proposed are dropped, no further additions can be made even by taking recourse to Explanation 3 - whether once the issue of accommodation entry and which alone formed the subject matter of the notice issued u/s 148 was ultimately dropped, any further additions could have been made thereafter? HELD THAT:- Tribunal rested its conclusions on the judgment rendered by a Division Bench of this Court in Ranbaxy Laboratories Ltd. [ 2011 (6) TMI 4 - DELHI HIGH COURT] to hold that once the principal grounds on which reassessment was proposed are dropped, no further additions can be made even by taking recourse to Explanation 3. Indelible connection between Section 148A(b) and Section 148 A(d) of the Act are clearly not impacted by Explanation 3. As we read Sections 147 and 148 of the Act, we come to the firm conclusion that the subject of validity of initiation of reassessment would have to be independently evaluated and cannot be confused with the power that could ultimately be available in the hands of the AO and which could be invoked once an assessment has been validly reopened. Explanation 3, or for that matter, the Explanation which presently forms part of Section 147, would come into play only once it is found that the power to reassess had been validly invoked and the formation of opinion entitled to be upheld in light of principles which are well settled. The Explanations would be applicable to issues which may come to the notice of the AO in the course of proceedings of reassessment subject to the supervening requirement of the reassessment action itself having been validly initiated. Explanation 3, cannot consequently be read as enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions - we answer the question which stands posited in the negative and against the appellant.
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2024 (8) TMI 516
Seeking certificate of 'nil' deduction of tax at source (TDS) u/s 197 - Compensation received by the petitioner for the diminution in value of ESOPs - capital receipt or a perquisite taxable under the Income-tax Act, 1961 - HELD THAT:- In order to determine the value of the perquisite as per clause (vi), one should be in a position to ascertain the benefit that the employee or other person received from the specified security, albeit not by way of capital gains. In order to tax an ESOP as a perquisite, the benefit flowing to the employee from the ESOP should be ascertained. Because shares are offered to employees and other stakeholders under stock option schemes either free of cost or at a concessional rate, the benefit would ordinarily be the difference between the fair market price of the share and the price at which such share is offered to the ESOP holder. Since such monetary benefit would typically be realized, albeit notionally, only at the time of exercise of the option and remains a non-monetizable contractual right until then, the fair market price of the shares as on the date of exercise of option is reckoned and the price paid by the option holder is deducted therefrom to determine the value of the perquisite in the form of ESOP. Explanation (c) to clause (vi), therefore, prescribes that the value of the specified security is the difference between the fair market value of the shares on the date of exercise of the option and the price paid by the option holder. Unusually, in the current case, the assessee received a substantial monetary benefit at the pre-exercise stage by way of discretionary compensation for diminution in value of the Stock Options. I move next to the facts so as to examine whether the value of the perquisite can be determined in these circumstances. From the material on record, it is not possible to discern the exercise price under the FSOP 2012. In any event, this is not material because the petitioner has not exercised the Option in respect of any of the 2137 Vested ESOPs. Effectively, no payments were made by the petitioner under the FSOP 2012 as on the record date. Nonetheless, by qualifying as an Employee under the FSOP 2012, the petitioner received compensation at the rate of USD 43.67 per ESOP on all 5924 ESOPs (both Vested and Unvested) held by him as on the record date. These ESOPs were clearly granted to the petitioner as an Employee under the FSOP 2012. If payments had been made by the petitioner in relation to the ESOPs, it would have been necessary to deduct the value thereof to arrive at the value of the perquisite. Since the petitioner did not make any payment towards the ESOPs and continues to retain all the ESOPs even after the receipt of compensation, the entire receipt qualifies as the perquisite and becomes liable to be taxed under the head salaries . It is unnecessary to consider whether it falls within any other head of income. As a consequence of the conclusion that the compensation qualifies as a perquisite and not a capital receipt, the judgments cited in respect of capital gains, including those relating to the absence of a rate or computation mechanism or provision for tax deduction at source lose relevance. For various reasons set out in this order, I am also unable to endorse the opinion of in Sanjay Baweja [ 2024 (6) TMI 78 - DELHI HIGH COURT ] As a corollary to the above conclusions, the petitioner is not entitled to a 'nil' certificate of deduction. In effect, although the basis for the conclusion in the impugned order is flawed, the rejection of the request for a 'nil' certificate of deduction is affirmed.
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2024 (8) TMI 515
Validity of Assessment u/s 153C - absence of valid satisfaction recorded by the AO before initiating assessment as per special provision (in cases of assessment to be framed where search took place) - HELD THAT:- Perusal of the satisfaction note not reveal that the AO has made any averment as to his satisfaction that any money, bullion, jewellery or other valuable articles belongs to assessee or things or books of account or documents seized pertains/relates to the assessee which is the jurisdictional fact required to be made by AO in order to usurp jurisdiction u/s 153C which is clearly absent in this case and therefore on this legal issue itself the assessee has to succeed and we hold that AO did not record valid satisfaction before issuing notice to assessee u/s 153C dated 09.12.2009. Therefore, AO did not had requisite jurisdiction to issue notice to assessee u/s 153C of the Act dated 09.12.2009. Therefore, subsequent framing of assessment order u/s 153C/143(3) of the Act is null in the eyes of law. Thus in the light of the Hon ble Supreme Court decision in the Super Mall Pvt Ltd. [ 2020 (3) TMI 361 - SUPREME COURT] AO having not recorded valid satisfaction note in the case of the other person /assessee in this case as required by section 153C of the Act, we find that the AO lacked jurisdiction to frame assessment u/s 153C/143(3) of the Act and therefore assessment framed by him for AY 2008-09 and 2009-10 are held to be without jurisdiction and therefore quashed. Penalties levied under 271AAA pursuant to the quantum assessment framed u/s 153C - Since the foundation for the levy of penalty u/s 271AAA of the Act has been removed, the penalty also falls because the case of the assessee is squarely covered by the legal maxim Sublato fundamental Credit opus meaning in case foundation is removed, the super-structure falls. In Badarimath V/s Tamilnadu [ 2000 (9) TMI 1044 - SUPREME COURT] it was held by Hon ble Supreme Court that once the basis of proceedings is gone, all consequential order acts would fall on the ground automatically which is applicable to judicial and quasi-judicial proceedings - penalties levied under 271AAA of the Act are also without jurisdiction and consequently quashed. Appeals of the assessee are allowed
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2024 (8) TMI 506
Receipts as lump sum after cessation of employment - addition as capital gains or salaries - bifurcation of composite settlement amount into capital gains and salaries - assessee held share certificates in evidence of the 50,000 shares which had been allotted to him and pointed out that the assessee was constrained to approach the CLB since TTPL was refusing to enter his name in the Register of Members and thus formally recognize the allotment of 50,000 shares. HELD THAT:- We note that a bifurcation of the consideration amount between salary and capital gains was one which was never advocated by the respondents. It thus clearly appears to represent an exercise which the Tribunal undertook of its own volition. We bear in mind the undisputed fact that TTPL had never doubted the fact that the assessee did possess share certificates of the 50,000 sweat equity shares which had been allotted to it. This aspect is also liable to be viewed in light of the well settled position in law of a share certificate being prima facie evidence of valid title. The litigation before the CLB had ensued only because of a refusal on the part of TTPL to record the name of the assessee in the Register of Members. It was in the aforesaid context that the assessee had addressed a prayer for specific performance before the CLB. From a plain reading of the various clauses of the Settlement Agreement which have been extracted hereinbefore, it is manifest that the consideration was concerned with an unconditional and irrevocable relinquishment of the right of the assessee to seek and enforce the registration of the shares held by it. As it is apparent from a reading of Clause 5 of the Settlement Agreement, it was the relinquishment of the aforesaid right which formed the basis for the assessee being compensated by TTPL. This is further fortified by the fact that the assessee undertook not to take any steps to enforce any right, title or interest in the shares in question. The consideration thus appears to be undeniably connected with the relinquishment of all claims which could have been raised by the assessee in respect of sweat equity. Regard must be had to the fact that Section 17 of the Act, while seeking to define the expression salary , includes perquisites in terms of sub-section (2) and sweat equity being a constituent of perquisites by virtue of clause (vi) thereof. Sub-section (3) to Section 17, on the other hand, deals with profits in lieu of salary . In our considered opinion, the fundamental mistake which the Tribunal committed was failing to bear in mind the distinction between a perquisite and profits in lieu of salary and both of which are dealt with separately in Section 17. Profits in lieu of salary , which is spoken of in Section 17 (3), deals with compensation received by an assessee from his employer or former employer in connection with the termination of his employment or on a modification of terms and conditions of service. Tribunal has fundamentally erred in ignoring the indubitable position of the employment of the assessee having been brought to an end on 24 August 2010 itself and thus before the action came to be even laid or instituted before the CLB. Regard must also be had to the fact that in the petition, which was filed before the CLB, there was no relief which was sought with respect to the cessation of employment of the assessee or the validity of termination of employment. As noticed hereinabove, the principal relief sought by the assessee in those proceedings was for the registration of the 50,000 sweat equity shares in his name and thus essentially of specific performance. Viewed in light of the above, it becomes apparent that the Tribunal clearly erred in viewing the settlement consideration as being payment connected to the termination of the assessee s employment. We find that it is essential to note at this juncture that clause (iii) of Section 17 (3) is liable to be construed bearing in mind the subjects which are covered in the preceding parts of that sub-section. Consequently, the lump sum amount which is spoken of in clause (iii) would also have to draw colour and meaning from compensation received in connection with termination of employment or modification of terms and conditions of service and which are the principal subjects of profits in lieu of salary . The ultimate exercise undertaken by the Tribunal of segregating the consideration into two components is thus clearly rendered unsustainable considering the reasons recorded hereinabove. Since the respondents had failed to either doubt or question the entitlement of the assessee to the 50,000 shares, there existed no justification to enter that thicket. All that the Tribunal was called upon to examine was whether the settlement consideration was liable to be construed as capital gains or taxed as profits in lieu of salary . In light of what we have found above, the consideration could not have possibly or justifiably been placed in the category of profits in lieu of salary . We, consequently, allow the instant appeal and set aside the order of the Tribunal - The question of law shall stand answered in favour of the appellant-assessee.
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2024 (8) TMI 505
Best judgement assessment - argument of petitioner that the petitioner did not receive the notices that preceded the impugned orders for the respective assessment years - Partnership Firm discontinued the business and the business was carried on by the deponent Ramesh Kumar as the Proprietor - HELD THAT:- Petitioner has neglected in not intimating the alleged dissolution of the Partnership Firm on 31.03.2007 and that not surrending the PAN obtaining for the Partnership Firm with PAN No. ABHFS6206J. Transactions have been made from the account maintained in the name of the Partnership Firm, which allegedly became a Proprietary concern of the deponent. There are also indications that the Returns filed by the deponent in his individual capacity is from the same address, for which the PAN was obtained in the name of the Partnership Firm. That apart, there appears to be a huge transactions. Since there was no reply to the notices issued by the respondent, the respondent cannot be found faulted in passing the order under Section 144 read with Section 147 of the Income Tax Act, 1961. Since the petitioner is also assessed to tax individually with the PAN No. AKWPR0604F, the matter would require a detail consideration. The Court is inclined to come to the rescue of the petitioner by giving an opportunity to the petitioner to file an appropriate reply to the notices that preceded the respective impugend orders.The impugned orders, which stand quashed, shall be treated as addendum to the show cause notices that preceded the respective impugned orders. The petitioner shall, however, pre-deposit a sum of Rs. 50,00,000/- (Rs. 25,00,000/- each) to the credit of the Income Tax Department within a period of eight weeks from today.
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2024 (8) TMI 504
Review petition - Levy of penalty u/s 271(1)(c) - Tribunal sustaining the levy of penalty u/s 271(1)(c) of the Act with reference to the facts of the present case without providing an opportunity of hearing to the appellant herein/ respondent before them - Review applicant had already paid the entire tax amount for the assessment years in question - HELD THAT:- Review applicant has not filed these review applications based on new facts. Further, it is discernible from the records that the materials collected during the search were never put to the Review applicant prior to his filing of the voluntary revised returns of income and there is no material to show that he was aware of the documents collected in the premises of M/s.Apollo Hospitals. In such circumstances, it can be reasonably presumed that there is no deliberate or wilful omission on the part of the Review applicant. The review applicant is on the same footing as that of Dr.R.Gopalakrishnan [ 2010 (7) TMI 1233 - MADRAS HIGH COURT] and he also is entitled to the same relief as Dr.R.Gopalakrishnan was entitled to. Superadded, from the facts obtaining in this case, this Court has no incertitude in holding that the plea of the learned counsel for the Review applicant that the Review applicant is a professional doctor and he has rendered service to thousands of downtrodden people and hence, levying penalty on him would affect his mental status as well as professional career, appears to be bona fide and quite reasonable and hence, merits acceptance. The judgment passed by this court [ 2023 (12) TMI 1265 - MADRAS HIGH COURT] is recalled and the Tax Case Appeals are disposed of by setting aside the order dated [ 2011 (3) TMI 1835 - ITAT CHENNAI] .
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2024 (8) TMI 503
Validity of search action u/s. 132 carried out at the residential premises as well as the office premises of the Petitioner - as alleged search being conducted in an unreasonable manner -respondents right to analyse the data of third party - Scope of protection as per the Explanation to Section 126 of the Evidence Act - As submitted that the respondent authorities cannot assume at the stage of seizure of the documents that all the information possessed by the petitioner in form of digital data and physical documents are incriminating in nature so as to conduct the search and seize all the data and thereafter intend to search and raid all the entities who are clients of the petitioner though they are third parties and not the targeted group contrary to the provisions of Section 126 of the Evidence Act and the doctrine of attorney-client privilege prevailing since ages - whether the satisfaction recorded by the respondent authority for initiation of the search proceedings are justified or not? HELD THAT:- As on of the search by the competent authority in a sealed cover to this Court. Learned Additional Solicitor General has also provided copies of other seized materials and documents during the course of hearing to demonstrate that what is recorded in the satisfaction note prior to the search was actually found to be true during the course of search. We are, therefore, of the opinion that on perusal of the satisfaction recorded by the respondent authority for initiation of the search, it does not require any interference by this Court and this Court is satisfied for the satisfaction recorded by the respondent authority for initiation of the search against the petitioner and therefore, challenge by the petitioner to the search initiated under Section 132 of the Act would fail. Therefore, without going into the further details with regard to the submissions made by both the sides on pre-search action of the respondent authorities, we are of the opinion that the petition would fail so far as challenge to the search operation qua petitioner is concerned. Whether the respondents are entitled to use the seized materials in physical and digital form which, according to the respondent authorities, would be incriminating materials against any third party found during the course of search from the office and residential of the petitioner or not? - As in order to apply the provision of Section 126 of the Evidence Act read with keeping in mind the doctrine of attorney- client privilege, the respondent authorities can consider the documents which are incriminating which falls under Illustrations (b) and (c) of Section 126 of the Evidence Act. However, the documents which are found to be incriminating which would be covered by the Illustration (a) of provision of Section 126 cannot be utilised or no action can be taken upon such documents which are found to be incriminating which covered by Illustration (a). Meaning thereby that where the petitioner is found to be in possession of any document of his clients which, according to the respondents are incriminating prior to the employment of the petitioner in his legal capacity, then no action can be taken against such documents. Approach of the respondent authorities which is clarified on oath by respondent No.3 who is a Principal Director of Income Tax (Investigation), Ahmedabad, being a responsible officer for conducting search under the provisions of Section 132 of the Act, we are of the opinion that judicious discretion shall be exercised by the respondent authorities while arriving at the conclusion with regard to the incriminating documents falling under two categories viz. as per Illustration (a) of Section 126 and Illustrations (b) and (c) of Section 126 read with the Proviso to the said Section and thereafter abide by the aforesaid averments in the affidavit placed on record. It is true that initially this Court has shown apprehension as to who will decide the incriminating documents, if any, found during the course of search from the office and residential premises of the petitioner and suggestion was made to the respondents as to appointment of any independent agency as agreed before the Apex Court in the case of S.R. Batliboi [ 2009 (8) TMI 1293 - SUPREME COURT ] by the respondent Department. Additional Solicitor General objected to such suggestion of the Court and upon the instructions submitted that such practice would set a wrong precedence for unearthing the evasion of tax in the country and to curb the generation of black money in the economy and every assessee would take recourse to such precedence and therefore, the respondent authorities are not agreeable to such suggestion, as in the facts of the case of S.R. Batliboi [ 2009 (8) TMI 1293 - SUPREME COURT ] the documents and the papers were found during the course of search at the place of search of a third person and not at the place of search of a Chartered Accountant, whereas in the facts of the case, petitioner who is though a practicing advocate, but has been searched by valid initiation by invoking provision of Section 132 of the Act and this Court having been satisfied with regard to the initiation of the search in case of the petitioner, the discretion is vested in the respondent authorities who are the highest authority of the Income Tax Department to conduct the search for taking or not taking action upon the incriminating documents and if such discretion is exercised judiciously, we hope that no further litigation would arise in the case of third parties whose documents were found during the course of the search. However, it will be open for such third parties to raise all the contentions available under the law and observations made by this Court in the facts of the present case would not come in way if any action is taken by the respondent authorities against such third parties. Petition is disposed of. Rule is discharged.
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2024 (8) TMI 502
Validity of Assessment framed u/s 153C - search was carried at the secret office of the searched person - determination of period of limitation - as argued when the AO of searched person and third person is same, it is sufficient by AO to record in satisfaction note that documents seized from searched person belonged to other person and there is no requirement of transmitting documents so seized from searched person - gross violation of principles of natural justice for not allowing any of the respective petitioners to cross examine the searched person and the Accountant of the searched person . HELD THAT:- As per definition of Books and Books of Accounts in Section 2(12A) of the Income Tax Act, 1961, at the time when the search was conducted at the premises of the searched person u/s 132 of the Income Tax Act, 1961 on 10.11.2020, i.e., before amendment and after amendment to Section 2 of the Income Tax Act, 1961 by the Finance Act, 2022 with effect from 01.04.2022, since the definition uses the word includes it should be given a wide connotation. Mere substitution of phrase in the written form or as print-outs of data stored with in the written form or in electronic form or in digital form or as print-outs of data stored in such electronic form or in digital form or in will not mean that the information that was stored in a floppy disk, tape or pen drive or any other form of electro-magnetic data storage device did not qualify as books and books of account for the purpose of section 2(12A) of the IT Act, 1961. The amendment to the definition of Books and Books of Accounts to clause (12A) to Section 2 of the Income Tax Act, 1961 by The Finance Act, 2022 w.e.f 01.04.2022 by substituting the words in written form or as print-outs of data stored with in written form or in electronic form or in form or in digitial form or as print-outs of data stored in such electronic form or in digital form was intended to merely align the definition with the current practice on account of the advancement of technology and its widespread utility in daily conduct of business for maintaining books of accounts. The Amendment to the definition of books and books of accounts in clause (12A) to Section 2 of the IT Act, 1961 is clarificatory and therefore, retrospective. The expression print-outs of data stored would include pdf copies of the print-outs in electronic form or in digital form. At the time when the search was completed on 10.11.2020 not only print outs of data stored in a floppy disk, tape, pen drive or any other form of electro-magnetic data storage device was included in the definition of Books and Books of Accounts also other forms of storage implying that the informations stored in such form of electro-magnetic data search devicse such as san disk, hard disk etc., already quantified as Books and Books of Accounts . The amended definition includes books of accounts in electronic form or in digital form or scanned copies of data or printouts of data stored in digital or electronic form. Therefore, arguments advanced by Petitioner that there was a jurisdictional error in invoking Section 153C cannot be accepted and is rejected. Period of limitation - The time limit for completing Assessment proceedings and passing the Assessment order will be one year from the date on which the documents were handed over or deemed to have been handed over to the Assessing Officer of the other person such as these petitioners, i.e. 31.03.2024. Therefore, the Writ Petition challenging the Assessment Orders passed under Section 153C read with Section 143(3) of the IT Act, 1961 are liable to be dismissed. The above periods are relevant only for preparation and issuance of the satisfaction note under Section 153C of the Income Tax Act, 1961. They are not relevant for the purposes of computation of limitation for completing the assessment under Section 153C read with Section 143(3), Income Tax Act, 1961. The assessment of the searched person was completed on 31.3.2022. The satisfaction notes of the Assessing officers of the searched person are after passing of the assessment order for the searched person as on 31.03.2022. These notices under Section 153C preceded satisfaction notes of the Assessing Officers of the searched person followed by satisfaction notes of the Assessing Officers and the respective petitioners (other person) as detailed above. Thus, the last date for issuance of the satisfaction note(s) under Section 153C of the Income Tax Act, 1961 for the respective petitioners i.e other person could be at the time of or along (or) during the course of assessment (or) immediately after passing of the assessment order of the searched person on 31.3.2022. There is hardly any time lag between 31.03.2022 and the date of satisfaction note(s) under Section 153C of the Income Tax Act for the respective Assessing officers although such satisfaction note(s) could have been issued earlier as per the decision of Calcutta Knitwears. Ludhiana [ 2014 (4) TMI 33 - SUPREME COURT ] These satisfaction notes issued under Section 153C of the IT Act, 1961 of the respective Assessing Officers were in time. It cannot be said that no incriminating material were unearthed during the search. Once notices u/s 153C were issued in time, and since the presence of incriminating material is the only requirement, the assessment had to be completed with the period of limitation under 3rd proviso to Section 153B(1) - As per the 3rd proviso to Section 153B(1) of the Income Tax Act, 1961, the last date for completing the assessment for the notices issued to the respective Petitioners under section 153C of the Income Tax Act, 1961, is twelve months from the end of the financial year from the date on which the documents were handed over or deemed to have been handed over to the assessing officer of the other person i.e. the respective petitioners. Even if the Assessing Officers of the searched person and the Assessing Officer of other persons like the respective petitioner are same, the date of satisfaction note is to be the deemed date of handing over of the books of account or documents or assets seized or requisitioned for the purpose of computation of limitation. Thus, twelve months from the end of the financial year from the date on which the documents were handed over or deemed to have been handed over to the Assessing Officer of the other person such as these petitioners would be start running for computation of limitation from 31.03.2023. Therefore, it has been held that initiations of proceedings against the respective petitioners were both justified and were in time. That apart all these Petitioners have had transactions with the searched person . Merely because, the assessing officers are one and the same for both searched person and the other person ipso facto would not mean that the moment the documents were seized either by the investigating team and handed over to the assessing officer for completing the assessment under section 153A of the Income Tax Act, 1961, the limitation for completing the assessment in the case of other person would start running under 3rd proviso to section 153B (1) of the Income Tax Act, 1961. Therefore, even if, the assessing officer of the searched person and the other person were one and the same, the only requirement is that a single satisfaction note in the capacity as the assessing officer of the searched person is sufficient. There is no merits in the arguments advanced on behalf of the respective petitioners that the assessment orders ought to have been passed on or before 31.03.2022. The submissions of the learned counsel for the respective petitioners are fallacious and are liable to be rejected. Validity of scrutiny assessement orders passed u/s 143(3) - Validly initiated proceedings for completing the assessment cannot abate. The respective Assessing Officer have passed Assessment Orders within the time stipulated under Section 153 of the Income Tax Act, 1961. Merely because these assessment orders were passed on the same date as on the dates when orders passed under Section 153C read with Section 143(3) of the Income Tax Act, 1961, would not mean that the Assessment Orders were without jurisdiction. Therefore, challenge to scrutiny of the above Assessment Order passed under Section 143(3) of the Income Tax Act, 1961 are without merits. Therefore, these Writ Petitions challenging the Assessment Orders passed under Section 143(3) of the Income Tax Act, 1961 are also liable to be dismissed. Addition of amount of unexplained income to the accounts of both the directors of M/s.KLP Projects Private Limtied, i.e., Manish Parmar and Mr. Sunil Khetpalia. Therefore, the Impugned Orders are liable to be quashed and cases are remanded back to the respondents to redo the exercise by adding the unexplained income under Section 69A of the Income Tax Act, 1961 to the income of the Petitioner.
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2024 (8) TMI 501
Denial of exemption u/s. 10(23C)(iv) - charitable activity u/s 2(15) - as per DR assessee s activities are in the nature of trade, business or commerce - AR stated that the assessee provides for rental space in Fairs and Trade shows receipts from such activity should also be considered for the purpose of complying with the limit of 20% of total receipts of the Council - HELD THAT:- As the assessee is a non-profit organization sponsored by the Ministry of Commerce and registered u/s 25 of the Companies Act and it is approved u/s. 10(23C)(iv) of the Act, in notification No.23/2007 from the A.Y. 2004-05 and onwards. The main activity of the council is to promote exports of leather industries. It is facilitating the participation of its members in Trade fairs. About 2,850 exporters of leather, leather products and footwear spread all over India are members of this council. The Council serves as a bridge between Indian exporters and overseas buyers on one hand and between Government and industry on the other hand. The assessee has been granted exemption u/s. 10(23C)(iv) of the Act, for the earlier Assessment years upto 2015-16 based on the ITAT order on the ground that, Council is not carrying out any activity of business, trade or commerce and proviso to Sec. 2(15) will not apply. What is the receipts that has to be considered for the purpose of applying the Proviso 2 to sec.2(15) - As the assessee provides for rental space in Fairs and Trade shows receipts from such activity should also be considered for the purpose of complying with the limit of 20% of total receipts of the Council. While total receipts is to be taken as the denominator for the second proviso, whether total receipts from different activities has to be aggregated or only the profit element alone has to be taken into consideration as Numerator, for complying with the condition under second proviso? - As in respect of activities incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated, it can be granted exemption provided the quantitative limit of not exceeding 20% under second proviso to Section 2(15) for receipts from such profits, is adhered to. Therefore, if some profits (nominal) is earned in carrying out the objectives, then only the profits from such activities (and not the entire receipt) should be considered whether it is below the limit of 20% of the entire receipts of the institution. As noted that, from the financials of the activities in respect of participation in Trade fairs, Appellant charges/collects only the actual expenditure from Govt as grant and members as participation charges.(Receipts Rs. 24,07,51,794/- and expenditure 24,76,65,706/- = Loss of Rs. 80,57,912/-). Therefore, in respect of these activities which is in furtherance of the objective of the Appellant as per Para 171 of the Hon ble Apex order referred to above, while the receipts are Rs. 24.07 Crores only, the profit (here a loss of Rs. 80,57,912/-) can be considered for Numerator for the purpose compliance of second Proviso to sec. 2(15). As per second proviso to sec. 2(15) these profits has to be maximum cap of 20% of the Total receipts of the Institution - As the net surplus of Rs. 7.62 crores is less than 20% of the total receipts of the Institution i.e., Rs. 42.82 Crores, by applying the ratio of the Apex Court, the exemption u/s.10(23C)(iv) cannot be rejected under second proviso to sec 2(15). We are of the considered view that, the orders of the lower authorities are erroneous in denying the exemption and hence, set aside the impugned order by allowing the grounds of appeal of the assessee.
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2024 (8) TMI 500
Penalty levied u/s 271(1)(c) - addition of unsecured loan received by the assessee was added u/s 68 based on the statement of the assessee u/s 131 that she had taken entries from the three parties because she was not having much capital at hand for her business - whether the penalty was leviable for concealment of income or for furnishing inaccurate particulars thereof? HELD THAT:- It is well established that penalty proceedings and assessment proceedings are separate and distinct and assessee is entitled to file further explanation and lead further evidence in course of penalty proceedings. The Hon ble Supreme Court in case of T. Ashok Pai [ 2007 (5) TMI 199 - SUPREME COURT] has held that since burden of proof in penalty proceedings varies from that in the assessment proceedings, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceedings. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. We find that despite repeated request the AO has not supplied copy of the alleged statement recorded on oath where assessee admitted to have taken the unsecured loans as entries for business purpose. This is a relevant piece of evidence in absence of which penalty cannot be levied. The assessee has challenged that no such statement was given by her. No prejudice would be caused to the interests of revenue if such statement had, in fact, been recorded. The assessee should have been supplied a copy of the said statement as per the principles of natural justice, which has not been followed in the case. Therefore, levy of penalty without supplying copy of the impugned statement and without eliciting reply of the assessee thereon is not in accordance with law. Assessee has also stated that the impugned loans were subsequently repaid by the assessee. Such claim has not been rebutted by the Department. As in the case Ayachi Chandrashekhar Narsanghji [ 2013 (12) TMI 372 - GUJARAT HIGH COURT] has held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. Hence, on merit also assessee is not liable for penalty u/s 271(1)(c) - Decided in favour of assessee.
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2024 (8) TMI 499
Income and the tax has to be assessed in the hands of the Appellant in its capacity as Representative Assessee - no similar credit for prepaid taxes is availed by the beneficiaries - JCIT(A) directing the AO to verify the claim of prepaid taxes (advance tax and tax deducted at source) in the hands of each beneficiary of the Appellant - interest u/s 234B and interest u/s 234C levied - Return of income filed by the assessee in the capacity of representative assessee - tax position for onshore funds setup as AIF - assessee is registered as an Alternative Investment Fund (AIF) under Securities and Exchange Control board of India (Alternative Investment Funds) Regulations, 2012 and as per Section 160(1)(iv) of the Act, the assessee is a representative of the beneficiaries of the funds - CPC has not considered the advance tax paid by the trustee of the assessee trust. HELD THAT:- The assessee furnished a statement of income to each of the beneficiaries indicating share of income under each head of income and share of taxes paid by the trustee of the assessee in the representative capacity. The trustee has also paid the tax on the share of income of each beneficiary under the respective PANs of the beneficiaries and gave a declaration as required under Rule 37BA(2) of the Rules. Thus, for the first quarter for the year under consideration, TDS was made by the investee companies under the PAN of the beneficiaries and advance tax was paid by the assessee. Subsequently, the assessee withdrew the declaration following the CBDT Circular No. 13/2014 dated 28/07/2014 which applies to the later quarter of the FY 2014-15. The circular is extracted at page 7 8 of the order of the ld. CIT(A) and we find that this circular has been issued with an intention to clarify the tax position for onshore funds setup as AIF. Facts on record show that the assessee fulfills both the conditions to be eligible for passing through taxation. Since the corresponding income has been offered by the assessee in the capacity of the representative assessee within the meaning of Section 160(1)(iv) r.w.s. 164(1) of the Act, the assessee deserves to be allowed the credit of TDS and advance tax as claimed by it under return of income. Thus, no error or infirmity in the above mentioned findings of the ld. CIT(A) and uphold the same. Appeal of the assessee is dismissed.
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2024 (8) TMI 498
Deduction u/s 80P(2)(d) - income earned from deposits with bank - HELD THAT:- Artificial distinction attempted to be created between idle funds and operational funds may be misconceived since the interest arising out of funds advanced as loans to the members has already been allowed by the authorities below. Such funds have been deemed to be operational funds and hence, due credit for the same has been allowed. The remaining funds, available with the assessee for whatever reason, have been treated to be the kind of funds on which the Totgars, Co-operative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT ] case has specifically ruled that they would be outside the purview of Section 80P of the Act and would constitute income from other sources. We draw considerable strength from the case of PCIT vs. Electro Urban Co-operative Credit Society Ltd. [ 2020 (3) TMI 402 - CALCUTTA HIGH COURT ] in which a similar question arose whereby certain funds had to be considered u/s 80P of the Act where also the West Bengal Cooperative Societies Act, 2006 was applicable and the issue was required to be dealt with keeping in view the Totgars, Co-operative Sale Society Ltd. (supra) case by the Hon'ble Jurisdictional High Court. Thus, it is held that the impugned amount of interest income cannot be considered for relief u/s 80P of the Act. However, the alternative submission of the appellant, as per ground no. 2, deserves to be considered and for this limited purpose, the matter is restored to the file of ld. CIT(A) for allowing a reasonable expense for earning the said income. For that purpose, the ld. CIT(A) may refer to the case of Kisan Sahkari Chini Mills Ltd. [ 2004 (7) TMI 57 - ALLAHABAD HIGH COURT ] for necessary guidance in terms of identifying the quantum of expense to be allowed as relief on the said disallowance. Appeal filed by the assessee is partly allowed.
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2024 (8) TMI 497
Validity of reassessment proceedings - period of limitation - as submitted AO has issued notice within the extended time limit provided by Taxation and Other Laws (Relaxation and Amendment of certain provisions) Act, 2020 (TOLA) - HELD THAT:- Hon ble High Court in the case of Hexaware Technologies Ltd [ 2024 (5) TMI 302 - BOMBAY HIGH COURT] followed its earlier decisions rendered in the case of Tata Communications Transformation Services Ltd[ 2022 (4) TMI 44 - BOMBAY HIGH COURT] and Siemens Financial Services (P) Ltd [ 2023 (9) TMI 552 - BOMBAY HIGH COURT] held that the provisions of TOLA provide that any notice issued under sec. 148 of the Act after 31st March 2021 will travel back to the original date. With regard to the second question, the Hon ble High Court held that the first proviso to sec. 149 of the new provisions will not enable issuing of notice u/s 148 of the Act after 1st day of April, 2021, if the notice could not have been issued under the erstwhile provisions of sec. 149(1)(b) of the Act on the date when the impugned 148 notice was issued. Under the erstwhile provisions, a notice u/s 148 of the Act could be issued on or before 31st March, 2022. Accordingly, the Hon ble High Court held that the notice u/s 148 issued on 27th August, 2022 is barred by limitation. The present case is related to AY 2015-16 and the notice u/s 148 of the Act has been issued on 29th July, 2022. The last date for issuing notice u/s 148 of the Act under the old provision is 31st March, 2022. Hence as held in the case of Hexaware Technologies Ltd (supra), the above said notice is barred by limitation. Assessee appeal allowed.
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2024 (8) TMI 496
Penalty u/s. 270A(9) - Mis-reporting of income - excess claim of ineligible expenditure u/s. 35(2AB) - quantum of deduction claimed on account of part disallowance of expenditure by the DISR - HELD THAT:- As observed earlier, the certificate of the DSIR in Form No. 3CL disallowing part of the expenditure was received by the assessee on 05.12.2019, i.e. at a much later stage, even after the AO has started enquiry with regard to assessee's claim of deduction under section 35(2AB) of the Act. We further noted that Ld. CIT(A)/NFAC has observed that in view of the facts the assessee cannot be alleged of mis-reporting of income, as it was not made with a malafide intention. Therefore, in our considered opinion, the penalty restricted to 100% of tax payable by CIT(A)/NFAC is not justified, as he himself admitted in his order that the assessee cannot be alleged of mis-reporting of income as it was not made with a malafide intention. Thus, in our view, the penalty in dispute deserves to be deleted. Decided in favour of assessee.
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2024 (8) TMI 495
Validity of Reassessment order - validity of jurisdictional order passed by the ITO Ward-2, Bhiwani - HELD THAT:- Order passed u/s 127 for transferring the jurisdiction on the assessee from Jalandhar to Bhiwani to enable the ITO,Ward-2, Bhiwani to pass the reassessment order. Several opportunities were provided to the DR to furnish any evidence with regard to the transfer of jurisdiction but no such order/evidence were made available. In absence of any order u/s 127, we can only conclude that the transfer of the jurisdiction from Jalandhar to Bhiwani were made without any order u/s 127 from the competent authority. Therefore, we are of the considered opinion that assumption of jurisdiction by the ITO Ward-2, Bhiwani was without any statutory compliance of law. The reliance of the DR on the case of Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] is distinguishable. The Hon ble Supreme Court was dealing with the effect of provision of section 292BB on the improper service of notice. The question in the instant case is assumption of valid jurisdiction in absence of any order u/s 127. We are of the considered view that the reassessment order passed by the ITO Ward-2, Bhiwani is without assumption of valid jurisdiction and is therefore bad in law and deserves to be quashed.
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2024 (8) TMI 494
LTCG on sale of land - assessee claimed that the stamp duty value exceeded the fair market value and requested a referral to the DVO - HELD THAT:- Once the assessee objects to the value of property proposed to be adopted by the AO, then the AO is duly bound to refer the matter to the DVO in terms of Section 50C(2). In the instant case, the assessee had submitted that there were serious infirmities in the title to the property and hence the Jantri value adopted by the Stamp Valuation Authorities did not represent the correct value of the property sold by the assessee during the impugned year under consideration. Therefore, when the assessee had raised a specific objection as to the value of the property adopted by the Stamp Valuation Authorities, on the ground that the title itself to the impugned property under consideration was defective, then, in our considered view, CIT(Appeals) has correctly held that the matter was required to be referred to the file of DVO. Accordingly, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. Appeal of the Department is dismissed.
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2024 (8) TMI 493
Denial of exemption u/s. 54 - assessee failed to deposit unutilized amount of capital gain in separate account and also not filed the Return of Income as prescribed u/s.139(1) - HELD THAT:- We find that the assessee is eligible to claim deduction under this section, even if a new residential house is purchased within one year before the date of transfer of capital asset, which means that assessee has to make use of funds other than the sale consideration of house sold for investing in a residential Flat and it is not mandatory that only the sale consideration of Flat sold is to be utilized for purchasing or constructing a new residential house. In the present case the assessee has utilized other funds (apart from sale consideration) for constructing new residential house and for this reason only he cannot be denied deduction u/s 54 of the Act. As going through the provisions of section 54 we also observe that there is no mention about the date of start of construction of residential house, but it only refers to a construction of a residential house, which in our view is the date of completion of the constructed residential house habitable for the purpose of residence. Whether the assessee is entitled for claiming exemption u/s. 54 where the return is filed belatedly u/s. 139(4)? - As relying on C. Aryama Sundaram [ 2018 (8) TMI 864 - MADRAS HIGH COURT] and Manilal Dasbhai Makwana [ 2018 (8) TMI 1244 - ITAT AHMEDABAD] we are of the considered view, the assessee is eligible for deduction u/s. 54 and we hereby direct the AO to grant deduction and delete the addition made by him. Thus the Ground of Appeal raised by the Assessee are allowed.
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2024 (8) TMI 492
Disallowance u/s. 37(1) - payment of professional fees paid to doctors - HELD THAT:- AO has not doubted the genuineness of these payments. He stated that no documentary evidence has been submitted by the assessee in support of its claim that the doctors have worked in the capacity as consultants, researchers or advisors. Whereas as noted that the assessee has already provided all the details like logbook along with agreements with different doctors, summary sheets of professional fees paid, copies of scientific broachers, training manuals and research papers. CIT(A) has also noted that the facts are identical and followed the decision of tribunal while deleting the disallowance. We do not find any infirmity in the order of CIT(A), so as to interfere with his decision. Therefore, this ground of Revenue is dismissed. Disallowance u/s.14A r.w.r. 8D - Revenue argued that the assessee-company did not provide any fund flow statement evidencing the use of own funds - HELD THAT:-The assessee was having sufficient funds in hand on the date of investment, as it is evident from the bank statement where proceeds of issuance of share capital were deposited and investments in mutual funds was made, we are in agreement with the decision of the CIT(A) s decision to delete the disallowance u/s 14A on account of interest expenses. This ground number 2 of the Revenue s appeal is dismissed. Addition u/s. 14A on account of administrative expenses - AO s adoption of Rule 8D proves mechanical. Most of the judicial precedents, including those relied on by the assessee, underscore the importance of procedural fairness and due diligence by AO and also held that the AO has to objectively examine assessee s claim. We also note that the Ld.CIT(A) also has not recorded his reason while confirming the addition on account of administrative expenses. We are of the opinion that the CIT(A) and the AO both have failed in recording dissatisfaction before applying third component of rule 8D relating to administrative expenses.
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2024 (8) TMI 491
Bogus LTCG - Addition u/s 68 and 69A - treating the transaction in shares by the assessee as bogus - basis of the information received from Investigation Unit, Kolkata that the assessee is a beneficiary of bogus entries of long term capital gain proceedings u/s 147 were initiated in the case of the assessee - HELD THAT:- Evidences were furnished by the assessee to prove the genuineness of the share transaction before the AO. AO without commenting on any of the evidence submitted by the assessee placed reliance upon the report of the Investigation Wing, Kolkata, and the price fluctuation of shares of the entities in which the assessee has transacted. The findings of the Investigation Wing, appears to be mere general findings of the investigation without any adverse observation regarding the assessee or the scripts in which the assessee has transacted. Revenue has failed to prove as to how the said findings have any relevance to the present case in view of the facts and circumstances as noted in the foregoing paragraph. There is also no reference to the any portion of sworn statements, wherein any adverse observation against the assessee has been noted by the Investigation Wing. The price fluctuation of shares of the entities in which the assessee has transacted also does not support the case of the Revenue, as no material has been brought on record to show that the assessee was involved in such price manipulation even after purchasing and selling the shares on the stock exchange through a SEBI registered stock-broker. Therefore, in the present case, it is sufficiently evident that the AO without finding any fault with the evidence submitted by the assessee proceeded to treat the transaction as non-genuine and the long-term capital gains earned by the assessee as bogus. AO did not issue any summons to the BSE or examine the broker of the assessee, despite specific request by the assessee vide its letters. Therefore, we find no merits in the impugned order upholding the addition made u/s 68 and disallowing the exemption of long-term capital gains claimed by the assessee. Similarly, we also do not find any merit in the disallowance of the investment made by the AO under section 69A - Decided in favour of assessee.
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2024 (8) TMI 490
Disallowance of Foreign Tax Credit (FTC) - assessee had not filed Form No. 67 on or before due date of filing of return of income provided u/s. 139(1) - HELD THAT:- We find, this issue is no more res integra in view of the various decisions of the Coordinate Benches. In case of Bhaskar Dutta [ 2023 (1) TMI 534 - ITAT DELHI] while deciding the identical nature of dispute, the Coordinate Bench has held that the provisions contained under Rule 128(9) are directory and cannot override the provisions contained u/s. 90 of the Act. The Bench had further held that even Rule 128(9) nowhere debars claim of FTC on account of delay in furnishing Form No. 67. Thus we allow assessee s claim and direct the Assessing Officer to grant Credit of FTC, after factual verification. Assessee appeal allowed.
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2024 (8) TMI 489
Estimation of income - bogus purchases - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee s own case in Ashwin Moolchand Madhani [ 2020 (2) TMI 1722 - ITAT MUMBAI] in similar factual matrix, directed that disallowance be restricted to 12.5% of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. The coordinate bench further held that if the gross profit rate already declared by the assessee is more than 12.5%, then no disallowance is called for. Since, in the present case, Addl./Joint CIT(A) has followed the decision of the coordinate bench of the Tribunal in assessee s own case cited supra, we find no infirmity in the impugned directions. Appeal by the Revenue is dismissed.
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2024 (8) TMI 488
Denial of deduction u/s 54G - Capital Gain arising on account of shifting of an undertaking from urban area to rural area - investment was made by the partnership firm and not by the assessee - HELD THAT:- Transfer must be affected in the course of or in consequences of shifting of the industrial undertaking from an urban area to a non-urban area. The capital gain would be exempt to the extent, it is utilized within a period of one year before or three years after the date of transfer. The assessee under consideration, has complied with and satisfied the following conditions, namely: (i) Assessee has shifted the existing undertaking from urban to rural area, (ii) The assessee has transferred and installed the existing plant machinery, and other equipment in the rural area, (iii) The assessee made further investment of Rs. 1.38 crores in the newly undertaking for the expansion and investment in the foundry business, (iv) The assessee has made MoU to make expansion and investment in shifting of the business, and (v) The assessee made new investment in the firm and the assessee is a partner and therefore the assessee has total right in the investment of the firm. Hence, we note that the important conditions to comply with the object and intention of section 54G of the Act have been fulfilled by the assessee under consideration. We find that assessee has invested amount of Rs. 1.22 Crores in the firm, as a partner and same was utilized in construction of building and purchasing of new plant and machineries. The assessee has shifted the existing plant and machinery, along with all important business plans, goodwill to rural area and therefore the whole manufacturing undertaking has been shifted to rural- area. Therefore, the assessee is eligible for exemption u/s 54G of the Act. The firm name is only a compendious name given to the partnership for the sake of convenience. The assets of the firm belong to and are owned by the partners of the firm as held by Hon'ble Supreme Court in the case of N. Khadervali Saheb Anrs. Vs. N. Gudi Sahib [ 2003 (2) TMI 63 - SUPREME COURT ] Any property owned by it is really the property of the partners and the use of expression 'firm' is only a compendious mode to designate the persons who have agreed to a joint venture and what is called the property of the firm is really the property of the partners. The partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. In Juggilal Kamlapat Bankers vs. WTO [ 1983 (12) TMI 1 - SUPREME COURT ] Apex Court held that the interest of a partner in a partnership firm belonged to him and would be includible in his 'assets' and will have to be taken into account while computing his net wealth. In this view of the matter, the assessee in the present case could be said to be having specific interest in the factory land and the building belonging to the firm and, as such, is entitled to the exemption under section 54G of the Act. Thus as in the assessee s case under consideration, we find that each partner is owner of the assets to the extent of his share in the partnership, hence, exemption u/s 54G of the Act, should not be denied to the assessee under consideration. The primary condition is that the assessee should have made investment in the undertaking shifted in rural area, nowhere section 54G of the Act, states that asset should be acquired in the name of the assessee. Therefore, we delete the addition made by the assessing officer. Decided in favour of assessee.
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2024 (8) TMI 487
Addition u/s 56 - interest on enhanced compensation on compulsory acquisition of agricultural land belonging to the assessee - whether the interest u/s. 28 of the Land Acquisition Act is taxable or not being part and parcel of compensation? HELD THAT:- Interest granted u/s. 28 of Land Acquisition Act on enhanced compensation/compensation by the reference court u/s. 18 of Land Acquisition Act, from the date of possession of land and till the judgment of High Court, is part of compensation, could not be taxed in view of amendments by substitution of section 145A read with clause (iii) of section 56(2) of the Act. In the present case, the AO simply proceeded on the premise that the amendments to provisions u/s. 145A which bears the heading method of accounting in certain cases, section 145A(b) provides that notwithstanding anything to the contrary contained in section 145, interest received by an assessee on compensation or on enhanced compensation shall be deemed to be the income of the year in which it is received read with section 56(2)(viii) of the Act which provides income by way of interest on compensation or on enhanced compensation referred to in sub-section (1) of section 145B of the Act shall be chargeable to income tax under the head Income from other sources . Therefore, we hold that the interest granted by the reference Court u/s. 28 of the Land Acquisition Act from the date of possession of land till the date of judgment of High Court is an accretion of the value of the land acquired. Respectfully following the decision of Rupesh Rashmikant Shah [ 2019 (8) TMI 518 - BOMBAY HIGH COURT] we hold the interest received u/s. 28 of the Land Acquisition Act would not fall within the ambit of the expression interest as envisaged u/s. 145A(b) of the Act, further, hold that the amendment by way of substitution of section 145A by Finance (No. 2) Act, 2009 w.e.f. 01-04-2010 and amendment by way of insertion of clause (iii) in section 56(2) by Finance Act, 2009 would have no applicability to the facts of the present case and in view of the same the order of CIT(A) in confirming the order of AO is not justified. Thus, ground Nos. 1 and 2 raised by the assessee are allowed.
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2024 (8) TMI 486
Addition u/s 56(2)(x) - difference between purchase value and value determined by District Valuation Officer - as contended on behalf of the Appellant that the difference though more than 5% of purchase consideration was below 10% of the purchase consideration - whether transacted amount was within tolerance limit? - HELD THAT:- We find that identical contentions raised by the Revenue stands rejected in the case of Joseph Mudaliar [ 2021 (9) TMI 701 - ITAT MUMBAI] as held that the assessee would be eligible to get the benefit of ten per cent margin difference in the valuation between the value determined by the stamp duty authority and the declared sale consideration. Thus, if the variation between the aforesaid two values falls within the range of ten per cent, no addition can be made. The benefit of tolerance band of 10% shall be available to the Appellant for the Assessment Year 2018-19. Since, in the present case, admittedly the variation is purchase consideration and the fair market value is 9.14%, no addition was warranted in terms of Section 56(2)(x)(b)(B)(ii) of the Act. Accordingly, addition made by the Assessing Officer, which was confirmed by the CIT(A), is deleted. Accordingly, Ground No. 1 raised by the Appellant is allowed.
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2024 (8) TMI 485
Addition as alleged receipts reflected in Form 26AS but not recorded in books of account of the assessee - onus of establishing that the conditions of taxability are fulfilled - AR submitted that the assessee did not enter any transaction with deductor party, hence, the alleged receipt or the credit against which such TDS was wrongly made by the deductor party has also not been included in the sales/turnover of the assessee HELD THAT:- Assessee s books of accounts were audited. Assessee had filed Profit and Loss Account, Balance Sheet before the Lower Authorities. Assessee is a electrical contractor as mentioned in the assessment order. The total turnover of the assessee during the assessment year was Rs. 12,30,35,743.50 as shown in the Trading Account which is duly audited. The assessee has repeatedly denied any transaction with deductor party /M/s. V.S. Lignite Power Private Limited. Assessee had filed TDS reconciliation statement produced audited books before the AO. In these facts and circumstances of the case, the onus was on the Revenue to prove that assessee had received Rs. 2 lakhs from deductor party and the impugned amount is taxable as income. Revenue has not brought on record any evidence to demonstrate that sum was received or accrued to assessee and the impugned sum is taxable as income. As held in K.P.Varghese case [ 1981 (9) TMI 1 - SUPREME COURT ] the onus was on the Revenue to prove that it is income of the assessee. Therefore we hold that the impugned amount of Rs. 2 lakhs is not income of the assessee. Accordingly, AO is directed to delete the addition of Rs. 2 lakhs. However, assessee will not be eligible for credit of TDS amount of Rs. 20,000/- which has been admittedly claimed by assessee as erroneous. Accordingly, grounds of appeal raised by the assessee are allowed.
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Customs
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2024 (8) TMI 484
Smuggling - gold bars of foreign origin - Section 135(1)(a) (1)(b) of the Customs Act - conversation retrieved through mobile data disclose the active participation of V.Girinath in transporting gold bar illegally - exoneration in the adjudication proceedings - legal impediment for parallel proceedings of adjudication and prosecution or not - HELD THAT:- The Law as well the judicial pronouncements is well settled and had made clear that the adjudicating proceedings under the Customs Act and the criminal prosecution under the Customs Act are not in alternate but independent to each other. They can be launched simultaneously. There is no legal impediment for parallel proceedings of adjudication and prosecution. Only in case the adjudication ends in exoneration, the continuation of criminal prosecution will be on the touch stone whether the prosecution is on the same set of facts and for the same act or omission. Otherwise, even the outcome of one will not have bearing on the other. As far the case in hand, the adjudicating authority had held the petitioner liable for penalty. That order is under challenge before High Court, bye-passing the remedy available under the statute (i.e.,) Appeal before the Commissioner (Appeals). Courts can never fail to note the difference between the adjudication proceeding before the Authority of the Department and the prosecution before the Court of Law. Adjudication under Section 112 of the Customs Act is with regard to the property/article smuggled into India. It is an action in personam. Whereas criminal prosecution under Section 135 of the Customs Act is for the offence affecting the economy of the Country. This is an action in rem. One action cannot be a substitute for the other action. This Court holds that the petition to quash the C.C.No.446/2023 on the file of Chief Judicial Magistrate, Coimbatore is devoid of merit. Petition dismissed.
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2024 (8) TMI 483
Refund of 4% SAD for import of PB100 Finger Print Scanner with USB Cable - rejection of refund on the ground that the identity of the imported goods that were claimed to have been sold under the respective sales invoices have not been established beyond doubt - HELD THAT:- The procedure to be adopted for refund of 4% Additional Duty of Customs has been prescribed by Boards Circular No. 6/2008-Customs, issued from F. No. 401/104/2007-Cus.III, dated 28/04/2008. The circular states that the refund applicant should produce a certificate from the statutory auditor/ Chartered Accountant who certifies the importer s annual financial accounts under the Companies Act or any statute, explaining how the burden of 4% CVD has not been passed on by the importer and to fulfill the requirement of unjust enrichment. In the absence of a challenge to the said certificate by revenue it would not be possible to discard the same and reject the refund. Hence the rejection of the refund claim merely on grounds of the mismatch of description of the goods in the Bill of Entry and invoice, without challenging the certificate, is not sustainable, so long as the CA s certificate shows that the goods mentioned in the BE and commercial invoice as per the correlation statement are one and the same thing. The Hon'ble High Court of Madras in the case of JOHNSON LIFTS PVT. LTD. VERSUS ASSTT. COMMR. OF CUS. (REFUNDS) , CHENNAI [ 2021 (2) TMI 401 - MADRAS HIGH COURT] in a similar situation held ' Circular No. 6/2008, which clarifies the conditions prescribed in Notification No.102/2007, dated 14-9-2007, requires the importer to produce the certificate of the Statutory Auditor along with the correlation statement and if such certificate and correlation statement are produced, the respondent is bound to accept the description of the goods in the import documents as well as the Sales Invoice to be one and the same, on the strength of the certificate/correlation statement.' The appellant is entitled to the refund claims made. Consequently, the impugned order is set aside - Appeal allowed.
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2024 (8) TMI 482
Revocation of Customs Broker license - forfeiture of security deposit - imposition of penalty - violation of Regulations 10(a), (d), (e) and (n) of CBLR. Violation of Regulation 10(a) of CBLR - filing of Shipping Bills without authorization - HELD THAT:- It is convincing that the omission of the word exports in the body of the authorization letter issued by the exporter is merely a careless omission since the subject of the letter indicates both imports and exports. It is found from the facts of this case that the appellant had not violated Regulation 10(a). Violation of Regulation 10(d) of CBLR - over-valuation of exports to avail undue drawback - HELD THAT:- While it is generally the transaction value, the proper officer can, under the Valuation Rules, reject the transaction value and re-determine the assessable value. If the officer re-determines the assessable value, duty, drawback etc. may be determined accordingly. However, it does not change the transaction value which will still be what was agreed to between the buyer and seller. The liability of the buyer will not increase or reduce even if the assessable value is re-determined by the officer. Valuation under the Customs Act is a part of assessment under section 17 of the Customs Act. It can be determined as a part of self-assessment by the importer or exporter or by the officer as a part of re-assessment or by any superior appellate authority while deciding the appeals. The Customs broker has no role or responsibility in deciding the assessable value. The power of the proper officer to determine the correct assessable value as a part of assessment does not lie with the Customs Broker. Thus, we find that the appellant Customs Broker had not violated Regulation 10(d). Violation of Regulation 10(e) - case of department in the offence report is not that the appellant had imparted some information to the exporter which is not correct but that the exporter had over valued exports - HELD THAT:- The appellant, as Customs Broker, does not provide the value of the goods. Therefore, the allegation that the appellant had violated Regulation 10(e) is completely unfounded even if the offence alleged in the offence report is correct. Violation of Regulation 10(n) - case of the department is that when officers went to investigate, they found that the exporter was not functioning at its declared address - HELD THAT:- If the appellant was guilty of trusting the address given in the IEC when filing the Shipping Bills, so is the Additional Commissioner who sent his order (which forms the offence report in this case) to that very address. There are no hesitation in concluding that there is no evidence whatsoever that the appellant had violated Regulation 10(n). It is found that the findings in the impugned order that the appellant had violated Regulations 10(a), (d), (e) and (n) are not correct and cannot be sustained - the revocation of the appellant s licence, forfeiture of its security deposit and imposition of penalty cannot be sustained - the impugned order is set aside - appeal allowed.
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2024 (8) TMI 481
Cancellation of the Private Bonded Warehouse License in terms of section 58B of the Customs Act, 1962 - address of the licensed premises was not indicated as either the principal place of business or additional place of business in the GST registration - non-compliance of CBIC Circular No. 34/2019 dated 1.10.2019 - non-submission of relevant documents on online portal - neither have any goods been imported into the Customs Bonded Warehouse nor has any manufacturing activity taken place in it for the entire period of 9 months. Not mentioning the licensed premises as principal or additional place of business under the GST as required by CBIC s circular No. 34/2019 dated 1.10.2019 - HELD THAT:- While it is a serious typographical error to mention the wrong address in an application for the Customs warehouse licence, evidence on record shows that the correct address is Khasra No. 15/22. According to the appellant, this is also the address in its IEC which is the primary document for all imports and exports. It does appear that the appellant committed a mistake and the officer issuing the licence also did not notice - However, it is not that, this is not such a serious violation as to warrant cancellation of licence. Not registering and uploading documents on the website as required under CBIC Circular No. 34/2019 - HELD THAT:- The appellant admits that it had not done so but pleads that it was due to ignorance and after learning about this requirement, it had registered on the portal. It is not that this is a curable violation. Not importing any goods into the warehouse and not starting any manufacturing activity in it - HELD THAT:- This is not a violation of any provision of the law but the question arises as to what is the purpose of the licence if it is not being operated. The appellant s submission is that it is in touch with several people and will import into the customs warehouse and also manufacture in it. The appellant had violated some conditions of licence including mentioning the wrong address of the premises to obtain the licence. It is common practice for the officers to examine the blueprint or map of the premises and visit the premises to check its safety and other features before issuing the licence. Therefore, there could be no doubt about which premises were licenced. According to the appellant, the correct address of the premises was also in its IEC and in its GST registration and mentioning of the wrong address in its application and also in the licence issued by the department is only a typographical error in typing 24 instead of 22 . The officers were apparently also not careful enough and issued licence with the wrong address - it is not why the address cannot be corrected and if that is done, the correct address will match with the additional place of business declared in the GST registration. It was also careless of the appellant not to have obtained registration and uploaded documents as required on the portal. The penalty imposed on Shiv Probuild under section 117 is reduced to Rs. 50,000/- - On payment of the above fine, its private bonded warehouse licence under section 58 of the Customs Act and its manufacturing and other operations licence under section 65 of the Customs Act shall be restored and the address of the premises shall be corrected - the penalties imposed on Kuldeep and Rajkumar under section 117 of the Customs Act are set aside. Appeal allowed.
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2024 (8) TMI 480
Classification of Aluminum Circles - to be classified under CTH 7606 or under CTH 76169990? The assessee-Respondent has opted to classify the Article in question under 76069110 since according to the assessee they are only raw materials, the department proposed the classification under 7616 in the show-cause Notice, while the DRI which undertook investigation, had initially suggested the same to be classified under 7615. HELD THAT:- When the revenue disputes the classification, it is the settled position of law that the burden is heavily on the revenue to justify not only how the declared classification was wrong, but also as to why its proposed classification is to be accepted. It is found that other than denying the contentions of the assessee, that too without any evidence, no material whatso ever is placed on record by the revenue. When their own chartered engineer reports that the articles were raw materials which undergo further process, that aspect has also not been disputed other than the Adjudicating Authority holding that the same was not acceptable. Thus, the allegations are not taken to their logical conclusion. Rule 2(b) is required to be applied in the case on hand, also for the reason that heading 7616 does not require otherwise with regard to classification of material containing a combination of metals. The takeaway from the above is that the heading specifically requires that the product should not be mixed or otherwise prepared and therefore, for classifying any product under that heading, Rule 2(b) could never be applied. But there is no such provision similar to that under 7616 and therefore, any reference to the clause otherwise requires does not have any implications for the reason that the same is not in accordance with the scheme of the heading under chapter 76. From a perusal of CTH 7606, it is found that the aluminium circles are specifically mentioned under heading 7606 9110 and since the same is a composite product made up of aluminium as well as stainless steel, with the predominant material being aluminium, by implication of Rule 2(b), the same has essentially to be classified as aluminium circle only. The department has not made out any case for our interference with the findings of the First Appellant Authority and hence, the classification of articles in question as confirmed in the impugned order is held to be in order. Appeal dismissed.
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2024 (8) TMI 479
Rejection of Duty Drawback claim - Export of non-Basmati Rice - whether the rejection of drawback claim holding that the appellant has not established that they had not filed drawback shipping bill at the time of export due to reasons beyond their control is legal and proper? - HELD THAT:- The Commissioner has a discretion to allow the claim of drawback even though free shipping bill is filed, if he is satisfied that the exporter had not filed the draw back shipping bill for reasons beyond his control. The Commissioner has taken the view that the appellant has not adduced evidence to show that there were reasons beyond his control. It is found the said conclusion to be not justifiable and erroneous. The Ld. Counsel for the appellant has explained the difference in the Notifications which mentions the Cereals / list of Cereals. This has caused confusion to the appellant by which the draw back claim was not made at the time of export. It is convincing that the appellant has made out sufficient grounds for not filing draw back shipping bills. The Board Circular is binding upon the Department. The Commissioner ought to have exercised the discretion judiciously and not in a mechanic way. The impugned order is set aside - appeal allowed.
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Corporate Laws
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2024 (8) TMI 478
Striking off the Appellant from the register of companies, which was purportedly taken under Section 248(1)(c) of Companies Act - HELD THAT:- It is a well settled that Ld. NCLT is empowered to restore the company where it thinks it to be just and equitable to restore it i.e. it is fair and prudent from the commercial point of view to restore the same. Considering the assets and further that the appellant is inclined to shift its business from iron ore to crushing stone, it would be appropriate to restore the appellant and it is in the benefit to State Exchequer and would also aid employment generation. It is just and equitable to restore the name of the appellant company to the record of ROC - the impugned order set aside - appeal allowed.
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Insolvency & Bankruptcy
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2024 (8) TMI 477
Declarations of the petitioner as Wilful Defaulter by the Identification Committee as well as the Review Committee - Liability of the personal guarantor post-assignment of debt under the approved Resolution Plan - whether the NBFC, simultaneously with the original financial creditor/bank, can recover the debt from the guarantors? - HELD THAT:- The answer is a resounding No , since the Resolution Plan itself contemplates that the assignment, including the security interests, in favour of the NBFC is confined only to the CD-company, categorically excluding the guarantors. In fact, it is further clarified in the Resolution Plan that it does not deal at all with personal guarantors or corporate guarantees given by other persons than the company. The personal guarantors, being excluded from the purview of the Resolution Plan, are by default also excluded from the assignment of the right to recover debt in favour of the assignee. Insofar as the surviving liability for the debt is concerned, the same is retained by the financial creditors, including the respondent no.1-bank herein, to be exercised in respect of the guarantors only - The CD is absolved by operation of law in terms of the Resolution Plan and the assignee of the debt never gets any right to recover the debt from the guarantors, since the guarantors are excluded from the Resolution Plan as well as from the process of assignment itself. The debt survives only between the financial creditors/bank and the guarantors - the argument of the petitioner that its liabilities are transferred to the assignee is not borne out by the Resolution Plan and the corresponding provisions of the IBC. There is an element of continuity in the liability of the borrower to repay the debt. Seen from such perspective, a borrower may very well make good the loan taken by it even subsequent to the classification of its account as NPA, thereby regularizing the account - By a logical corollary, the converse is also true, that is, if the borrower, despite having the means, fails to repay the loan and continues the violations as envisaged in Clause 2.1.3 read with Clause 2.2 of the Master Circular, there is no bar in declaring the borrower and the other entities contemplated in the Master Circular as Wilful Defaulters. Petition is allowed on contest, thereby setting aside the impugned decision dated December 30, 2022, whereby the Review Committee confirmed the decision of the Wilful Defaulter Identification Committee that the petitioner is a Wilful Defaulter under the RBI Master Circular dated July 1, 2015.
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Service Tax
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2024 (8) TMI 476
Refund of service tax paid on ocean freight - appellant s refund is hit by Rule 9 (1)(b) or (bb) of Cenvat Credit Rules, 2004 or not - suppression of fact or malafide intention alleged/established against the appellants or not - HELD THAT:- Firstly there is no demand notice in respect of Service tax on ocean freight which was paid by the appellants on their own and also there is no adjudication as regard the suppression fact, therefore, in absence of any charge by way of show cause notice or adjudication thereof, the allegation of suppression of fact only to invoke Rule 9 (1) (b) or (bb) of Cenvat Credit Rules, 2004 is on assumption and presumption which cannot be accepted. Moreover, the payment of service tax is not towards the non-payment by reason of suppression of fact. In the present case the service tax was paid Suo-moto for which no offence was made out by the department. Therefore, in this fact, no suppression of fact is involved. Consequently, penal provision under Rule 9 (1) (b) or (bb) shall not apply. It is found that except the legal issue there is no discussion about the fact, documents and verification thereof, hence the matter needs to be remanded for this limited purpose for processing the refund claim of the appellant - appeal allowed by way of remand.
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2024 (8) TMI 475
Invocation of extended period of limitation - Levy of service tax - Mining Services - HELD THAT:- On identical issue for the earlier period, a show-cause notice has been issued to the appellant to demand service tax by invoking extended period of limitation and in this case also, the showcause notice has been issued to the appellant by invoking extended period of limitation. Therefore, following the ratio of the decision of the Hon ble Supreme Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] it is held that the show-cause notice is barred by limitation. Thus, the whole of the demand confirmed against the appellant is set aside on limitation. Consequently, the impugned order deserves no merits. The same is set aside - appeal allowed.
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Central Excise
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2024 (8) TMI 474
Refund of CVD and SAD in respect of payment of custom duty for regularizing excess import under advance authorization prior to introduction of GST regime - duty liability was finalized and paid after the introduction of GST - HELD THAT:- The appellant have claimed the refund of Cenvat of CVD and SAD in terms of Section 142 (3) of CGST, 2017 - From Section 142 (3) of CGST, 2017 it is clear that an assessee who is eligible for Cenvat credit and unable to take the credit due to GST regime after 01.07.2017 shall be eligible for the cash refund. In the present case the CVD and SAD was paid which is admissible as Cenvat credit to the appellants under the existing law i.e. Cenvat Credit Rules, 2004. Secondly the said amount is refundable to the appellants as per various judgments cited by the learned Counsel support the case of the appellant. Whether the appellant s claim of CVD and SAD is hit by Rule 9 (1) (b) or(bb) of Cenvat Credit Rules, 2004? - HELD THAT:- Firstly there is no demand notice in respect of CVD and SAD which was paid by the appellants on their own and also no adjudication as regard the suppression fact, therefore, in absence of any charge by way of show cause notice or adjudication thereof, the allegation of suppression of fact only to invoke Rule 9 (1) (b) or(bb) of Cenvat Credit Rules, 2004 is on assumption and presumption which cannot be accepted. Moreover, the payment of CVD and SAD is not towards the non-payment of duty by suppression of fact - In the present case the advance license is on record and since there was excess import as compared to the eligible under advance license the appellant have discharged the duty of CVD and SAD suo moto for which no offence was made out by the department. Therefore, in this fact, no suppression of fact is involved. Consequently, penal provision under Rule 9 (1) (b) or (bb) shall also not apply. It is found that except the legal issue there is no discussion about the fact, documents and verification thereof, hence the matter needs to be remanded for this limited purpose for processing the refund claim of the appellant - the impugned order is set aside - appeal allowed by way of remand.
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2024 (8) TMI 473
CENVAT Credit - Removal of capital goods - Depreciation - date from which the deduction of 2.5% has to be applied - whether the amount arrived at by the appellant for clearances of capital goods on which credit was availed is correct or whether the demand of differential duty alleging that the appellant has to apply 2.5% deduction only on 50% of the credit availed from the date of availing credit is legal and proper? - Rule 3 (5) and Rule 3 (5A) and Rule 4(2) of CCR - time limitation. Department has worked out 35% (for the second 50%) as against the allowable deduction of 37.5% calculated by appellant from the date of availing the credit which is 22.11.2008. HELD THAT:- The provisions under Rule 3 (5)/3(5A) as noticed above would show that, the words used are from the date of availing credit. Though the capital goods are received in the factory and the appellant may have put to use, the legislature in Rule 3 (5A) has consciously used the words from the date of availing the credit . It has not used the words from the date on which the capital goods were put to use or from the date of receiving the capital goods in the factory. It can be seen that the date of availing the credit has been made the relevant date for applying the deduction of 2.5%. The appellant has sought to apply the deductions on 100% from the date of availing the initial credit itself. It may be true that though capital goods are received at the same time, Rule 4 (2) restricts the availment of credit to 50% of the duty paid on capital goods in a financial year. The legislature while introducing Rule 3 (5A) was fully conscious of the existence of Rule 4 (2) also. Nothing can be read to be added in to the provisions of law, when the ordinary meaning does not give rise to any ambiguity. Though the Ld. Consultant relied upon the decision in the case of MAHINDRA UGINE STEEL CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE ST, NASHIK [ 2019 (2) TMI 755 - CESTAT MUMBAI ], the facts of the case are not so clear as to whether the issue considered is the same. Time Limitation - HELD THAT:- Though department has invoked the extended period there is no positive act of suppression established against the appellant. The entire figures have been taken from the accounts maintained by the appellant. As the appellant had paid the amount as calculated by them and also filed ST3 returns reflecting such reversal of credit on capital goods, there are no grounds bringing out wilful suppression of facts on part of the appellant. The show cause notice is time barred. The appellant succeeds on the ground of limitation. The impugned order is set aside on the ground of limitation - appeal allowed.
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2024 (8) TMI 472
Denial of interest on the alleged delayed sanction of refund - HELD THAT:- On perusal of the SCNs dt. 31.03.2015 and 04.11.2015, it is not found that even though the appellant had filed a refund claim, the show cause notice proposed to reject the refund claim alleging that the appellant is not eligible for the benefit of exemption under Notification No.30/2004. After due process of law, the original authority considered the issue as to whether the appellant is eligible for the benefit of notification and held the issue against the appellant. The original authority held that the appellant is not eligible for benefit of exemption and the duty paid is in order. Consequently, the refund was rejected. Against this, the appellant filed appeal before the Commissioner (Appeals) who vide order dt. 23.08.2018 held that the appellant is eligible for the benefit of exemption of the notification and that they are not liable to pay the CVD. Consequently, the Commissioner (Appeals) remanded the matter to verify as to whether the claim of refund is hit by unjust enrichment. In such de novo order, the original authority held that after verification of details from the Range officer concerned, it is established that the duty element is not passed on to another. There are no ground to accept the argument of the appellant that they are eligible for interest on the refund by considering the date of filing the original refund claim. In regard to the periods for July 2016 to September 2016 as well as October 2016 to June 2017, the Ld. Consultant has brought to our notice that the refund claims were filed on 27.06.2017 and 16.10.2017 respectively. The Department has not issued any SCN at all for these periods. The appellant is eligible for interest on the delayed payment of refund from the date immediately after the expiry of 3 months from the date of Order-in-Appeal dt. 23.08.2018 in terms of Section 11BB of Central Excise Act, 1944. The appellant would be eligible for interest at the rate applicable as per the relevant notification issued under Section 11BB of Central Excise Act, 1944. Appeal allowed in part.
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2024 (8) TMI 471
Classification of goods - Health mix - Dia Mix - Dia Food - Ragi Malt - Badam Mix - instant food preparations - Valuation of the goods under section 4A of CEA 1944 - non-clubbing of value of clearances made by SHFPL with that of SFPPL, with the goods having been manufactured in the same factory and clearing the same clandestinely - Invoking the extended period of time along with imposition of penalties. Classification of the impugned goods - Health Mix - HELD THAT:- Health Mix classified by revenue under heading 1904 1090 of CETA 1985: The appellant has stated that health mix consist of 82% of cereals of different varieties, 12% of pulses and 2% on nuts namely ground nuts, cashew nut and Badam, 3% sugar and 1% cardamom. Admittedly all the above products are grounded and pulverized and made into a powder or to a flour floor form and mixed to constitute a health mix which is a food substitute. The end product is neither in the form of flakes or grain or in a grain worked form. He hence stated that the question of classifying the same under CH 1904 is ruled out since that Chapter covers only products in flakes or grain form - with revenue changing its own earlier classification proposal, the duty demanded during the impugned period cannot be sustained. Dia Mix and Dia Food - It has been brought to notice by the appellant that the demand for the said goods was dropped and the classification left open vide OIO No: 33-34 / 2016 dated 21.07.2016. Hence it is found that the classification made and the duty demanded during the impugned period for the said goods also cannot be sustained. Ragi malt/ Badam mix - While revenue classified the product under heading CH 2106 1000 of CETA 1985, for the subsequent period it had given up the above classification and dropped the proceedings vide OIO No. 33-34 / 2016 dated 21.07.2016. In later proceedings the classification of Badam mix was confirmed under heading 2106 9099 vide OIO No. 59/2017 dated 21.06.2017. In the OIO No. 12/2021 dated 22/03/2021 the respondent classified Ragi malt under CH 1901 9090 and thus revenue has abandoned the earlier classification under CH 21061000 for both the products. This being so, the demand for the impugned period, on the said goods, fail. The department has failed to discharge the burden of proof regarding the classification of the impugned goods, thereby the demand for duty made in the said orders must fail along with the penalties etc. Once the duty on the goods are found to have been wrongly confirmed and merits to be set aside, the revised valuation of the goods and the issue of clubbing of clearances from the same factory also does not survive. The impugned orders are set aside - Appeal allowed.
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CST, VAT & Sales Tax
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2024 (8) TMI 470
Maintainability of petition - availability of alternative efficacious statutory remedy under Section 62 of the KVAT Act, 2003 - authority of officers to make a sudden visit - HELD THAT:- The facts are sufficiently stated and do not require reiteration. The petitioner contends M/s. Three 1st Enterprises and Trishul Bar and Restaurant are different entities. The Tax Officers could not have made a sudden visit. The objection is also raised about the authority of the Tax Officers to make a sudden visit. Several contentions are urged regarding the identity of the petitioner and that of the Trishul Bar and Restaurant. It is a disputed question of fact. In general, the disputed question of fact is not investigated in a proceeding under Article 226 of the Constitution of India. As far as the endorsement issued by the Commercial Tax Officer, seeking the production of books of accounts, the petitioner has an alternative efficacious statutory remedy before the jurisdictional Joint Commissioner of Appeals by filing an appeal as per the provisions of the Act. Hence, the petitioner is at liberty to avail the statutory remedy. The time spent before this court shall be excluded. The Writ Petition is disposed of, directing the petitioner to avail statutory remedy as provided under law.
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Indian Laws
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2024 (8) TMI 469
Debarring the appellant for a period of five years - appellant contended that the Corporation could only impose a penalty for late payments under clause 9 and not blacklisting - HELD THAT:- Blacklisting has always been viewed by this Court as a drastic remedy and the orders passed have been subjected to rigorous scrutiny. In ERUSIAN EQUIPMENT CHEMICALS LTD. VERSUS STATE OF WEST BENGAL ANR. [ 1974 (11) TMI 89 - SUPREME COURT ], this Court observed that ' The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction.' What is significant is that while setting out the guidelines prescribed in USA, the Court noticed that comprehensive guidelines for debarment were issued there for protecting public interest from those contractors and recipients who are non-responsible, lack business integrity or engage in dishonest or illegal conduct or are otherwise unable to perform satisfactorily - blacklisting will not only debar the person concerned from dealing with the concerned employer, but because of the disqualification, their dealings with other entities also is proscribed. Even in the terms and conditions of tender in the present case, one of the conditions of eligibility is that the agency should not be blacklisted from anywhere. The appellant, after the award of the tender, has admittedly paid an amount of Rs. 3,71,96,265/-, though, according to the Corporation, the outstanding amount as on the date of the debarment was Rs. 14,63,24,727/-. It is found that the appellant, after the award of the tender, has admittedly paid an amount of Rs. 3,71,96,265/-, though, according to the Corporation, the outstanding amount as on the date of the debarment was Rs. 14,63,24,727/-. However, as would be clear from the facts discussed hereinabove, right from the inception there have been issues between the appellant and the Corporation with regard to the fulfilment of the reciprocal obligations in the bid document. There has been exchange of correspondence between the parties with each side blaming the other for not performing the reciprocal obligations. The impugned judgment set aside - appeal allowed.
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2024 (8) TMI 468
Dishonour of Cheque - insufficient funds - presumption contemplated by virtue of Section 118 of the NI Act 1881 - standard of preponderance of probabilities - reasons to believe - HELD THAT:- Earlier, a case of dishonour of a cheque was dealt through provisions of Section 420 read with Section 415 of the IPC 1860. To enhance the acceptability of cheques as well as to provide for adequate safeguards to prevent harassment of honest drawers through painting the liability arising out of dishonour of a cheque with a punitive brush, an amendment to the NI Act 1881 was brought about by introducing Chapter VIII. Thence, seeking to promote credibility in transactions through the medium of banking channels and operations as well as their efficacy. This Court in ICDS. LTD. VERSUS BEENA SHABEER [ 2002 (8) TMI 577 - SUPREME COURT] , has held that proceedings under Section 138 of the NI Act 1881 can be initiated even if the cheque was originally issued as security and was subsequently dishonoured owing to insufficient funds. The failure to honour the concerned cheque is per se deemed as a commission of an offence under Section 138 of the NI Act 1881. The NI Act 1881 enlists three essential conditions that ought to be fulfilled before the said provision of law can be invoked. Firstly, the cheque ought to have been presented within the period of its validity. Secondly, a demand of payment ought to have been made by the presenter of the cheque to the issuer, and lastly, the drawer ought to have had failed to pay the amount within a period of 15 days of the receipt of the demand. These principles and pre-requisites stand well established through Judgment of this Court in SADANANDAN BHADRAN VERSUS MADHAVAN SUNIL KUMAR [ 1998 (8) TMI 541 - SUPREME COURT] . There is an explicit limitation of 30 days, beginning from period when the cause of action arose, prescribed by the statute vide Section 142(b) of the NI Act 1881 to initiate proceedings under Section 138 of the NI Act 1881. Since a presumption only enables the holder to show a prima facie case, it can only survive before a court of law subject to contrary not having been proved to the effect that a cheque or negotiable instrument was not issued for a consideration or for discharge of any existing or future debt or liability - In this backdrop, it is pertinent to make a reference to a decision of 3-Judge Bench in BIR SINGH VERSUS MUKESH KUMAR [ 2019 (2) TMI 547 - SUPREME COURT] which went on to hold that if a signature on a blank cheque stands admitted to having been inscribed voluntarily, it is sufficient to trigger a presumption under Section 139 of the NI Act 1881, even if there is no admission to the effect of execution of entire contents in the cheque. Admittedly, the Appellant was able to establish that the signature on the cheque in question was of the Respondent and in regard to the decision of this Court in Bir Singh, a presumption is to ideally arise - The Respondent has been able to shift the weight of the scales of justice in his favour through the preponderance of probabilities. Upon perusal of the aforementioned principles and applying them to the facts and circumstances of the present matter, it is evident that there is no perversity and lack of evidence in the case of the respondentaccused. The concurrent findings have backing of detailed appraisal of evidences and facts, therefore, do not warrant interference in light of above enlisted principles. Appeal dismissed.
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