TMI Tax Updates - e-Newsletter
August 16, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

GST

• Massive crackdown on fake GST registrations from 16 Aug-15 Oct 2024. Suspicious GSTINs flagged, ITC blocked & recovered, arrests made.

  Comprehensive guidelines issued for second special All-India drive against fake GST registrations from 16th August to 15th October 2024. Suspicious GSTINs identified through data analytics by GSTN/DGARM to be shared with tax authorities for verification. Non-existent GSTINs to be suspended/cancelled, with input tax credit blocked and recovered. Nodal officers appointed for inter-jurisdictional coordination through GSTN's 'Initiate Enquiry' module. Weekly reporting mechanism established for monitoring progress. Tax evasion detected to be quantified, with recoveries and arrests made. Unique modus operandi to be compiled for sharing across tax administrations. Feedback on outcome against each GSTIN shared by GSTN to be provided after drive's conclusion.
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• High Court quashed seizure order as E-way bill produced before order; no contravention occurred. Authorities didn't verify transaction.

  The High Court quashed the seizure order and allowed the petition, holding that once the E-way bill was produced before the seizure order could be passed, it could not be said that any contravention of the Act's provisions had occurred. The court observed that although the goods were initially detained due to the absence of an E-way bill, the petitioner subsequently produced the E-way bill before the seizure order was issued. The authorities had the power to survey the petitioner's business premises to verify the transaction's correctness but chose not to exercise it. The court distinguished the case from the precedent cited, where goods were seized due to a complete lack of accompanying documents.
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• Illness grounds for quashing assessment orders. Remanded for fresh orders considering petitioner's reply & medical condition within 30 days.

  Assessment orders quashed due to petitioner's illness, remanded for fresh orders. Petitioner directed to file consolidated reply within 30 days. Cases remitted to respondent to pass fresh orders on merits and in accordance with law after considering petitioner's reply and medical condition. Petitioner had not replied to show cause notices, citing kidney ailment treatment. Impugned orders treated as addendum to show cause notices.
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• GST Registration cancellation: violating natural justice. Registration restored but ITC utilization barred until fresh proceedings.

  The show cause notice for cancellation of registration u/s 29(2)(e) was invalid as it lacked specific factual details and reasons for alleging fraud, misstatement, or suppression of facts. The subsequent orders cancelling registration were quashed due to the defective notice violating principles of natural justice. While the registration was restored, the petitioner cannot utilize any remaining unutilized Input Tax Credit until fresh show cause proceedings conclude.
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Income Tax

• UIDAI exempted from income tax on govt grants, fees, interest u/s 10(46) for 5 yrs till 2028-29. Conditions apply. No commercial activity.

  Notification grants exemption from specified income u/s 10(46) of Income Tax Act 1961 to Unique Identification Authority of India (UIDAI), a statutory body under Aadhaar Act 2016, for grants/subsidies from Central Government, fees/subscriptions, authentication/enrolment/updation charges, term deposits, interest on bank deposits. Conditions - no commercial activity, nature of income unchanged, filing return u/s 139(4C)(g). Applicable for assessment years 2024-25 to 2028-29 and relevant financial years 2023-24 to 2027-28.
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• West Bengal Transport Workers' Social Security Scheme exempted from income tax u/s 10(46) for govt grants, cess, fees & interest income.

  The Central Government has notified 'West Bengal Transport Workers' Social Security Scheme' (PAN AAALW0133G) for exemption from specified income u/s 10(46) of the Income Tax Act, 1961. The exempted income includes government grants, cess under West Bengal Motor Transport Workers' Welfare Cess Act, 2010, registration fees from beneficiaries, and interest on bank deposits. The exemption is subject to conditions of non-engagement in commercial activities, unchanged nature of activities and income, and filing of income tax returns. It is applicable retrospectively from assessment years 2021-2022 to 2025-2026.
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• Gift receipts accepted, penalty waived; interest applicable. Justified 'spirit of settlement'. Conditions u/s 115BBE not met. No interference warranted.

  The Settlement Commission's order accepting the additional income offered as cash gifts from relatives was reasonable and fair. The immunity from penalty and prosecution was ordered, but interest u/ss 234A, 234B, and 234C was to be levied. The assessee filed an affidavit u/r 8 explaining the receipt of gifts, which was not rebutted by the revenue. The Settlement Commission's conclusion to accept the explanation 'in the spirit of settlement' was justified. The Commission observed that the conditions prescribed u/s 115BBE were not met. The HC held that the Settlement Commission's reasoned order, in keeping with the spirit of settlement under Chapter XIX-A, did not warrant interference.
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• Penalty on LAO for non-TDS deduction on land acquisition compensation set aside as he followed Court order in good faith.

  The High Court held that the Land Acquisition Officer (LAO) cannot be penalized u/s 201 and 201(1A) of the Income Tax Act, 1961 for non-deduction of TDS on compensation paid for acquisition of agricultural land. The LAO genuinely followed the advice of his superior, a District Revenue Officer, based on legal advice and directions from the High Court. While the Court's order may have been inconsistent with other High Court orders, the LAO could not ignore or violate the Court's presumptively correct order until set aside on appeal. Absence of fault and genuine belief based on the High Court's judgment that TDS need not be deducted on interest paid, renders the LAO's action of releasing interest without TDS deduction neither wrongful nor illegal. The LAO cannot suffer due to Court orders. The penalty imposed by the Assistant Commissioner of Income Tax, TDS Circle is set aside.
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• Legal reps don't need to inform about assessee's death. Dept must recall notices issued to deceased. Legal heirs need fresh notice.

  The High Court held that there is no statutory obligation on legal representatives to immediately inform about the death of an assessee or cancel the PAN registration. If the Department becomes aware of an assessee's death after issuing a notice, there must be a mechanism to recall such notice as serving it on a deceased person would be futile. The legal heirs cannot respond unless served with a notice. The Court quashed the impugned notice for being issued to a deceased person.
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• Reassessment notice quashed; interest from NCDs taxed u/s 194LD, not dividend; variation in reasons recorded & final order.

  The High Court quashed the impugned notice u/s 148A(b), order u/s 148A(d), and consequential notice u/s 148, holding that the interest income derived from Non-convertible Debentures floated by Genpact India Private Limited was appropriately offered to tax u/s 194LD. The Court observed a manifest variation between the initial reasons recorded for reassessment and the final order disposing of objections. Furthermore, even if the payment were assumed to be dividend, the liability to pay tax would be on the company declaring or paying the dividend, not the recipient. The Court also noted that issues emanating from the CIT(IT)'s order u/s 263 are pending adjudication in another appeal, which cannot sustain the reassessment proceedings impugned herein.
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• Registration approved despite delay in filing audit report. Commissioner should have condoned delay instead of rejecting application.

  Registration u/s 12A - Rejection of petitioner's application u/s 119(2)(b) for delay in filing audit report in Form-10B. Held that petitioners are entitled to succeed. Delay in filing audit report in Form-10B can at best be 30 days, as law requires report to be uploaded at least a month before due date for filing returns. Considering extent of delay, Commissioner should have exercised jurisdiction u/s 119(2)(b) to condone delay instead of taking strict view. Relying on Al Jamia Mohammediyah Education Society case, writ petitions allowed by quashing orders dismissing petitioners' applications u/s 119(2)(b). Delay in filing audit report in Form-10B stands condoned.
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• Settlement Commission can't reopen concluded proceedings via Sec 154; its order final except for fraud/ misrepresentation. Interest payable only until settlement application allowed.

  The High Court held that the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Income Tax Act. Section 154 allows rectification of orders, but it is not applicable to the Settlement Commission, which is a quasi-judicial body like the Income Tax Appellate Tribunal (ITAT). While the ITAT has the power to rectify orders u/s 254(2), no such power is given to the Settlement Commission. The order of the Settlement Commission is final and conclusive u/s 245I, except in cases of fraud or misrepresentation. Interest u/s 234B is payable on income disclosed in the return and before the Settlement Commission until the Commission acts u/s 245D(1). After allowing the application for settlement, no further interest u/s 234B is chargeable. The invocation of Section 154, which was held inapplicable to Chapter XIX-A proceedings, cannot be justified for levying interest u/s 234B.
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• Reassessment quashed due to email issues. Petitioner to address income source for deposits, pay Rs.25L/year. Fresh orders for closed firm's assessment.

  Validity of reassessment proceedings questioned due to non-filing of responses against notices issued, as old email ID was inaccessible. Court held petitioner deserves fair chance to address grievances regarding reopening of assessment u/s 147 r.w.s.144B of Income Tax Act for partnership firm that closed business. Petitioner must establish if huge deposits were accounted for. Impugned assessment orders quashed, case remitted to pass fresh orders. Petitioner directed to pay Rs. 25,00,000/- each for respective assessment years and file reply to Section 148A(b) notices within 4 months.
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• Interest earned on margin deposits for business loans rightly treated as business income, netted off against interest capitalized in WIP. Upheld based on nexus with business.

  Interest income earned from fixed deposits created as margin for availing business loans was rightly treated as business income and netted off against interest expenditure capitalized in work-in-progress (WIP). CIT(A) and coordinate bench for earlier year upheld this treatment based on nexus between interest earned and assessee's business. Decisions relied upon held such interest to be business income, not income from other sources. Assessing Officer failed to establish that fixed deposits were from surplus funds rather than borrowed advances/overdraft facility for business purposes. Assessee established funds were incidental to business activity, hence interest cannot be treated as income from other sources. CIT(A)'s order upheld, decided against revenue.
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• Revised return & Form 67 filed on time. Salary earned abroad taxed under DTAA. Late filing can't deny treaty benefit. No double taxation.

  Assessee filed revised return of income and Form 67 within extended due date. Assessee paid taxes on salary earned in Netherlands under Article 23 of India-Netherlands DTAA. Late filing of Form 67 cannot be reason for denying treaty benefit when salary earned abroad and tax paid in foreign country. Assessee cannot be taxed twice on same income resulting in double taxation. CIT(A) and AO erred in denying assessee's claim. Appeal allowed.
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• Penalty for non-compliance with income tax notices invalid without proof of service & willful default. Separate proceedings required for each failure.

  The Appellate Tribunal held that the penalty imposed u/s 272A(1)(d) for non-compliance with notices u/s 142(1) was not legally valid. The Assessing Officer failed to prove actual service of notices u/s 142(1), and willful default by the assessee could not be established. The Tribunal observed that separate penalty proceedings should have been initiated for each failure, instead of a consolidated penalty order. In the absence of proof of service, the penalty was deleted, and the assessee's appeal was allowed.
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• Assessee undervalued sales, but no addition under sec 43CA. Excess payment not interest, no TDS. Sec 40(a)(ia) not applicable.

  The assessee undervalued sales in books compared to market value of flats. Received advances per agreement, executed sale deeds later at agreement value. No addition under sec 43CA as part consideration received by cheque based on agreement. ITAT directed AO to delete addition. Excess payment to purchaser not interest, no TDS obligation per Beacon Projects case. Amount paid for surrender of rights not interest, no TDS obligation. Sec 40(a)(ia) not applicable. Decided in favor of assessee.
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• Trustee bought car with charity funds but denied tax exemption. Registering in managing trustee's name for tax benefit rejected.

  Denial of exemption u/ss 11 and 12 due to car purchase in trustee's name using funds meant for charitable purposes. Assessee's argument of registering car in managing trustee's name to save taxes rejected. CIT(A) upheld Assessing Officer's decision. Assessee failed to provide details supporting car's use for charitable activities. Claim of submitting vehicle log book dismissed as unsupported. ITAT affirmed denial of exemption.
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• Assessment reopened to check non-filing status. Reopening based on survey operation at hotel. Incorrect return filing info = invalid jurisdiction.

  The case involves the reopening of assessment u/s 147 to determine if the assessee is a non-filer. Reopening was based on a survey operation at a hotel owned by the wife of the HUF's Karta. The assessee's original return filing status was not mentioned in the reasons recorded by the AO, leading to an invalid assumption of jurisdiction u/s 148. Citing relevant case law, including Gaurav Joshi, 'Sagar Enterprises', 'Fortune Metaliks Ltd.', 'Monika Rani', and 'Baba Kartar Singh Dukku Education Trust', the Tribunal held that incorrect facts regarding return filing render the jurisdiction u/s 148 invalid due to lack of independent assessment by the AO. Decision favors the assessee.
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• Investment in hotel building not explained. DVO report estimation-based, no incriminating material found. 4-star hotel qualifies for deduction.

  Assessment u/s 153A - unexplained investment in Hotel Building - addition under sec 69 r.w.s. 115BBE - reliance on DVO report post-search - Held, DVO report estimation-based, no incriminating material found during search, addition not valid. Rejection of books u/s 145(3) - difference in investment amount, books not rejected due to deletion of difference. Disallowance of current year business loss - unjustified due to sustainable books rejection. Disallowance u/s 35AD - hotel building expenditure - 4-star rating obtained, qualifies for deduction, AO's misinterpretation rejected, claim allowed.
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• Dispute over agricultural income resolved! Assessing Officer added income, but Tribunal ruled in favor of assessee.

  The case involved a dispute over the determination of agricultural income, focusing on the variance between admitted and net agricultural income. The Assessing Officer (AO) added an amount u/s 69 due to the difference in agricultural income reported. The case underwent limited scrutiny to verify the income source. The Appellate Tribunal noted that the assessee had submitted a sworn affidavit asserting the sole source of agricultural activity without investing the disputed amount. The AO did not challenge this affidavit, and the assessee was not cross-examined. Citing legal precedents, the Tribunal ruled in favor of the assessee, emphasizing that sworn statements should be accepted unless proven otherwise. Consequently, the AO's addition to the assessee's income was overturned.
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• Appellant's cash deposits during demonetization were explained sufficiently, supported by evidence of cash withdrawals. No additions.

  The appellant could not establish the source for cash deposits during demonetization. The Appellate Tribunal held that sales cannot be rejected solely based on higher sales compared to previous periods. The explanation of receiving cash from customers for jewelry sales was considered reasonable. The appellant provided evidence of sufficient cash withdrawals before demonetization, supporting the cash deposits. The Tribunal found the explanation satisfactory, citing a precedent. The Tribunal upheld the deletion of additions by the Commissioner, dismissing the revenue's appeal.
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• Assessee entitled to interest relief u/s 234B if tax paid before final determination. Refund exceeds 10% of tax demand.

  The appeal was made regarding the incorrect charge of interest u/s 234B of the Act in an order passed u/ss 254, 143(3), and 153A. The issue was whether the assessee should receive credit for taxes paid after the assessment year but before the final determination of demand by the AO for calculating interest u/s 234B. The bench found that the assessee is entitled to relief of interest if tax is paid before total income determination or regular assessment. The AO was directed to give credit for taxes paid while computing interest u/s 234B. The bench also ruled that if the refund amount exceeds 10% of the tax determined, interest u/s 244A should be paid. The assessee was found eligible for interest u/s 244A based on undisputed facts, resulting in a refund of Rs. 2,38,31,324, exceeding 10% of the tax demand. The appeal grounds raised by the assessee were allowed by the bench.
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• Penalty overturned for non-compliance with notices due to hostile Director. Appeal allowed by Tribunal.

  The case involves penalty imposition u/s 272A(1)(d) for non-compliance with statutory notices issued u/ss 143(2) and 142(1). Assessee explained non-compliance due to a hostile Director holding relevant information. The argument that subsequent compliance cannot be considered as assessment was u/s 144 was dismissed. Assessee's argument focused on substantial compliance post-penalty order. Penalty u/s 272A(1)(d) was deleted, and assessee's appeal allowed by the Appellate Tribunal (ITAT).
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• Dispute over Income Tax Act adjustments due to Form 10B filing issue. AO's scope limited. CPC made errors. Remanded for review.

  The case involves a dispute regarding adjustments made u/s 143(1) of the Income Tax Act due to the denial of exemption u/s 11 for not electronically filing Form 10B. The assessing officer's scope u/s 143(1) is limited to prima facie mistakes apparent from available records. The Central Processing Center (CPC) in Bengaluru made adjustments based on non-electronic filing of Form 10, despite the form being later filed electronically. The issue requires reconsideration by the AO, as seen in similar cases where the Tribunal directed verification of manually filed forms to assess exemption claims. The matter is remanded to the AO for proper consideration, and the appeal by the assessee is partly allowed.
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Customs

• SCOMET list: Aircraft engines from U.A.E. deemed civilian; export rules must be rational

  The case involves the import of aircraft engines from the U.A.E. and the invocation of Catch-all provisions under Para 10.05 of the Foreign Trade Policy (FTP), 2023. The petitioner sought SCOMET authorization from the DGFT for exporting aircraft parts, claiming they are for civilian use. The court found that the engines in question were certified for civil aviation and did not fall under the Catch-all provisions. The court emphasized the need for rationality in export regulations, stating that items certified for civil use should not be restricted based on potential military applications. The impugned notification was quashed, and the writ petition was allowed by the High Court.
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• Dispute over import valuation! Court emphasizes written certificate for electronic evidence. Appellant's challenge upheld.

  The case involves a dispute regarding valuation for import assessment. The appellant challenges the rejection of declared value in favor of depreciated value in the Valuation Certificate issued by a Customs Examiner (CE). The court refers to ANVAR P.V. case, emphasizing the requirement of a written certificate under CA 1962 for admissibility of electronic evidence. It clarifies the binding legal position on admissibility of electronic evidence. Section 138C of CA 1962 allows admissibility of computer print-outs subject to conditions, with lack of certificate being fatal to the case. The appellant imported secondhand machines, with valuation based on Circular not challenged. The court sets aside the order, stating no justification for rejecting CE's Certificate, and rules out duty demand or penalties due to lack of merit. - CESTAT
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FEMA

• Property forfeiture challenge denied under SAFEMA & TADA. No nexus needed for notice validity. Appellant's claims lacked proof.

  The case involves property forfeiture under SAFEMA, which was also part of TADA proceedings. The Appellant's challenge based on different statutes was rejected. The validity of the notice u/s 6 of SAFEMA does not require establishing a nexus with the detainee's income. The argument of violating natural justice principles due to quick decision-making was dismissed. The Appellant's acquisition of Flat No. 604 was deemed legitimate, nullifying the forfeiture. The Appellant, as a tenant, should not be affected by property forfeiture. Lack of evidence led to rejection of challenges regarding other properties and income sources. The Appellant's claims of property acquisition lacked substantiation, leading to the dismissal of challenges against forfeiture.
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Corporate Law

• NFRA appoints Sanjay Kallapur & Prof. R. Narayanswamy as part-time members. Amendment notified by MCA under Companies Act.

  This notification amends the National Financial Reporting Authority appointment of Part-time members Rules, 2022. It substitutes serial numbers (8) and (9) with new entries: "(8) Shri Sanjay Kallapur" and "(9) Professor R. Narayanswamy". The amendment comes into force on the date of publication in the Official Gazette. It is issued by the Ministry of Corporate Affairs under the Companies Act, 2013.
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• Foreign companies must file docs in Form FC-1 with Registrar, Central Registration Centre. Rules effective 09.09.2024.

  The notification amends the Companies (Registration of Foreign Companies) Rules, 2014. It substitutes the word "Registrar" with "Registrar, Central Registration Centre" in rule 3(3). In rule 8(1), a proviso is inserted mandating foreign companies to deliver documents for registration in Form FC-1 to the Registrar, Central Registration Centre. The rules come into force on 09.09.2024.
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Indian Laws

• Cheques for debts should be decided at trial, not initially. NI Act promotes cheque use for business. Debt terms defined.

  The court held that the determination of whether cheques were issued for a legally enforceable debt or other liability should be made at trial, not at the initial stage. The court emphasized that the purpose of the NI Act is to promote the use of cheques in business transactions and that the term "debt or other liability" includes both legally enforceable debts and other liabilities. The court noted that the issue of whether a debt is time-barred or legally enforceable, as well as other related matters, should be addressed during trial proceedings. The court declined to dismiss the complaint at that stage and directed the Trial Court to proceed with the case according to the law.
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• Partners are jointly liable for business acts under Partnership Act. Directors have different responsibilities. Partners remain liable without public notice of retirement.

  The complaint of dishonour of cheque was challenged for lack of necessary averments against the partners. Partnership Act provisions establish partners' liability for firm's business. Partners are agents and jointly/severally liable for firm's acts. In a partnership, all working partners are responsible for firm's business. Directors of a company have different responsibilities. Without public notice of retirement, partners remain liable. Court quashed the complaint against one partner (a sleeping partner) but allowed it to proceed against others. The High Court disposed of the petition.
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• Dispute over bounced cheques: Did Respondent have to repay? Court looked at legal duties and presumptions. Respondent raised doubt, won.

  The case involved a dispute regarding the dishonour of cheques, with the key issue being whether the Respondent had a legal obligation to pay back the money under the cheques. The Appellate Court considered the scope of interference in a judgment acquitting the accused and the statutory presumptions u/ss 138 and 139 of the NI Act. The Respondent admitted executing promissory notes and cheques which were later dishonoured. The Court noted that the presumption u/s 139 could be rebutted by the accused with a defense based on a preponderance of probabilities. The Respondent successfully rebutted the presumption by raising doubts about the Petitioner's claims, shifting the burden of proof. The Petitioner failed to discharge this burden, leading to the Respondent's acquittal u/s 138 of the NI Act. The petition seeking leave to appeal was dismissed by the High Court.
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IBC

• Appeal dismissed as court rules no breach of Insolvency Code. Corporate Debtor's non-payment caused default.

  The appeal sought to quash an Expression of Interest (EoI) for a new contractor due to an alleged error in an Assignment Agreement. The court found that the EoI did not breach the Insolvency and Bankruptcy Code. The Facility Use Agreement showed the appellant had operational rights but not ownership. The court ruled that the Corporate Debtor was not in possession, so Section 14(1)(d) did not apply. The Adjudicating Authority correctly upheld the EoI. The Corporate Debtor's non-payment of facility charges led to default and SARFAESI Act proceedings. The appeal was dismissed by NCLAT.
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SEBI

• SEBI amends REIT regulations, exempting REITs from filing draft offer documents for fast track rights issues, subject to conditions.

  This notification amends the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014. It introduces a new proviso exempting REITs from filing draft offer documents with SEBI in case of fast track rights issues, subject to conditions specified by SEBI from time to time. The amendment comes into force on the date of its publication in the Official Gazette.
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Service Tax

• Can excess service tax be adjusted against short-payment? Tribunal says no. Recovery rule must apply. Department's time limit extended unjustified. CESTAT allows appeal.

  The case involves the adjustment of short-payment of tax with excess payment of service tax on services exported overseas. The appellant sought to adjust an inadmissible credit against the excess service tax paid, but the tribunal held that such adjustment was not permissible as it did not relate to subsequent service tax liabilities. The recovery of the erroneously availed credit was found to be applicable only after the insertion of a recovery provision in the relevant rule. The tribunal also ruled that the invocation of an extended period of limitation by the Department was not justified as they were aware of the issue well within the normal limitation period. As a result, the impugned order was set aside, and the appeal was allowed by the CESTAT.
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• Appeal rights under FEMA clarified by top court. Orders of Tribunal can be challenged in High Court with restrictions. No bypassing statutory provisions.

  Service Tax liability and Pre-deposit - The Supreme Court held that Section 35 of FEMA confers the right of appeal to any person aggrieved by "any order" or decision of the Appellate Tribunal, subject to limitations. Section 35G allows appeals to the High Court from "every order" of the Tribunal, with statutory restrictions. An order need not adjudicate on parties' rights to qualify for appeal. Statutory limitations do not render an order non-appealable. Writ petition not entertained due to alternative remedy and lack of territorial jurisdiction, preventing bypassing of statutory provisions. Petition dismissed. (HC = High Court)
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• Railway rakes control by Indian Railways. Not a tangible goods service. Appeal allowed.

  The case involved a dispute over the classification of services as either Supply of Tangible Goods Service or not, regarding the activity of allowing clients to use railway rakes for goods transportation. It was held that the appellant lacked control over the rakes once handed to Indian Railways, making the service received by clients from Railways "Transportation of goods by Rail," not a supply of tangible goods service. The possession and control of the rakes by Indian Railways, not the appellant, precluded the activity from being taxable. The dispute period from 2008-09 to 2009-10 was deemed time-barred, with no fresh material supporting tax evasion. The demands were set aside on both merit and limitation grounds, and the appeal was allowed by CESTAT.
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VAT

• High Court upheld tax assessment u/s 7A for missing sale bill. Burden on dealer to prove transactions not taxable. Penalty upheld.

  The High Court confirmed the tax assessment u/s 7A for nonproduction of sale bill. The burden of proof lies on the dealer to show transactions are not taxable. Failure to prove second sale results in being deemed first seller/purchaser. Tax levy upheld due to lack of evidence. Disallowed turnover on export sales upheld due to product mismatch. Penalty upheld as it is a percentage of disputed tax. Petition dismissed.
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TMI Short Notes

• Income Tax:

  Unraveling the Royalty Conundrum and DTAA: ITAT's Stance on Marketing and Reservation Fees

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• Income Tax:

  Royalty or Not? Decoding the Taxability of Marketing and Reservation Contributions under India-USA DTAA

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• Income Tax:

  Unraveling the Intricacies: Assessing a Political Party's Claim for Income Tax Exemption

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• Income Tax:

  Bogus Capital Gains and Accommodation Entries: Unraveling the Penny Stock Scam and Tax Evasion

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• Income Tax:

  Strict Interpretation of Exemption Provisions: Supreme Court's Ruling on Section 10B(8) of the Income Tax Act

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• Income Tax:

  Disallowance u/s 14A: Prospective or Retrospective Effect of the Amendment?

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• Income Tax:

  Navigating the Complexities of "Charitable Purpose" in Income Tax Exemptions

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• Income Tax:

  Cooperative Banks vs. Primary Agricultural Credit Societies: Implications for Section 80P Deduction

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• Income Tax:

  Exemption u/s 11: Condonation of Delay in Filing Form 10

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• Income Tax:

  Interpreting Section 249(4)(b) of the Income Tax Act: When Non-Payment of Advance Tax Cannot Dismiss an Appeal

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Articles

• RE-ASSESSMENT ON THE FAILURE TO UPLOAD AND DIGITALLY FILE FORM 10

Notifications

• Companies Law

• G.S.R. 496 (E) - dated 13-8-2024 - Co. Law
  National Financial Reporting Authority appointment of part-time members (Amendment) Rules, 2024.

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Circulars / Instructions / Orders

• GST - States - 12/2024-Kerala SGST - dated 13-8-2024
  Manner of penalty calculation under IGST Act, 2017 for the show cause notices issued under section 73(1)/74(1) of the KSGST Act, 2017 read with section 20 of the IGST Act, 2017 - clarifications issued
• DGFT - Trade Notice No. 12/2024-25 - dated 14-8-2024
  API Integration and Bulk Upload Facility for Self-Certification of eBRC

News

• Financial Stability in the Emerging Technology Landscape (Speech by Shri Swaminathan J, Deputy Governor, Reserve Bank of India - August 14, 2024 - at the International Conference of the International Association of Deposit Insurers- Asia Pacific Regional Committee (IADI-APRC) hosted by the Deposit Insurance Credit Guarantee Corporation (DICGC) held in Jaipur)

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• India’s total exports estimated to grow at 2.81% in July 2024.The cumulative overall exports during April-July 2024 estimated to grow at 6.65%.

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Case Laws:

• GST

• 2024 (8) TMI 772
  Seizure order - detention of goods on the ground that the goods were not accompanying with proper documents as require under the Act as E-way bill - HELD THAT:- It is admitted between the parties that at the time of interception of the goods, no E-way bill in respect of tax invoice no. 22 dated 12.7.2019 was produced, therefore, the goods were detained, however before the seizure order could be passed and after issuance of show cause notice, the E-way bill in respect of tax invoice no. 22 dated 12.7.2019 was produced, in which no discrepancy was pointed out by any of the respondent authorities. The only ground for detention being taken by the respondent authority is that once the goods in question was not accompanying with proper documents, there was intention to avoid the payment of tax. In the case of M/S HAWKINS COOKERS LIMITED VERSUS STATE OF U.P. AND 2 OTHERS [ 2024 (2) TMI 760 - ALLAHABAD HIGH COURT] the goods were seized on the ground that no document was available along with the goods, therefore, the proceedings under Section 29 of the Act was justified by the Court. However, in the present case, the consignment of two different dealers were loaded in the vehicle and two separate tax invoices i.e. tax invoice no. 21 dated 12.7.2019 and tax invoice no. 22 dated 12.7.2019 were generated. So far as tax invoice no. 21 dated 12.7.2019 is concerned, there is no dispute in this respect. However so far as tax invoice no. 22 dated 12.7.2019 is concerned, admittedly, E-way bill was not produced at the time of detention and the same was produced before passing the seizure order. The GST authorities have full mechanism as well as power that after detaining the goods, if the same was not accompanying with the proper documents, the authority could have made survey of the business premises of the petitioner to find out the correctness of transaction but the respondent authorities have chosen in their wisdom not doing so. Once E-way bill was produced before the seizure order could be passed, it would not be said that any contravention of the provision of the Act have been made by the petitioner. The impugned order dated 14.7.2019 passed by the Assistant Commissioner, Mobile Squad -11, Kanpur Nagar and the order dated 18.11.2021 passed by Additional Commissioner, SGST Grade -II, Appeal IV, Kanpur Nagar are hereby quashed - Petition allowed.

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• 2024 (8) TMI 771
  Seeking issuance of a Writ of Certiorari to call for the records in connection with the order passed by the 2nd respondent - improper order by 2nd respondent without proper notice and opportunity to rectify - Violation of principles of natural justice - HELD THAT:- In the present case, the learned Government Advocate for the respondents contended that three notices were issued to the petitioner. According to the petitioner, the petitioner was not aware of issuance of the notice and the documents related to the disputed transactions were not furnished to them. In such circumstances, this Court is of the view that the impugned order came to be passed, without affording an opportunity of personal hearing to the petitioner to establish their case, thereby violating the principles of natural justice and that it is just and necessary to provide an opportunity to the petitioner to establish their case on merits and in accordance with law. The impugned order dated 31.12.2023 is set aside on condition that the petitioner deposits 20% of the disputed tax amount in respect of the impugned assessment period within a period of four weeks from the date of receipt of a copy of this order. This Writ Petition is allowed.

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• 2024 (8) TMI 770
  Violation of principles of natural justice - denial of an opportunity of hearing - challenge to order u/s 73 (9) read with Rule 142 of the Maharashtra GST Act - cancellation of GST registration of petitioner - HELD THAT:- The principles of natural justice were inbuilt in the statutory provisions itself and mandate an opportunity of hearing, either (1) Where a request in writing is received from the person chargeable with tax or penalty or (2) where any adverse decision is contemplated against such person. Even presuming, that no reply was given by the petitioners, that, however, did not prevent it from justifying the self-assessment for the period July, 2017 to March, 2018, submitted by him to the GST authorities, for which, an opportunity of hearing was necessary. The notice dated 01.11.2021 (page 41), indicates, that no date, time or venue was indicated for personal hearing, on the contrary, it was stated to be not applicable. The subsequent notice dated 14.12.2021 (page 45), 02.12.2022 (page 46) as well as the screen shot of the GST portal dated 26.2.2024, all depict the same position, considering which, it is apparent, that the requirement of Section 75 (4) of the GST Act, 2017 has not been complied with. The matter is remitted back to the respondent, to grant an opportunity of hearing to the petitioners as contemplated by Section 75 (4) of the GST Act, 2017 - Petition disposed off by way of remand.

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• 2024 (8) TMI 769
  Maintainability of petition - availability of alternative remedy of appeal - cancellation of GST registration - all the notices were uploaded in the portal - HELD THAT:- Since all the notices were uploaded in the portal and the petitioner has not noticed the same, the RC was cancelled by the respondent on 11.07.2023 due to the reason that the petitioner discontinued the business. In this circumstance, the assessment orders pertaining to the years 2018-19, 2019- 20 and 2020-21 are well within the limitation period. However, the assessment order pertaining to year 2021-22 is beyond the limitation period. Therefore, he requested for waiver of pre-deposit of 10%. This Court does not accept the contention of the learned counsel for the petitioner for the reason that the reply of the petitioner was not accepted and that is the reason DRC-01A was issued. Though the notices were uploaded, the petitioner did not file their reply. It is the fault of the petitioner. This Court is inclined to grant liberty to the petitioner to avail the appeal remedy and accordingly, the petitioner is permitted to file an appeal before the authority concerned within a period of 30 days from the date of receipt of a copy of this order - Petition disposed off.

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• 2024 (8) TMI 768
  Challenge to N/N. 56/2023 dated 28.12.2023 issued by the respondent No.2 - ultra vires to the provisions of Section 168A of the CGST Act of 2017 or not - Extension of limitation under the provisions of Section 168(A) of the Central Goods and Service Tax Act, 2017 - HELD THAT:- This Court having given an anxious consideration of the matter is of the opinion that the matter as to whether there was a force majeure and what were the circumstances, under which the provisions of Section 168A was invoked would require a determination and the same can be done on the basis of an affidavit to be filed by the respondent authorities. Be that as it may, a perusal of the materials on record prima facie show that there was no recommendation made by the GST Council before issuance of the Notification No. 56/2023 dated 28.12.2023. Under such circumstances, it is the opinion of this Court that if the Notification No. 56/2023 cannot stand the scrutiny of law, all subsequent action(s) taken on the basis thereof also cannot be sustainable. This Court till the next returnable date, directs the respondent authorities not to take any coercive action against the petitioner in respect to the notice dated 08.05.2024. It is, also made clear that during the subsistence of the instant order, the respondent authorities can pass the order under Section 73 (9) of the CGST Act of 2017. However, no coercive actions be taken on such order, till the next date. List again on 21.08.2024.

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• 2024 (8) TMI 767
  Challenge to assessment orders relating to assessment years 2018-19, 2019-20, 2020-21 and 2021-22 - responses, to the queries raised in the course of inspection, were not taken into consideration while issuing the impugned orders - mismatch between the petitioner's GSTR 3B and GSTR 1 returns - HELD THAT:- The petitioner has placed on record the statement dated 19.09.2022 and the reply dated 26.10.2022. Although the inspection report and the findings of the inspection officer were adverted to in the impugned order, the petitioner's responses in the course of inspection do not find mention therein. It also appears that the tax proposals were confirmed under Section 74 of applicable GST enactments. As regards assessment period 2019-20, on examining the order, with regard to defect no.2 relating to the mismatch between purchase value as per GSTR 2A and aggregate value of e-way bills, the tax dues as per the e-way bill was Rs. 4,01,89,368/-, whereas, it was Rs. 4,15,51,852/- as per GSTR 2A. Liability, if any, should have been imposed on the difference between these two figures, which amounts to Rs. 13,62,400/-. The petitioner cannot be absolved of all responsibility for the current state of affairs since the petitioner failed to reply on merits during the adjudication process although about three months' time was provided after the show cause notice. For such reason, it is also necessary to put the petitioner on terms. The orders impugned herein are set aside on condition that the petitioner remits 5% in relation to each head of demand with the qualification that, as regards the defect no.2 in assessment year 2019-20, 5% shall be paid on Rs. 13,62,400/- and not on the amount specified in the impugned order. Such remittance shall be made within 15 days from the date of receipt of a copy of this order. Within the said period, the petitioner is permitted to submit a reply in respect of the show cause notices. The Writ Petitions are disposed of.

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• 2024 (8) TMI 766
  Violation of principles of natural justice - challenge to order - non-application of mind and failure to consider the material placed on record by the petitioner - HELD THAT:- On examining the impugned order, as regards the tax proposal relating to trade payables, it appears that such order was passed by assuming that 5% of the trade payables reflected in the financial statement were not paid within the 180 day period. This conclusion is entirely speculative and, therefore, calls for interference. As regards the tax proposal relating to excess input tax credit being availed, in respect of supplies where the difference in ITC is more than Rs. 5 lakhs, the petitioner should have produced certificates from the chartered accountants of the suppliers' concerned. This does not appear to have been done by the petitioner. After making adjustments, tax was imposed by assuming that there was sales suppression as a consequence of inward supply suppression. This conclusion is also speculative and reconsideration is warranted. About two tax proposals were dropped and, therefore, it is sufficient if reconsideration is restricted to confirmed tax proposals. The impugned order dated 17.11.2023 is set aside partly (only insofar as confirmed tax proposals are concerned) on condition that the petitioner remits a sum of Rs. 25 lakhs towards the disputed tax demand within 15 days from the date of receipt of a copy of this order. Subject to being satisfied that the said amount was received, the 2nd respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of a copy of this order. The Writ Petition is disposed of.

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• 2024 (8) TMI 765
  Challenge to assessment orders - petitioner has not replied to the SCN stating that the petitioner was undergoing treatment for Kidney ailment, which stands recorded in the respective impugned orders - HELD THAT:- Having considered the fact that the petitioner has not replied to the respective Show Cause Notices issued under Section 74 of the respective GST enactments, considering the predicament of the petitioner that the petitioner was ailing from Kidney problem and considering the fact that the petitioner has paid a sum of Rs. .5,76,810/-, the Court is inclined to come to the rescue of the petitioner by quashing the impugned orders and remitting the cases back to the respondent to pass fresh orders on merits and in accordance with law. The impugned orders, which stand quashed, shall be treated as addendum to the respective show cause notices that preceded the respective impugned orders - The petitioner is directed to file consolidated reply within a period of 30 days from the date of receipt of a copy of this order - Petition disposed off.

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• 2024 (8) TMI 764
  Challenge to impugned orders - impugned orders are quashed, as the petitioner failed to notice the notices in DRC 01 for the respective assessment years and to respond the same - HELD THAT:- Recording the submissions of the learned counsel for the petitioner that the petitioner is willing to deposit 10% of the disputed tax in the respective proceedings within the period of 30 days from the date of receipt of a copy of this order from the petitioner's Electronic Cash Register, the impugned orders stand quashed, with a liberty the petitioner to file a reply within a period of 30 days from the date of receipt of a copy of this order, subject to depositing 10% of the disputed tax in the respective proceedings. The impugned orders, which stand quashed, shall be treated as addendum to the show cause notices, which preceded the impugned DRC 01 dated 28.08.2023 and 21.09.2023 for the respective assessment years - It is expected that the petitioner will co-operate with the respondent, failing which, the respondent is at liberty to pass orders on merits based on the available materials. These Writ Petitions are disposed of.

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• 2024 (8) TMI 763
  Rejection of application for revocation of cancellation of registration - invalid show cause notice dated 09.11.2023 - violation of principles of natural justice - HELD THAT:- The show cause notice dated 09.11.2023 shows that the singular reason for taking action is that the registration is liable to be cancelled based on Section 29 (2) (e), which says that registration is obtained by means of fraud, wilful misstatement or suppression of facts. There are subsistence in the argument of the learned counsel for the petitioner that the factual backdrop or the reason on the strength of which, conclusion of fraud or misstatement or suppression of facts was drawn is totally absent in the show cause notice. The show cause notice, should spell out the factual backdrop of breach, on the strength of which the department has rejected and concluded that Section 29 (2) (e) of the Act, can be invoked. If minimum factual backdrop and nature of breach is not mentioned with accuracy and precision, the petitioner was not in a position to file reply. Needless to mention that the show cause notice dated 09.11.2023 became the foundation for issuance of orders dated 29.11.2023 and 23.02.2024, since the foundation cannot sustain judicial scrutiny, the entire edifice of orders passed thereupon are liable to be jettisoned. The show cause notice dated 09.11.2023, order dated 29.11.2023 and order dated 23.02.2024 set aside - since the impact of setting aside the show cause notice dated 09.11.2023 automatically restores the registration of the petitioner, it is made clear that if any Input Tax Credit (ITC) remains unutilized, the petitioner shall not be permitted to utilize the same till the finalization of the show cause proceedings as directed above. Petition allowed.

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• Income Tax

• 2024 (8) TMI 762
  Validity of Settlement Commission order passed - accepted additional income offered was reasonable and fair, immunity from penalty and prosecution was also ordered, however interest u/s 234A, 234B and 234C was to be levied - additional income offered which it is asserted to be an amount constituting cash gifts received from the relatives HELD THAT:- It must be noticed that the Settlement Commission while dealing with the contention that genuineness of the declaration of gifts cannot be accepted as the assessee had not shown the cash gifts as closing cash balance in the wealth tax return, has recorded a finding that the question of making such declaration did not arise as, if such declaration was made earlier, the question of disclosure seeking settlement would not have arisen. In fact, the petitioner has filed an affidavit under Rule 8 explaining the receipt of gifts from friends and relatives. Such declaration has not been rebutted by the revenue by placing any additional facts to the contrary. In light of the same, conclusion of the Settlement Commission by accepting the explanation in the spirit of settlement cannot be faulted calling for interference in exercise of the limited jurisdiction. Insofar as the allied contention that the additional income disclosed is to be treated as income under the head referred to in Section 68 or 69 of the Act, the Settlement Commission has once again referred to the affidavit filed under Rule 8 and observed that the report under Rule 9 does not place any contra material. It is observed that the PCIT has not shown how the conditions prescribed under Section 115 BBE are met. In the present case, the conclusion arrived at by the Settlement Commission while accepting the contents of the affidavit filed under Rule 8 in the spirit of the settlement and refusing to accept the contention of having recourse to Section 115BBE cannot be permitted to be interfered with. As regards the declaration with respect to cash gifts, alleged non-disclosure of the same in the wealth tax returns of the previous years, the Settlement Commission has dealt with the said contention held as no incriminating material was found during search, declaration being made in the Settlement Commission is supported by affidavit under Rule 8 in support of an assertion of fact that is not borne out by record, no contra material is produced by the Department to conclude that the assessee has not received gift by way of cash. Such conclusion also is well reasoned which would constitute plausible reason and a finding recorded on a satisfaction of the authority in keeping with the spirit of settlement does not warrant interference. Thus the order of the Settlement Commission with elaborate reasoning which has a nexus with the objective of settlement as regards the statutory provisions in Chapter XIX-A of the Act, the order does not call for interference and the petition is rejected.

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• 2024 (8) TMI 761
  Liability u/s 201 - non deduction of TDS on compensation received for acquisition of agricultural land - HELD THAT:- It cannot be said that the LAO was at fault. He was genuinely following the advice given to him by his superior officer who was a District Revenue Officer, whose directions of not deducting TDS were based on legal advice. The legal advice was given on the basis of the directions of this Court. While this Court may have passed order which was not in conformity with some other orders passed by the High Court, it was not available for the LAO to ignore or flout the Court s orders, which are to be presumed to be correct till they are set aside in appeal. Thus, no fault can be attributed on the LAO or on his officials. In the absence of there being any fault and there being a genuine belief based on judgment of the High Court that TDS was not required to be deducted on the interest paid, the action of the LAO cannot be said to be wrongful or illegal. The action of releasing the interest amount without deducting TDS therefore, cannot be a reason for imposing penalty in terms of Section 201 and 201 (1A) of the Act, 1961 and cannot be justified. The Land Acquisition Officer cannot be made to suffer on account of the orders passed by the Court. Penalty imposed on him by the Assistant Commissioner of Income Tax, TDS Circle vide its orders dated 22.03.2016 and 31.03.2016 are liable to be set aside. Accordingly, these writ petitions are allowed. The orders passed by Assistant Commissioner of Income Tax, TDS Circle are quashed and set aside.

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• 2024 (8) TMI 760
  Notice for re-opening assessment issued to a deceased person - Scope of specific provisions which would enable the Authority which has issued such notice, to withdraw the notice - HELD THAT:- In Alamelu Veerappan V/s. Income Tax Officer [ 2018 (6) TMI 760 - MADRAS HIGH COURT ] it was held that there is no provision which casts a statutory obligation on the part of the legal representatives of the deceased to immediately intimate the death of the assessee or take steps to cancel the PAN registration. It cannot be debated upon that it is the duty of the Department to ensure that it s notice is issued and executed on a person to whom it is intended to be served. If the Department gets knowledge after issuance of such a notice that the concerned assessee has passed away, there must be a mechanism to recall such a notice since, it would be a wasteful exercise to spend time for attempting to serve such a notice on a dead person, in as much as, it would not advance the case of either of the parties since a dead person would not be answerable to or respond to the notice and the legal heirs, unless served with a notice, would have no authority to reply to the said notice. Writ Petition is allowed. The impugned notice stands quashed and set aside for having been issued to a dead person.

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• 2024 (8) TMI 759
  Reopening of assessment u/s 148A - reassessment on an order u/s 263 - interest income derived from Non-convertible Debentures [NCDs] floated by Genpact India Private Limited [GIPL] had not been appropriately offered to tax due to mischaracterization of income - HELD THAT:- As is evident from a reading of the initial notice u/s 148A(b), the respondents had taken the stand that the interest income derived from the NCDs floated by GIPL had not been appropriately offered to tax on account of mischaracterization of income. By the time the Section 148A (d) order came to be passed, the respondents sought to buttress their case of proposed reassessment on an order u/s 263 of the Act passed by the CIT (IT) in the case of Headstrong Consulting Singapore Pte. Ltd. The principal allegation now laid was that although the funds were taken out in the form of interest payments, they were in fact liable to be declared as dividend and subjected to DDT. It is in the aforesaid backdrop that Mr. Jolly had contended that there is an evident and manifest variation between the reasons which had been originally recorded in the notice dated 11 March 2022 and the final order passed by the respondents disposing of the objections of the petitioner on 29 March 2022. The ineffaceable connect which must exist between the reasons initially disclosed proposing reassessment and which constitute the basis for formation of opinion with respect to escapement of income and the final decision to commence reassessment, was an aspect which was duly highlighted by us in our judgment in ATS Infrastructure Limited [ 2024 (7) TMI 1441 - DELHI HIGH COURT ] Quite apart from the above, the impugned proceedings are liable to be quashed on a more fundamental ground. Undisputedly, the petitioner had offered the interest income to tax in terms of the provisions contained in Section 194LD of the Act. The ultimate order u/s 148A (d), however, alleges that the remittance in fact, constituted dividend and which was liable to be taxed in terms of Section 115-O of the Act. As is plainly evident from a reading of that provision, DDT is liable to be paid by the company which declares, distributes or pays the same. The petitioner herein was merely the recipient of the interest income and it was thus, clearly not the entity which had either declared or paid the dividend. Viewed in that context, even if the payment were to be assumed to be dividend, the liability to pay tax thereon could have only been foisted upon the company which had declared, distributed or paid the same. That in the facts of the present case and even if the allegation laid by the respondents were to be accepted would have been GIPL. We also note that the issues emanating from the order of the CIT (IT) under Section 263 of the Act presently forms subject matter of challenge in Genpact Consulting Singapore Pte Ltd. While issues relating to the merits and the validity of the view taken by the CIT (IT) would have to be examined in that pending appeal, the same would clearly not sustain the action for reassessment which is impugned herein. Writ petition and quash the impugned notice u/s 148A (b) impugned order u/s 148A (d) and the consequential notice issued u/s 148.

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• 2024 (8) TMI 758
  Registration u/s 12A - Rejection of the petitioner's application u/s 119(2)(b) - delay in filing the audit report in Form-10B - HELD THAT:- The petitioners are entitled to succeed. As rightly pointed out by petitioners, the delay in filing the audit report in Form-10B can at best be 30 days, as the law only requires that the audit report be uploaded atleast a month before the due date for filing returns. Considering the extent of the delay, it should have been appropriate that the Commissioner exercised his jurisdiction under Section 119(2)(b) of the 1961 Act to condone the delay instead of taking a strict view of the matter. As relying on Al Jamia Mohammediyah Education Society [ 2024 (4) TMI 939 - BOMBAY HIGH COURT] writ petitions are allowed by quashing the orders issued by the CITx(E), Kochi, dismissing the applications filed by the petitioners u/s 119(2)(b). As a result of this order, the delay on the part of the petitioners in filing the audit report in Form-10B stand condoned.

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• 2024 (8) TMI 757
  Rectification u/s 154 of an order of the Settlement Commission - levy interest u/s 234B, as not done in the original proceedings - HELD THAT:- Issue should be decided adverse to the Department and in favour of the petitioner by virtue of a judgment in the case of Brij Lal [ 2010 (10) TMI 8 - SUPREME COURT] as held in computation of additional income tax payable by the assessee, there is no mention of section 154. On the contrary, under section 245I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be re- opened by way of review or recall. Like ITAT, the Settlement Commission is a quasi-judicial body. Under section 254(2), the ITAT is given the power to rectify but no such power is given to the Settlement Commission. Thus, we hold that Settlement Commission cannot reopen its concluded proceedings by invoking section 154 of the Act. Interest charged u/s 234B becomes payable on the income disclosed in the return and the income disclosed before the Settlement Commission; that, such interest is chargeable till the Commission acts in terms of section 245D(1) and that after the Settlement Commission allows the application for settlement to be proceeded with there will be no further charge of interest u/s 234B. Thus, even on the question of terminus there was lot of controversy and in the circumstances, we are of the view that invocation of section 154 (held to be inapplicable to Chapter XIX-A proceedings) cannot be justified - WP allowed. WP allowed.

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• 2024 (8) TMI 756
  Validity of reassessment proceedings - non filling responses against notices issued - as argued old E-mail ID was inaccessible and therefore, the notices issued to the petitioner for the respective Assessment Years went unnoticed which have culminated in the impugned Assessment Orders - HELD THAT:- As petitioner deserves a fair chance to address its grievances regarding the reopening of the assessment under Section 147 r.w.s.144B of the Income Tax Act, 1961, for the partnership firm, as it has purportedly closed down its business w.e.f. 01.04.2014. The petitioner will have to establish whether the huge deposits made in the petitioner's bank account have been brought into the books of accounts under the name of the deponent. This would require a detailed consideration. However, considering the fact that the deponent has been negligent in not responding to the notices issued under Section 148A(b) of the Income Tax Act, 1961 and thereafter to the orders passed under Section 148A(d) of the Income Tax Act, 1961, we are inclined to quash the impugned Assessment Orders and remit the case back to the first respondent to pass fresh orders. Direct the petitioner to pay Rs. 25,00,000/- each for the respective Assessment Years, and file a reply the notices issued under Section 148A(b) within a period of 4 months from the date of receipt of a copy of this order.

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• 2024 (8) TMI 755
  Addition made on account of interest income received on fixed deposits - netting off of interest receipt on bank fixed deposits with interest expenditure capitalized in the closing work-in- progress - CIT(A) deleted addition - HELD THAT:- CIT(A) for the year under consideration and for the earlier year has held the interest earned out of fixed deposit to be a capital receipt which was capitalized and reduced from WIP. The coordinate bench for A.Y. 2014-15 upheld the order of the ld. CIT(A) by holding that the fixed deposits was created as margin for availing bank loan which was utilized for the business of the assessee, thereby establishing a nexus between the interest earned out of the FD with the business of the assessee and further held that the interest income was rightly netted off with the interest expenditure claimed by the assessee. The co-ordinate bench had relied on various decisions of the Hon'ble High Court and the Tribunal which held that the interest income out of such fund are to be treated as business income and not income from other sources . A.O. has failed to corroborate the fact that the FD made by the assessee is out of the surplus funds held by the assessee in a case where the assessee has borrowed huge advances from banks and has also availed over draft facility for the purpose of its business resultantly expending higher rate of interest than that received out of the FD. Assessee has established that the said funds were incidental to the assessee s business activity and, therefore, the same cannot be said to be income from other sources - no infirmity in the order of the ld. CIT(A) - Decided against revenue.

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• 2024 (8) TMI 754
  Bogus LTCG - denial of exemption u/s. 10(38) - HELD THAT:- We notice that the assessee has purchased the shares from the market in physical form, got it transferred to his name and later dematerialised the same. The payment for purchase of shares was made through banking channels. Assessee has sold the shares in the stock exchange platform through a registered broker and received the sale consideration through banking channels. Assessee has furnished copy of demat statement, which shows entry and exit of the shares. As observed by the CIT(A), AO has not found fault with any of the documents furnished by the assessee evidencing the purchase and sale of shares - AO has also not carried out any independent enquiry with regard to the transactions carried on by the assessee, i.e. he has simply relied upon the generalised the report given by the Investigation wing. Appeal filed by the Revenue is dismissed.

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• 2024 (8) TMI 753
  Penalty u/s 271(1)(c) - defective notice u/s 274 - non specification of clear charge - assessee has made wrong claim of exemption u/s 10(23C) (vi) in absence of any valid registration - HELD THAT:- As in notice it is not specified under which limb the penalty is initiated whether for concealing the particulars of income or for furnishing the inaccurate particulars of such income, and in our view the said notice suffers from incurable defect which goes to the root of the matter and the same is not legally valid. The case of the assessee is supported by the decision of CIT vs SSA Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] and in the case of CIT vs. Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2024 (8) TMI 752
  Levy of late fees u/s. 234E - default in furnishing the said TDS statements - THAT:- The charging mechanism u/s. 234E as triggered with the Department from 01.06.2015, only prospectively and not prior to that. Therefore, the power to the Department u/s. 234E is provided from F.Y.2015-2016 relevant from Assessment Year 2016-2017. Having said that if TDS statements are filed after 01.06.2015 then the Revenue Authorities shall exercise the power to levy late fees u/s. 234E of the Act for default in furnishing the said TDS statements. Resultantly, the late fee u/s. 234E of the Act can be levied only prospectively i.e. w.e.f. 01.06.2015 as held in the case of Fatheraj Singhvi v. Union of India [ 2016 (9) TMI 964 - KARNAT AKA HIGH COURT] and this ratio was followed in Gajanan Construction [ 2016 (10) TMI 92 - ITAT PUNE] ; M/s Allacode Technology Solution (P) Ltd. [ 2022 (11) TMI 526 - ITAT PUNE] ; Maharashtra Cricket Association, Pune [ 2016 (10) TMI 104 - ITAT PUNE] Admittedly, with regard to the matters for adjudication before me, all of them pertains to Financial Years 2012-2013; 2013-2014; 2014-2015 relevant to Assessment Years 2013-2014; 2014-2015 and 2015-2016 respectively and obviously therefore the late fees u/s. 234E of the Act in all these cases were levied prior to 01.06.2015 i.e. prior to F.Y.2015-2016 relevant to Assessment year 2016-2017 onwards and during the said time the Department did not had the power to impose the late fees as per the stated provisions of the Act. Such an act of the Department is held to be arbitrary, unlawful, void ab initio. AO is directed to delete the additions/late fee charges from the hands of assessee.

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• 2024 (8) TMI 751
  Denying the relief claimed u/s 90 - CIT(A) denying the relief on the ground that the Appellant has not filed Form 67 within the due date of filing of return of income prescribed u/s 139(1) - assessee has paid the taxes outside India u/s 90 - assessee filed revised return of income - HELD THAT:- Assessee has filed return of income beyond the due date of filing of return of income, but the same was filed within the extended due date of the return of income. The revised return of income was also filed on 09.06.2020 and Form 67 was also filed within the extended period of filing of the due return. This aspect was not taken into account and, in fact, the assessee has paid the taxes outside India u/s 90 of the Act read with Article 23 of the India Netherlands DTAA. This fact is not denied by the AO or by the CIT(A). The late filing of Form No.67 cannot be the reason for denying the entitlement of the assessee in respect of the benefit of treaty when the salary earned in Netherlands and the tax thereof was paid in the said foreign country as per the provisions of Article 23 of the DTAA between India and Netherlands. The same should have been taken into account. The salaries earned outside India and this fact was not disputed, in fact, the payment of tax in foreign country was also not disputed. Therefore, the assessee cannot be taxed twice on the same amount which results into double taxation. CIT(A) as well as AO was not right in denying the claim of the assessee. Accordingly, the appeal filed by the assessee is allowed.

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• 2024 (8) TMI 750
  Addition of cash deposits u/s 68 - HELD THAT:- As from the perusal of records and Bank statements, it appears that this needs verification as the complete set of Bank statement were not before the AO as well as before the CIT(A). Hence, this issue needs to be verified. LTCG u/s 50C - HELD THAT:- Deed of sale of land is produced before the Tribunal at the time of hearing and the same also needs to be verified whether the land sold was in the nature of agricultural land or not has to be taken into account in the context of the specific provisions of Income Tax Statute. This issue also needs verification. Addition made u/s 56(2)(vii)(b)(ii) towards purchase of immovable property also needs verification - As all the issues placed before us are remanded back to the file of the AO for proper adjudication of the issue and verification, after taking cognisance of the evidences filed by the assessee during the assessment proceedings as well as appellate proceeding before the CIT(A) and before the Tribunal. AO is directed to decide the issues as per Income Tax Statute.

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• 2024 (8) TMI 749
  Penalty u/s 272A(1)(d) - non-compliance of notices u/s 142(1) - Assessee argued no notice u/s 142(1) have ever been served and as such, the entire proceedings are illegal and without justification - CIT(A) rejected the contention of the assessee on the ground that the AO has clearly mentioned service of notice through E-mail which is valid service, and such the appeal has been dismissed - HELD THAT:- We find from the copy of the order sheet, submitted before us which is downloaded from the Income Tax Departmental portal, that notice u/s 142(1) were issued on 01.08.2019 and second notice on 23.09.2019 has been issued but the service date of such notice in the service column has been left blank, so, it is not clear whether the notice has at all been served on the assessee or not. Since, it is the case of imposition of penalty each failure has to be viewed and considered separately. In such cases, there should be separate penalty notices for each separate failure and in this case, there should have been two separate penalty proceedings for two separate defaults. But we find from the penalty order passed u/s 272A(1)(d) dated 03.08.2021 that a consolidated order of penalty has been passed in a consolidated manner for two separate defaults u/s 142(1) which cannot be termed as legally valid, as per provision of section 271(1)(b)(ii) r.w.s. 272A(1)(d) of the Act 61. As in absence of proof of actual service of notices u/s 142(1) available in the portal submitted by the assessee, willful and intentional default, on the part of the assessee cannot be proved. We are of the opinion that penalty imposed for two separate defaults u/s 142(1) vide a consolidated penalty order is not legally valid, and is deleted. Assessee appeal allowed.

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• 2024 (8) TMI 748
  Addition u/s 43CA - assessee has booked its sales less in its books of account on the basis of agreement value as compared to market value of these flats - HELD THAT:- Assessee has received advances by cheque in respect of those three flats as per agreement and the sale deeds were executed subsequently where the market price is more than the agreement value. Since the assessee has received a part of the consideration as advance as per agreement and the sale deeds were made on the basis of the agreement value, although the market price gone by that time, therefore, in view of the provisions of sub-clauses (3) and (4) of section 43CA of the Act, no addition is called for since a part of the consideration has been received by cheque on the basis of agreement and the sale deeds were registered on the basis of value mentioned in the agreement. We, therefore, set aside the order of the CIT(A) / NFAC and direct the Assessing Officer to delete the addition - Decided in favour of assessee. Addition u/s 40(a)(ia) - non deduction of TDS on payment of compensation for surrender of rights - HELD THAT:- We find the issue stands decided in favour of the assessee by the decision of Beacon Projects (P.) Ltd. where it has been held that the excess payment made to the purchaser on cancellation of booking of apartment could not be qualified to be interest as defined u/s 2(28A) of the Act and therefore, the builder would not have any TDS obligation. Thus amount paid by the assessee to Dipps Hospitality Pvt. Ltd. for surrender of rights which has been treated as compensation cannot be treated as interest and therefore, the assessee has no TDS obligation and therefore, section 40(a)(ia) of the Act cannot be applied - Decided in favour of assessee.

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• 2024 (8) TMI 747
  Eligibility to claim revenue expenditure incurred exclusively to earn income - appellant/ assessee is not eligible to claim exemption u/s 11 or expenses of capital nature - HELD THAT:- The finding it is not eligible to claim exemption under section 11 of the Act does not mean that the appellant/assessee is not eligible to claim revenue expenditure incurred exclusively to earn income. We are of the firm view that at most, in this case, the income embedded in the gross receipts can be taxed and not the entire gross receipts as such. AO has to assess the income of the appellant/assessee under the head Income from Other Sources in accordance with the provisions of Sections 56 and 57 of the Act. Therefore, the revenue expenditure incurred exclusively to earn income along with the depreciation on assets has to be allowed as expenditure in accordance with the provisions of Section 57. Thus, the AO is directed to allow all expenses/deductions in accordance with the provisions of Section 57 against the receipts taxable under section 56 of the Act. Accordingly, we order so. The matter is therefore, restored back to the AO for doing needful as above. Appeal of assessee is allowed for statistical purposes.

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• 2024 (8) TMI 746
  Denial of exemption u/s 11 - value of car purchased in the name of trustee - HELD THAT:- The submissions made by the assessee are not acceptable in registering the vehicle in managing trustee s name by utilizing the funds of the assessee, in order to save road/life tax and insurance charges which are meant for charitable purposes. We note that the ld. CIT(A) rightly confirmed the view of the Assessing Officer in denying exemption under sections 11 and 12 of the Act to the extent of value of that car. CIT(A) asked the assessee to furnish the details therein, but, however, no details filed before the first appellate authority and even before us. When we asked for the log book for verification to find out as to whether the said vehicle was used for purpose of assessee s activities, the ld. AR could not produce anything in support of his argument to show that the said vehicle was utilized for the purpose of charitable activities. The submission of the AR that the log book of the vehicle was filed before the AO/CIT(A) is not acceptable, because, a mere statement cannot be taken into consideration without there being any corroborative evidence. Thus, the ground raised by the assessee fails.

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• 2024 (8) TMI 745
  Ex-parte order passed by CIT(A) - Validity of reopening of assessment - addition of bogus expenses - HELD THAT:- Reassessment proceedings submissions were duly made before the Assessing Authority which were not considered by the AO and in appeal before the learned First Appellate Authority no physical notice of hearing was ever received by the assessee and CIT(A) dismissed the appeal of the assessee, ex parte, without adverting on merit of the case and without affording adequate opportunity of hearing. Considering all, we hereby set aside the order of CIT(A) and restore the matter to the file of learned First Appellate Authority for fresh decision.

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• 2024 (8) TMI 744
  Reopening of assessment u/s 147 - whether the assessee is non-filer or not? - Reopening were initiated on the basis of survey operation conducted at Hotel Sagar Proprietary concern of Wife of Karta of HUF - HELD THAT:- There is no mention by the assessee having filed the original return and neither that fact has been mentioned in the reasons so recorded by the AO how there can be reason to believe that the income has escaped assessment by the reason on the failure on the part of the assessee to disclose fully and truly all material facts necessary for assumption of jurisdiction u/s 148. Thus, by not recording the fact that the assessee had filed the original return, which is evident from record, it is very much clear that the reasons are wrong and on the basis of these wrong reasons, the assumption of jurisdiction by the AO u/s 148 is invalid. We are fortified by the Judgement of of Gaurav Joshi,[ 2019 (1) TMI 1893 - ITAT AMRITSAR] Sagar Enterprises [ 2001 (12) TMI 18 - GUJARAT HIGH COURT] and also Fortune Metaliks Ltd. [ 2021 (2) TMI 781 - ITAT CHANDIGARH] , Monika Rani ,[ 2020 (9) TMI 271 - ITAT CHANDIGARH] Baba Kartar Singh Dukku Education Trust [ 2015 (5) TMI 1200 - ITAT CHANDIGARH] and in all the above said judgments, it has been held that where wrong facts have been recorded regarding the filing of return, the assumption of jurisdiction u/s 148 was not valid and also that the Assessing Officer has not applied his mind independently. Decided in favour of assessee.

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• 2024 (8) TMI 743
  Assessment u/s 153A - unexplained investment made in the construction of Hotel Building - addition invoking the provisions of section 69 r.w.s. 115BBE - whether the report of the DVO obtained after search action can be based for making the impugned additions in this case in the absence of any incriminating material during the course of search action.? - HELD THAT:- As decided in own case [ 2023 (12) TMI 803 - ITAT CHANDIGARH] noted that the report of the DVO is purely based on estimation basis. The assessee had filed various objections against the said report. One of the important objections of the assessee was that the DVO had taken the rates of construction as per the Central Public Works Department (CPWD) rate. It was submitted that the property was situated in the State of Punjab. That the DVO, subject to a other objections, was otherwise required to take the prescribed rates of State Public Works Department (PWD rates). It was submitted before the Assessing Officer that there was difference of at least 25% in the rates of construction released by the CPWD as compared to PWD rates. We, further, note that no incriminating or corroborating evidence was found during the course of search action at the office premises of the assessee prompting the search party/Assessing Officer to get the report of the DVO regarding the cost of construction. The issue has been settled by the various Hon ble High Courts, who have been unanimously on the point that if during the course of search, no incriminating material was found exhibiting unexplained investment by an assessee, merely, on the basis of DVO s report, the addition cannot be made. Decided in favour of assessee. Rejection of books of accounts u/s 145(3) - as noted difference between the amount invested in the building and amount as disclosed in the books of accounts, therefore, the books of accounts are liable to be rejected - HELD THAT:- We agree with the contention so advanced by the ld AR as the whole basis of rejection of books of accounts was difference in amount invested in building and as we have deleted the same, there is no justifiable basis for rejection of books of accounts and hence, the said ground of appeal is allowed. Disallowing the current year business loss being without pointing out any defect and not allowed to be carried forward to the subsequent years - Since the very basis of rejection of books of accounts is not sustainable as discussed above, we see no basis for denying the current year business loss and carry forward of the same for set off in subsequent years. Hence, the ground of appeal is allowed. Disallowance of deduction u/s 35AD - expenditure incurred on hotel building - AO held that the Hotel being run by the assessee company is not registered / classified as a star rated Hotel by the Central Government for the Financial Year under consideration - scope of certificate as subsequently obtained - HELD THAT:- As decided in River View Hotels [ 2018 (7) TMI 1079 - ITAT AHMEDABAD] there is no time limit of obtaining star certificate as prescribed in Section 35AD(8)(a)(c)(iv) of the Act and only requirement is to build and operate two or more star hotel classified by the Central Government and the AO has misconstrued the said clause where he observed that in order to avail the benefit of a three star category hotel, the assessee was required to classify his three star category hotel in the year of operation as the benefit of this can only be given to a two and above star hotel and the said finding of the AO were set aside. No contrary authority has been brought on record. In the instant case, we find that the hotel being run by the assessee has been duly granted a four star rating certificate by the Ministry of Tourism, Government of India and thus, it qualify as a specified business for the purposes of claim of deduction u/s 35AD of the Act. The compliance of other conditions are not in dispute - there is no justifiable basis to deny the claim of deduction and the assessee is held eligible for claim of deduction u/s 35AD of the Act. Assessee ground of appeal is allowed.

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• 2024 (8) TMI 742
  Determination of agricultural income - difference in admitted agricultural income as compared to net agricultural income - addition u/s 69 for difference in agriculture income shown - Since the assessee has offered the large amount of agricultural income in the return of income the case was selected for limited scrutiny to verify the source of agricultural income HELD THAT:- As it is very much clear that the assessee filed an affidavit dated 15.02.2018 and order is passed on 11.11.2018. The ld. CIT(A) or that of the AO did not discuss this aspect of the facts declared by the assessee in an affidavit. Even the ld. AO though the ld. DR at the time of hearing of this appeal did not dispute the content of the affidavit dated 15.02.2018 wherein the assessee claimed that he has only source of agricultural activity and he has not invested or expended the alleged amount. Since this fact is not being disputed and the assessee was never cross examined by the A.O. Therefore, the averments contained in duly sworn affidavit are to be accepted as a correct unless the same are rebutted by the evidence. On this proposition, we found support from the decision of Mehta Parikh Company [ 1956 (5) TMI 4 - SUPREME COURT] , Dr. Prakash Rathi [ 2005 (10) TMI 252 - ITAT JODHPUR] , Labh Chand Bohra[ 2008 (4) TMI 731 - RAJASTHAN HIGH COURT] , Shrikumar [ 2008 (4) TMI 731 - RAJASTHAN HIGH COURT] and Union of India Vs Kamalaxmi Finance Corporation [ 1991 (9) TMI 72 - SUPREME COURT] Thus, we are of the considered view that the addition made by the ld. AO in the case of the assessee is directed to be deleted - Decided in favour of assessee.

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• 2024 (8) TMI 741
  Unexplained cash credit u/s. 68 r.w.s.115BBE - appellant could not establish source for cash deposits into bank account during demonetization period - CIT(A) deleted addition - HELD THAT:- As in absence of any contrary findings to the effect that the sales declared by the assessee is not backed by corresponding purchase or supported by stock in hand, in our considered view, simply sales cannot be rejected on the ground that sale for the particular month or period is higher when compared to corresponding previous period. There cannot be any reason for uniform sales in all days or month or year. There may be various reasons for increase or decrease in sales which depends upon various factors, including festival sales, clearing sales, yearend sales, etc. Therefore, in our considered view, the explanation of the assessee that it has received cash from various customers towards sale of jewellery and subsequently the advances have been converted into sales, appears to be bona fide and reasonable. We find force in the arguments of the assessee for simple reason that as per the details furnished by the assessee like bank statements, cash book, it is undoubtedly clear that assessee was having sufficient withdrawals from very same bank accounts before the date of demonetization which was recorded in the books of accounts of the assessee. The cash balance maintained by the assessee as per books of accounts as on 08.11.2016 was much higher than the amount of cash deposited to bank account during demonetization period. Therefore, when the assessee is able to file necessary evidences to prove that there was sufficient cash withdrawal from very same bank account which is further backed by bank statements, where it has been clearly evident that there are sufficient cash withdrawals, in our considered view, there is no reason for the AO to reject explanation of the assessee that cash deposit is out of cash withdrawals from very same bank account. Respectfully following the decision of M/s. Sahana Jewellery Exports Pvt Ltd [ 2024 (1) TMI 112 - ITAT CHENNAI] we are of the considered view that the assessee has satisfactorily explained source for cash deposits into bank account during demonetization period, out of cash balance in hand as on 08.11.2016 and further, said cash in hand has been explained out of known source of income. AO, without appreciating relevant facts simply made additions towards cash deposits u/s 68 of the Act and also brought to tax u/s. 115BBE - CIT(A), after considering relevant facts, has rightly deleted additions made by the AO. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.

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• 2024 (8) TMI 740
  Interest for defaults in payment of advance tax - appeal before the ld. CIT(A) for charge of interest incorrectly u/s 234B of the Act in an order passed u/s 254 r.w.s. 143(3) r.w.s.153A - whether the assessee is eligible to receive the credit of the amount of taxes paid after the end of the assessment year and before the completion of the final determination of the demand by the AO while computing the interest payable by the assessee as per provision of section 234B of the Act or not? HELD THAT:- On careful perusal of the provision of section 234B of the Act bench observed that the assessee shall be eligible to receive the relief of interest before the date of determination of total income under subsection (1) of section 143 or completion of a regular assessment, tax is paid by the assessee u/s 140A or otherwise and interest shall be calculated in accordance with the provisions of section 234B up to the date on which the tax is so paid, and reduced by the interest, if any, paid u/s 140A towards the interest chargeable under this section and thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. Thus, considering that specific provision of the Act and the specific acceptance of the fact by the AO in the remand report that the assessee was not granted the credit of taxes while calculating the interest u/s. 234B of the Act and that too without referring to any adverse comment in the remand report. Therefore, considering the specific provision in law and acceptance of the error in calculation of interest u/s. 234B of the Act the ld. AO is directed to give the credit of the taxes paid by the assessee. As per the computation sheet given in the remand report and the interest based on the chart given by assessee we direct the ld. AO to give credit of payment of tax for which credit was not granted while computing the interest as provision of section 234B Assessee submitted that based on the non disputed facts the assessee is eligible to have reduction in interest u/s. 234B charged by the ld. AO for an amount for a year about or so. Based on the finding so recorded and considering the actual date of payment of taxes the ld. AO is directed to reduce the interest wrongly computed u/s. 234B of the Act and grant the refund arising out of this error in charge of interest u/s. 234B of the Act. In terms of these observations the ground no. 1 2 raised by the assessee is allowed. Denial of benefit of the interest u/s. 244A only on the ground that the net refund due and calculated by the lower authority for an amount which is less then 10 % of the total demand raised upon the assessee for an amount - On this issue the bench noted that if the interest charged by the ld. AO in excess for an amount u/s. 234B of the Act is considered based on the finding recorded by us in ground no. 1 2 then the refund amount comes which is more then 10 % of tax demand. Even the ld. CIT(A) has after considering the remand report has held that if the assessee s refund is in excess of the 10 % of the determined tax then the interest is payable to the assessee. Since the assessee is eligible to get relief u/s. 234B of the Act for an amount of Rs. 1,43,33,259/- then after that credit the resultant figure of refund is more than 10% of the tax determined the assessee is eligible to receive the interest u/s. 244A of the Act in accordance with the law and when even the ld. AO as well as ld. CIT(A) has not disputed this fact that when the refund amount is more then 10 % of tax determined the assessee is eligible to receive the refund. Based on these non-disputed facts and then the interest amount due to the assessee comes to Rs. 2,38,31,324/- which is more then 10 % of tax demand of Rs. 18,70,26,635/-. Based on these observation ground no. 3 4 raised by the assessee is allowed.

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• 2024 (8) TMI 739
  Revision u/s 263 - as per CIT AO has not made any enquiry in respect of loan - HELD THAT:- It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the AO has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. No error or infirmity in the assessment order which could make it erroneous and prejudicial to the interest of the revenue. Therefore, we set aside the order of the PCIT and restore that of the AO. PCIT was of the opinion that the AO has not made any enquiry in respect of loan taken from M/s Vardhman Financial Services Pvt Ltd amounting to Rs. 1 crore. This is factually incorrect as explained hereinabove. AO has raised specific query to which the assessee had filed specific reply alongwith supporting documentary evidences mentioned hereinabove. Therefore, it cannot be said that the AO has not made any enquiry. This, in itself, makes the assumption of jurisdiction by the PCIT bad in law. Assessee appeal allowed.

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• 2024 (8) TMI 738
  Addition u/s. 69A - deposits during the post-demonetization period - assessee ought not to have accepted SBN s which were no longer a legal tender - HELD THAT:- Instruction 21/02/2017 issued by the CBDT suggests some indicators towards verifying the suspicion of backdating of cash. It also suggests indicators to identify abnormal jump in cash trials on identifiable persons as compared to earlier history in the previous year. Therefore in our opinion it is important to examine whether assessee falls into any of these categories and transfer of deposit of cash is not in line with history of transactions in the preceding assessment years. The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions based on the facts in present case. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. Assessee is directed to furnish PAN and address details of the depositors from whom loan repayment has been accepted in cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Appeal filed by the assessee stands partly allowed for statistical purposes.

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• 2024 (8) TMI 737
  Levy of penalty u/s 272A(1)(d) - non compliance to certain statutory notices issued u/s 143(2) and 142(1) - HELD THAT:- We find that the assessee has put forth its explanation in terms of non-availability of information/documentation due to one of the its Directors becoming hostile and who has in his possession the relevant information/documents as sought for. Regarding the contention of the DR that it is a case where the assessment order has been passed u/s 144 and not u/s 143(3) of the Act and the assessee company cannot take benefit of subsequent compliance to the notices, we find that firstly, AR has not raised any such contention and secondly, besides the aforesaid notices, there are subsequent notices and the responses to the said notices by the assessee company and to what extent the compliances have been made or not and what has lead to passing of the best judgment order u/s 144 is not the subject matter of present penalty proceedings and is not emerging from the impugned penalty order. The contention of the AR has been limited to the extent that the notices which are subject matter of present penalty proceedings have been substantially complied with though after the passing of the penalty order and the same therefore be considered. Penalty levied u/s 272A(1)(d) is herby directed to be deleted. Assessee appeal allowed.

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• 2024 (8) TMI 736
  Scope of making adjustments u/s 143(1) - Denial of exemption u/s 11 on non-electronic filing of Form 10B - assessee filed the audit report in Form 10B electronically though omitted to file along with the return of income - assessee upon realising the mistake filed Form 10B before it preferred application u/s. 154 - HELD THAT:- The scope of section 143(1) is restricted to adjustment of prima facie mistakes and omissions, which are apparent from what is available on record. In such case record would be constituted by the return of income as well as other data such as brought forward losses etc. The assessing officer carrying out processing of a return of income u/s 143(1) cannot initiate investigation into the facts of the case, nor presume the existence of facts and circumstances which are not brought by the records of the case. Adjustment made by the CPC Bengaluru, was on account of non-filing of Form 10 electronically. The record available before the CPC Bengaluru, was the return of income for assessment year under consideration and the tax audit report in Form 10B both of which had been filed by the assessee subsequently. As noted in preceding paras that in present case Form 10B was furnished electronically and the assessee had preferred application u/s. 154. The issue that thus needs to be addressed is that when electronically filed Form 10 was available on record, could the AO ignore such record to arrive at a finding that deduction claimed by the assessee u/s. 11 is not admissible and that the impugned adjustment could be made. As narrated in the discussion above, the assessee had filed Form 10 electronically before the application u/s.154 was filed, which could have been considered by the Ld.AO u/s. 154 for necessary remedial action as per law. As admitted fact that the CPC, Bengaluru made adjustment for non-filing of Form 10 along with original return of income. Subsequently, when the same was filed electronically, it could have considered the same u/s. 154 and was eligible for rectification We note that Hon ble Tribunal at Mumbai has addressed similar issues in case of Pane Hindu Devalaya Mandal [ 2020 (3) TMI 1353 - ITAT MUMBAI] Tribunal held that assessee s claim of exemption under section 11(2) of the Act cannot be rejected only for the reason that Form no.10 was not filed electronically. The issue was restored to the AO with a direction to verify Form no.10 filed by the assessee manually, as stated by assessee therein to consider the claim of exemption u/s 11(2) of the Act. Also decided in Shree Dadar Jain Paushadhshala Trust [ 2019 (9) TMI 145 - ITAT MUMBAI] with a view to expedite the disposal of applications filed by trusts for condoning the delay and in exercise of the powers conferred u/s. 119(2)(b) of the Act, the Central Board of Direct Taxes authorized the Commissioners of Income-tax, to admit belated applications in Form No. 9A and Form No.10 in respect of AY 2016-17 where such Form No. 9A and Form No.10 are filed after the expiry of the time allowed under the relevant provisions of the Act. Thus, we are of the opinion that the issue needs to be remanded to the AO for necessary verification / consideration of Form 10B and to consider the claim of the assessee u/s.11(2) in accordance with law. Appeal filed by the assessee stands partly allowed for statistical purposes.

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• 2024 (8) TMI 735
  Addition as unexplained money - assessee is purely an agriculturist and has deposited the said sum from out of past drawings and past savings - scope of standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean - HELD THAT:- It is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. Instruction 21/02/2017 issued by the CBDT suggests some indicators towards verifying the suspicion of backdating of cash. It also suggests indicators to identify abnormal jump in cash trials on identifiable persons as compared to earlier history in the previous year. Therefore in our opinion it is important to examine whether assessee falls into any of these categories and transfer of deposit of cash is not in line with history of transactions in the preceding assessment years. Assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions based on the facts in present case. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. Assessee is directed to furnish PAN and address details of the depositors from whom loan repayment has been accepted in cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Assessee appeal stands partly allowed for statistical purposes.

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• 2024 (8) TMI 734
  Ex Parte Order Passed by CIT(A) - CIT(A) dismissed the appeal of the assessee for non-compliance of notice - Validity of order passed u/s 144 - Notices u/s 142(1) were issued calling for specific details and Assessee began gathering the details as required by the learned ITO meanwhile the Ld.AO passed his order u/s 144 - denying the assessee a reasonable opportunity of being heard. HELD THAT:- Before us, ld. A.R. submitted that assessee is not well versed in Income Tax Portal and failed to notice about the notice issued by the department digitally. Hence, he prayed that one more opportunity of hearing may be given before the Ld. CIT(A). We accede to the request of the Ld. A.Rs. and remit the issue in dispute to the file of Ld.CIT(A) to decide the same afresh after giving an opportunity of hearing to the assessee. Appeal filed by the assessee stands partly allowed for statistical purposes.

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• 2024 (8) TMI 733
  Assessment u/s 143(3) - treatment amount as income from undisclosed sources - addition to assessee's income HUF as income from other sources - assessee HUF declared agricultural income during the year under consideration and claimed exemption on the same u/s 10(2) - HELD THAT:- AR submitted that assessee is not well versed in Income Tax Portal and failed to notice about the notice issued by the department digitally. Hence, he prayed that one more opportunity of hearing may be given before the CIT(A). We accede to the request of the AR and remit the issue in dispute to the file of CIT(A) to decide the same afresh after giving an opportunity of hearing to the assessee. Grounds raised by the assessee stands partly allowed for statistical purposes.

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• 2024 (8) TMI 732
  Disallowance u/s 14A r.w.r. 8D - certain shares held as stock in trade - What happens when the shares are held as 'stock-in-trade' and not as ' investment', particularly, by the banks? - HELD THAT:- Assessee is a Bank, where shares were held as stock-in-trade and therefore it becomes business activity of assessee as observed by Hon ble Supreme Court in Maxopp Investments [ 2018 (3) TMI 805 - SUPREME COURT] Further Hon ble Karnataka High Court has followed the same view in case of Canara Bank [ 2023 (1) TMI 243 - KARNATAKA HIGH COURT] decision of Hon ble Delhi High Court in case of Punjab National Bank [ 2022 (6) TMI 85 - DELHI HIGH COURT] . Respectfully following the view taken by decisions supra, we allow this ground raised by assessee and hold that these were not made by assessee in order to fall within the ambit of Rule 8D (iii) of Income tax Rules 1963. Decided in favour of assessee.

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• Customs

• 2024 (8) TMI 731
  Depriving duty credit under RoDTEP on exports - exports fall under the restricted category or not - prior period i.e. 01.01.2021 to 31.05.2022 - subsequent period i.e. 01.06.2022 to 13.12.2022 - it was held by High Court that 'The respondents are directed to grant benefit of rebate under the RoDTEP scheme to the petitioners who have exported sugar with specific permission under the specific condition prescribed by the Directorate of Sugar as per Notification No. 19/2015-20 dated 17th August 2021 and Clause 3 of paragraph 2 of the Notification No. 76/2021-Customs (N.T.) dated 23rd September 2021' - condonation of delay of 87 days in filing SLP. HELD THAT:- Delay of 87 days in filing the special leave petition is condoned - The decision of High Court upheld. SLP dismissed.

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• 2024 (8) TMI 730
  Application for listing Review Petitions in open court is rejected - error apparent on the face of record or not - HELD THAT:- Having carefully gone through the Review Petitions, the order under challenge and the papers annexed therewith, it is convincing that there is no error apparent on the face of the record or any merit in the Review Petitions, warranting reconsideration of the order impugned. The Review Petitions are, accordingly, dismissed.

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• 2024 (8) TMI 729
  Import of aircraft engines from the U.A.E. - invocation of Catch-all provisions under Para 10.05 of the Foreign Trade Policy (FTP), 2023 - SCOMET authorization from the DGFT for exporting the consignment of aircraft parts as per the Catch-all provisions - goods used for military purposes - HELD THAT:- A perusal of Appendix 3 of the SCOMET lists shows the exception that has been carved out under Clause 8A901.1.A, i.e. Catch-all or SCOMET provisions do not apply to any of those aero gas turbine engines that are certified by civil aviation authorities of India and have a type rated certificate. Perusal of the DRDO report and the type certificate issued by the DGCA was that the GE CF-34-8E5 model of engines is a recognized type of civil engine and has also been further cleared by the DRDO as having civilian application. Further the Petitioner in this case has also provided end user certificates, from the party they are exporting the product, to help verify the civil nature of the end use of these products. The contention of the Respondent that these products have dual use and can potentially be used for military purposes, and hence should not be exported without further clearance of the DGFT finds no footing with this court. Almost everything can have a dual use, like soap being manipulated into a bomb, but rationality must guide the implementation of export regulations. Import and export regulation must be rational to effectively balance economic interests with national and global security concerns. Items that have been certified by subject matter experts as having civil use and are allowed within the ambit of the export policy, cannot be stopped from being exported to countries with which India has established export ties, with no restrictions in the realm of economic policy, on the pretext that the products may have a potential military use. In view of the fact that the products which the Petitioner company is trying to export are of civil nature and do not attract any of the restrictions established in the SCOMET list or Catch-All provisions, the impugned notification is quashed. The writ petition is allowed.

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• 2024 (8) TMI 728
  Valuation - SCN sseks to discard the declared value and not to reject the depreciated value adopted for assessment as per the Inspection Report and Valuation Certificate (Valuation Certificate) given by a CE, that was accepted by the department at the time of import - HELD THAT:- It is found that in ANVAR P.V VERSUS P.K. BASHEER AND OTHERS [ 2014 (9) TMI 1007 - SUPREME COURT] , a three Judge Bench of the Hon ble Apex Court, held that any documentary evidence sought to be produced from an electronic record under the provisions of the Evidence Act 1872, (Evidence Act) can be proved only in accordance with the procedure prescribed under Section 65B therein. The judgment held that the certificate required under Section 65B(4) is a condition precedent to the admissibility of evidence by way of electronic record. Oral evidence in the place of such certificate will not suffice as Section 65B(4) is a mandatory requirement of the law. The judgment is of relevance to this case as section 138C of the CA 1962 is pari materia to the said section 65B of the Evidence Act. Hence a written certificate under section 138C(4) is a sine qua non for admissibility of such electronic evidence under the CA 1962 also. Consequent to the judgment in ANVAR P.V VERSUS P.K. BASHEER AND OTHERS [ 2014 (9) TMI 1007 - SUPREME COURT] , some confusion arose over the scope and ambit of Section 65B of the Evidence Act as different views were taken in a few subsequent decisions of Constitutional Courts namely, the Hon ble Apex Court judgments in SHAFHI MOHAMMAD VERSUS THE STATE OF HIMACHAL PRADESH [ 2018 (1) TMI 1402 - SUPREME COURT] and TOMASO BRUNO ANR. VERSUS STATE OF U.P. [ 2015 (1) TMI 1307 - SUPREME COURT] and the Hon ble Madras High Court judgment in K. RAMAJAYAM VERSUS THE INSPECTOR OF POLICE [ 2016 (1) TMI 1509 - MADRAS HIGH COURT] . The discordance was placed for a resolution before a three-judge bench of the Hon ble Supreme Court, in ARJUN PANDITRAO KHOTKAR VERSUS KAILASH KUSHANRAO GORANTYAL AND ORS. [ 2020 (7) TMI 740 - SUPREME COURT] . The Hon ble Court, after examining the said judgments clarified the binding legal position. The Hon ble Court upheld the Anvar P.V. judgment while overruling the Shafhi Mohammed s judgement and made it clear that the certificate must be mandatorily provided as a condition under Sec 65B(4) for admissibility of electronic evidence. It is found that Section 138C of the CA 1962 provides for the admissibility of micro films, facsimile copies of documents and computer print-outs as evidence in a proceedings under the Act without further proof of production of the original. The section differentiates between the original information (primary evidence) contained in the computer itself and copies made there from (secondary evidence). The section would not come into play when original documents are being produced in evidence - the evidence in the form of computer print-outs etc. can be admitted, as in the present proceedings, only subject to fulfilling the conditions under section 138C as evidenced by the certificate issued by a responsible person under sub-section (4) of the said section - it is found that the lack of such a certificate is fatal to revenues case and the portion of the order relying on such evidence is liable to be set aside. It is found that there have been six secondhand machine imported by the appellants. The value for the purpose of assessment as per Rule 3 of CVR 2007, was at the time of import arrived at as per the procedure established under a Boards Circular. The said depreciated value arrived at in the Inspection Report and Valuation Certificate of a CE based on the Circular, has not been challenged. Only the declared price, which had earlier been discarded by the department in favour of the depreciated value, has been sought to be rejected once again. No reason for ignoring the CE s Certificate has been stated in the impugned order. The department cannot blow hot and cold at the same time on its own circular without any explanation. As the issue does not survive on merits the question of demand for duty, imposition of penalties etc. also does not arise. The impugned order is set aside - appeal allowed.

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• Insolvency & Bankruptcy

• 2024 (8) TMI 727
  Rejection of prayer for quashing the invitation of Expression of Interest ( EoI ) dated 25.04.2022 issued by Respondent No.1 Financial Creditor - error in the Assignment Agreement executed by Respondent no.2 or not - It is submitted that EoI for selection of new operation and maintenance contractor does not amount to any breach of Section 14(1)(d) of the IBC - HELD THAT:- On looking into the Facility Use Agreement entered between Corporate Debtor and Respondent No.2, it is clear that the Appellant has been handed over the substations (switchyards) for operation and maintenance and there is a clear Agreement between the parties that notwithstanding the Corporate Debtor operating, maintaining and usage of Facility, the ownership of the Facility shall remain solely with Respondent No.2. Except for the right to operate, maintain and use the Facility, the Corporate Debtor will have no right whatsoever in the ownership of the Facility. We have also extracted Clause 2.2.(d) of the Facility Agreement dated 12.08.2013. There can be no dispute that Facility has been handed over to the Appellant for operation and maintenance. Further, Respondent No.2 was also obliged to provide access to representative of the Corporate Debtor for operating and maintenance, but the mere fact that the Appellant has been permitted to use the Facility for operation and maintenance, cannot lead to conclusion that the Corporate Debtor is in occupation of the Facility and there is any breach of Section 14(1)(d). Section 14(1)(d) of the IBC prohibits recovery of any property by an owner or lessor, where such property is occupied and in possession of the Corporate Debtor. The present is not a recovery of the Facility by owner or lessor, who is Respondent No.2 herein. Further, the Facility is neither in occupation, nor in possession of the Corporate Debtor, since the Corporate Debtor has been appointed as operating and maintenance contractor The Adjudicating Authority has considered the various Clauses of the Facility Agreement and has rightly come to the conclusion that the EoI issued by Respondent No.1 to appoint another operating and maintenance contractor, cannot be interfered with. The fact is not disputed that the Corporate Debtor is not paying the facility use charges and is trying to set off the same against the claim against Respondent No.2. It is due to the non-payment of facility use charges, Respondent No.2 is unable to service the debt, causing an event of default for which Respondent No.1 has already initiated proceedings under the SARFAESI Act, 2002 against Respondent No.2. Thus, no error has been committed by the Adjudicating Authority in rejecting the Application filed by the Appellant - there are no merit in the Appeal - appeal dismissed.

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• FEMA

• 2024 (8) TMI 726
  Property forfeited under SAFEMA - Properties were also subject matter of TADA proceedings - HELD THAT:- The perusal of Section 8 reveals it to be distinct than the provision of SAFEMA and thereby the judgment of the Apex Court Amina Ahmed Dossa [ 2001 (1) TMI 1028 - SUPREME COURT ] in reference to different statute cannot be applied. It is more so when even the facts giving rise to the case are different. If the Appellant and his relatives have filed declaratory suits before the Bombay High Court, it would have no bearing on the present proceedings but can be under TADA. Therefore, the first issue raised by the Appellant to challenge the impugned order is not made out. The forfeiture of property under TADA is to be dealt with as per the provision of TADA and would have no effect on the action taken as per the provision of SAFEMA. Validity of Notice under Section 6 of SAFEMA - obligation to first establish nexus between the income of the Detenue and the property in question - HELD THAT:- As per plain reading of Section 6 of the Act we do not find that the Competent Authority should have issued Show Cause Notice after showing link or nexus with the income of Detenue and property sought to be forfeited. If the argument is accepted, we would be virtually rewriting the provision, which is not permissible. The second issue raised by the Appellant is accordingly rejected. Violation of Principles of Natural Justice - principles of nature justice have not been followed because proceeding remain pending before many officers but decided by one posted on the date of hearing - HELD THAT:- In the instant case the final hearing was made by the Competent Authority on 23rd May, 2005 said to be for few minutes without any proof has resulted in pronouncement of order. It was by the same Authority. The written arguments itself show that the Appellant remain present on the date of hearing though said to be only of 10 to 15 minutes. It is however a fact that the order has been passed by the same Authority. Thus, arguments in reference to the principle of natural justice is not made out and therefore rejected summarily. Forfeiture of property - Flat No. 604 on 6th Floor of the building known as Bagh-e- Rehmat (Rajput Villa) Society, Agripada, in Bombay - Appellant has disclosed the source of acquisition of Flat No. 604 on 6th Floor. It may be that it was originally acquired by the detenue but having settled in favour of the Appellant pursuance to a decree, the forfeiture would nullify the decree of the Court. It cannot be said to be under collusion as the decree was made 10 years prior to detention. Thus, we do not find forfeiture of Flat no. 604 to be legally substantially and accordingly we make interference in the order for property aforesaid. Forfeiture of the property being protected by the realm of the provisions of the Rent Act and who can be affected by the forfeiture is the owner of the property and not the tenant -Provision for forfeiture of property under two different statutes are distinct and separate and the basis of forfeiture is also distinct and different. Section 21 of SAFEMA otherwise makes it clear that finding under other laws not to be conclusive proceedings under this Act. The judgment of the Apex Court in the case of Amina Ahmed Dossa v/s. State of Maharashtra [ 2001 (1) TMI 1028 - SUPREME COURT ] is already clarified and in any case if the Appellant is only the tenant and not the owner of the property should not get affected by the forfeiture of the property and according to the Appellant, he has already handed over the Flat No. 2B and Flat No. 12 for redevelopment of the said building. It could not be clarified how the Appellant is affected by the forfeiture when he is only a tenant. The allotment of Flat No. 502-503 by the developer shows that Appellant was in fact enjoying all the benefit in the property and therefore only the forfeiture of the property has been challenged, otherwise tenant would not be affected by change of the hands of the ownership. It may remain with the builder or with the Government. The Appellant has failed to disclose the source of acquisition of property with all the rights referred above. Thus, the arguments are not worth acceptance and thereby summarily rejected. Forfeiture of rented property - So far as Flat No. 611-C, of Meena Apartment is concerned, the source said to have been disclosed but we do not find any material on record to accept the contention. It is contented by the Appellant that he was having income out of gifts and further received Rs. 11,70,000/- under the Foreign Exchange Immunity Scheme, 1991 during the year ended 31st March 1992. The remittance under FEIS is only a mode of transfer and not evidence for receipt of genuine money by the Appellant. Further, the sum of Rs. 2 Lakh said to have been taken as loan from Ms. Hadia Haroon Merchant but no document for it has been submitted. It could have been Income Tax Return and loan agreement but no such document has been submitted. As regards Shop No. 1, on the Ground Floor of Ruksana Palace, Plot No. 57/54A, Mohd. Ali Road, Mumbai, the Appellant is stated to be on monthly rent. No pagdi or premium said to been paid by the Appellant. If that is so than there is no reason for tenant challenge forfeiture of property. We find failure of the Appellant to substantiate the arguments and failure to disclose the sources of property therefore we are unable to cause interferences of the impugned order of the forfeiture. Change of ownership would not affect the tenant - Appellant started a business in the name and style of Sana Communication Centre in 1992 however, it stood closed in 1995. It has been stated by the Counsel that the Appellant had income from interest on saving deposits but no source of such savings has been disclosed. Further, the appellant had purchased equipment for running Sana Communication Centre and income out of it has been received by way of FEIS, 1991 but no documentary evidence has been produced before this Tribunal to support the contentions, as aforesaid. Therefore, we do not find any substance in challenge to the forfeiture of the property in the hands of the Appellant. Property acquired by the Appellant from his natural guardian by a Conveyance Deed - The building has been given on lease and many tenants are said to be residing. It is stated that share of each Appellant is to the extent of 1/5th portion on the property and the source has been disclosed in the Income Tax Return. It is further stated that the property has been acquired by the appellants by way of gifts, but we do not find any material on record to substantiate the arguments and accordingly unable to accept the case of the Appellant against the forfeiture of the property. Property is in the ownership of Seth Ismailji Abdoolally Machiswala Religious and Charitable Trust and was originally let out to Municipal Corporation of Greater Bombay, however it ceased to use the premises - On a bare reading of the terms of the rent agreement relied upon by the appellants, it would show that the appellants are virtually owning the property. However, the appellants have failed to show any source for acquiring the said properties. The bank statement only shows entries but from the amount was sourced has not been proved. Thus for the reason given above and when Appellant is not claiming ownership of the property thus, we do not find any ground to cause interference in the impugned order.

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• PMLA

• 2024 (8) TMI 725
  Grant of interim bail - Money Laundering - offences punishable under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 and Sections 384 and 120B of the Indian Penal Code, 1860 - HELD THAT:- This Court prima facie found that the petitioners had made out a case for their enlargement on interim bail. Accordingly, they were directed to be released on interim bail, subject to their furnishing bail bonds to the satisfaction of the Special Court, Raipur, Chhattisgarh. The petitioners deserve to continue on bail during the pendency of the trial. Consequently, the orders dated 17.05.2024 and 08.07.2024 are made absolute. The special leave petitions are, accordingly, disposed of.

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• 2024 (8) TMI 724
  Money Laundering - attachment of the properties of the petitioners - HELD THAT:- The order of attachment is not in existence, no purpose will be served by keeping these Petitions pending. The order by which the accused are discharged is subject-matter of challenge in the pending criminal revision petitions before the High Court. If by virtue of the orders which may be passed in the criminal revision petitions, the order of discharge is set aside and the order of attachment is revived, we permit the petitioners to either apply for revival of these Petitions or to challenge the order of attachment substantively. SLP disposed off.

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• 2024 (8) TMI 723
  Seeking to recall/modify a part of para 15 of order dated 12.02.2024 - short grievance of the review-petitioners is that while granting liberty to the Directorate of Enforcement to avail two independent remedies, an impression has been created as if this Court has authoritatively held that a complaint at the instance of E.D. is maintainable before a Judicial Magistrate under Section 156(3) Cr.P.C. HELD THAT:- Keeping in mind the well settled principle that a Court order causes prejudice to none, we deem it appropriate to modify/clarify para 15 of the order dated 12.02.2024 to the extent that the said order shall not be construed to have held that a complaint under Section 156(3) Cr.P.C. is maintainable at the instance of E.D. Whether such a complaint is maintainable or not shall be decided by the court of competent jurisdiction in accordance with law. We have not expressed any opinion in relation thereto. The aggrieved party thus shall be at liberty to have recourse to the appropriate remedy as may be permissible in law - The Review Petitions stand disposed of accordingly.

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• 2024 (8) TMI 722
  Seeking to be released on bail - appellant, Humayun Suleman Merchant, is more than 75 years of age and has already suffered actual incarceration for four years and nine months - HELD THAT:- The appellant, Humayun Suleman Merchant, will be released on bail during the pendency of trial in connection with Supplementary Prosecution for the offence(s) punishable under Section 4 of the Prevention of Money Laundering Act, 2002, on terms and conditions to be fixed by the trial court. The appellant, Humayun Suleman Merchant, will surrender his passport and will not leave India without the permission of the trial court. In case of non-compliance with the terms and conditions, it will be open to the trial court to cancel the bail . The impugned judgment is set aside and the appeal is allowed.

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• 2024 (8) TMI 721
  Seeking grant of bail - money laundering - proceeds of crime - fraudulent acquisition of land which was in possession of Ministry of Defence, Government of India - reasons to believe - twin conditions laid down u/s 45 PMLA, 2002 - it was held by High Court that 'The twin conditions as prescribed u/s 45 PMLA, 2002 having been fulfilled, this application is allowed.' HELD THAT:- There are no reason to interfere with the impugned judgment and order passed by the High Court. The special leave petition is, accordingly, dismissed.

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• 2024 (8) TMI 720
  Grant of anticipatory bail - complaint has already been filed and the appellant not been arrested during the investigation - HELD THAT:- Taking note of the fact that the complaint has already been filed and the appellant not been arrested during the investigation, it is required to set aside the impugned order and grant anticipatory bail to the appellant. In such view of the matter, the impugned order is set aside and the appellant is granted bail, subject to the conditions that may be imposed by the trial Court. Appeal allowed.

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• Service Tax

• 2024 (8) TMI 719
  Pre-deposit for maintaining appeal - recovery of service tax with interest and penalty - HELD THAT:- The Hon ble Supreme Court in the case of RAJ KUMAR SHIVHARE VERSUS ASSTT. DIRECTOR, DIRECTORATE OF ENFORCEMENT [ 2010 (4) TMI 432 - SUPREME COURT] while considering the scope of the provisions of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 and Foreign Exchange Management Act, 1999 (FEMA ), in relation to an order passed in connection with an application for dispensation of pre-deposit of penalty and the right to prefer an appeal to the High Court in terms of Section 35 thereof, in paragraph 24 of such judgment was, inter alia, pleased to observe by taking note of the language used in Section 35 of FEMA that the word any in this context would mean all - the Hon ble Supreme Court had opined that the said Section confers right of appeal to any person aggrieved and such a right to appeal is a right which has been conferred by the statute. Any decision passed, would be appealable under Section 35 of the FEMA and that the legislature has conferred such right to a person aggrieved from any order or decision of the Appellate Tribunal, though with certain limitations. Taking note of Section 35G of the said Act, it would appear that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, though the maintainability thereof would be dependent on certain statutory limitations. Thus, it cannot be said that the order passed by the Tribunal on 5th January, 2024 does not qualify as an order for preferring an appeal before the High Court, simply because the same does not seek to adjudicate the rights of the parties. It is a different question whether the High Court would admit the same having regard to the substantial questions of law involved. There are limitations imposed by the statute which are required to be followed. Such statutory limitations, do not make an appealable order, non appealable, especially when there is no limitation on the nature of order or the decision to be appealed against, as in this case. The present writ petition ought not to be entertained on the ground of alternative remedy as also on the ground of lack of territorial jurisdiction - Allowing a petition of this nature would permit bypassing of statutory provision which is not ordinarily permissible. Petition dismissed.

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• 2024 (8) TMI 718
  Adjustment of short-payment of tax with excess payment - erroneous paid service tax on services exported to overseas clients, which the Department has accepted as refundable u/s 11B of the Central Excise Act, 1944 - recovery could be effected by invoking larger period of limitation or not. Adjustment of outstanding inadmissible credit against excess payment of service tax - HELD THAT:- In the event, the assessee pays service tax in respect of a taxable service which is not paid by either wholly or partially for any reason, he may adjust the service tax so paid by him against the service tax liability for the subsequent period. Therefore, it is clear that the assessee is allowed to adjust service tax excess paid against the service tax liability for the subsequent period. Whereas in the present case, the appellant had erroneously availed cenvat credit of Rs.2,03,69,972/- and sought to adjust against service tax paid on export of services previously which cannot be considered as an adjustment of service tax relating to service tax liability for the subsequent period. However, it is found that erroneous availment of cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004 could be recoverable only after insertion of the recovery provision to the said Rule by insertion of an Explanation through amending Notification No.3/2013-CE(NT) dated 01.03.2013 as amended only w.e.f. 01.03.2013. Invocation of extended period of limitation - HELD THAT:- It is found that the Department was aware of the adjustment of the inadmissible cenvat credit against the excess service tax paid since February 2007 as communications have been exchanged between the appellant and Department resulting to payment of interest in March, 2009; and the show-cause notice was issued on 15.06.2009 i.e. after two years; thus invocation of extended period of limitation alleging suppression of fact cannot be sustained. The impugned order is set aside and appeal is allowed.

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• 2024 (8) TMI 717
  Classification of services - Supply of Tangible Goods Service or not - activity of allowing clients to use the rakes given to them by Railways for transportation of goods - time limitation. HELD THAT:- The appellant has no control over the railway rakes supplied by them to the Indian Railways. Once the rakes are handed over to the Indian Railways, the Indian Railway are free to use the said rakes for any of their clients.The appellant was never getting the same rakes for transportation of goods by Rail for themselves or for their clients. Hence, the effective control and possession of the said rakes was not with the appellant once the rakes / wagons were handed over to the Indian Railways - The services received by the clients from Indian Railways is Transportation of goods by Rail service. There was no supply of tangible goods service involved. From the Clauses of the Agreement, it is observed that possession and effective control of the wagons. When the control and possession of the Railway Rakes were with the Indian Railway, question of Supply of Tangible Goods Service by the Appellant for use to their clients does not arise. Further, it is observed that the wagon/rakes were allotted by the Indian Railways to the Appellant under the Agreement from the common pool and it was not the same rakes/wagons supplied by the Appellant to the Indian Railways. Accordingly, the activity under taken by the appellant in the instant case cannot be considered as taxable service under the category of supply of tangible goods services . It is observed that in the case M/S. RASHTRIYA CHEMICALS FERTILISERS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX (LTU) , MUMBAI [ 2024 (3) TMI 1341 - CESTAT MUMBAI] , after analysing the agreement, which is almost similar to the agreement in the present case on hand, the Tribunal held that leasing out the wagons to Railways would not fall under the category of taxable service of ' Supply of Tangible goods'. In the present case, the appellant did not have the effective control and possession of the rakes supplied by them to the Indian Railways and hence, they have not rendered any supply of tangible goods service to this effect. Time Limitation - HELD THAT:- The dispute in the instant case relates to the period from 2008-09 to 2009-10 whereas the impugned Show Cause Notice was issued on dated 23-07-2012. The instant proceeding is initiated on the basis of Audit of Books of Accounts and scrutiny of Profit Loss A/c. [Schedule XV (Other Income)] of the Appellant. No fresh material is brought by the Department to allege any suppression of facts with intention to evade the tax - the entire demand is barred by normal period of limitation of one year and hence the demands confirmed in the impugned order are liable to be set aside on the ground of limitation also. The demands confirmed in the impugned order set aside on merits as well as on limitation - appeal allowed.

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• 2024 (8) TMI 716
  Scope of SCN - demand of Service Tax has been confirmed under the category of clearing and forwarding agents services - the cargo handling service‟ has been confirmed which is not the subject matter of the Show Cause Notice - HELD THAT:- As in this case, Show Cause Notice proposes to demand of Service Tax under the Mining Service which the Adjudicating Authority has held that the demand is not sustainable under Section 65105(zzzy) of the Finance Act, 1994 which means that the activity undertaken by the appellant does not fall under Mining Services . But the Adjudicating Authority has gone beyond the scope of the Show Cause Notice by holding that the activity undertaken by the appellants falls under Section 65(105)(zr) of the FA, 1994 which is beyond the scope of the Show Cause Notice. Thus, demand proposed in the Show Cause Notice under Mining Service and confirmed under Cargo Handling Service . Therefore, the impugned order is not sustainable in the eyes of law which is beyond the scope of Show Cause Notice. Accordingly, impugned order is set aside. Appeal allowed.

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• Central Excise

• 2024 (8) TMI 715
  CENVAT Credit based on invoices addressed to the units Head Office - invoices were raised in the name of the Head Office which was not registered as an Input Service Distributor (ISD) - Rule 9(2) of the CENVAT Credit Rules, 2004 - HELD THAT:- It is found that the Adjudicating Authority vide Order in Original dated 30.09.2013 after relying on the decisions of Tribunals in the case of COMMISSIONER OF CENTRAL EXCISE, VAPI VERSUS JINDAL PHOTO LTD. [ 2009 (1) TMI 187 - CESTAT, AHMEDABAD ] and PRECISION WIRES INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE VAPI [ 2014 (3) TMI 630 - CESTAT AHMEDABAD ], held that since there is no allegation that the services had not suffered service tax or that the services were not received at the Kattur plant, the only issue was that the invoice was raised in the name of the Head Office, which cannot be the sole ground to deny credit. The appellant has also pointed out that while the disputed invoices are for the period August 2010 to August 2011, their HQ had applied for an ISD registration on 07.01.2010 and the registration certificate was also issued and has also been accepted at para 4.2 of the Order in Original. The Adjudicating Authority had dropped the demand on the above grounds. The issues raised in the impugned order that the Order in Original does not throw light on how the credit was verified that the service was fully received in the premises of the Kattur unit and further that the order does not condone the shortcomings in the invoice under Rule 9(2) of the CENVAT Credit Rules, 2004 after satisfaction of receipt of service in the Kattur Unit, does not appear correct. The very fact that the OIO accepts the assessee s claim and had dropped further proceedings indicates that the Original Authority had condoned short comings if any. The appellant cannot be denied the credit just because the Order in Original does not throw light on how the credit was verified and how the service was fully received in the premises of the Kattur unit - There is nothing to show that the credits were not reflected in the monthly returns filed by the assessee or that there was a deliberate attempt to evade payment of duty. It is thus held that substantial benefit should not be denied on purely technical grounds especially when there is no allegation with regard to the payment of service tax on the services, receipt of the services and utilization of services by the appellant, merely on the ground that invoices were in the name of head office. The appeal merits to be accepted - the impugned order is set aside - appeal allowed.

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• 2024 (8) TMI 714
  Adjustment of amount of excess payment of duty due to various reasons, at the time of the quantification of duty pursuant to finalisation of provisional assessment - HELD THAT:- The learned Commissioner (Appeals) after analysing the provisions of Rule 9B of the Central Excise Rules, 1944 held that the factors which were not at the time of provisional assessment or while finalizing the assessment were not raised, cannot be considered while quantification of the demand. Consequently, the learned Commissioner (Appeals), dropped the excess amount relating to addition of packing and forwarding charges and value of software in arriving at the assessee value as proposed by the department. Applying the same principle he has also rejected the claim of the appellant that the excess amount of the duty, if any, paid due to various reasons, not raised at the time of finalisation of assessment under Rule 9B of Central Excise Rules, 1944, the Order of assessment being not challenged, cannot be raised at the quantification of demand. The learned Commissioner has confused between assessment and quantification. Once the provisional assessment is finalised taking note of the elements to be considered in determining the assessable value subsequent additions or alterations of certain elements of deduction or expenses relating to sale would be in contravention to the finalisation order of the assessment. However, in the present case, at the time of quantification of the demand, the appellant claimed certain corrections in the quantification amount by submitting that excess payment of duty due to error in billing, wrong quantity etc. which has nothing to do with the assessment for determination of assessable value of the goods. Therefore, the rejection of the claim of the appellant to adjust the excess duty paid during the assessment period at the time of quantification of demand cannot be sustained. Appeal allowed.

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• 2024 (8) TMI 713
  Denial of CENVAT Credit - want of proper document to establish availability of stock and subsequent receipt at it service station - HELD THAT:- While proof of payment of duties at the time of import and at the time of subsequent transfer to respective units are not denied when entire stock having been transferred to the service centre of Volvo, the parent company of the Appellant, the Appellant is eligible to avail the credit, as determine and claimed by it. The order passed by the Commissioner of GST Central Excise (Appeals-Thane) Mumbai is hereby set aside - Appeal allowed.

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• 2024 (8) TMI 712
  SSI Exemption - clubbing of clearances - mutuality of interest - flow back of funds between the units - N/N. 8/2003-CE dated 02/03/2003 - HELD THAT:- It is found that the Revenue has erred by not issuing any Show Cause Notice to DTS whose turnover is being sought to be clubbed with that of the appellant. This goes against the judicial principles since the other party is not even given notice to make their submissions. The Calcutta High Court in the case of COMMISSIONER OF C. EX., KOLKATA-II VERSUS DIAMOND SCAFFOLDING CO. [ 2011 (7) TMI 854 - CALCUTTA HIGH COURT] has held that ' clubbing of clearance, the Tribunal further came to the conclusion that clearances of two other units were clubbed with the clearance made by the importer without issuing any show cause notice to the other units and there was no notice to the two units for clubbing clearance with the clearance of the importer. In such circumstances, in our opinion, the Tribunal was quite justified in holding that demand by clubbing the clearance of other units without issuing any show cause notice was not sustainable.' It is also found that the Revenue has not brought in any specific evidence towards mutuality of interest and flow back of funds between these units. In respect of the second Show Cause Notice, it is found that the Hon ble Supreme Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] has held that ' When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant.' The impugned order is set aside - appeals allowed on merits as well as on account of limitation.

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• 2024 (8) TMI 711
  Valuation - Inclusion of freight charges collected from customers in the transaction value for central excise duty - place of removal - circular no.1065/4/2018-CX dated 08.06.2018 - penalty u/s Section 11AC of the Central Excise Act. Valuation - HELD THAT:- The issue considered in the impugned order was whether the freight charges paid for transport of goods from the premises of the appellant to their customers premises on FOR basis shall be included in the assessable value of goods for the purpose of charging central excise duty. That similar issue was considered by the Apex Court in COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. [ 2015 (4) TMI 857 - SUPREME COURT] and in COMMISSIONER CENTRAL EXCISE, MUMBAI-III VERSUS M/S. EMCO LTD. [ 2015 (8) TMI 200 - SUPREME COURT] and the principles laid down in Roofit Industries Ltd. were 'As per the 'terms of payment' clause contained in the procurement order, 100% payment for the supplies was to be made by the purchaser after the receipt and verification of material. Thus, there was no money given earlier by the buyer to the assessee and the consideration was to pass on only after the receipt of the goods which was at the premises of the buyer. From the aforesaid, it would be manifest that the sale of goods did not take place at the factory gate of the assessee but at the place of the buyer on the delivery of the goods in question.' It is not disputed that the appellant had collected the amount towards freight from the customers but have not included the same in the transaction value and hence, no central excise duty was paid on the said amount. The ownership of the goods was to be transferred at the buyers premises, where the sale actually took place and, therefore, the place of removal for the purpose of valuation under Section 4 was the buyers premises - The facts clearly show that the point of sale was where the ownership of goods was transferred to the buyers or customers, and, therefore, all the expenses incurred and collected by the appellant till the buyers premises shall be part of the assessable value under Section 4 of the Act. The next submission of the learned counsel for the appellant is that authorities erred in relying on the rescinded Circular No.988/12/2014-CX dated 20.10.2014 and Circular No.97/8/2007-CX dated 23.08.2007 - HELD THAT:- The opening paragraph of the later Circular dated 8 June 2018, clearly refers that it has been issued on the implementation of the circulars in view of the various judgements pronounced by the Supreme Court and rescinding the earlier Circular - Relying on the observations of the Apex Court in COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [ 2015 (10) TMI 613 - SUPREME COURT] , the Circular stated that the place of removal is required to be determined with reference to point of sale with the condition that place of removal (premises) is to be referred with reference to the premises of the manufacturer, however, at the same time, an exception is provided in paragraph-4 that though para-3 would apply in all situations, except where contract for sale is FOR contract in the circumstances. In the present case, it is an admitted position that the contract was on FOR basis and, therefore, no reliance could be placed on the principles provided in paragraph-3 - Lastly, para-6 of the Circular is relevant as it provides for the facts and circumstances of each case to be verified. In view thereof, the contention of the appellant has no substance and needs to be rejected. Thus, the freight charges of outward transportation of excisable goods have been rightly included in the assessable value of goods for the purpose of discharging the central excise duty by the impugned order and hence the same needs to be affirmed. The demand towards excise duty having been affirmed, the levy of statutory interest under Section 11AA of the Act is automatic and hence the same is rightly imposed. Penalty under Section 11 AC of the Act - HELD THAT:- The non-payment of central excise duty was noticed by the Departmental Audit Team during the course of audit, which clearly shows that the appellant suppressed the facts with intent to evade the payment of central excise duty by suppressing the value of excisable goods in their ER-I monthly returns. Though the law was settled by the Apex Court in COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [ 2018 (2) TMI 117 - SUPREME COURT] , yet the appellant resorted to unlawful deduction of freight from the assessable value. Thus, they are liable to pay penalty under Section 11 AC of the Act which the Commissioner (Appeals) has reduced to 25%. Accordingly, the same is upheld. Appeal dismissed.

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• 2024 (8) TMI 710
  CENVAT Credit - inputs - MS Angles, Channels, Plates etc. which have been used for fabrication of capital goods - HELD THAT:- It is found from the records that the Appellant has produced copy of the Chartered Engineer s Certificate showing in detail as to how the input has been used in fabrication of various capital goods within the factory premises. Inspite of such detailed evidence produced, the lower authorities have not given proper consideration and confirmed the demand - the issue is no more res integra. The Hon ble Madras High Court in the case of M/S. THIRU AROORAN SUGARS, M/S. DALMIA CEMENTS (BHARAT) LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [ 2017 (7) TMI 524 - MADRAS HIGH COURT] has held ' Therefore, in our opinion, whether the user test is applied, or the test that they are the integral part of the capital goods is applied, the assessees, in these cases, should get the benefit of Cenvat credit, as they fall within the scope and ambit of both Rule 2(a)(A) and 2(k) of the 2004 Rules.' The Appeal is allowed both on merits as well as on account of limitation - appeal allowed.

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• CST, VAT & Sales Tax

• 2024 (8) TMI 709
  Denial of claim for concessional rate of tax and claim for sales returns - no C Forms to support the claim for concessional rate of tax - claim of the petitioner rejected on the ground that the claim for sales return had not been made within the time contemplated under the statute - differential demand of tax on the petitioner - it was held by Supreme Court that 'The questions of law raised in this revision petition have to be answered in favour of the revenue and against the assessee' - HELD THAT:- It is not required to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

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• 2024 (8) TMI 708
  Classification of goods - tinted glass sheets - to be taxed as goods or wares made of glass under the Notification No.5784 dated 07.09.1981 being Entry No.IV or as unclassified item - it was held by Supreme Court that 'There is no vagueness in the notification dated 07.09.1981 and the entry No. 4 is clear and unambiguous namely it has brought within the sweep all goods and wares made of glass exigible to tax but not including plain glass panes and the exemption being the creation of the statute itself, it has to be construed strictly and even if there is any vagueness in the exemption clause must go to the benefit of the revenue.' HELD THAT:- No case for review of the judgment dated 09.10.2023 is made out - The review petitions are, accordingly, dismissed.

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• 2024 (8) TMI 707
  Confirmation of tax being the turnover assessed by the Assessing Authority under section 7A for nonproduction of sale bill - disallownace of turnover by the Assessing Authority on the export sales claimed by the dealer - burden to proof - levy of penalty. Whether the tax of Rs. 5,80,905/- being the turnover assessed by the Assessing Authority under section 7A for nonproduction of sale bill and confirmed by the Appellate Assistant Commissioner is correct? - HELD THAT:- Section 10 of the TNGST Act, 1959 is entitled 'Burden of proof' and states that for the purpose of assessment of tax under the Act the burden of proving that any transaction or any turnover of a dealer is not liable to tax, shall lie on such dealer. The provision goes on to enumerate the consequence of non-discharge of the burden imposed stating that in the case of a claim of second sale, if an assessee is unable to prove that the goods have already been subjected to tax, he will be deemed to be a first seller/first purchaser. The full onus of this burden falls on the petitioner and has, admittedly, not been discharged in this case - the conclusion of the Tribunal to the effect that the levy of purchase tax is warranted in the absence of any material to support the petitioner's stand contains no infirmity and we confirm the same. Whether the turnover of Rs. 8,68,432/- disallowed by the Assessing Authority on the export sales claimed by the dealer and confirmed by the Appellate Assistant Commissioner is correct? - HELD THAT:- There is a mismatch between the products purchased by the petitioner and those exported. Even if one were to take a stand that the hosiery yarn purchased by the petitioner had been utilised in the manufacture of the mens shorts that had been ultimately exported, there is no bifurcation available between the export turnover relating to mens shorts and the tops - the addition is confirmed. Whether the levy of penalty of Rs. 85,133/- by the Assessing Authority and confirmed by the Appellate Assistant Commissioner is correct? - HELD THAT:- Though learned counsel for the petitioner would submit that levy of penalty is excessive, the levy is a percentage of the disputed tax alone - there are no avenue to intervene in the levy of penalty and thus confirm the same. This Writ Petition is dismissed.

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• Indian Laws

• 2024 (8) TMI 706
  Dishonour of Cheque - Time-barred debt and its acknowledgment - whether cheques were issued for a legally enforceable debt or other liability should be decided only at the time of trial and not at this stage? - HELD THAT:- The issue as to whether by subsequent conduct did the Petitioner promise the Respondent to pay the amount or not is a question of fact which can be decided only in trial. The Apex Court in Yogesh Jain vs. Sumesh Chadha, [ 2022 (10) TMI 1198 - SUPREME COURT] has held that the issue as to whether the debt is time barred or is legally enforceable or not ought not to be considered at the initial stage. The object of the NI Act is to enhance the acceptability of cheques and inculcate faith in the efficiency of negotiable instruments for transaction of business. In the opinion of this Court, the true purport of Section 138 of the NI Act would not be fulfilled if the debt or other liability is interpreted to include only a debt that exists as on the date of drawing of the cheque. The Parliament has used the expression debt or other liability and the explanation appended to Section 138 of the NI Act states that the debt would mean a legally enforceable debt, however, the expression also uses the word other liability. In the opinion of this Court, the word other liability would have to be something other than a legally enforceable debt and must be given a meaning of its own. The legislature has purposely used two distinct phrases i.e., legally enforceable debt and other liability. The issue as to whether the debt is time barred or is legally enforceable or not or as to whether the cheques were deposited after an understanding was reached between the parties regarding payment of liability or as to whether the cheques could have been deposited at any time for repayment of liability or whether it was a part discharge of liability etc. cannot be decided at the time of issuing of summons and the same can be considered only in the trial and not at this stage. This Court is not inclined to quash the present complaint at this juncture. The Ld. Trial Court is requested to proceed with the complaint in accordance with law - Petition disposed off.

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• 2024 (8) TMI 705
  Dishonour of Cheque - Maintainability of petition - Liability of partners - equal and efficacious remedy of appeal - Complaint not maintainable for the reason that it does not have the necessary averments against the Petitioners - whether the complaint, as framed, should be permitted to proceed ahead or should the complaint be quashed for want of necessary averments? - HELD THAT:- The position of a Partner is distinct from Director of a company. Section 18 of the Partnership Act specifically provides that a partner is an agent of the firm for the purpose of business of the firm. Section 19 states that the act of a partner which is done to carry on the business of the kind carried on by the firm, binds the firm. Section 23 states that an admission or representation made by a partner concerning the affairs of the firm is evidence against the firm, if it is made in the ordinary course of business. Section 25 states that every partner is liable jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. In a company, every Director is not responsible for the conduct of the business of the company but in a partnership firm all the working partners are responsible for the conduct of day-to-day business of the firm as every partner is a representative of the other partners of the firm. In view of the above, the averment that an accused is a partner is sufficient to show that that partner is responsible for the conduct of the affairs of the firm. All the judgments relied on by the learned Counsel for the Petitioner, which pertains to directors of a firm, are, therefore, clearly distinguishable. A perusal of the abovementioned Section shows that until and unless a public notice of the retirement is given, a partner of the firm continues to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement. There is nothing on record to show that a public notice has been given. However, since Ms. Anju Khanna, i.e. the Petitioner No. 1 herein, was only a sleeping partner of the firm, this Court is inclined to exercise its jurisdiction under Section 482 Cr.P.C to quash the Complaint qua Ms. Anju Khanna, i.e. Petitioner No. 1 herein only. As far as Petitioners No. 2 3 are concerned the complaint shall proceed ahead against them. The Petition is disposed of.

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• 2024 (8) TMI 704
  Dishonour of Cheque - discharge of the legal debt/liability - preponderance of probablities - whether Respondent had paid back the money or not and if not, the same was payable? - HELD THAT:- Indisputably, Respondent has been acquitted by the learned Trial Court and therefore, the first issue that needs consideration is the scope and ambit of interference by an Appellate Court in a judgment acquitting the accused. Appellate Court has, no doubt, wide powers to re-appreciate the evidence in an appeal against acquittal and come to a different conclusion, on facts and law, but there is no gainsaying that this power must be exercised with due care and caution since the presumption of innocence at the start of the trial is strengthened by acquittal of the accused by a judicial order. It is a settled law that in matters relating to dishonour of cheques, Courts have to consider whether the ingredients of Section 138 of NI Act are made out and if so, whether the accused is able to rebut the statutory presumption under Section 139 of NI Act. Coming to the present case, the undisputed position that obtains is that Respondent admitted execution of promissory note Ex. CW1/B and agreement Ex. CW1/C as well as his signatures on 7 cheques in question Ex. CW1/E and Ex. CW1/H-1 to Ex. CW1/H-6. It is also established through cheque return memos dated 12.07.2010 and 06.08.2010, Ex. CW1/F and by Ex. CW1/I-1 to Ex. CW1/I-6, that on presentation with the bank, all 7 cheques were returned unpaid with remarks Funds Insufficient . Whether Respondent had any legally enforceable debt or liability to pay the allegedly due amount under the cheques in question to the Petitioner? - HELD THAT:- Reading Section 139 and applying the same, there is little doubt that since Petitioner was the holder of the cheques in question and the signatures on the cheques were not denied by the Respondent, presumption shall be drawn that the cheques were issued for discharge of a debt or other liability. The presumption under Section 139 of NI Act is, however, a rebuttable presumption. At this stage, I may allude to observations of the Supreme Court in BASALINGAPPA VERSUS MUDIBASAPPA [ 2019 (4) TMI 660 - SUPREME COURT ], wherein the Supreme Court, before proceeding to the judgments under Sections 118 and 139 of NI Act noticed the general principles pertaining to burden of proof on an accused especially in a case where some statutory presumption regarding guilt of the accused has to be drawn. In RANGAPPA VERSUS SRI MOHAN [ 2010 (5) TMI 391 - SUPREME COURT ] the Supreme Court observed that presumption under Section 139 of NI Act is rebuttable and it is open to the accused to raise a defence and contest that the cheque was not issued in furtherance of an enforceable debt or liability. It was also held that in the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden and therefore when an accused has to rebut the presumption under Section 139 of NI Act, the standard of proof for doing so is preponderance of probabilities . This Court is unable to find any infirmity in the finding of the Trial Court that Respondent was able to set up a plausible defence, which on the principle of preponderance of probability, rebutted the presumption in favour of the Petitioner under Section 139 of NI Act. Execution of agreement Ex. CW1/D-8 reflecting the execution of documents regarding transfer/sale of the property as security for loan of Rs.25 lacs; Respondent being in possession of the coloured photocopies of the documents executed on 27.11.2009 coupled with absence of any explanation by the Petitioner on how these were with the Respondent; doubts over availability of funds to the extent of Rs.50 lacs with the Petitioner; his failure to prove the alleged two separate transactions of purchase of property and loan, certainly raises doubts over Petitioner s version and defence of the Respondent appears to be a probable defence. Thus, presumption under Section 139 of the NI Act stands rebutted. Once presumption under Section 139 was rebutted by the Respondent, burden of proof shifted on the Petitioner and as held by the learned Trial Court, Petitioner was unable to discharge the burden and the Respondent was rightly acquitted of the offence punishable under Section 138 of NI Act. Thus, no ground for grant of leave to appeal is made out. Petition seeking leave to appeal is hereby dismissed.

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