Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 18, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of SCN issued u/s 73 of GST Act - In any event, the issue as to whether a show cause notice is bad and lacks detail or is unintelligible to qualify to be a show cause notice cannot be put in a straight-jacket formula and has to be decided considering the facts and circumstances of the cases on hand. - The Ld. single Bench rightly refused to interdict the SCN - HC
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Validity of objection raised in GST audit report - The petitioner has not come against any order passed by the authority concerned. In any case, if the petitioner shall have any grievance with regard to the audit report and the subsequent order in connection with notice under Annexure-5, then he may raise the objection before the assessing authority. The petitioner shall get a chance to have its say in the assessment proceeding. - Petition dismissed as pre-mature - HC
Income Tax
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Validity of Settlement Commission Order - when the High Court set aside the order of the Settlement Commission, the matter had to be remanded to the Settlement Commission (Not Interim Board for Settlement) for re-consideration and re-determination of the undisclosed income, after giving an opportunity to both sides. - SC
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Validity of assessment - Jurisdiction of AO - any objection with regard to territorial and pecuniary jurisdiction should be taken at the earliest possible opportunity before the settlement of issues and not at a subsequent stage and the interpretation of Section 254 of the Act by this Court, we find no error in the order passed by the ITAT. - HC
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Estimation of income - bogus purchases - A.O. has observed that respondent has purchased material from someone else while bogus bills were organized by these Hawala Traders. Therefore, at least to the extent even if it has been purchased from Hawala Traders the indisputable fact is that the purchases have been made and admittedly quantitative reconciliation of the stock was done by respondent of sale and purchase. - Estimation of income @12.5% sustained- HC
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Deduction u/s 80IA - notional carried forward of unabsorbed losses/depreciation - The deeming fiction created by sub-section (5) of Section 80IA does not envisage such an adjustment. The fiction which has been created is simply this: the eligible business will be the only source of income. There is no fiction created, that losses which have already been absorbed, will be notionally carried forward and adjusted against the profits derived from the eligible business to quantify the deduction that the assessee could claim u/s 80IA of the Act. - HC
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Exemption u/s 11 - Charitable activity u/s 2(15) - entities engaged in providing other than essential services - business of providing built-up space or making available vacant land, on leasehold basis - the letting is being undertaken in an organized manner - The lease rentals are deployed to finance both creation of more built-up space, as well as through charge of depreciation, sustain that existing. - The same qualifies as an eligible business u/s. 11(4A), and it’s income assessable as business income. - AT
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Addition made on the basis of loose papers found and seized from the third person - the jottings made without identification of any asset or investment cannot be the basis for making the addition of unexplained investment as done by the assessing officer. - Ld CIT(A) deleted the addition correctly. - AT
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Addition u/s 56(2)(vii) - Determination of value of shares on the basis of financial statement of a Company or the book value does not have much relevance under DCF method, because it is based upon, fair expected revenue growth and fair expected cash flow for a period of five years; discount rate and terminal growth rate; and terminal value, etc. are the factors which are taken in the consideration. - Rejection of valuation under DCF Method is not correct - AT
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Benefit of deduction u/s 80IA - portion of the interest attributable on the bank loan - loan not used for business purpose - Contention of the AO that this was a colourable device to enhance the eligible profit of the company, which falls under the ambit of sub-section 10 of section 80IA cannot be accepted or subscribed to, because, if the interest expenditure incurred on funds granted as loan to the associate company are not added back to the taxable income of the company, it would have been a reduction of the taxable income, which would lead to a wrong or inaccurate presentation of the facts by the assessee. - AT
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Unexplained cash credits u/s 68 - There is no justification in treating the loans raised by the assessee from the said companies as unexplained cash credits u/s 68 - Apart from that the part-repayment of loan by the assessee to one of the lenders further fortifies the authenticity of the loan transaction under consideration. - Additions deleted - AT
Customs
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Withholding of permission to the petitioner’s vessel to leave the Haldia Dock Complex - in any event, the Customs officials have not claimed any import duty from the petitioner till date. The ground of refusal was mere pendency of certain Bills of entry which have been waived by the importers themselves, by way of their no objections - In the present case, it is undisputed that the goods have not been put into the course of home consumption or warehousing and are still on board the petitioner’s vessel. Hence, the status of the goods is admitted. - HC
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Provisional release of goods - the Act of adjudicating authority in deciding an application for provisional release is adjudicating procedure and not a ministerial act as contended by the respondents. Therefore, the adjudicating authority is bound to adhere to the elementary principles of natural justice by adverting to the contentions raised in an application seeking provisional release and afford the applicant an opportunity of being heard. - HC
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Recovery of money towards local and detention charges and value of the containers - The present suit for recovery of money has nothing to do with any of the statutory duty or liability of an agent under Section 148 of Customs Act. The suit is for recovery of charges based on the contract of the carriage between the plaintiff's principal and the importers and violation thereof. Therefore, the arguments advanced by the learned counsel for the plaintiff by relying on Section 148 of Customs act is also of no use. - HC
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Levy of Anti Dumping Duty (ADD) - Diethyl Thio Phosphoryl Chloride (DETPC) imported from China - The appellant is not liable to pay the Anti-Dumping Duty as the Notification No.73/2009 was not in existence at the time of import of goods. - AT
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Confiscation - quantum of redemption fine and penalty - import of old and used worn clothing, completely fumigated - - the redemption fine and penalty imposed on the respondent to the tune of 10% & 5% respectively on the assessed value is sufficient. - AT
Indian Laws
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Dishonour of Cheque - Framing of charges - The averment in the complaint would be supported by legal presumption under Section 138 and 139 of Negotiable Instruments Act at trial. The documents with regard to dissolution of partnership and the statement contained therein, may be probable defence of the accused which cannot be gone into at the preliminary stage of proceeding i.e., cognizance and framing of charge. - HC
IBC
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Initiation of CIRP - Period of limitation - date of NPA to be taken as date of default or not - the period of limitation would be attracted from the date when the default occurs and not from the date of declaration of NPA. Therefore, the date of NPA cannot be taken to be the date of default for the purpose of limitation. - AT
Service Tax
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Classification of Service - Tour Operator Service or not - keeping in view the fact that the vehicles involved were tourist vehicles and not stage carriages, he has failed to produce the relevant documents to support his contention that he did not fall within the exclusion condition of the Notification. - AT
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Short payment of service tax on works contract service - challans were not in the name of the assessee- appellant - As the partnership firm has no service tax liability and the service tax amount in terms of the show cause notice was already deposited with the Government exchequer, it was not a case of tax evasion. - AT
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Non-payment of Service tax - reimbursable expenses - foreign owners where payment is received in foreign currency - the quantification of the value of the service can therefore never exceed the gross amount charged by the service provider for the ship management service provided by them. - AT
Central Excise
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Refund of the excise duty paid in cash - Area based exemption - New Industrial Unit in terms of the notification or not - Surrendering the old central excise registration and taking a new registration alone not sufficient to consider that the Appellant has commenced a new industrial unit - the Appellant’s unit cannot be considered as a new unit which has commenced its commercial production w.e.f. 11.04.2007. - AT
Case Laws:
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GST
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2023 (8) TMI 779
Validity of SCN issued u/s 73 of the WBGST Act - It is the submission of the learned advocate for the appellant that the show cause notice is dated 10th May, 2023 but the report (report in the matter of the appellant/assessee) is dated 8th May, 2023 and therefore, the same cannot be treated as a show cause notice. HELD THAT:- On a perusal of the report, it is seen that it has been explicitly stated that the appellant is required to show cause as to why it should not pay the amount specified in the table in the said report along with the interest payable and penalty leviable thereon. Therefore, the assessee should treat the annexure to the notice i.e. the report dated 8th May, 2023 as the material based on which they are called upon to show cause as to why the tax, which has been computed should not be recovered along with the interest and penalty. The show cause notice is neither vague nor lacking in particular and it is for the appellant/assessee to raise all contentions in its reply, which will include the contention regarding the pecuniary jurisdiction and the authority, which has issued the show cause notice. In any event, the issue as to whether a show cause notice is bad and lacks detail or is unintelligible to qualify to be a show cause notice cannot be put in a straight-jacket formula and has to be decided considering the facts and circumstances of the cases on hand. The learned single Bench rightly refused to interdict the show cause notice. Accordingly, the appeal fails and the same is hereby dismissed along with the connected application.
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2023 (8) TMI 778
Provisional attachment of Bank Accounts - Petitioner submits that it is not the current account but in fact the cash credit account which is provisionally attached - Section 83 of the CGST Act - HELD THAT:- It appears that on more than one occasion, the Court has deprecated the practice of the respondent authorities in seeking to enforce tax liabilities by provisionally attaching cash credit account. Issue notice to the respondent/s, returnable on 17.8.2023.
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2023 (8) TMI 777
Provisional attachment of Immovable properties and bank accounts - non-application application of mind and in flagrant violation of the certain provisions of law under the Central Goods and Service Tax Act and Rules - HELD THAT:- While it may be a fact that the value of the immovable properties attached is not sufficient to meet the demand contained in the show cause notices, it must be necessarily reminded that the appellant cannot be financially choked to the extent of preventing it from carrying on legitimate business activities while simultaneously defending the proceedings initiated by the respondents against him. The ends of justice would require to modify the judgment of the learned single Judge and to permit the appellant to operate two of its bank account pending finalisation of the adjudication proceedings by the respondents so that the appellant can carry on its legitimate business activities even while defending the proceedings initiated against him by the respondents. Lifting of the attachment in respect of the two accounts allowed - appellant shall be permitted to operate the said accounts during the pendency of the adjudication proceedings initiated at the instance of the respondents and until the culmination thereof - appeal disposed off.
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2023 (8) TMI 776
Validity of objection raised in GST audit report - direction to discharge its statutory liabilities as per the provisions of the Act and the Rules made thereunder, failing which proceeding as deemed fit may be initiated against it under the provisions of the Act - petitioner contended that against certain objections in the audit report, the petitioner is not liable to be charged with liability - HELD THAT:- The petitioner has challenged the audit report under Annexure-4 contending that certain observations have been made in the audit report to which the petitioner is not liable to pay the amount. On the basis of such audit report, the notice under Section 65 (6) of the Act (Annexure-5) has been issued, where the petitioner has been directed to discharge its statutory liabilities as per the provisions of the Act and the Rules made thereunder, failing which proceedings as deemed fit may be initiated against it under the provisions of the Act. The petitioner has not come against any order passed by the authority concerned. In any case, if the petitioner shall have any grievance with regard to the audit report and the subsequent order in connection with notice under Annexure-5, then he may raise the objection before the assessing authority. The petitioner shall get a chance to have its say in the assessment proceeding. This writ petition at this stage is premature one, for which this Court is not inclined to entertain the same. Petition disposed off.
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Income Tax
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2023 (8) TMI 780
Exemption u/s 10(46) - rejection of the application by the CBDT as the petitioner was engaged in a commercial activity - scope and amplitude of the definition charitable purpose - HELD THAT:- As said aspect of the matter has now been put to rest by judgment of Ahmedabad Urban Development Authority [ 2022 (10) TMI 948 - SUPREME COURT] as held that in clause (b) of Section 10(46) of the IT Act, commercial has the same meaning as trade, commerce, business in Section 2(15) - sums charged by such notified body, authority, Board, Trust or Commission (by whatever name called) will require similar consideration i.e., whether it is at cost with a nominal mark-up or significantly higher, to determine if it falls within the mischief of commercial activity . However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case-by-case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case[ 2007 (12) TMI 7 - SUPREME COURT] - Denial of benefit under Section 10(46) after 01.04.2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and seeking exemption under Section 10(23C) or other provisions of the Act. Thus the issue raised in the present petition, pertaining to the eligibility of the petitioner to seek exemption under the provisions of Section 10(46) of the Act now stands concluded by judgment (supra) and the subject matter now needs to be examined by the CBDT in the light of the said judgment, the order impugned is set aside and the matter is remanded back to the CBDT to redetermine the aspect of eligibility of the petitioner in seeking exemption under Section 10(46) of the Act in the light of the above judgment.
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2023 (8) TMI 775
Validity of Settlement Commission Order - determination of the undisclosed income or not? - Department objected to the offer of settlement being offered as additional income and contended that there was no full disclosure of the material particulars. The Department sought for closure and dismissal of the settlement application - HC concluded that the Settlement Commission had not passed a just and proper order; that this was not a case which was acceptable for settlement at all and, therefore, set aside the order of the Settlement Commission - HELD THAT:- It is noted that initially only Rs.34 lacs was offered as the disclosed income spread over a period of three Assessment years. But, pursuant to the conduct of survey and recovery of incriminating documents during the course of settlement proceedings, ultimately, the authorised representative of the appellant/Assessee offered Rs.56 lacs as additional income for the purpose of taxation. We find substance in the argument of learned ASG appearing for the respondent/Department to the effect that there is no real determination of the undisclosed income. However, the High Court while setting aside the order of the Settlement Commission could have remanded the matter to the Settlement Commission for re-determination of undisclosed income and granted the benefit of any of the settlement to the appellant/Assessee, if it could have been so granted. That has not been done so in the impugned order of the High Court. The order of the Settlement Commission has been set aside and no further orders have been passed thereon. It is in the above context that the Department has moved forward to make re-assessment and further demand notices have been issued to the Assessee. We find that there is a real object and purpose of setting up of the Settlement Commission as an Assessee, who is given an opportunity to disclose the undisclosed income in order to seek benefit in the form of immunity from penalty and prosecution. Therefore, when the High Court set aside the order of the Settlement Commission, the matter had to be remanded to the Settlement Commission for re-consideration and re-determination of the undisclosed income, after giving an opportunity to both sides. Consequentially, we set aside the order of the High Court as well as the order of the Settlement Commission and remand the matter to the Settlement Commission, which is now substituted by Interim Board for Settlement-V (IBS-V), Mumbai or Interim Board for Settlement VI (IBS-VI), Mumbai, as the case may be, vide Office Order dated 31.01.2022, issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, Government of India. In view of the remand being made to the said Interim Board, the subsequent re-assessment and demand made by the Department to the Assessee shall be kept in abeyance and subject to the order to be made by the Interim Board for settlement. The concerned Interim Board shall issue notice to the Assessee/Appellant, preferably within a period of four weeks, to appear before it and dispose of the application filed by the Assessee seeking settlement, in accordance with law and after giving an opportunity to both sides.
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2023 (8) TMI 774
Reopening of assessment u/s 147 - Reopening on the basis of the audit objections - as decided by HC [ 2022 (1) TMI 900 - BOMBAY HIGH COURT] reasons for reopening of the assessment are almost identically worded as that of audit report, the reopening of the assessment is misconceived, incorrect and bad in law - HELD THAT:- As SLP is dismissed on the ground of delay as well as on merits. All pending applications are disposed of.
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2023 (8) TMI 773
Accrual of income - reliance on documents seized in search - As decided by HC AO, FAA and ITAT having concurrently recorded findings of the fact against the assessee, the question of law framed in this appeal are answered in favour of the revenue - HELD THAT:- The High Court was right in holding that no substantial question of law arose in the appeal. We are in conformity with the said view taken by the High Court. Hence, the special leave petitions stand dismissed.
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2023 (8) TMI 772
Validity of Assessment u/s 153A - addition for bogus unsecured loan and bogus LTCG/ STCG - incriminating materials found at the time of search/ survey or not? - HELD THAT:- Having heard learned counsel appearing on behalf of the petitioner(s) and having gone through the reasoning given by the High Court on incriminating material found and thereafter assessment under Section 153-A of the Income Tax Act, 1961, in the facts and circumstances of the case, no interference of this Court is called for in exercise of powers under Article 136 of the Constitution of India. The Special Leave Petitions stand dismissed. Pending application(s) shall stand disposed of.
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2023 (8) TMI 771
Validity of assessment - Appropriate Stage to raise the issue of Jurisdiction of AO - ITAT remitted the matter for framing the assessment order by the competent officer - HELD THAT:- This court in Fidelity Business Services India (P.) Ltd [ 2018 (7) TMI 1738 - KARNATAKA HIGH COURT] has held that the words as it thinks fit confer wide powers upon the ITAT to pass such orders in the subject matter of appeal. As in Abhishek Jain, the Delhi High Court has held [ 2018 (6) TMI 211 - DELHI HIGH COURT] as far as territorial or pecuniary jurisdiction are concerned, objection should be taken at the earliest possible opportunity and/or before the settlement of issues and not at the subsequent state. Jurisdiction as to the subject matter is distinct and stands on a different footing Admittedly, assessee has not raised any objection with regard to pecuniary jurisdiction before the AO. In view of the law laid down in Abhishek Jain that any objection with regard to territorial and pecuniary jurisdiction should be taken at the earliest possible opportunity before the settlement of issues and not at a subsequent stage and the interpretation of Section 254 of the Act by this Court, we find no error in the order passed by the ITAT. All questions raised by the appellant in the memorandum of appeal are similar in nature, i.e., assailing the ITAT s order and remitting the case for framing fresh assessment by the competent officer. The main ground urged is that the AO had no jurisdiction. Appeal dismissed. Questions of law are answered in favour of the Revenue and against the assessee.
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2023 (8) TMI 770
Estimation of income - bogus purchases - HELD THAT:- In the present case, one thing is clear is that the A.O. has not doubted the sales made by respondent against the purchases. Similar case of respondent was also considered by the Tribunal with regard to issues for AY 2010-11. In that also the Tribunal has observed that the A.O. has not doubted the sales made by assessee against the purchases and assessee has reconciled the quantitative details of stock as per sale invoices. A.O. has observed that respondent has purchased material from someone else while bogus bills were organized by these Hawala Traders. Therefore, at least to the extent even if it has been purchased from Hawala Traders the indisputable fact is that the purchases have been made and admittedly quantitative reconciliation of the stock was done by respondent of sale and purchase. ITAT therefore accepted the explanation of respondent that only the profit element in these accommodation entries are to be added to the income. CIT(A) has restricted the addition by estimating the gross profit at 12.5%. Whether that is the right estimate is a question of fact. Therefore, we see no reason to interfere.
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2023 (8) TMI 769
Penalty u/s 271AAA - income surrendered during search - Tribunal held that in the case of surrender, except the seized documents, otherwise nothing was found during the search action, which would construe undisclosed income of the assessee, thus deleted the penalty levy - HELD THAT:- After going through the impugned order, we are of the view that appeal filed by the revenue, on this issue, has been rightly dismissed. The impugned order has been passed after appreciating the facts in the right perspective and no ground is made out to interfere therein. No substantial question of law arises for consideration.
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2023 (8) TMI 768
Deduction u/s 80IA - which AY would qualify as the initial AY ? - HELD THAT:- Tribunal, inter alia, relied upon CBDT Circular no.1/2016 dated 15.02.2016 as emphasized the fact that the initial AY was the year which the assessee chooses to opt for, and was not the year when the eligible business commenced or the point in time when the manufacturing activity was carried out in the first instance. Tribunal, in support of its reasoning, also relied upon the judgment of Prabhu Spinning Mills (P.) Ltd. [ 2016 (3) TMI 1309 - MADRAS HIGH COURT ] Whether unabsorbed losses/depreciation could be notionally carried forward for the purposes of determining profit for the eligible business u/s 80IA? - According to us, there is nothing to suggest in Sub-clause (5) of Section 80IA of the Act that the profits derived by an assessee from the eligible business can be adjusted against notional losses which stand absorbed against profits of other business. The deeming fiction created by sub-section (5) of Section 80IA does not envisage such an adjustment. The fiction which has been created is simply this: the eligible business will be the only source of income. There is no fiction created, that losses which have already been absorbed, will be notionally carried forward and adjusted against the profits derived from the eligible business to quantify the deduction that the assessee could claim u/s 80IA of the Act. A perusal of the judgment rendered in the Microlabs Ltd. case [ 2015 (4) TMI 678 - KARNATAKA HIGH COURT ] would show that the Karnataka High Court gave weight to the fact that sub-section (5) of Section 80IA commenced with a non-obstante clause. It was based on this singular fact that the Karnataka High Court chose to veer away from the view expressed by the Madras High Court in the Velayudhaswamy Spinning Mills (P.) Ltd. [ 2010 (3) TMI 860 - MADRAS HIGH COURT ] case. We are unable to persuade ourselves to agree with the view taken by the Karnataka High Court in the Microlabs Ltd. case. We respectfully agree with the view taken by the Madras High Court in the Velayudhaswamy Spinning Mills (P.) Ltd. case, which has been followed in the Prabhu Spinning Mills (P.) Ltd. case as well. We have given our own reasons as to how sub-section (5) of Section 80IA should operate. Another additional reason why we agree with the view of the Tribunal. The Tribunal has noted that in earlier AYs, the AO has neither disallowed the claim nor adjusted notional depreciation/losses of previous years set off against other income in the years prior to the initial AY. Question of law is answered against the appellant/revenue and in favour of the respondent/assessee.
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2023 (8) TMI 767
Validity of reopening of assessment u/s 147 - reasons to believe - non furnishing of information to petitioner which prompted reassessment proceedings - HELD THAT:- A perusal of record, as presently made available to us, does seem to indicate that no material or information has been furnished to the petitioner, in support of the allegations levelled against him. The impugned order only adverts to the fact, that in a search action against Jignesh S Shah and another person i.e., Sanjay Shah, certain information emerged, which seemed to suggest that they were in the business of providing accommodation entries. It is also suggested, that Directors of those companies had filed affidavits, in which the name of the petitioner appeared as one of the beneficiaries of the accommodation entries. It is in this backdrop, that the reassessment proceedings appear to have been triggered against the petitioner. It appears, that the Assessing Officer (AO) has failed to do even the minimum, which is to furnish a copy of the affidavit filed by those Directors. Respondent on the other hand, submits that it is quite possible, that the information is in the custody of the AO, which the AO, for whatever reason, has failed to furnish. Given this position, we are inclined to set aside the impugned notices and the order. It is ordered accordingly.
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2023 (8) TMI 766
Exemption u/s 11 - Charitable activity u/s 2(15) - basis of the denial of it s claim for exemption by the Revenue is that the activity of letting built-up space and provision of amenities, the principal activity undertaken in pursuance of it s objects, though otherwise qualifying as advancement of an object of general public utility and, thus, a charitable purpose, is no longer so in view of the proviso to sec.2(15) - business of providing built-up space or making available vacant land, on leasehold basis - Interest on fixed deposits with banks credited directly to the corpus fund - Whether society constituted under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 (on 27.10.2004) and registered u/s. 12AA as a charitable trust, is entitled to exemption u/s. 11? - HELD THAT:- The word involves in proviso to sec.2(15) is not preceded by the word necessarily , and neither is there anything in the language of the provision, or the decision in Ahmedabad Urban Development Authority [ 2022 (10) TMI 948 - SUPREME COURT] which is being sought to be scrupulously followed in deciding these appeals, for it being so read. The adopted business model, however, necessarily involves letting the said space to the industry for a consideration, and which is pegged at market rates. Any other basis, as we shall presently see, would be inconsistent with sound business practice and economic rationale. It is by and through the carrying on of this business of providing built-up space or making available vacant land, on leasehold basis, i.e., even if at a charge, that the assessee-society fulfills its object of promotion of IT/ITES industry in the State of Kerala. The same is thus incidental to its object/s. Whether the charges levied by it, including the lease rentals, are with a view to recover it s costs, or at best with a nominal margin, or this is not the case, with it, as alleged, operating on commercial basis, charging lease rentals at market rates? - Coming to the assessee s case, even as it s MoA lists a number of objects, all toward promotion of IT/ITES industry in Kerala, it is essentially engaged in, firstly, setting-up and, then, managing industrial park by the name Infopark Kerala at Kochi, which houses such units on leasehold basis. That, in any case, is the only activity being pursued. Sec.2(15) being a definition provision, where its terms are not satisfied, the assessee s claim of a charitable institution shall be ousted even if its activities are not hit by the provision or are in relation to objects other than GPU.As informed, built up space is leased thereto for 7-8 year term. The other format followed is 99-yearlease of vacant land. There is no restrictive element in the scope of the term business to exclude an activity. The Apex Court in Sultan Brothers (P.) Ltd. [ 1963 (12) TMI 4 - SUPREME COURT] on an argument of rental income being a business, as what was being let was a commercial asset, clarified that a thing can not by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Whenever the matter, arising on account of the differential computation of income under the two heads of income, i.e., of business, and from house property, travelled to the higher courts, it has been unequivocally clarified for being decided in the conspectus of the case, so that decisions both ways, i.e., as business income, as indeed from house property, from the Hon'ble Apex Court obtain. The determinative test, as explained by it, being that the letting is being undertaken in an organized manner to turn the house property, i.e., land and building, into account. The test is satisfied in the instant case . The lease rentals are deployed to finance both creation of more built-up space, as per it s mandate, and which we observe to be at, besides Cochin, Thrissur, Ambalapuzha and Cherthala, as well as through charge of depreciation, sustain that existing. This business is not a property held under trust, but one carried on the basis or by virtue of such property, being, for instance, 80 acres of land transferred from KINFRA; the capital infusion by GoI and GoK, etc. The income generated from it s business by the assessee, or, more precisely, the assets representing the same, again, is property held under trust inasmuch as there is no other activity, at least for the present, by the assessee-society. The same qualifies as an eligible business u/s. 11(4A), and it s income assessable as business income. The head of income under which the income of a charitable institution, where taxable, would stand to be assessed under the Act, cannot even otherwise be determinative of the matter. Vetting the financial summary provided by the assessee, reveals it to have excluded, in arriving at the surplus, the interest earned by it on it s capital/corpus parked with banks in the form of term deposits. The same may be as a matter of policy or, as it appears to us, the same being idle for the time being, i.e., till they are deployed toward further investment an ongoing process, for its activities. We see no reason for its exclusion, being as much a part of it s income as any other, being in fact duly reported to the Revenue per it s returns for the relevant years and, further, as subject to application u/s. 11(1)(a) . It may be stated that interest does not represent operational income, justifying it s exclusion on that basis. We can hardly agree. The reason is simple. The monies have not been provided for safe-keeping, but, representing property held under trust, for being deployed for charitable purposes. Their deployment would in fact generate additional revenue, i.e., in sums higher than that fetched on bank deposits, as apparent from Table A above, and which also puts the cash profit, i.e., prior to depreciation, in perspective. Reference here may be made to the decision of UOI v. Baba Banda Singh Bahadur Education Trust [ 2023 (5) TMI 283 - SUPREME COURT] wherein the Apex Court was moved solely by the profit figures, i.e., before and after depreciation, themselves, in holding the assessee-respondent as not entitled to exemption u/s. 10(23C)(vi) of the Act. The assessee is, in our clear view, not entitled to any exemption u/s. 11 qua its surplus on its application for the relevant years, and its income is liable to assessed as business income. This decides the first issue Depreciation claim - The assessee shall be entitled to claim depreciation up to AY 2014-15 at the rates specified under the Act read with IT Rules. This would be irrespective of whether it has already claimed and been allowed exemption u/s. 11(1) on application of income on the cost of relevant capital assets. This is as s. 11(6) is operative only AY 2015-16 onwards. Decided partly in favour of assessee.
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2023 (8) TMI 765
Assessment u/s 153A - Unaccounted investment - assessee did not give any substantial evidence in respect of the contention taken by them, nor could prove that the said deal did not materialize in form of satakhat or other documents, therefore an addition as made by the AO - assessee submitted that entire addition made by Assessing Officer based on the unsigned memorandum of understanding (MoU) - HELD THAT:- We note that in assessee`s case under consideration, the other partners` scrutiny assessment were completed by the assessing officer u/s 143(3) r.w.s. 153A and the proportionate addition for impugned amount were not made by the assessing officer. As decided in the case of Late Shri Mohanlal Ambelal Desai [ 2021 (2) TMI 345 - ITAT SURAT] it is vivid that being co-owner, the assessee is also entitled for similar treatment. The Revenue cannot treat the assessee indifferently. We have gone through the scrutiny assessments completed by the AO u/s 143(3) r.w.s. 153A of the Act and we note that the proportionate addition for impugned amount were not made by the assessing officer, in respect of above partners. The assessee, being co-owner, is also entitled for similar treatment. Decided in favour of assessee. Addition made on the basis of loose papers found and seized from the third person - HELD THAT:- We note that Assessing Office did not make any inquiry from buyers of flat in respect of actual prices paid by them. He also did not make any other inquiry in order to corroborate his conclusion. There is no incriminating evidence to show that the assessee has sold the flats at a higher rate. we note that the impounded loose sheet can at the most be termed as dumb document which did not contain full details about the dates, and its contents were not corroborated by any material and could not relied upon and made the basis of addition. Therefore, we observe that ld CIT(A) has rightly held that the jottings on the loose papers found have not been corroborated with any other evidence or the property purchased or invested by the assessee. Therefore, the jottings made without identification of any asset or investment cannot be the basis for making the addition of unexplained investment as done by the assessing officer. Therefore, ld CIT(A) deleted the addition correctly. Unexplained gift - gifts received by the assessee from his brother were accommodation entry - HELD THAT:- AO held that the gifts were the accommodation entries without any basis or any investigation to that effect. The assessing officer has not been able to prove that the cash was deposited before the gifts were given in the bank donor to form a reasonable belief that the gifts were accommodation entries. During the appellate proceedings the bank account statement of the donor was produced as part of the submission and it was found that in the said case no any cash was deposited in the bank account of the donor and on the contrary donor had the receipts out of his own sources/businesses. Therefore, the view of the assessing officer that the gifts received by the assessee from his brother were accommodation entry has not been proved. As the donor has given all the required details of his creditworthiness and capacity to give gifts to the assessee and as he has confirmed the gifts u/s 133(6) of the Act before the assessing officer, the gift received cannot be held to be accommodation entry. Accordingly, the addition made by the assessing officer was deleted by ld CIT(A) correctly. Unaccounted investment/ contribution by the assessee for becoming partner of the firm - HELD THAT:- The addition made just on the basis of two loose sheets of papers containing the details of offer received but cannot be sustained in the absence of any other corroborative. In view of above facts, ld CIT(A) held that addition made towards the unaccounted/ unexplained investment/ contribution for becoming partner into the said Firm M/s. Shree Kuberji Enterprise and its land cannot be sustained. The incriminating material relied upon by the assessing officer do not suggest any contribution/ investment actually made by the assessee. Therefore, the addition made by the assessing officer was deleted by ld CIT(A) correctly. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions.
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2023 (8) TMI 764
Disallowance of provision for computerization of branches of the appellant - HELD THAT:- Admittedly, the assessee has created reserve for computerization of its operations which were manual earlier and has undoubtedly incurred an expenditure - It is also the fact that such expenditure was capitalized by the assessee. Since the expenditure made pertaining to computerization was in nature of capital expenditure, the eligible depreciation is available u/s.32 and the assessee is entitled to claim the same. The reserve created for incurring the expenditure in accordance with notifications issued under the Chhattisgarh Co-operative Societies Act, 1960, on account of computerization was in nature contingent liabilities which cannot be construed as actual expenditure and cannot be subject matter of deduction, even under the mercantile system of accounting. The observation of CIT(A) on this issue are worth agreed to. However, depreciation on expenditure actually incurred and capitalized will be allowed in accordance with the provisions of the Act. Therefore, we partly allow this ground of the assessee to reduce the addition made to the extent of eligible depreciation. Disallowance of provision for contribution/subscription to District Union - HELD THAT:- The understanding of the revenue authorities that the funds were in the control of the assessee cannot be accepted, on the contrary, the funds were set apart and kept for contributing according to the direction of the regulatory authorities. Therefore, the funds were not at all freely available in the hands of the assessee s bank. Hence, respectfully following the ratio of decision of CIT v. M/s.Krishi Upaj Mandi Samiti [ 2013 (6) TMI 75 - MADHYA PRADESH HIGH COURT] we do not find any hesitation to hold that the contributions made in accordance with the binding by-laws of Regulatory Cooperative Society Act, which is in the nature of statutory liabilities of the assessee and the funds kept aside were never available to be used at its disposal. Decided in favour of assessee. Disallowance of depreciation - HELD THAT:- Admittedly, there was a mistake on the part of the assessee that the claim of the depreciation was made at a lower amount in the computation of income, which was noticed by the Ld.CIT(A) and has directed the AO to allow the same after due verifications applying the provisions of the Act. Assessee s grievance is that till date, no effect was given by the AO even after the directions of the Ld.CIT(A). As the issue was raised before us. Since there was no infirmity pointed out in the order of the Ld.CIT(A), we do not find any divergent view on this issue. CIT(A), who has co-terminus with that of the AO, should have allowed the relief after factual verifications, may be by way of a remand report from AO, we restore this issue and direct the Ld AO to follow the direction of Ld CIT(A), which we are also having concurrence with. Ground of assessee is partly allowed for statistical purposes. Double disallowance on account of advance tax and TDS - HELD THAT:- Since the matter was referred back to the AO by the CIT(A) for verification and allowing appropriate relief to the assessee, whereas the Ld.CIT(A) who has powers co-terminus with the AO, was supposed to adjudicate the issue by verifying the facts by himself or by seeking Remand Report from the AO on the issue. However, as it is apparent from the facts available for us at the addition was made on account of double disallowance. Therefore, the assessee is entitled for the relief. Ground for assessee s appeal is partly allowed for statistical purpose. Addition on account of reserve funds of interest from Apex Bank - HELD THAT:- The observation in the case of CIT v. M/s.Krishi Upaj Mandi Samiti [ 2013 (6) TMI 75 - MADHYA PRADESH HIGH COURT] wherein, it has been held that assessee s interest incurred consists on such reserve fund, it was taxable and has rightly held by the Tribunal, in view of such findings of the Hon ble Madhya Pradesh High Court. We are of inclined to accept that interest earned on such reserve funds are taxable in the hands of the assessee and therefore, there was no error in the order of the Ld.CIT(A) on this issue. Therefore, we sustained the addition. Decided against assessee. Addition representing provision for reserve fund to the extent of 5% - HELD THAT:- Admittedly, the funds transferred to statutory reserves in accordance with the provisions of Chhattisgarh Co-operative Societies Act, 1960, i.e. Regulatory Body for the assessee s bank, which is mandatory for the assessee and after creation of such funds, the control thereof is fully transferred in the hands of Registrar and the assessee does not remain the beneficiary of the same. Respectfully following the judgement of Krishi Upaj Mandi Samiti Seon [ 2013 (6) TMI 75 - MADHYA PRADESH HIGH COURT] we are of the considered opinion that reserve funds so created for which amount is transferred under the statutory obligation over which the assessee loses control, diverted overriding title is eligible for deduction and therefore, the same does not form part of the assessee income, accordingly, we set aside the order of the Ld.CIT(A) and vacate the addition made by the AO on this count. Decided in favour of assessee.
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2023 (8) TMI 763
Addition u/s 56(2)(vii) - calculation adopted by the assessee for calculating the fair market value be disallowed - DCF method - partner of the valuer firm has not provided any logical submission in respect of calculation of fair value of shares and on subsequent dates, none represented the valuer firm - Assessee argued share premium has been valued by an approved valuer, as per the relevant provisions of the Act, who valued the fair market value on DCF method, which is a recognized method and the AO/CITA has not pointed out any defect or error in the said method and has simply rejected the valuation report without any basis - HELD THAT:- There is no dispute that the assessee has supported its valuation by a valuer s report as per the relevant provisions of the Act. It is also true that the lower authorities have not pointed out any error or infirmity or defect in the said valuation report. The said valuation report has been rejected only because there were differences between actuals and projection done by the valuer. As decided in INDIA TODAY ONLINE PVT. LTD. VERSUS ITO, WARD-12 (2) NEW DELHI [ 2019 (4) TMI 1646 - ITAT DELHI] DCF method is a recognised method where future projections of various factors by applying hindsight view and it cannot be matched with actual performance, and what Ld. CIT (A) is trying to do is to evaluate from the actual to show that the Company was running into losses, therefore, DCF is not correct. Valuation under DCF is not exact science and can never be done with arithmetic precision, hence the valuation by a Valuer has to be accepted unless, specific discrepancy in the figures and factors taken are found. Determination of value of shares on the basis of financial statement of a Company or the book value does not have much relevance under DCF method, because it is based upon, fair expected revenue growth and fair expected cash flow for a period of five years; discount rate and terminal growth rate; and terminal value, etc. are the factors which are taken in the consideration. Therefore, to reject the valuation mainly on the basis of losses shown in the financial statement would not be correct, until and unless some discrepancy has been out either in the DCF method or in the Valuation Report furnished by an independent Valuer. No merit in the addition made by the AO. The findings of the ld. CITA are set aside - Decided in favour of assessee.
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2023 (8) TMI 762
Adjustment u/s 43B - intimation u/s 143(1) - non - payment of GST - sum erroneously mentioned by the auditor in form 3CD Report in Column No. 26(i)(B)(a) in as against column just to above column, as the same was paid on 26.06.2019 20.09.2019 - HELD THAT:- As considering the documents which substantiates the fact that the assessee had deposited the aforesaid amount of GST before the due date of furnishing of his return of income for the year under consideration, therefore, he could not have been saddled with any disallowance u/s. 43B. Also we cannot remain oblivion of the fact that the revised audit report filed u/s. 44AB was not there before the lower authorities at the time of processing of the assessee s return of income u/s. 143(1) and has been filed before us as additional evidence. As the claim of the assessee that the amount of GST payable as was reflected as payable in the balance sheet on 31.03.2019, is shown to have been deposited prior to the due date of filing of his return of income as provided in sub-section (1) of Section 139 of the Act, i.e., on the strength of his affidavit and the copy of GST payable account for A.Y. 2019-20, therefore, the revised audit report dated 25.02.2023 that has been filed by the him as an additional evidence being merely supportive of the aforesaid factual position merits to be admitted. The matter in all fairness requires to be revisited by the A.O, who shall in the backdrop of the aforesaid documentary evidence filed by the assessee to fortify his claim, therein verify the authenticity of the same - if the amount of GST was deposited by him on or before the due date of furnishing of his return of income for A.Y. 2019-20, then, the disallowance made by the A.O u/s. 43B of the Act shall stand vacated. Appeal of the assessee is allowed for statistical purposes
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2023 (8) TMI 761
Disallowance of salary expenses - allowable business expenses or not? - AO considering the volume of business activities of providing credit facility, the staff is sufficient and disallowed the salary of employee engaged for collection charges - assessee submits that the expenses was incurred for the employee engaged for daily collection and expenses were incurred wholly and exclusively for the purpose of its business - HELD THAT:- As the assessee is the best person to assess its requirement for smooth functioning of its affairs. The existence of person to whom such salary was paid is not doubted by the assessing officer, rather held that there is sufficient staff with the assessee. The action of AO was not justified to assess the justification of number of employees or their expenses, therefore, direct AO to allow the salary expenses to the assessee. Decided in favour of assessee.
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2023 (8) TMI 760
Unexplained credit/cash deposit - assessee sold five piece of agricultural land and assessee received sale consideration in cash, which is duly reflected in the sale deeds but AO added entire amount for the want of reply from assessee - CIT(A) confirmed the addition only reason for treating the cash deposit is the delay in deposit of such sale proceed in her bank account - HELD THAT:- It is a matter of fact that the assessee is residing in USA for more than 40 years. The revenue authorities have not brought on record that the assessee is having multiple bank accounts in India. There is no dispute that the sale consideration was received in cash. Considering all assessee does not maintain any other account except the account where the sale proceed was deposited. The assessee has also filed affidavit of Rameshbhai Ahir to corroborate the fact that such amount was kept with him and he deposited in the account of assessee. AO was not justified in making the addition. Loan amount from repayment from relatives - As assessee failed to disclose the name of relative who have allegedly repaid the loan amount to assessee by way of cheque. In absence of discharge of primary onus in disclosing the identity and genuineness of transaction, the assessee has not eligible for deleting the addition, accordingly, we uphold the same. In the result, ground related to the credit entry are confirmed. Levy of penalty u/s 271(1)(c) on various additions made in the assessment order - Considering the fact that substantial addition is deleted, therefore, penalty is also deleted. In the result, the grounds of appeal raised in this appeal are allowed. In the result, this appeal of assessee is allowed.
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2023 (8) TMI 759
Benefit of deduction u/s 80IA - portion of the interest attributable on the bank loan used for granting of ICD for which no interest was either stipulated or being charged was added back to the income by the assessee suo moto - According to CIT(DR), CIT(A) was wrong in not considering the correct view taken by the AO that the interest on borrowed loan which was not used for the business is not an allowable expenditure and is required to be disallowed and added to the income of the appellant - HELD THAT:- As on perusal of the computation of the total income of the assessee it is observed that the interest attributable to the ICD loan extended by the assessee to its associate concern was added back to the taxable income since the same has no connection with the eligible business of the assessee, this was correct and acceptable as per law. Contention of the AO that this was a colourable device to enhance the eligible profit of the company, which falls under the ambit of sub-section 10 of section 80IA cannot be accepted or subscribed to, because, if the interest expenditure incurred on funds granted as loan to the associate company are not added back to the taxable income of the company, it would have been a reduction of the taxable income, which would lead to a wrong or inaccurate presentation of the facts by the assessee. This was also according to the instructions issued by CBDT vide its Circular 37/2016 - The same has also confirmed by the PCIT by dropping the revisionary proceedings u/s 263 on this issue. Thus, the contention of the revenue that the deduction claimed by the assessee was excessive by disallowance of the interest to increase the eligible profit u/s 80IA, so as to claim higher amount of deduction u/s 80IA than the same is available ordinarily on eligible business, is unsustainable. CIT(A) had correctly, appropriately and categorically decided the issue, thus we found no infirmity in the order of Ld CIT(A), the same deserves to be upheld and we do so. Validity of Revision u/s 263 - fresh issue raised - HELD THAT:- PCIT has raised a fresh issue which was neither a part of the notice under section 263 nor it was confronted to the assessee at any point of time during the proceeding s u/s 263. The new issue raised was to examine working of taxable income under the provisions of section 115JB after taking into consideration of provisions of Company Act 1956, it was restored to the files of AO to adjudicate again after providing opportunity of being heard to the assessee. A fresh issue without hearing the assessee or causing the assessee to make its submissions on the same is against the principle of natural justice. Considering the facts of the case and respectfully following the judicial principle coming out from the case of Universal Music India Pvt. Ltd [ 2022 (4) TMI 1081 - BOMBAY HIGH COURT ] and various judgments, an action taken by the Ld PCIT against the assessee without confronting it to submit its response or defence to the query raised, without giving an opportunity of being heard is illegal and in contravention to the principle of natural justice. Such action is not permissible in revisionary proceedings u/s 263, thus we are of the considered opinion that the order passed u/s 263 deserves to be quashed and we do so. Thus, we allow the appeal of the assessee.
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2023 (8) TMI 758
Disallowance u/s 40(a)(ia) - claim for deduction of interest paid to NBFC - HELD THAT:- On the basis of settled position of law as had been laid down by the Hon ble Apex Court in the case of Shree Choudhary Transport Co. [ 2020 (8) TMI 23 - SUPREME COURT] we are of the considered view that the issue in hand is no more res-integra and the amendment made vide the Finance (No.2) Act, 2014 restricting the disallowance to 30% of the sum payable could not be given a retrospective effect. We, thus, in terms of our aforesaid observations reject the claim of the Ld. AR that the disallowance u/s. 40(a)(ia) of the Act was liable to be restricted only to the extent of 30% of the sum payable by the assessee. Ground of appeal No.2 raised by the assessee is partly allowed in terms of our aforesaid observations. Unexplained cash credits u/s 68 - Loans raised by the assessee from the companies - HELD THAT:- Non-compliance of the notices issued by the A.O u/s 131 and u/s 133(6) to both the aforementioned companies, coupled with the fact that the said lender companies had duly confirmed the loan transactions; and also that the loans that were advanced by both the said companies to the assessee concern in the immediately succeeding year i.e A.Y 2011-12 had been accepted by the A.O while framing the assessment u/s 143(3), we find no justification in treating the loans raised by the assessee from the said companies as unexplained cash credits u/s 68 - Apart from that the part-repayment of loan by the assessee to one of the lender, i.e, M/s MRA Global Pvt. Ltd further fortifies the authenticity of the loan transaction under consideration. Now when the assessee had duly substantiated the authenticity of the loan transactions under consideration and the same had not been dislodged by the department, therefore, the treating of the same as unexplained cash credits u/s 68 cannot be sustained. Loans raised by the assessee from certain individuals - As the lower authorities had neither considered the aforesaid supporting documentary evidences that were filed by the assessee in order to fortify his claim of having raised genuine loans from the aforementioned parties, nor had the occasion to taken cognizance of the respective affidavits of the lenders that have been filed for the very first time before us, therefore, the matter in all fairness requires to be restored to the file of the A.O. We, thus restore the matter to the file of the A.O for re-adjudication after considering the aforesaid supporting documents that have been filed by the assessee in order to drive home his claim of having raised genuine loans from the aforementioned three parties. Disallowance of expenditure made u/s 14A r.w.r. 8D - HELD THAT:- We find that the CIT(Appeals) too had failed to record his satisfaction that having regards to the accounts of the assessee it was not possible to accept the correctness of the assessee s claim that no disallowance of any expenditure was called for u/s 14A of the Act. In case the A.O or the CIT(A) in exercise of his powers which are coterminous with that of an A.O, sought to have disallowed the assessee s claim that no expenses could be attributed to earning of the exempt dividend income by him, then, there was an innate obligation cast upon them to have recorded the requisite satisfaction that having regard to the accounts of the assessee as were placed before them, it was not possible to generate the requisite satisfaction with regards to the correctness of the said claim. We may herein observe that in the case of CIT Vs. Sociedade De Fomento Industrial (P). Ltd. [ 2020 (11) TMI 277 - BOMBAY HIGH COURT] had observed that the A.O before rejecting the disallowance offered by the assessee remains under a statutory obligation to give a clear finding with reference to the accounts of the assessee that the other expenditure which were being claimed qua the non-exempt income were in fact related to its exempt income. Alternatively, we may herein observe that even otherwise as the assessee was having sufficient self-owned interest free funds available with him, therefore, on the said count itself no disallowance of any part of interest expenditure was liable to be made in the his hands. Be that as it may, we are of the considered view that as the A.O had failed to record his satisfaction as to why the assessee s claim that no part of the expenditure was attributable towards earning of exempt dividend income, was not to be accepted having regard to his books of account as were placed before him, therefore, disallowance so made by him u/s. 14A could not be sustained and was liable to be quashed - Ground of appeal No.4 raised by the assessee is allowe d accordingly. Unexplained credit of bank interest - HELD THAT:- In case the interest income on FDR is included in the interest income on FDR s credited by the assessee in the profit loss account of his proprietary concern, viz. M/s. Shrikishan Co., then no separate addition would be called for in his hands. In our considered view the aforesaid aspect can be verified by the A.O by calling for the requisite details from the bank as regards the total amount of interest on FDRs received/accrued in the account of the assessee during the year under consideration. As observed by us hereinabove, in case the aggregate amount of FDRs interest as reported by the bank had been credited by the assessee in his profit and loss account of the proprietary concern, viz. M/s. Shrikishan Co., then the addition made by the A.O would stand vacated. We, thus, in terms of our aforesaid observations for the said limited purpose restore the matter to the file of the A.O. Thus, the Ground of appeal No.5 is allowed for statistical purpose in terms of our aforesaid observations. Addition on account of LIC maturity proceeds - HELD THAT:- As it was for the assessee to substantiate his aforesaid claim that the amount in question was non-taxable which he had failed to do, therefore, no infirmity could be attributed to the A.O who had held the same as the unexplained income of the assessee. In so far the claim of the assessee that the A.O ought to have carried out necessary verifications, from LIC before rejecting his aforesaid claim, we are of the considered view that as no such request was made by the assessee in the course of the assessment proceedings, therefore, on the said count also the order passed by the A.O does not suffer from any infirmity In all fairness and interest of justice in order to avoid any exempt income being subjected to tax the matter requires to be restored to the file of the A.O with an opportunity to the assessee to substantiate his aforesaid claim on the basis of supporting documentary evidence. In case the assessee in the course of the set-aside proceedings is able to substantiate that the amounts were the LIC maturity proceeds that were exempt within the meaning of section 10(10D) of the Act, then, the addition so made by the A.O by dubbing the same as the unexplained income of the assessee shall stand vacated. Addition on account of notional lettable value of the residential houses owned by the assessee - HELD THAT:- As the assessee had failed to place on record any material which would prove to the hilt that his residential property i.e. HIG-101. M.P Nagar, Korba was being used for the purpose of business, therefore, his said unsubstantiated claim that was raised in the thin air cannot be accepted. Also the claim of the assessee that his another residential house at Jal vihar Colony, Raipur was under construction during the year under consideration cannot be summarily accepted and would require to be verified. At the same time, we find substance in the claim of the Ld. AR that the determination of the ALV of the aforesaid residential properties could not have been arrived at by the A.O on an estimation basis. As the methodology for determining the ALV of a property is provided in section 23(1) of the Act, therefore, we herein direct the A.O to determine the same strictly as per the mandate of law. Accordingly, the matter is restored to the file of the A.O for giving effect to our aforesaid observations. Low house hold withdrawals - HELD THAT:- As no substance at all in the claim of the Ld. AR that the quantification of the household expenses in the case of the assessee who has a family comprising og five members (including two school going children) was taken by the A.O at an exorbitant figure of Rs. 3 lac. In our considered view the A.O had in all fairness quantified the household expenses of the assessee at Rs. 3 lac. At the same time, we are of the considered view that the claim of the assessee that S/Smt. Sarita Devi Agrawal (wife) and Murti Devi Agarwal (mother) had during the year under consideration contributed towards the household expenses had been lost sight of by the A.O despite the fact that the same in the course of the assessment proceedings was brought to his notice by the assessee vide his letter. In case the aforesaid letter/reply of the assessee is found available on the assessment record, then, the A.O shall verify the respective contributions made towards household expenses by S/Smt. Sarita Devi Agrawal (wife) and Murti Devi Agarwal (mother) during the year under consideration and shall scale down the addition to the said extent in the hands of the assessee. We, thus, restore the matter to the file of the A.O to give effect to our aforesaid observations. Disallowance of interest expenditure corresponding to interest free loans/advances given by the assessee - HELD THAT:- The interest free advances so made by him were sourced out of such interest free funds and no disallowance of any part of interest expenditure was called for in his hands. Our aforesaid view is fortified by case of CIT Vs. Reliance Industries Ltd [ 2019 (1) TMI 757 - SUPREME COURT] while approving the view taken by the Hon ble High Court, had observed, that in case the interest free funds available with the assessee were sufficient to meet its investment, then, it could be presumed that the investments were made by the assessee from the interest free funds available with it. We, are of the considered view that no disallowance of any part of the assessee s claim for deduction of interest expenditure u/s.36(1)(iii) was called for in his hands. Charging of interest u/s. 234B - HELD THAT:- As we find no substance in the same. We, say so, for the reason that as held i n the case of Anjum M.H Ghaswala Ors [ 2001 (10) TMI 4 - SUPREME COURT] as the levy of interest u/s. 243B is mandatory, therefore, no infirmity can be attributed to the direction of the A.O for charging of the same in the body of the assessment order. Adhoc disallowance of expenses - HELD THAT:- We are of the considered view that a disallowance of an expenditure claimed by the assessee as a deduction as per the mandate of section 37 of the Act can only be disallowed in case of satisfaction of either of the conditions set out in the said section, viz. (i) the expenditure is in the nature of a capital expenditure or personal expenditure of the assessee; or (ii) that the expenditure had been incurred for any purpose which is an offence or which is prohibited by law. As the A.O had failed to place on record any material which would prove to the hilt that the assessee had either raised a bogus claim of expenditure; or that the said expenditure was not incurred wholly and exclusively for the purpose of business; or that the expenditure so claimed as a deduction did not fall within the four parameters of Section 37 of the Act, therefore, we are unable to persuade ourselves to subscribe to the disallowance to the said effect so made by the A.O. We, thus, in terms of our aforesaid observations vacate the disallowance made by the A.O. Enhancing the gross profit of the assessee by CIT(A) - HELD THAT:- In our considered view there is substance in the claim of the Ld. AR that the CIT(Appeals) had carried out the impugned enhancement without validly putting the assessee to show cause as to why the same may not be made in his hands. At the same time, we are unable to concur with the Ld. AR that merely for the said failure on the part of the CIT(Appeals) the enhancement so made is liable to be quashed. We are of the considered view that as the CIT(Appeals) while carrying out the enhancement had failed to comply with the mandate of sub-section (2) of Section 251 of the Act, therefore, the matter in all fairness requires to be restored to his file for re-adjudication after affording a reasonable opportunity to the assessee to show cause as to why enhancement to the said effect may not be carried out in his hands. We, thus, in terms of our aforesaid observations restore the matter to the file of the CIT(Appeals). TDS u/s 194A - interest charges - Disallowance u/s. 40(a)(ia) - HELD THAT:- Although the CA certificates refers to the fact that the respective payees, respectively, in their taxable income and had paid the taxes on the same, however, as the said certificates are either incomplete or not in the prescribed form i.e. not in Form 26A as provided in the 1st proviso to Sec. 201(1) r.w. Section 40(a)(ia) of the Act, therefore, the same cannot be acted upon for concluding that the assessee is not to be treated as being in default as regards deduction of tax at source u/s 194A of the Act on the interest charges paid to M/s. Religare Finvest Limited and M/s Magma Fincorp Limited, respectively. Considering the aforesaid technical lapse on the part of the assessee in not furnishing the accountant certificates in the prescribed form i.e Form 26A , we, thus, in all fairness restore the issue to the file of the A.O with a liberty to the assessee to furnish the same in the prescribed form in the course of the set-aside proceedings. In case the assessee furnishes the certificates in the prescribed form i.e Form 26A with the A.O in the course of the set-aside proceedings, then, the disallowance u/s 40(a)(ia) to the said extent shall be vacated by him. The Ground of appeal No.4 is allowed for statistical purposes in terms of our aforesaid observations. Short receipts shown by the assessee - Assessee failed to reconcile the difference in receipts, thus, he sustained the aforesaid addition - HELD THAT:- As the genesis of the controversy can be traced in the books of account of the assessee which were duly produced in the course of the assessment proceedings, therefore, the matter in all fairness requires to be restored to the file of the A.O for fresh adjudication. Accordingly, we set aside the order of the CIT(Appeals) and restore the matter to the file of the A.O for fresh adjudication, wherein he is directed to re-adjudicate the matter after considering the reconciliation statement of the assessee explaining the impugned discrepancies in the gross receipts shown in his books of accounts as against those reflected in the TDS certificates.
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2023 (8) TMI 757
Deduction u/s 80IA for CFS division - acquisition of the business under a Slump Sale business agreement - HELD THAT:- AR contentions that the assessee company is entitled to the deduction U/sec 80IA of the Act as the transferor company has already entered into agreement in carrying on the business as CFS and benefit of deduction is available to the assessee company as it was acquired under Slump Sale and there is only change of ownership and activities of the assessee fall under sec 80IA(4) of the Actis acceptable. We find the CIT(A) has dealt on the facts, provisions of law, remand report, rejoinder and judicial decisions. The Ld. DR could not controvert the findings of the CIT(A) with any new cogent material or information to take different view. CIT(A) has passed a reasoned and logical order. Accordingly,no infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
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Customs
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2023 (8) TMI 756
Seeking directions on the respondent-Authorities to permit the vessel to sail out of the Haldia Anchorage for discharging cargo at Tuticorin, another destination - perishable goods - Customs Authorities have raised any claim against the petitioner to justify the withholding of permission to the petitioner s vessel to leave the Haldia Dock Complex or not - HELD THAT:- The refusal to grant permission to the petitioner to leave the Sandheads of Haldia and/or the anchorage of the Haldia Dock Complex are entirely misplaced and de hors the law. It is required to be mentioned here that Section 30 of the Act empowers the issuance of Import Manifest. Although there is no specific provision in the Act for cancellation of the same, it is well-settled that in the absence of power of cancellation having been vested in the authorities, the same has to be read into the powers of the issuing authority. The delivery of import manifest or import report and issuance of the same, since it takes place under Section 30, the power of cancellation of the same under appropriate conditions has to be read into the said Section as well - The Bills of Entry are to be proceeded on by the importer. Since they themselves gave no objections permitting the cargo to be sold elsewhere, thus giving a go-bye to the goods being imported through Haldia, there is no bar to the Bills of Entry elapsing or being cancelled. Since there is no other allegation of any violation of law or any claims of dues or charges made by the Customs Authorities till date against the petitioner, and as the shipping agent and all importers have been impleaded in the present writ petition and have issued their consent by way of no objections , there cannot be any further impediment of releasing the vessel of the petitioner. In the present case, in any event, the Customs officials have not claimed any import duty from the petitioner till date. The ground of refusal was mere pendency of certain Bills of entry which have been waived by the importers themselves, by way of their no objections - In the present case, it is undisputed that the goods have not been put into the course of home consumption or warehousing and are still on board the petitioner s vessel. Hence, the status of the goods is admitted. The no objections given by the importers have also not been challenged, despite service of notice of the writ petition on the importers. Hence, it cannot be argued that the said Clause overrides the provisions of the Customs Act, 1962 itself or creates any embargo on the petitioner to remove its vessel from the Haldia Dock Anchorage. The respondent nos. 2 to 5 are directed to take immediate steps for issuing necessary permit for the petitioner s vessel M.V. Dariya Ganga to sail out of the Haldia Anchorage for her present location, that is, the Tuticorin Port or elsewhere - petition allowed.
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2023 (8) TMI 755
Provisional release of goods - Smuggling - Gold - reliance placed on voluntary statements - Conducting an adjudication in an application filed under Section 110A of Customs Act - HELD THAT:- A reading of Section 110A of Customs Act establishes that the adjudicating authority has been conferred with the power to provisionally release any goods, documents, things seized or bank accounts to the owner or the bank account holder, on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require - the provision read with Section 122A of the Act clearly establishes that during the pendency of the adjudicating procedure, the adjudicating authority has the power to provisionally release the things enumerated under Section 110A of the Act, on taking a bond and/or security. On an overall appreciation of the statutory provisions, its interpretations, the guidelines laid down by the CBEC, leads me to irresistible conclusion that the Act of adjudicating authority in deciding an application for provisional release is adjudicating procedure and not a ministerial act as contended by the respondents. Therefore, the adjudicating authority is bound to adhere to the elementary principles of natural justice by adverting to the contentions raised in an application seeking provisional release and afford the applicant an opportunity of being heard. The finding of the second respondent in Ext P5 is erroneous, wrong and in blatant violation of the rudimentary principles of natural justice. Ext P4 application is to be directed to be considered by the adjudicating authority, constituted under Section 110A of the Act - adjudicating authority constituted under Section 110A of the Act, is directed to consider and dispose of Ext P4 application, in accordance with law and as expeditiously as possible, at any rate, within a period of one month from the date of receipt of a certified copy of this judgment, after affording the petitioner an opportunity of being heard - petition disposed off.
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2023 (8) TMI 754
Recovery of money towards local and detention charges and value of the containers alongwith interest - plaint presented by an authorized signatory of the plaint - non joinder of proper and necessary parties - delivery order issued in the name of the plaintiff - illegal delivery of the cargo by the second and the third defendants - bill of lading and indemnity bonds were issued by the principal of the plaintiff. Whether the suit is barred for non joinder of proper and necessary parties? - HELD THAT:- A perusal of the Section 230 of Contract Act would make it clear that an agent cannot personally enforce contracts entered by him on behalf of the principal nor he is personally bound by it. As discussed earlier Exs.P2 to P8 and P21 clearly establish contract of carriage was entered into between the plaintiff's principal and the importer. The role of the plaintiff is that of an agent in port of discharge. There is no evidence available on record to suggest a contract to the contrary. No authorization has been produced by the plaintiff to show that he has been authorized by its principal either by contract or otherwise to sue. It is not the case of the plaintiff that contract was entered into or negotiated by him on behalf the principal. It is clearly disclosed in the plaint M/s. MSC Mediterranean Shipping Company SA is the principal of the plaintiff, therefore, it is clear, the plaintiff is only an agent of the disclosed principal. It is also not the case of the plaintiff that its principal cannot be sued. The present suit for recovery of money has nothing to do with any of the statutory duty or liability of an agent under Section 148 of Customs Act. The suit is for recovery of charges based on the contract of the carriage between the plaintiff's principal and the importers and violation thereof. Therefore, the arguments advanced by the learned counsel for the plaintiff by relying on Section 148 of Customs act is also of no use. The principal of the plaintiff is a necessary party to the suit and the suit filed by the plaintiff in its individual capacity without any authorization from the principal is not maintainable - Issue is answered in favour of the defendants and against the plaintiff. Whether the plaint presented by an authorized signatory of the plaint is maintainable? - HELD THAT:- Ex.P1 is the extract of board of resolution passed by the plaintiff company authorizing one A.Umaibalan, Senior Manager to sign and verify the plaint. The said Umaibalan, verified the plaint under the seal of the company. In the absence of any contra evidence to doubt Ex.P1, it is held that the present plaint verified by the authorized signatory of the plaintiff company is in accordance with law and the issue is answered, accordingly in favour of the plaintiff. Whether the delivery order issued in the name of the plaintiff is true and valid? - HELD THAT:- This Court takes adverse inference against the defendants for failure to produce the delivery order said to have been issued by the plaintiff and hold that no delivery order has been issued by the plaintiff. Accordingly, the issue is answered in favour of the plaintiff as against the defendants. Whether the first defendant and the fourth defendant colluded to take illegal delivery of the cargo by the second and the third defendants? - HELD THAT:- There is no evidence on record to show that delivery order was issued by the plaintiff and the same was presented to the first defendant at the time of taking delivery of cargo by the importers namely the defendants 2 and 3. The 4th defendant is the customs agent of defendants 2 an 3. A perusal of Ex.P20-e-mail communication between the plaintiff and the first defendant would suggest the first defendant in his e-mail dated 21.09.2018 clearly admitted that the cargo was delivered to the importers based on their urgency - Though, the first defendant in his written statement had taken a defence, as if, cargo were released after submission of delivery orders, no such delivery order has been produced by him. The first defendant also failed to examine any witness and lead contra evidence to that of P.W.1. The defendants 2 and 3 remained ex-parte. The 4th defendant though engaged a counsel failed to file a written statement and participate in the trial. In these circumstances, the collusion pleaded by the plaintiff is proved and the issue is answered in favour of the plaintiff and against the defendants. Whether the plaintiff is entitled to claim the charges viz., value of the containers, import customs duty for containers, local and detention charges? - Whether the plaintiff is also entitled for interest at the rate of 18% p.a. - HELD THAT:- The suit filed by the plaintiff as agent of disclosed principal is not maintainable, the plaintiff is not entitled to any relief in the suit and accordingly issues are answered against the plaintiff and in favour of the defendants. Whether the first defendant is jointly and severally liable with the other defendants, when the bill of lading and indemnity bonds were issued by the principal of the plaintiff and the other defendants 2 to 4? - HELD THAT:- This Court came to a conclusion that the suit is not maintainable. Hence, the 1st defendant is not jointly and severally liable to meet the suit claim. Accordingly, the issue is answered against the plaintiff and in favour of 1st defendant. The suit is dismissed, however, in the circumstances of the case, there will be no order as to costs.
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2023 (8) TMI 753
Seeking implementation of order regarding release of goods - case of respondents is that the letter which has been filed by the petitioner with the respondents on 18.07.2022, merely asks for waiver of demurrage/storage charges and not for the release of goods - HELD THAT:- The petitioner's representation dated 18.07.2022 is only for waiver of demurrage/storage charges vide issuing necessary detention certificate in terms of Regulation 6(l) of the Handling of Cargos in Cargos in Customs Area Regulations, 2009, regarding the Bill of Entry No.4281619 dated 11.06.2021, which is now stationed at Chandra CFS, Chennai - As far as the implementation of CESTAT order is concerned, the petitioner has to elect either the re-export the goods or opt for destruction of 26 kids bikes. Without the petitioner electing, the respondents cannot comply with the CESTAT'S Order. This writ petition is disposed of by directing the petitioner to give an appropriate representation to the second respondent within a period of two (2) weeks from the date of receipt of a copy of this order. The second respondent shall dispose both the representations on merits and in accordance with law within a period of four (4) weeks from the date of receipt of a copy of this order.
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2023 (8) TMI 752
Levy of Anti Dumping Duty (ADD) - Diethyl Thio Phosphoryl Chloride (DETPC) imported from China - applicability of amendment brought forth to subsection (8) of Section 9A of the Tariff Act - HELD THAT:- The sub section (8) to 9 A of Customs Tariff Act, 1975 adopts the provisions of Customs Act for implementation of Anti-Dumping Duty Notifications. Prior to 19.08.2009, sub section (8) of Section 9 did not adopt provision of section 15 of Customs Act which relates to determination of the date on which the rate of duty applies. After amendment w.e.f. 19.08.2009, this provision is also included. It can be seen that prior to 19.08.2009, subsection (8) did not specify that the provisions contained in Section 15 of Customs Act would be applicable to determine the date on which the rate of duty / ADD is payable - The Hon ble Apex Court in the case of SNEH ENTERPRISES VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [ 2006 (9) TMI 179 - SUPREME COURT] was dealing with the situation prior to amendment to subsection (8) of 9 A and held that ADD would be payable at the time of import of the goods. Taking note of the amendment, the Commissioner (Appeals) has held that appellant is not liable to pay ADD. The decision in the case of M/S. LSML PRIVATE LTD. VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS (VICE-VERSA) [ 2022 (2) TMI 682 - CESTAT CHENNAI] relied by the Ld. AR is not applicable to the facts of the case before us as the decision related to imports made after amendment to subsection (8) of 9 A. The appellant is not liable to pay the Anti-Dumping Duty as the Notification No.73/2009 dated 22.06.2009 was not in existence at the time of import of goods. The impugned order does not call for any interference. The same is sustained. Appeal dismissed.
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2023 (8) TMI 751
Valuation of imported goods - rejection of declared value - relevant SCN along with relied upon documents including correspondence with Hong Kong- Customs, on the basis of the department s case have not been placed on record - HELD THAT:- It is found that the rejection of value by the Adjudicating Authority, and also the basis of setting aside of the order-in-original by the Commissioner (Appeals), has neither been made available by the department nor was filed by the department. It is therefore, for the concerned administrative authorities to take remedial action to ensure that Show Cause Notice and R.U.D s are filed in departmental appeals. Even the grounds of appeal taken by the department indicate that they are relying upon inquiry report received from Hong Kong through the mutual assistance agreement from the department of justice Hong Kong vide letter dated June, 18 2009, but still appeal has been filed without even providing the same alongwith other documents and copy of the SCN. And now at this stage same documents are untraceable. The appeal has been filed by the department after review and authorization by Committee of Commissioners, but even the basic documents like SCN and RUDs including the relevant correspondence has not been put on record. In the absence of such documents having not been made available by the department despite opportunities given, the findings of Learned Commissioner (Appeals) agreed upon and the same is held as correct based upon evidence on record. The appeals of the department are rejected.
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2023 (8) TMI 750
Classification of imported goods - Industrial Composite Mixture - classifiable under tariff heading 27101290 or under CTH 27101990 - department failed to appreciate that on examination it was found that the goods were declared as Industrial Composite Mixture , however, on the basis of test report, the goods was found to be light oil - HELD THAT:- It is a clear finding that the product was light oil has been arrived at, by the department. The learned Commissioner (Appeals), after detailed discussion upheld the classification proposed by the Department. As can be seen the report sought to be relied upon by the appellant was drawn behind the back of the department and in another country and therefore cannot be given precedence over the report relied upon by the Department, which has much higher credence, in the factual matrix of the matter, as the party s report does not even match on the parameters tested by the department. Further even by relying upon this report, the appellants despite advice of suppliers for second opinion and the sample re-test did not opt for same foregoing their right of SCN or personal hearing or even re-test in the matter and just pleading for minimum fine and penalty. After having got the goods cleared by waiving Show Cause Notice or personal hearing and requesting for imposition of minimum fine, which were clearly brought in violation of EXIM policy relating to light oil at the relevant time as the same was a canalised item and was allowed to be imported only through State Trading Enterprises, as per the policy condition 5 of chapter 27. An after thought of the appellants cannot be allowed to help their cause. Reliance in this regard is placed on PINE CHEMICAL SUPPLIERS VERSUS COLLECTOR OF CUSTOMS [ 1992 (9) TMI 111 - SUPREME COURT ] to emphasize that when violation in relation to goods are accepted, penalties get attracted. Party had all the opportunity to seek re-test or even cross examination of Chemical analyst, if it found it to be erroneous, but it chose not to do the same. Having acquiesced with so termed erroneous report, it cannot now be allowed to resist it. Error, qui non resistitur. (An error not resisted is approved) will therefore, in any case apply in the facts and circumstances of the matter. Having accepted the classification and the nature of goods without seeking any re-test of the sample, it is found that the present appeal is devoid of merits both on classification issue as well as violation of ITC policy and penalties imposed - there are no merits in the present appeal - appeal dismissed.
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2023 (8) TMI 749
Valuation of imported goods - old and used worn clothing, completely fumigated - rejection of declared value - enhancement of value - Confiscation - quantum of redemption fine and penalty - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI ], wherein this Tribunal has observed The failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. It is held that the redemption fine and penalty imposed on the respondent to the tune of 10% 5% respectively on the assessed value is sufficient. Therefore, the redemption fine and penalty confirmed by the ld.Commissioner (Appeals) are sufficient to meet the end of justice. There are no infirmity in the impugned order and the same is upheld - appeal filed by the Revenue is dismissed.
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Insolvency & Bankruptcy
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2023 (8) TMI 748
Initiation of CIRP - Period of limitation - Term Loan I challenged on the ground that the application filed under Section 7 of the Code could not ever have been filed - date of NPA to be taken as date of default or not - HELD THAT:- No doubt that as per schedule of payment, provided in the sanction letter, the repayment was to be made in respect of term loan 1 on half yearly basis, as per schedule provided in the sanction letter on the basis of which, as per chart prepared by the Appellant, 4th instalment was to be paid on 30.06.2020 of an amount of Rs. 14.59 Cr. but the same was not paid. Similarly, 5th instalment was to be paid on 31.12.2020 again of an amount of Rs. 14.59 Cr. which was also not paid and lastly 6th instalment was to be paid on 30.06.2021 of Rs. 26.27 Cr. which too was not paid. The question that has been raised by the Appellant is that the amount of debt became due and payable by the Respondent on 30.06.2020, therefore, it should have been the date of default whereas according to the Respondent, there is no concept of first date of default because the word first is not deliberately used by the legislature in Section 7 of the Code as a prefix with the word default and if the limitation of three years is counted from 30.06.2020 even then the application has been filed within the period of limitation. Next argument of Counsel for the Appellant is that since the notice of demand was issued on 01.10.2020, therefore, the date of default has to be treated as such, which could not have been 30.06.2021 as has been projected by the Respondent in order to wriggle out of the vigours of Section 10A of the Code - HELD THAT:- The submissions made by Counsel for the Appellant cannot be accepted because term loan I has been provided to the Corporate Debtor in which there is no bank guarantee which is there in term loan II and the notice dated 01.10.2020 has been issued both to the Corporate Debtor and the Guarantor making specific reference to term loan II, highlighting the amount, which was disbursed in that account. The last argument raised by the Appellant is about the date of NPA - HELD THAT:- There is no dispute that if the date of NPA is taken as the date of default then it would definitely come within the aforesaid period during which no petition under Section 7 could have ever been filed - it is also submitted that even in this appeal, the Appellant has not filed any application, seeking permission from this Tribunal, to bring on record the additional documents much less the record of DRT alongwith certificate of NPA. Therefore, these documents cannot be looked into being not a part of the record - thus the contention raised by the Appellant, to take the date of NPA as the date of default, cannot be accepted. Thus, all the points raised by the Appellant, in order to bring the date of default within the ambit of Section 10A of the Code fails and as a result thereof, all the contentions of the Appellant are hereby rejected - Appeal dismissed.
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2023 (8) TMI 747
Direction to the Suspended Management to handover all the requisite documents/records of the Corporate Debtor to the IRP within one-week - HELD THAT:- As per the Rule 49 of NCLT Rules, in case, the Appellant being the Respondent in the application who was proceeded against ex parte, could have filed an application before the same court for setting aside the impugned order by recalling the same but no such effort was made at that time rather the present appeal has been filed. It would be just and expedient if an application is filed by the Appellant in terms of Rule 49 of the Rules before the Adjudicating Authority who has passed the impugned order for the purpose of recalling the same on the ground that the Appellant was never served with the notice of the court and the email was only computer generated, therefore, it does not fall within the ambit of due notice as required by the Rules. The present appeal is hereby disposed of, without commenting on the merits of the case and liberty is extended to the Appellant to file an appropriate application, in terms of Rule 49 of the Rules, for recalling the impugned order.
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Service Tax
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2023 (8) TMI 746
Classification of services - Information Technology Software service or Intellectual Property Service? - period from 1st April 2004 to 31st March 2009 - whether in respect of the particular transactions, service tax was payable under the classification mentioned in the show cause notices? HELD THAT:- Clause (e) of subsection (1) of Section 26 refers to exemption from service tax under the Finance Act on taxable services provided to a developer or unit to carry on authorised operations in SEZ. Under Subsection (1) of Section 51, SEZ Act prevails over other enactments which are inconsistent to the provisions contained therein. Thus, only when by exercising the power under subsection (2) of Section 26 of SEZ Act, an exemption is granted by the Central Government that the assessee can claim exemption. There are no fault with the reasoning adopted by CESTAT. However, in the proceedings pursuant to remand, it will be open for the assessee to show that an exemption was available under subsection (2) of Section 26 of the SEZ Act. It is also held that octroi charges are in the nature of levy for transportation of goods. Therefore, octroi charges cannot be a part of the value of the taxable services. However, a remand was ordered to enable the assessee to produce evidence regarding the amounts paid towards octroi charges. Appeal dismissed.
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2023 (8) TMI 745
Classification of Service - Tour Operator Service or not - appellant was transporting passengers, but the buses were in possession of Tourist Permit - N/N. 20/2009 -ST dated 07.07.2009 - time limitation - HELD THAT:- The Commissioner has observed that the 25 tourist permits issued by the Secretary, State Transport Authority contain the details of tourist passenger places where passengers will travel and the tour programme would be conducted as per the dates mentioned in the permit. He has also examined the copies of contracts which were available on record wherein it is established that the appellant was providing the services of tour operator by providing their buses for marriage, parties, picnic parties etc. From the records available, the Commissioner has held that there are no documents available in the record and nor had the appellant submitted any documents which shows that they are eligible for the exemption in terms of the notification. The appellant has not been able to discharge the onus on him prove his case that they are eligible for exemption under the said notification. Despite clear directions of this Tribunal to the adjudicating authority to determine the eligibility of the appellant for the benefit of the said notification, keeping in view the fact that the vehicles involved were tourist vehicles and not stage carriages, he has failed to produce the relevant documents to support his contention that he did not fall within the exclusion condition of the Notification. Time limitation - appellant has pleaded there was confusion in regard to the definition of Tour Operator - penalty - HELD THAT:- It is apparent that definition of tour operator has been amended from time to time since it was brought into the service tax net. Therefore, it has to be acknowledged that there may have been confusion to the scope of this service, and the benefit should go the taxpayer - the demand upheld for the normal time period, and the demand for the extended period set aside. The penalty is also modified accordingly. Appeal allowed in part.
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2023 (8) TMI 744
Short payment of service tax on works contract service - challans were not in the name of the assessee- appellant - amount inadvertently paid in the partnership firm, however there is no liability of service tax in that firm - demand alongwith interest and penalty - HELD THAT:- The mistake of submitting the challans in different service tax registration which pertained to the partnership firm was a bonafide mistake. The appellant, namely Uday Raj Singh is having proprietorship firm in the name of Uday Raj Singh having STC code CATOS1091NSD001 whereas Uday Raj Singh is also having partnership firm as M/s Uday Raj Singh with different STC Code AADFU9316JSD001. The submission of the appellant that he had inadvertently paid the service tax in the code of partnership firm merely because, the name and the address is the same. He has duly accepted this even before the issuance of show cause notice vide his letter dated 29.11.2018. In fact, it was a case where the Department should not have even proceeded to issue the show cause notice and in terms of the circular should sorted the issue at that stage itself. As the partnership firm has no service tax liability and the service tax amount in terms of the show cause notice was already deposited with the Government exchequer, it was not a case of tax evasion. From the contents of the Circular No. 58/7/2023 (F. No. 157/2/2003 CX.4) dated 20.05.2003, it is clear that it refers to the payment of service tax under a wrong accounting code wrong STC Code/ Central Excise registration number and in that event it has been clarified that the assessee shall not be asked to pay the service tax again. In fact on the basic principle, the Government is not entitle to retain that amount, which is liable to be refunded, but unfortunately the application for refund of the appellant has been rejected as being time barred. The adjustment of the amount, which is already with the Revenue is allowed and the present show cause notice is dropped - no penalty under Section 78 of the Act or under Section 77(2) of the Act is leviable on the appellant and also no interest under Section 75 of the Act can be levied - appeal allowed.
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2023 (8) TMI 743
Non-payment of Service tax - reimbursable expenses - foreign owners where payment is received in foreign currency - export of service or not - period October 2006 to March 2011. Whether the amounts recovered by the appellants through debit notes are to be treated as part of taxable value for the purpose of levy of service tax or not, and on which he had passed an order confirming the adjudged demands? HELD THAT:- Ship Management Service was brought into service tax net in Union Budget 2006 by specifically including it as taxable service and explained the same by providing an inclusive definition. Owners or operators of ships may enter into an agreement with ship managers for provision of a wide range of services in respect of running and operations of ships. Indicative list of services provided under this category are mentioned under the definition of ship management service . Further, the existing section 67 was substituted with a new section 67 to provide for determination of value of taxable service. Prior to this, service tax was charged on the gross amount received. The proposed section provides for determination of taxable value in cases where the consideration received for taxable services provided is not wholly in money terms and the consideration received is in money terms but not known explicitly. Separate valuation rules were also brought out for this purpose. Hence, it is desirable to examine the above legal provisions along with the rules. In rendering ship management services, the appellants have incurred various expenditures for and on behalf of the ship owners and claimed reimbursement for the same. In terms of the above specific clauses of the agreement, the appellants have carried out their responsibilities as agents, for and on behalf of the owners. Accordingly, all monies received by the appellants was credited in a separate bank account and the interest accrued on the same was also credited to the owners. Commission and discount obtained by the appellants was also credited to the owner s bank account - The expenses were shown for the month as per budget allotted/agreed to, actual expenses, variation and the total expenditure incurred up to the month for the financial year with full year budget as compared to last year actual expenditure. Thus, both on the facts of the case and on the interpretation of legal provisions of the Finance Act, 1994, the demand of service tax on reimbursement expenses goes beyond the mandate of Section 67, which is a charging section for levy of service tax. Section 67, both before and after 01.05.2006 amendment authorises the determination of the value of the taxable service for the purpose of charging service tax under Section 66 as the gross amount charged by the service provider for such service provided or to be provided by him, in a case where the consideration for the service is money - service provided by the petitioner falls under clause (zzzt). It is only the value of such service that is to say, the value of the service rendered by the appellants to ship owner, which is that of a ship management service, that can be brought to charge and nothing more. It is not the case of the Revenue that on ship management fees, for the services rendered by the appellants, they have failed to pay the service tax. Thus the quantification of the value of the service can therefore never exceed the gross amount charged by the service provider for the ship management service provided by them. The Principal Bench of this Tribunal had dealt with the similar issue in the case of M/s Seher Vs. Commissioner of Service Tax, Delhi II [ 2022 (6) TMI 614 - CESTAT NEW DELHI] by holding that the service tax demands confirmed under Rule 5 do not survive, in asmuchas Rule 5 itself has been held to be ultra vires of Section 67 by the Hon ble Supreme Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. [ 2018 (3) TMI 357 - SUPREME COURT] . Thus, the impugned order cannot be sustained - appeal allowed.
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2023 (8) TMI 738
Abatement of duty - renting of motor vehicle - abatement of 60% under Sl. No. 9 of Notification No. 26/2012-ST dated 20.06.2012 or not - extended period of limitation - HELD THAT:- The issue of abatement is an indirect way of granting exemption to the extent prescribed in the statute and abatement is not normally denied on mere surmises or on any allegation of insufficient credit, considering the scheme of CENVAT Credit. But in any case, the Notification granting the benefit of abatement does not exempt wholly or partially the rate of tax and therefore, no such rigorous exercises are required to be employed, unlike in cases of exemption notifications. That is to say, the abatement Notification merely sanctifies the deduction in the assessable value of taxable services, the availment of CENVAT Credit is a caveat for eligibility to claim abatement. The Mumbai Tribunal in the case of M/s. Indian Oil Tanking Pvt. Ltd. [ 2017 (7) TMI 293 - CESTAT MUMBAI] has dealt with an identical issue and the Bench, after considering a catena of decisions, has held denial of abatement would be an act of encroachment by taxing sale of goods which is beyond the scope of legislative authority. To avoid such encroachment, erasure of credit is the only option. There is no allegation that such erasure has lead to deficiency of available credit at any time. Erasure would thus be substantial compliance and hence denial of abatement in the impugned order is not tenable. Coming back to the case on hand, the Assistant Commissioner records the reply of the appellant that they had reversed certain amount of CENVAT Credit by adopting the procedure given under Rule 6(3AA) (sic), but however, the same is not accepted for the reason that abatement is not exemption - it is also not found from the statute any distinction being made, as done by the adjudicating authority, but the facts borne on record clearly reflect the action in good faith by the appellant in reversing voluntarily before claiming abatement, which is the condition precedent in terms of the abatement Notification. Thus, the denial of abatement by the authorities below is not in accordance with law and consequently, they are liable to be set aside. Extended period of Limitation - HELD THAT:- The claim of abatement is, therefore, available in the S.T.-3 returns which was only sought to be denied and that per se would not amount to mis-declaration because the appellant claimed the abatement based on its understanding of the law and the authority chose to deny the same perhaps giving a different interpretation of the Notification. Hence, there cannot be any scope for mis- declaration, that too with an intention to evade payment of tax. Therefore, the demand, if any, for the normal period alone can sustain - demand is already set aside on merits. On merits, the appellant should succeed - Appeal allowed.
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Central Excise
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2023 (8) TMI 742
Method of Valuation - Physician Samples - contention of the department is that the valuation of the impugned goods should have been determined under Rule 4 of the valuation rules, 2000 based on the pro rate value of medicaments sold in the trade and valued under Section 4A - levy of penalty u/r 25 of CER - HELD THAT:- The issue is no more res integra. The Hon,ble Supreme Court has already decided the issue in the case of COMMR. OF CENTRAL EXCISE CUSTOMS, SURAT VERSUS M/S SUN PHARMACEUTICALS INDS. LTD. ORS. [ 2015 (12) TMI 670 - SUPREME COURT] , wherein it has been categorically held that valuation of physician samples is to be done as per Section 4(1)(a) of the Central Excise Act, 1944. The Appellant failed to follow the Board Circular dated 25.04.2005, which was available during the relevant period. Subsequently The Hon'ble Bombay High Court also decided the issue in the case of INDIAN DRUGS MANUFACTURER'S ASSOCN. VERSUS UNION OF INDIA [ 2006 (9) TMI 94 - HIGH COURT, BOMBAY] . Accordingly, by following the decisions of the Hon'ble Apex Court, Bombay High Court and the Board Circulars cited above, We hold that the valuation of physician samples is to be done as per under Rule 4 of the valuation rules, 2000 based on the pro rate value of medicaments sold in the trade and valued under Section 4A. Accordingly, we uphold the demand of duty along with interest confirmed in the impugned order. Levy of penalty - HELD THAT:- There were some contradicting decisions by the Tribunals during the relevant period and confusion prevailed regarding the correct method of valuation to be adoped for payment of duty on physician samples. However, the practice being followed by the Appellant was known to the department. Thus, there was no suppression or violation of any of the provisions of the Act involved and hence, no penalty imposable under Rule 25 of the Central Excise Rules. 2002. The demand of duty along with interest in the impugned order upheld - penalty imposed under Rule 25 of CER, 2002 is set aside - appeal disposed off.
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2023 (8) TMI 741
Refund of duty paid - benefit of the Notification No. 12/2012-CE(supra) was inadvertently not availed at the time of removal of the goods - denial on the grounds that the Appellant did not produce any document to prove that the goods were supplied against ICB - HELD THAT:- In this case the goods were supplied by the appellant to Mega Power Project against ICB and the same are exempted under Serial No.336 of the Notification No.12/2012-CE dated 17.03.2012 and the appellant has also complied with the condition of the said Notification and is not required to pay duty in terms of Serial No.336 of the Notification No.12/2012-CE dated 17.03.2012 read with Serial No.507 of the Notification No.12/2012-Cus dated 17.03.2012. Therefore, the appellant is not liable to pay duty. Accordingly, the excise duty paid by the appellant at the time of clearance of the goods is liable to be refunded. Appeal allowed.
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2023 (8) TMI 740
Refund of the excise duty paid in cash - error in interpreting the conditions of Notification No. 20/07-CE dated 25.04.07 - New Industrial Unit in terms of the notification or not - commencement of commercial production w.e.f. 11.04.2007 or not. HELD THAT:- The Appellant has been availing the benefit of exemption notification 32/99-CE and filing refund claim under the said notification. The new registration was taken under the old name with the same PAN number. The ownership and control has changed. It is observed that the change in ownership and control alone not sufficient to consider them as a new industrial unit, for the purpose of availing the benefit of the notification 20/2007-CE dated 25.04.2007 - It is observed that the Appellant has taken a new registration after surrendering the old one and started manufacturing a new product. This issue was not before the lower authority. Accordingly, the Commissioner (Appeals) has rightly rejected their appeal. The Appellant has filed a refund in terms of Notification 32/99-CE dated 8/7/99, which was sanctioned as claimed by them. Hence, for all intents and purposes, it is clearly evident and beyond doubt that they have sought the benefit of the said Notification alone from the Lower Authority and not the benefit of any other Notification, including the said later Notification 20/2007-CE dated 25.04.2007. Accordingly, the Appellant has not claimed the benefit of the Notification 20/2007-CE from the lower authority and hence, they are not eligible to avail the benefit of this notification. Whether the Appellant has started a new industrial unit and commenced its commercial production on 11.04.2007? - HELD THAT:- The Appellant has been availing the benefit of the exemption notification 32/99-CE and claiming refund as envisaged in the said notification, w.e.f. 08.11.2002 . The benefit of this notification is valid for a period of 10 years. Thus, even after change of management and product line in the unit, they continued to avail the benefit of the same notification from the earlier date of commencement of commercial production ie, w.e.f. 08.11.2002. Just because there is a change in the management and product line within the same factory, it cannot be called a new unit which commenced its production w.e.f. 11.04.2007. The benefit of the exemption under notification 32/99-CE was given to a new unit or an existing unit which has undertaken 25% installed capacity on or after 24.12.1997. The new notification 20/2007 also has similar clauses to be fulfilled for considering a unit set up in the specified area as a new industrial unit under this notification. Thus, for considering a unit as a new unit eligible for exemption under this notification, commercial production must have been commenced after 01.04.2007, for a new industrial unit or at least 25% addition in the value of fixed capital investment in plant and machinery for the purpose of expansion of capacity/modernization and diversification should have taken place and commercial production should have commenced from such expanded capacity on or after the 1st day of April, 2007 but not later than 31st day of March, 2017. No such verification has been undertaken on the unit claimed to be a new unit by the Appellant on account of change in the management and manufacturing a new product namely, plastic chairs from the same old premises. As the Appellants were already availing the benefit of exemption notification 32/99-CE for the unit located in the same premises, it cannot be considered that a new unit has come up in the same premises under a new ownership. The Appellant has not applied for a new unit with proper authority to determine the new unit satisfies all conditions to consider it as a new unit. Surrendering the old central excise registration and taking a new registration alone not sufficient to consider that the Appellant has commenced a new industrial unit - the Appellant s unit cannot be considered as a new unit which has commenced its commercial production w.e.f. 11.04.2007. Appeal dismissed - impugned order upheld.
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2023 (8) TMI 739
Liability to pay Excise Duty u/s 11D of CEA - price escalation clause - appellant is a registered dealer/depot - appellant had collected amounts representing Central Excise duty from the buyer in excess of the duty paid by them at the time of the clearance - the excess amount so collected not credited to the Central Government - HELD THAT:- The Hon ble Supreme Court in the case of Bharath Petroleum Corporation Limited [ 2011 (9) TMI 434 - SUPREME COURT ] had an occasion to consider the very same issue and held apart from the fact that in view of the period involved in the present appeal, viz. July 1997 to August 2000, there is no infirmity in the impugned order passed by the Tribunal on merits, the present appeal is otherwise not maintainable under Section 35-L(b) of the Act as it does not involve determination of any question having relation to the rate of duty of Excise or to the value of goods for the purpose of assessment. The very same issue was considered by the Hon ble High Court of Madhya Pradesh in the appellant s own case [ 2013 (12) TMI 880 - MADHYA PRADESH HIGH COURT ] and the demand was set aside holding that the duty demand on the registered dealer under Section 11D cannot be sustained. Thus, the demand cannot sustain. The impugned order is set aside - appeal allowed.
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Indian Laws
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2023 (8) TMI 737
Dishonour of Cheque - Framing of charges - legally recoverable debt or liability was in existence for issuance of the cheques, or not - invocation of inherent jurisdiction under Section 482 of CrPC - HELD THAT:- It is mentioned that in furtherance of business and for business need of the accused, complainant had advanced him money from time to time. When complainant demanded settlement of account, the accused has issued the cheuqes in question. Therefore, the complaint prima facie reflects allegations with regard to existence of legally recoverable debt or liability. The averment in the complaint would be supported by legal presumption under Section 138 and 139 of Negotiable Instruments Act at trial. The documents with regard to dissolution of partnership and the statement contained therein, may be probable defence of the accused which cannot be gone into at the preliminary stage of proceeding i.e., cognizance and framing of charge. From the complaint and the statement of complainant, no inference of absolute lack of legally recoverable debt or liability can be drawn. It cannot be said that the allegations as reflected in the complaint, if taken at their face value and accepted in their entirety, would not be sufficient to constitute an offence punishable under Section 138 of Negotiable Instruments Act. Also, the case under consideration does not fall within the ambit of principles laid down in case of Amit Kapoor [ 2014 (1) TMI 1042 - SUPREME COURT] for invoking inherent jurisdiction under Section 482 of CrPC. This Court is of the considered opinion that no case is made out for quashment of proceedings. Petition dismissed.
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