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TMI Tax Updates - e-Newsletter
August 4, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
Service Tax
CST, VAT & Sales Tax
Indian Laws
Articles
Highlights / Catch Notes
GST
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Petition for Granting Bail - Clandestine manufacturing and sale of pan masala without payment of GST - alleged evasion of tax - It is argued that the petitioners have been falsely implicated in the case. - the case for granting bail is made out. Therefore, without commenting on the merits of the case, both the petitions stand allowed. - HC
Income Tax
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Addition u/s 10B for not bringing back convertible foreign exchange of export sale within the extended time - the veracity of the claims needs to be examined on the basis of the evidence in regard to amount of convertible foreign exchange and the time period specified in order to determine the disallowance, if any. - AT
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TDS u/s 195 - Addition u/s 40(a)(i) - addition made/sustained by the AO/CIT(A) u/s 40(a)(i) for not deducting the tax at source of payments made for purchase of raw material, components, etc. from non-resident Indian is not sustainable in the eyes of law, hence ordered to be deleted. - AT
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Penalty u/s 271AAB - assessee as a result of search has disclosed an income in the return filed in response to the notice issued under section 153A - There was no reference made by the authorities below to the documents of incriminating nature having bearing on the income of the assessee in their respective orders - No penalty - AT
FEMA
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Permission for Direct Investment in certain cases - direct investment in joint venture or wholly owned subsidiary outside India - It was for the respondent/RBI to exercise its discretion in the facts and circumstances of the case keeping in view its own permissions given and subsequent facts and events that may have taken place after the permission was given. The discretion has to be exercised by RBI. The same cannot be delegated to the Enforcement Directorate. - HC
Service Tax
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Benefit of SVLDRS - the petitioner not having filed the returns in electronic form within the period specified in the statute, cannot now be heard to contend that he can file the return in manual form for the purposes of obtaining the benefit applicable to the said category of persons, under the 'Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019'. - HC
VAT
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Refund of excess collection of tax - payment of tax at higher rate, in the absence of Form ‘C - Price / rate is inclusive of tax - the rate of CST applicable for the goods supplied by the respondent-assessee is 4% - assessee deposited the CST at the rate of 10%/12.5% by making reverse working of the turnover under Section 8A of the CST Act. - The correct amount of tax payable would be therefore, much less than what the respondent-assessee has deposited. - Refund cannot be denied - HC
Case Laws:
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GST
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2020 (8) TMI 41
Detention of goods alongwith vehicle - transport of goods to the auction destination - goods although not auctioned on the same date as the onward transportation, were subsequently auctioned from the auction centre - HELD THAT:- The detention was on account of a misunderstanding of the nature of the transaction and transportation of the goods, and finding that the onward transportation of the goods was covered by valid documents, and on the return journey, when the vehicle was intercepted, it was not carrying any goods that had contravened the provisions of the Act, the Writ Petition is closed with a direction to the respondent to forthwith release the vehicle that has been detained through Ext.P5 detention notice. Petition disposed off.
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2020 (8) TMI 40
Petition for Granting Bail - Clandestine manufacturing and sale of pan masala without payment of GST - alleged evasion of tax - It is argued that the petitioners have been falsely implicated in the case. - petitioners, despite their right to challenge the assessment by depositing 10% of the amount assessed, they have deposited entire amount of ₹ 7 crores - Sale and distribution of pan masala has been completely banned across the country due to pandemic induced lockdown - HELD THAT:- On careful consideration of nature and gravity of the allegation made against the petitioners and the specific evidence collected in respect of these allegations, elaborate discussion of which would not be apt as it may adversely affect the interest of either party, the specific facts put-forth by the learned senior counsels for the petitioners and their reply and other facts and circumstances of the case, in the considered opinion of this court, the case for granting bail is made out. Therefore, without commenting on the merits of the case, both the petitions stand allowed. It is directed that the petitioners be released from custody on their furnishing a personal bond in the sum of ₹ 5,00,000/- each with separate sureties to the satisfaction of the Trial Court for their appearance before it as and when required further subject to the following conditions imposed.
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2020 (8) TMI 39
Release of detained goods alongwith vehicle - detention on the ground that the e-way bill covering the interstate movement of the goods had not been produced before the detaining authority when demanded - HELD THAT:- It is the case of the petitioner that the e-way bill covering the second leg of the journey from Cochin to Kasargod had been produced. The said explanation however, could not suffice to explain the absence of the e-way bill covering the first leg of the journey. Under the said circumstances, the detention of the vehicles and the goods cannot be said to be unjustified. The petitioner may be permitted to obtain a release of the vehicles and the goods on furnishing a bank guarantee for the amount demanded in Exts.P5 and P5(a) notices, it is directed that, if the petitioner furnishes a bank guarantee to cover the amount demanded in Exts.P5 and P5(a) notices, the respondent shall forthwith release the vehicles and the goods to the petitioner - petition disposed off.
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Income Tax
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2020 (8) TMI 38
TP Adjustment - upward adjustment of notional guarantee fees made u/s 92CA of the Act - HELD THAT:- This issue is entirely covered in assessee s own case by the judgment and order passed by the Co-ordinate Bench in favour of the assessee [ 2016 (11) TMI 1671 - ITAT AHMEDABAD] Upward adjustment of notional guarantee fees made by AO u/s 92CA - HELD THAT:- As relying upon the judgment passed by the Mumbai Tribunal in the case of Siro Clinpharm Pvt. Ltd. vs. DCIT [ 2016 (5) TMI 633 - ITAT MUMBAI] the upward adjustment made on notional guarantee fees has been deleted. Hence, taking into consideration the judgment passed by the Co-ordinate Bench in assessee s own case on the identical issue [ 2016 (11) TMI 1671 - ITAT AHMEDABAD] we find no reason to deviate from the decision and observation in its support made therein and thus, accordingly we direct the AO to delete the upward adjustment for notional guarantee fees. Addition u/s 10B for not bringing back convertible foreign exchange of export sale within the extended time - HELD THAT:- Upon perusal of the provision as envisaged 155(11A) of the Act we find that the veracity of the claims needs to be examined on the basis of the evidence in regard to amount of convertible foreign exchange and the time period specified in order to determine the disallowance, if any, and thus, we find it fit to set aside the issue to the file of the AO to amend the order of the assessment so as to allow deduction under Section 10B of the Act in respect of such income or part thereof which is brought into India and to pass order in the light of the provision laid down under Section 155(11A) of the Act. While doing so the Ld. AO shall give an opportunity of being heard to the assessee and the assessee will be at liberty to adduce evidence in support of its claim under Section 10B of the Act - Assessee s appeal is allowed for statistical purpose.
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2020 (8) TMI 37
TP Adjustment - comparable selection - HELD THAT:- In Dover India (P.) Ltd. v. DCIT [ 2017 (4) TMI 1497 - ITAT PUNE ] it is held that where a company was performing similar functions with that of the assessee, in absence of revenue establishing that said concern was persistent loss making concern, merely because said concern during relevant year had shown losses, could not be a valid reason for excluding same from list of comparables. We are of the considered view that the principles laid down in the above decisions are applicable to the instant case. A fortiori Sabero Organics Gujarat Ltd., Aksharchem (India) Ltd. and Bhageria Dyechem Ltd. have earned profit in FYs 2009-10, 2010-11, 2012-13 2013-14 and incurred losses only in FY 2011-12. Such fluctuations are normal in competitive business environment and the same cannot be considered as a reason for rejecting the aforesaid comparables. These three comparables are definitely not persistent loss making companies. We direct the AO/TPO to include Sabero Organics Gujarat Ltd., Aksharchem (India) Ltd. and Bhageria Dyechem Ltd. as comparable and compute the arithmetic mean margin and pass consequential order. Needless to say, the AO would give a reasonable opportunity of being heard to the appellant before passing the order. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded.
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2020 (8) TMI 36
Penalty u/ s 271(1)(c) - bogus long-term capital gain - Assessee himself had surrendered his long-term capital gains claim to be exempt u/s 10(38) as bogus in the assessment - HELD THAT:- We see no reason to express our concurrence with the Revenue s stand. We make it clear that hon ble apex court s landmark decision in Reliance Petroproducts case [ 2010 (3) TMI 80 - SUPREME COURT] has settled the law that quantum and penalty proceedings stand on different footing and each and every disallowance/addition in the former does not ipso facto attract the latter penal provision. Assessee has filed all the relevant supporting evidence in support of genuineness of this above-stated long-term capital gains derived during the course of scrutiny. That being the case, we find that this tribunal s coordinate bench s decision in Smt. Amita Tulsiyan [ 2019 (5) TMI 849 - ITAT HYDERABAD] holds that such an instance neither amounts to concealment nor furnishing of inaccurate particulars of income u/s 271 - Decided in favour of assessee.
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2020 (8) TMI 35
TDS u/s 195 - Addition u/s 40(a)(i) - payments made for purchase of raw material, components, etc. from non-resident Indian - DTAA between India and Japan - HELD THAT:- As far as the payment to Honda motor Japan is concerned, the issue in dispute is squarely covered by the decision of the Tribunal in assessment year 2009- 10 [ 2017 (8) TMI 1535 - ITAT DELHI] wherein the Tribunal has followed the decision of the Hon ble Delhi High Court in the case of CIT Vs. Herbalife [ 2016 (5) TMI 697 - DELHI HIGH COURT] . We note that Hon ble High Court in the case of Herbalife (supra) has also considered the amendment in provisions of section 40(a)(i) of the Act by way of insertion of sub-clause(ia) w.e.f. 01/04/2005. Accordingly, we delete the disallowance in respect of payment to Honda motor Japan. Regarding payment to Honda Asia Thailand in the year under consideration, the assessee contended that no PE has been held by the DRP in the case of non-resident company in assessment year 2010-11 and this fact was not controverted by the Ld. CIT-(DR), thus, following the decision of the Tribunal in assessment year 2009-10, we hold no disallowance could be made under section 40(a)(i) of the Act for payment made to Honda Asia Thailand without deduction of tax at source. We are of the considered view that addition made/sustained by the AO/CIT(A) u/s 40(a)(i) for not deducting the tax at source of payments made for purchase of raw material, components, etc. from non-resident Indian is not sustainable in the eyes of law, hence ordered to be deleted. - Decided in favour of assessee.
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2020 (8) TMI 34
Disallowance on account of late deposit of ESI arbitrarily - whether disallowance so made deserves to be deleted - HELD THAT:- Department has not disputed the fact that the payment on account of ESI contribution was made by the assessee before the end of the financial year relevant to the assessment year under consideration and therefore, the payment was made much before the due date of filing of return of income U/s 139(1) of the Act. As decided in M/S K.S. AUTOMOBILES PVT. LTD. [ 2019 (3) TMI 1648 - ITAT JAIPUR ] in view of a series of decisions of the Hon ble Jurisdictional High Court in favour of the assessee and further Hon ble Supreme Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. [ 2017 (7) TMI 1087 - SC ORDER ] has dismissed the SLP filed by the Department this issue is decided in favour of the assessee and against the Revenue.
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2020 (8) TMI 33
Penalty u/s 271AAB - assessee as a result of search has disclosed an income in the return filed in response to the notice issued under section 153A - HELD THAT:- Statement furnished by the assessee under section 132(4) of the Act, during the search proceedings and note that even in the statement there was no reference to any such material found during the course of search for the income disclosed by the assessee in response to the notice issued under section 153A. As such the voluntary income was disclosed by the assessee and the addition made by the AO was without having found any incriminating document in the course of search. There was no reference made by the authorities below to the documents of incriminating nature having bearing on the income of the assessee in their respective orders. The ld. DR has not advanced any arguments against the contentions raised by the assessee. There cannot be any penalty under the provisions of section 271AAB of the Act. - Decided in favour of assessee.
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Customs
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2020 (8) TMI 32
Import of prohibited goods or not - old and used tires which are reuseable - HELD THAT:- Let Notice be issued for final disposal to the respondents returnable on 19.08.2020. The situation being identical in all the captioned matters, similar interim directions are issued subject to similar conditions The Registry shall also notify the Special Civil Application No.8492 of 2015 along with the captioned writ applications for hearing.
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Insolvency & Bankruptcy
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2020 (8) TMI 31
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Annexure - 2 at Page no. 107 of the Appeal Paper Book statement does not show dues payment of ₹ 25,00,000/- by the Appellant (Operational Creditor) - Further, Annexure R-1 of the Written Submissions filed by the Respondent (Corporate Debtor) which is the e-mail ledger account of the Appellant (Operational Creditor) relevant at page no. 164 of the Appeal Paper Book dated 02-09-2016 shows receipt of ₹ 25,00,000/- first time during the course of argument before this Appellate Tribunal. This document has been marked as X . As letter sent by the Respondent (Corporate Debtor) to the Appellant (Operational Creditor), this document X was not placed before the Adjudicating Authority. So Ld. Adjudicating Authority rightly came to the conclusion that prior to filing of the application on 14th November, 2018, there is/are pre-existing dispute raised by the Respondent in respect of container detention charges - also, there was a pre-existing dispute and the Ld. Adjudicating Authority rightly dismissed the application filed under Section 9 of IBC. Appeal dismissed.
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FEMA
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2020 (8) TMI 30
Permission for Direct Investment in certain cases - direct investment in joint venture or wholly owned subsidiary outside India - application the petitioner seeks permission for remission of USD 54.99 Million on or before 31st July, 2020 - HELD THAT:- What prima facie appears is that based on a communication written by Directorate of Enforcement containing cryptic information the RBI/respondent has chosen to withhold permission to the petitioner. The discretion under clause 9 of the abovenoted Regulations has to be exercised by RBI the respondent based on cogent facts and materials and not at the mere directions of Directorate of Enforcement. It was for the respondent/RBI to exercise its discretion in the facts and circumstances of the case keeping in view its own permissions given and subsequent facts and events that may have taken place after the permission was given. The discretion has to be exercised by RBI. The same cannot be delegated to the Enforcement Directorate. The impugned orders is also a non speaking order. Petitioner has made out a prima facie case. The interim directions as stated in the order are reiterated. Pass the following directions:- The respondent shall permit the petitioner to transmit the sum of 54.99 million USD forthwith before 31.07.2020 as has been prayed for. This permission is however subject to the following: (i) The petitioner shall furnish an undertaking from the Board of Directors that if for some reason this court passes a direction to the petitioner to deposit the said remitted amount amounting to 55 million USD, the petitioner shall forthwith deposit the same in court. (ii)The petitioner shall give an undertaking that it has unencumbered assets worth 60 million USD or above and that the petitioner shall not sell, alienate or transfer or encumber these assets without prior permission of this Court.
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2020 (8) TMI 25
Permission for Direct Investment in certain cases - on the saying of the concerned Enforcement Directorate, permission is being refused to the petitioner - HELD THAT:- In case an Indian party does not satisfy the eligibility norms of Regulation 6 then it may apply for RBI for approval. It is Regulation 6 which states that permission cannot be given in case the investigations are pending by the Law Enforcement agencies. Regulation 9 does not provide any such stipulation. Hence, prima facie the petitioner was correct in having approached RBI under Regulation 9. Counsel for RBI has pointed out to some inquiry initiated recently as mentioned in communication dated 14.08.2019 by Enforcement Directorate. The petitioner refutes this. We cannot help noticing that the corporate guarantee and the loans have prima facie been taken with the prior permission of RBI. It would hardly be appropriate for the RBI to now let the petitioner go in default and dishonour its corporate guarantee because some investigation proceedings are pending by law enforcement agencies which appears to have been pending since 2015. In fact, as noted above while these proceedings were pending as late as in 2018, RBI has given permission to the petitioner. The petitioner has made a prima facie case. Necessary permission for transmission of 90 million USD is not granted, as sought for, it is manifest that irreparable loss and injury would be caused to the petitioners as their credit rating would get downgraded. Pass the following directions:- The respondent shall permit the petitioner to transmit the sum of 75 million USD forthwith, the respondent will also permit the petitioner to transmit another sum of 15 million USD by 30.06.2020 as has been prayed for. This permission is however subject to the following: (i) The petitioner shall furnish an undertaking from the Board of Directors that if for some reason this court passes a direction to the petitioner to deposit the said remitted amount amounting to 90 million USD, the petitioner shall forthwith deposit the same in court. (ii) The petitioner shall give an undertaking that it has unencumbered assets worth 100 million USD or above and that the petitioner shall not sell, alienate or transfer or encumber these assets till the next date of hearing.
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Service Tax
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2020 (8) TMI 29
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 ( SVLDRS ) - contention of the respondents is that Sub Rule (3) of Rule 7 only qualifies Sub Rule (1) of Rule 7 - HELD THAT:- While Sub Rule (1) of Rule 7 specifies the form that has to be used while filing the half yearly returns, Sub Rule(3) clarifies the manner in which the half yearly returns have to be filed by an assessee after 01.10.2011. When so read harmoniously, it would follow that the half yearly return that has to be submitted in the particular form mentioned in Sub Rule (1) had necessarily to be submitted electronically with effect from 01.10.2011 - In the instant case, the petitioner not having filed the returns in electronic form within the period specified in the statute, cannot now be heard to contend that he can file the return in manual form for the purposes of obtaining the benefit applicable to the said category of persons, under the 'Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019'. Petition dismissed.
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CST, VAT & Sales Tax
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2020 (8) TMI 28
Validity of assessment order - time limitation for completion of Best Judgement Assessment - contention is that in as much as the petitioner has a period till 31st of December, following the end of the financial year, for preferring the annual returns, the said period must also been seen as the date from which alone the respondents could proceed to complete the best judgment assessment, under Section 62 of the Act - HELD THAT:- The reference to Section 44 of the Act, in Section 62, is only for the purpose of determining the five year period within which the assessing officer has to complete the best judgment assessment. It does not mandate that the steps for completing the best judgment assessment should be initiated only after 31st December, following the end of the financial year, in which the default as regards filing of monthly returns occured. Section 62 of the Act must be seen as enabling an Assessing Officer to proceed to assess the tax liability of a person, who has not furnished the returns inter alia under Section 39, even after service of notice under Section 46, on best judgment basis, and thereafter issue the assessment order within a period of five years from the date indicated under Section 44 for furnishing of the annual returns. Hence, while the best judgment assessment can be done immediately after detection of the failure to file the returns despite service of notice, the outer time limit for completing the best judgment assessment is five years from the date specified under Section 44 of the Act. In the instant case, it is not in dispute that the petitioner did not furnish a valid return within 30 days from the service of the assessment orders under Section 62(1) of the Act. That being the case, it would follow that the petitioner cannot obtain the benefit under Section 62(2) of the Act, for deeming the assessment orders already passed on best judgment basis as withdrawn. The writ petition in its challenge to the assessment orders therefore fails and is dismissed.
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2020 (8) TMI 27
Refund of excess collection of tax - payment of tax at higher rate, in the absence of Form C - Section 9A of the CST Act - inter-state trade and commerce - HELD THAT:- When the assessee has sold the goods on the price, which is inclusive of tax, the turnover is to be calculated as per the formula provided in Section 8A of the CST. In the facts of the case the rate of CST applicable for the goods supplied by the respondent-assessee is 4%. Therefore, 4% tax is required to be applied on the turnover as calculated under Section 8A of the CST Act. As observed above, the respondent-assessee deposited the CST at the rate of 10%/12.5% by making reverse working of the turnover under Section 8A of the CST Act. The correct amount of tax payable would be therefore, much less than what the respondent-assessee has deposited. This has resulted into the excess amount of tax deposited by the respondent-assessee amounting to Rs. ₹ 1,81,49,641/-. Moreover, on perusal of the facts on record and as per the findings of fact given by the Tribunal, it cannot be said that that the respondent-assessee has collected the excess amount of CST from its buyer/receiver of the goods. In the facts of the present case, the respondent-assessee cannot be said to have collected the CST at the rate of 10% or 12% from its buyers/receiver of the goods in view of the contract of fixed price, there is no question of passing over the same to its buyer in view of the aforesaid decisions of the Apex Court in the case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] - Even otherwise the provisions of the CST Act do not contemplate any power to forfeiture of refund by the Revenue. Thus, as held by the decision of the Supreme Court in the case of KHEMKA CO. (AGENCIES) PVT. LTD. VERSUS STATE OF MAHARASHTRA STATE OF MYSORE VERSUS GULDAS NARASAPPA THIMMAIAH OIL MILLS [ 1975 (2) TMI 91 - SUPREME COURT] , the provisions of Section 31 of the VAT Act enabling the Assessing Officer to forfeit the excess amount of tax deposited by the assessee cannot be applied to the provision of the CST Act. The Appeal deserves to be dismissed and re-framed questions of law are answered in favour of the assessee and against the Revenue - Appeal dismissed.
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Indian Laws
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2020 (8) TMI 26
Wilful defaulters or not - default in repayment of dues - grievance of the petitioners was that the respondent bank was not giving access to the underlying documents to the petitioners - Master Circular dated 01.07.2015 - HELD THAT:- Procedure adopted by the respondent is wholly contrary to the mandate stated by the Supreme Court in the case of STATE BANK OF INDIA VERSUS M/S. JAH DEVELOPERS PVT. LTD. ORS. [ 2019 (5) TMI 862 - SUPREME COURT] . Firstly, it is not a reasoned order. Secondly, the order of the First Committee was never communicated to the petitioners. The net result is that the petitioners never had an opportunity to make a representation against the order of the First Committee to the Review Committee. There is clear non-compliance of the directions of the Supreme Court as noted in the judgment of STATE BANK OF INDIA VERSUS M/S. JAH DEVELOPERS PVT. LTD. ORS. [ 2019 (5) TMI 862 - SUPREME COURT] . Any consequential steps taken by the respondent declaring the petitioners as a wilful defaulter including putting their names on the net or communication to RBI would automatically stand withdrawn - Petition disposed off.
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