Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 25, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
Indian Laws
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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The findings that the three demand drafts were by way of accommodation entries of the unaccounted moneys of the assessee does not suffer from any error of law - HC
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Assessee was merely a labour contractor. - not entitled for benefit u/s 32A(2)(b) in respect of investment allowance. - SC
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Accrual of income is matter of fact to be decided separately for each case - The same cannot be stated as an accounting policy - AT
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Additional tax u/s 143(1)(a) - assessee claimed deduction, which were not permissible, and thereby not only tried to reduce the income to Nil, but also to carry forward the loss. - additional tax confirmed. - HC
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Receipt of compensation on termination of distributorship agreement is in the nature of revenue receipt - HC
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Weighted deduction u/s 35B - Mere obtaining of a packing credit loan or payment of interest thereon in India cannot be said to entail the performance of any service outside India. - not deductible - HC
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Deduction u/s. 80IB(11A) - assessee is simply handling and transporting the food grains and storing at the godowns of the FCI - no deduction - AT
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Block assessment - it was not clear as to what nature of the seized diaries were examined by the AO and how he satisfied himself that these diaries belong to the appellant firm. - additions made on protective basis need to deleted - HC
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There is no provisions in the Income Tax Act, 1961 which makes it mandatory for a person for maintaining the books of accounts at his residence or at his business premises - HC
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Addition on account of Same opening & closing balances of creditors in a FY - opening balances have been duly explained by the assessee. - no addition - AT
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Addition on account of difference in stock found during survey u/s 132 - As the discrepancy could not be reconciled and satisfactorily explained by assessee, addition upheld - AT
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An appeal against an order passed by an officer of the rank of Commissioner Income Tax under Section 271FA is maintainable before the Commissioner Appeals. - HC
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Non deduction of TDS on freight charges - as the assessee had not produced any material to establish the contention of the assessee, but from making a bald assertion, thus the disallowance was on facts - against assessee - HC
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As the income on account of the upfront appraisal fees was business income and as the respondents did not have a permanent establishment in India, the same could not be charged to tax in India under Article 7 of the DTAA - HC
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Penalty u/s 271 - Bank has not calculated the interest over the years possibly for the reason that, in its Accounts, this amount was classified as 'NPA', thus Section 271(1)(c) is not applicable - SC
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Rate of depreciation u/s. 32 - any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force - HC
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Deduction u/s 10-B - STPI unit - There is nothing implying that approval for purposes of an STP also entitled the unit to a benefit under Section 10-B. The orders of the Tribunal are consequently erroneous - HC
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Revision u/s 263 - expenditure related to the dividend income claimed exempt u/s 10 (33) - the issue was debatable - even if it were not debatable, the error by the AO is not “unsustainable” - HC
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DTAA between India and Japan - Where technical services are rendered by an enterprise to another, the same falls within the ambit of the expression “technical services” and constitute the rendering of technical services even though the same required technicians to be deputed for carrying out the work. - HC
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Deduction u/s 80I - The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process, which may or may not amount to manufacture. - SC
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Allocation of head office expenses on R&D activity among the manufacturing units is not correct to re-calculate the deduction u/s 80IA. - HC
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Suppression of income - Addition made due to difference in income shown in P&L and TDS certificate – freight payment on behalf of another person - decided in favor of assessee - AT
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Sikim Income Tax Rules, 1948 versus Indian Income Tax Act, 1961 - Since the assessee was not resident within the territories comprised in the of State of Sikkim, the provision of section 10(26AAA) was not applicable to him and income from winning of lottery in Sikkim was liable to tax under the provisions of Indian Income-tax Act, 1961 - AT
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Relinquishment of tenancy rights - allowance of relief u/s 54EC - the property was not occupied jointly and severally but was occupied individually and separately. - benefit allowed - AT
Customs
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Purchase of goods under auction - recovery of customs duty from the purchaser is not valid since it was neither purchased from a bonded warehouse or nor been imported by the purchaser - HC
Indian Laws
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CONSOLIDATED FDI POLICY (EFFECTIVE FROM 10-4-2012) updated upto 22-09-2012
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The establishment of Permanent Lok Adalats and conferring them jurisdiction upto a specific pecuniary limit in respect of one or more public utility services as defined in Section 22-A(b) before the dispute is brought before any court by any party to the dispute is not anathema to the rule of law. - SC
Wealth-tax
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Assets were forfeited on 8.6.1979 - forfeiture came to an end only on 24.6.1992 - when the subject assets did not legally belong to the assessee during the period under consideration, the same could not have been included while computing his net wealth. - HC
Central Excise
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Return of rejected goods - credit taken on the basis own invoice - the assessee would not have any document issued by others but can take credit only on the basis of his own invoice - AT
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In respect of the goods manufactured during the period when the appellant was not registered, credit can be taken subsequently also. - AT
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Payment of Service tax was not made through challan instead the payment was made through debit entry in the Cenvat credit account - cenvat credit allowed on the basis of debit entry - AT
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SSI exemption - Clubbing of turnover - assessee having two units - issuance to SCN to both the units does not amount to double jeopardy - AT
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Valuation under central excise - additional income arising out of the transportation charges/freight charges - no undervaluation - demand not sustainable - AT
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Provisional release of the goods – the condition of giving declaration that the assessee will not challenge the value of goods is not sustainable - AT
VAT
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Mandatory penalty under sales tax - The legislature thought it fit to specify a fixed rate of penalty and not give any discretion in lowering the rate of penalty. - No relief to assessee - SC
Case Laws:
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Income Tax
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2012 (9) TMI 665
Reopening of assessment - undisclosed benefit of accommodation entries - Held that:- The findings recorded by the AO, CIT (A) and ITAT in proceedings u/s 148 are findings of fact. The assessee could not satisfy the Income-tax authorities regarding the identity of Shri Trilok Chand Bansal, the Director of M/s Performance Trading and Investment Company Pvt Ltd and the genuineness of transactions. The story set up by the assessee, that Shri Trilok Chand Bansal executed the agreement paid three demand drafts totaling Rs. 15, 02, 700/- and thereafter did not claim either the property or the amount, and consequently the amount was forfeited, was not established and was not worthy of belief. The Income Tax Authorities did not commit any error in adding the amount to the income of the assessee as unaccounted undisclosed income. The findings recorded by the Income-tax authorities, that the three demand drafts were by way of accommodation entries of the unaccounted moneys of the assessee, thus, does not suffer from any error of law - aginst assessee.
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2012 (9) TMI 664
Whether the assessee was entitled to investment allowance under Section 32A(2)(b) - Held that:- The AO came to the conclusion that the assessee claimed to be in the business of mining & the only activity undertaken by it was removal of overburden/earth excavation work carried out for facilitating mining at lignite project site at Rajpardi and Pandhro and that the assessee was merely a labour contractor. These findings of fact have been upheld by the Income Tax Appellate Tribunal and they have not even been discussed in the impugned judgment of the High Court [2006 (8) TMI 144 - GUJARAT HIGH COURT] - against assessee.
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2012 (9) TMI 663
Dismissal of Appeal - non deciding the Department's appeal by treating it infructuous being duplicate - Held that:- Tribunal was not correct in observing that the department had filed duplicate appeals. The department had challenged two different orders one passed under Section 143 (1) (a) and other under Section 154 separately. The apparent mistake, which was sought to be corrected, before the Tribunal by an application dated 11.5.2000, Tribunal committed error in law in failing to take into consideration the application dated 11.5.2000, for correction of the mistake - The matter is remanded back to the Tribunal to consider the Appeal on merits after deciding the application dated 11.5.2000 for correction of the mistake - in favour of Revenue.
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2012 (9) TMI 662
Penalty u/s. 271(1)(c) - held that:- the assessee's was well aware of the amendment to section 80P - assessee files its tax return only at ₹ 20.16 lakhs, i.e., at less than 1/3rd the income for which it pays advance-tax. - Clearly, some adjustments were made (to the book profit) either at the time of calculating and depositing advance-tax or while finalizing and filing the tax return. - a person can not take the advantage of its own wrong - penalty to be confirmed. The return of income, as it appears, was prepared merely by adopting the figure of net profit as per the profit & loss account without any adjustments. Why, even the simple exercise of examining the details of various expenses, furnished before the Assessing Officer during the course of assessment proceedings, and which would exhibit it to bear sums which are clearly not allowable; rather, do not even qualify as expenditure, was not undertaken. It is rather, as we see it, a case of gross negligence and dereliction of duty – and by more than one person, and would thus qualify to be a conscious disregard of its obligations. - Benefit of section 273B not extended - penalty confirmed. Taxability of interest 'accruing' on the non-performing asset (NPA) - whether non-recognizing interest income on NPAs by the assessee-bank following RBI guidelines, as a matter of accounting policy, would by itself constitute a valid ground for not recognizing the said income on the basis of its non-accrual; the adopted method of accounting being admittedly mercantile? - held that:- even section 43D gives primacy to the bank's accounts, so that where interest stands credited to the profit and loss account for a particular year, the same is to be treated as its income for that year even where not received. - Decided against assessee. Accrual (or otherwise) of an income (or expenditure) is matter of fact, to be decided separately for each case, on the basis of the assessment of the obtaining facts and circumstances. The same cannot be stated as an accounting policy - which by its very nature is to be applied uniformly, except where it is stated in broad terms, bearing the necessary ingredients of the qualifying criterion, i.e., existence of a reasonable certainty as to ultimate realization at the time of raising the claim or even as at the end of the accounting period. The adopted accounting policy, i.e., recognizing income on NPA accounts only subject to realization, does not serve as a valid qualifying category as there could be other mitigating factors, making it reasonable to expect realization despite the account being a NPA. Where there is a difference in the provision (for bad and doubtful debts) in accounts and that allowable or allowed u/s. 36(1)(viia), the assessee shall tabulate a parallel provision statement u/s. 36(1)(viia), annexing it as a part of its computation of income with the return of income, each year, explaining the difference/s therein with reference to its accounts. The assessee's claim qua ₹ 19.23 lacs on the basis of non-receipt of interest income, thus, stands rightly rejected by the Revenue - against assessee. The assessee would only be entitled to a 'provision for bad and doubtful debts' u/s. 36(1)(viia) qua its total advances, including interest debited to the borrower's account and, therefore, forming part of its asset base - The A.O. shall, however, while giving effect to this order, verify and allow the assessee's claim u/s. 36(1)(viia) as eligible under law, seeking the relevant, primary details from the assessee as deemed fit by him.
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2012 (9) TMI 661
Additional tax u/s 143 (1) (a) on the difference of returned and assessed income - Denial of deduction u/s 80 IA for Unit I as assessee has taken benefit of Section 80IA on the gross total income by reducing the loss of Unit-II from Unit-I - SCN u/s 154 (1) (b) to assessee for rectifying the mistake - Held that:- The powers under Section 154 can be used to rectify the mistake. It is true that the mistake should not be such, which may allow debate or where two views are possible. In the present case there was no contentions issue or any legal issue on which two views are possible - The assessee had adopted a wrong method of calculation for the purposes of reducing income to 'Nil', and had also carrying the loss forward to next year. The computation was clearly impermissible and was against the provisions of Section 80A (2). The gross total income as defined under Section 80B (5) includes total income computed in accordance with the provisions of the Act, before making any deduction under the chapter. The assessee could not have made any deduction, from the gross total income for the purposes of claiming benefit to return the income as Nil, and carry forward the loss. The intention of Section 143 IA was to discourage the misuse by unscrupulous tax payer, who might return lesser income by making obvious examination, or by claiming obvious incorrect deduction and taking a chance that if the same is deducted by the department, they would have to pay correct taxes only. In such cases while correcting the return, additional tax was payable. In the present case the provisions of Section 143 (I) (a) are clearly attracted. The respondent assessee claimed deduction, which were not permissible, and thereby not only tried to reduce the income to Nil, but also to carry forward the loss. The respondent assessee took chance, in which it did not succeed, and thus the A.O. and CIT (A) rightly imposed additional tax on him - in favour of Revenue.
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2012 (9) TMI 660
Weighted deduction u/s 35B in respect of bank interest and bank charges - export packing credit facility from the State Bank of India - Held that:- As decided in M/s. KEC International Ltd. Versus CIT [2009 (1) TMI 5 - BOMBAY HIGH COURT] the very definition of the expression “packing credit” as advanced in the Export Credit (Interest Subsidy) Scheme, 1968, indicates that it is a loan or advance for the purpose of purchase processing and packing of goods. The Reserve Bank requires the lending bank to furnish it a declaration in writing that the loan was granted for pre-shipment activities. - That necessarily means that the activities for which the loan has been granted have to be carried out within India - Section 35B(1)(b)(viii) operates only when there is a performance of services outside India. Mere obtaining of a packing credit loan or payment of interest thereon in India cannot be said to entail the performance of any service outside India. The said expenditure would, therefore, not be deductible - against assessee. Professional fees paid in respect of its cement project - Capital expenditure or Revenue expenditure - Held that:- As decided in CIT Versus J. K. Chemicals Limited [1992 (10) TMI 18 - BOMBAY HIGH COURT] & Trade Wings Limited v. Commissioner of Income-tax [1989 (9) TMI 21 - BOMBAY HIGH COURT] order to decide whether to acquire some profit-making assets for the purposes of its business which would be of an enduring nature. The expenses incurred for the project report have, therefore, to be viewed as being capital in nature. Simply because the assessee had a running business of manufacturing it cannot be said that the expense for obtaining such a project report was a part of the expenses incurred by the assessee for running its business. It was clearly an expenditure incurred for ascertaining whether to acquire new assets of some durability for the purpose of earning profits - against assessee. Receipt from B.B.C. Limited, Switzerland under Memorandum of Settlement - Revenue receipt OR Capital receipt - Held that:- The termination of distributorship agreement and the compensation allegedly paid in respect thereof was only a part of the normal running of the business of the assessee - conclusion is based on the fact that the assessee has not established that the termination of the distributorship agreement has resulted in a loss of source of income or has affected its trading contract. This was not even the assessee's case before the authorities before whom it was contended that the receipt was in the nature of a gift or akin to a gift. The material on record, in fact, establishes that the distributorship agreement was but one of the many contracts that the assessee had entered into. - It was one of the many activities that the assessee had engaged in and that the assessee is not prevented in any manner whatsoever from continuing a similar line of business with other enterprises - Tribunal didn't erred in treating it as Revenue receipt - against assessee.
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2012 (9) TMI 659
Disallowance of deduction u/s. 80IB(11A) - assessee did not have any storage of his own and no storage was taken by the assessee on rent - CIT(A) allowed the claim - Held that:- Section 80-IB(11A) targets for relief for the business of processing preservation and packaging of fruits and vegetables as newly added from A.Y. 2005-06, while the relief has been available w.e.f. 1.4.2002 for all undertakings, which have begun to operate on or after 1st April, 2001 for any income from "the integrated business of handling, storage and transportation of food grains - Literal interpretation of words "integrated business of handling, storage and transportation of food grains" will not lead to any absurdity or produce any manifestly unjust result. The Legislative intent is not to encourage transportation or handling of food grains but the Legislative intent is to encourage construction of go-downs and warehouses with a view to providing storage of food grains. If we consider the entire combat of the scheme relating to the tax holiday provided by the Legislature, we find that the deductions are available under various provisions when the assessee has contributed something towards the infrastructure development of the country In the instant case, no find of any contribution towards the infrastructure by the assessee. The assessee is simply handling and transporting the food grains and storing at the godowns of the FCI which means that the assessee is using the existing infrastructure of the State whereas the main purpose of bringing this provision is construction of godowns specifically for stocking food grains for greater efficiency in the grain management system and minimize post harvest foodgrain losses. The assessee has not done anything towards these facilities - Even the tender participated by the assessee show that the assessee has been awarded the contract for handling and transportation of food grains to the places mentioned therein. The contention of the assessee that Sec. 80IB being a Benevolent provision liberal construction should be applied cannot be accepted because beneficial interpretation applies only where two views are reasonably possible whereas in the instant case no find of any other possible view on the facts of the matter where the law is clear and unambiguous, we cannot act contrary to it with a view to give benefit to the assessee - the conditions precedent for making assessee eligible for deduction u/s. 80IB(11A) is not satisfied - against assessee.
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2012 (9) TMI 658
Deduction in respect of profits retained for export business u/s 80HHC(3) - Whether excise duty and sales tax need to be included in the total turnover - Held that:- As decided in CIT Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] amendments to section 80HHC(3) indicate exclusion of book profits but reasoning in this judgment is confined to the workability of the formula in section 80HHC(3) as it stood at the material time - in favour of assessee.
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2012 (9) TMI 657
Block assessment order u/s 158BD r.w.s. 143 (3) - undisclosed net profit - search - addition was made in the hands of the assessee firm on protective basis - CIT(A) deleted the addition - Held that:- The order of the AO is need to be set aside as before initiating proceedings under Section 158BD, he was required to record a satisfaction note to be served along with the notice to the assessee - CIT(A) did not agree with the AO that the reasons were duly recorded but the same was not readily traceable due to transfer of records. The CIT (A) also considered the explanation of the AO, that the sentence written in the third para of the assessment order i.e. "considering the nature of seized diaries, therefore, a notice u/s 158BC r.w.s. 158BD was issued to the assessee" indicate that reasons were recorded, was not very convincing because it was not clear as to what nature of the seized diaries were examined by the AO and how he satisfied himself that these diaries belong to the appellant firm. As in the absence of satisfaction recorded by the AO, he did not have jurisdiction to proceed against the assessee under Section 158BC read with Section 158BD additions made on protective basis need to deleted - in favour of assessee.
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2012 (9) TMI 656
Addition on undisclosed income u/s 158BC - Assessee contended that it was wrong on the part of the A.O not to accept his computerized books accounts - Held that:- Considering explanation given by the assessee for the absence of books of accounts at the hospital as well as the delay in filing the accounts as book the books of accounts were taken by the Chartered Accountant for preparing and filing return such circumstances could not be treated as adverse as the assessee had disclosed the income more than the receipt as per the seized record. Revenue has not been able to point out any provisions in the Income Tax Act, 1961 which makes it mandatory for a person for maintaining the books of accounts at his residence or at his business premises & the AO was not justified in refusing to admit the books of accounts specially when the returned income was more than the receipts during the seizure - in favour of assessee.
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2012 (9) TMI 655
Assessee is an C&F agent - Incurred expenses on behalf of the company, which were claimed to be reimbursed by it – Addition made on account of non-disclosure of receipt – Held that:- On consideration of record and the assertion made by assessee, issue remand back to the file of AO to examine the correct nature of these expenses. Issue remand back to AO. Addition on account of Same opening & closing balances of creditors in a FY - Assessee firm was having opening balance of Rs. 13,15,955/- as on 31.3.2006 of sundry creditors including debtors and the entire list of 31 sundry creditors in Schedule-C in the balance sheet (as on 31.3.2007) is exactly the same as on 31.3.2006 - These sundry creditors were owing to the trading activities with the assessee firm, carried out until the end of the preceding year – Held that:- Assessee furnished the ledger accounts of the respective parties for the assessment year 2008- 09 wherein these were paid off. the opening balances have been duly explained by the assessee. These are not in agreement with the finding in the impugned order that new credits were introduced during the year which resulted into sustenance of addition. Appeal decides in favour of assessee. Addition on account of Cash Credit u/s 68 – In spite of opportunity given by the AO, no such confirmations was filed by the assessee - Confirmation was filed before CIT(A) - Held that:- Issue remand back to the file of the AO with a direction to examine the claim of the assessee.
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2012 (9) TMI 654
Addition on account of excess cash found in search u/s 132 - During Survey assessee made disclosure of Rs. 41 lacs comprising of excess cash of Rs 2 lac - In the profit and loss account the assessee had disclosed Rs. 41 lacs as “IT declared stock” and the same was offered for tax - AO had also made an addition on account of excess amount of cash of Rs. 2 lacs - Held that:- From the assessment order of the AO and the order of CIT(A) it is not clear as to whether the amount of Rs 41 lacs includes Rs 2 lac of excess cash found. In view of these facts, we are of the opinion that in the fairness of things and to meet the ends of justice this matter be remanded to the file of A.O for verification. Case remand back to AO. Addition on account of difference in stock found during survey u/s 132 - Assessee submit stock statement on the basis of purchases worked out on FIFO method inclusive of transportation and loading charges – AO made addition on basis of difference found in statement and stock shown in books of accounts – Held that:- As the discrepancy could not be reconciled and satisfactorily explained by assessee. The Assessee could not demonstrate before CIT(A) that the closing stock was without transportation charges and loading charges. The Ld. A.R. before us also could not demonstrate with any tangible evidence the correct working of stock. Therefore appeal decides in favour of revenue.
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2012 (9) TMI 653
Addition u/s 68 - alleged bogus accommodation entry based on information received from the Investigation Wing - rejection of additional evidence made under application under rule 46A - Held that:- Assessee contended that the said information was not before assessee and assessee had not opportunity to rebut the same. Hence, to meet ends of justice matter is remitted to the file of the AO to consider the issue afresh by giving a reasonable opportunity to the assessee of being heard - Decided in favor of assessee for statistical purposes.
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2012 (9) TMI 652
Penalty u/s 271 FA - non maintainable of appeal u/s 246A (1) (q) to the Commissioner Appeals against order passed u/s 271 FA by the Director Income Tax, who holds the rank of a Commissioner in the Income Tax Department - Held that:- Section 246A (1)(q) provides for appeals before the Commissioner Appeals against an order of penalty passed under Chapter 21 of the 1961 Act & Section 271 FA admittedly falls within Chapter 21 of the 1961 Act, therefore on a plain reading of the said provision an appeal against an order passed by an officer of the rank of Commissioner Income Tax under Section 271 FA is maintainable before the Commissioner Appeals. As against orders passed under Section 271 and 272A (also under Chapter XXI) before the ITAT, this court cannot on analogy hold that because the said orders passed by an officer of the rank of Commissioner of Income Tax are appealable before the ITAT under Section 253 of the 1961 Act, an order under Section 271 FA also passed by an officer of the rank of Commissioner Income Tax should also be appealable before the ITAT - it is an admitted fact that in the course of the demand notice under Section 156 following the order of penalty under Section 271 FA of the 1961 Act, the assessee was informed that the said order was appealable before the jurisdictional Commissioner (Appeals) - in the instant case Commissioner Appeals III Jaipur - in favour of assessee.
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2012 (9) TMI 651
Non deduction of TDS on freight charges - disallowance by invoking Section 40(a) (ia) - Held that:- The assessee had made the payment towards freight charges directly to the transporter and it was not a case where such payments were debited to the supplier's account - as the assessee had not produced any material to establish the contention of the assessee, but from making a bald assertion, thus the disallowance was on facts - against assessee Addition by Invoking Section 41(1) - Held that:- As with regard to the two sundry creditors where the assessee had not produced anything to show the subsisting liability towards the alleged creditors and there was no evidence placed with respect to the payments made and no consequent acknowledgment of such credits were proved by the assessee the said addition does not give rise to any question of law - against assessee Addition on cash credits - Held that:- As the assessee had contended the cash credits to be advances from customers who had made orders for specified goods but in the same breath contented that the details of the persons who made such advances were not known to them and the said advances were cash infused by the assessee into the business to make up the short fall in cash was found by the Tribunal to be a fact evident and emanating from the assessee's books of accounts - against assessee.
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2012 (9) TMI 650
Addition on account unexplained investment – Assessee introduced fresh capital in a firm – AO had given reasonable opportunity of being heard – Held that:- The assessee had not additional evidence in form of affidavits before the A.O. or before the CIT(A). Therefore, in the interest of justice and giving reasonable opportunity to the A.O. on fresh evidence. Case remand back to AO Disallowance of Interest expense u/s 57(iii) - The interest was paid for the purpose the earning of income - Assessee had filed PAN nos. of all the recipients of interest income & their ROI – Held that:- The assessee undisputedly borrowed the money which was utilized for the purpose of income from other source. The borrowings were made through bank account cheque. A.O. had not brought on record any evidence that these borrowings were used for personal purposes. Therefore, addition not justified. Decision in favour assessee.
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2012 (9) TMI 649
Penalty u/s 271(1)(c) - Assessee has taken advance against Deep Discount Bonds – Assessee claim interest expense in P&L without deducted TDS – During reassessment u/s 147, AO disallow the same – AO levy penalty u/s 271(1)(c) on concealment of income – Held that:- As the assessee is under bonafied belief of CBDT circular no. 4/2004 dated 13.5.2004, TDS was required to be deducted only at the time of redemption. The assessee has bonafied belief not to deduct the same during the intervening period. Therefore, mere non-deduction of tax on the interest will not amount to concealment of income by the assessee. Appeal decide in favour of assessee
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2012 (9) TMI 648
Addition on account of unexplained cash credit u/s 68 in bank account - Assessee has deposited huge cash in various bank accounts of his family members – The assessee claims that he was LIC agent, the cash was deposited out of the payment received from the respective LIC customers – Confirmation from these customers was not furnished before the AO - Held that:- As the onus lied on the assessee to explain the source of cash and, therefore, the confirmation from persons from whom cash was received was required to be furnished before the Revenue Authorities. The assessee also show before CIT(A) that the amount of cash so received and deposited in the personal bank account of assessee was ultimately utilized for issuing cheque in favour of LIC with respect to the payment due from such clients. Therefore issue remand back to AO for fresh consideration.
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2012 (9) TMI 647
Addition on up front appraisal fees - India-UK DTAA - Article 13(4)(c) v/s Article 7 - CIT(A) deleted the addition - Held that:- The entire appraisal process was to enable the respondent to take a decision as to whether the credit facilities ought to be advanced to the applicants or not. The respondent did not thereby or even while doing so, impart any technical or consultancy services to the applicants. Thus the upfront appraisal fee constitutes fees for technical services within the meaning of Article 13(4)(c) is unsustainable as said fees did not constitute payment in consideration of the respondent rendering any technical or consultancy services to the applicant/borrowers. Submission of the appellant that the upfront appraisal fees fall within the definition of "interest" under Section 2(28A) is not well founded as the fee is not payable in respect of any moneys borrowed or debt incurred. It is the debt itself. If any money was payable in respect thereof, it could have been held to be interest. However, admittedly, no amount was paid by the applicants in respect of the said fee. As the income on account of the upfront appraisal fees was business income and as the respondents did not have a permanent establishment in India, the same could not be charged to tax in India under Article 7 of the DTAA - against revenue.
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2012 (9) TMI 646
Deduction u/s 80HHC when loss is derived from the export of goods and merchandise - Held that:- Issue is no longer res integra. Supreme Court in IPCA Laboratories Ltd. vs. DCIT (2004 (3) TMI 9 - SUPREME COURT ) held that on an assessee suffering net loss in export business, the entitlement for deduction u/s 80HHC is not available - Decided in favor of Revenue
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2012 (9) TMI 645
Re-assessment proceedings u/s 148 - profit on sale of investment should be credited to P/L A/C for the purpose of computing the book profit u/s 115JA - Held that:- Power to reopen an assessment is not a power to review an assessment as held in CIT Vs. Kelvinator India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA]. The power to reassess has to be exercised only on fulfilment of certain pre conditions such as tangible material to come to a conclusion that there has been escapement of income. In the present notice, it is an admitted position that facts had been disclosed and the AO passed his order of assessment on 28/3/2003 for the assessment year 2000-01, thus the issue on which the assessment is being sought to be reopened was considered by the AO and accepted by his order dated 28/3/2003. The present proceedings emanating from the notice dated 28/12/2004 under Section 147/148 is bad in law as the same is based on mere change of opinion - no failure to disclose fully and truly all material facts on the part of the assessee and due consideration of the same was done before passing the assessment order dated 28/3/2003 - against Revenue.
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Customs
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2012 (9) TMI 644
Restriction on import of hazardous waste - Revenue appeal against Commissioner (Appeals)order that the goods have not been physically examined - Held that:- In the impugned order, the Commissioner (Appeals) has set aside the adjudication order therefore the ground taken by the Department that Commissioner (Appeals) has no power to remand the matter back to the adjudicating authority is not sustainable as Commissioner (Appeals) has not remanded the matter but set aside the adjudicating order. Further, as per the directions of the Hon ble High Court, the goods have already been released to the respondents, therefore, the appeals filed by the Revenue has become infructuous.
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2012 (9) TMI 643
Demand of duty – Confiscation - customs procedure – Held that:- Vessel has not been imported by the present petitioners but as aforesaid has been purchased by the petitioners in an auction - said vessel, having been confiscated under S. 126 of the Act therefore, the petitioners are not ‘importer’ consequently, the said vessel cannot be treated as imported goods and hence the petitioners ‘were not amenable to the provisions of the Act and were not required to follow the procedure as prescribed under Section 46 of the Act - vessel was not imported by the petitioners but was sold by respondent no. 5 as a property of the Central Government within the territory of India and, therefore, the respondent authority has wrongly come to the conclusion that the petitioners are required to observe the customs procedure as prescribed under law and file bill of entry as contemplated under Section 46 of the Act - vessel was purchased by the petitioners in an auction as aforesaid and it was neither purchased from a bonded warehouse or nor been imported - petition is allowed
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2012 (9) TMI 642
Import of 30 pieces of gold biscuits - foreign marked gold bars seized – Held that:- No reliable evidence has been led before us to conclude that the baggage receipt pertained to the goods under seizure - gold is a commodity whose value has appreciated substantially over the time period involved in this case and if any redemption is allowed at this juncture, it would lead to an anomalous situation wherein the appellant would make a windfall gain rather than facing penal consequences for their omissions and commissions - goods under seizure are “prohibited goods” as defined under Section 2(33) of the said Customs Act read Section 11 - order of the Commissioner absolutely confiscating 30 gold biscuits of foreign origin under Section 111(d) of the Customs Act, 1962 upheld Regarding confiscation of Indian Currency – Held that:- These were the sale proceeds of smuggled foreign marked gold biscuits supplied to Shri Ramdas Satpute. Therefore, they are also liable to confiscation under Section 121 of the Customs Act, 1962
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Corporate Laws
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2012 (9) TMI 641
Amendment of the company petition – alleged that equity shares held by International Commenter Limited have been unlawfully transferred to Star Light - amendment of the company petition, also on the ground that 44,800 equity shares held by P-14 in R-l have been transferred to R-2 without following the due procedure of law – Held that:- Amendment sought by Company Application is imperative for proper and effective adjudication of the company petition - It cannot be said that the application for amendment as also the application for impleadment of Star Light suffers from mala fides - proposed amendment does not change the nature and character of the company petition - amendment does not cause any prejudice to the respondents or to Star Light as they would have sufficient opportunity to contest the issues raised by the amendment
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Service Tax
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2012 (9) TMI 669
Services rendered for the common affluent treatment application which is erected and maintained by them for the industries in GIDC, Surat - liability confirmed on the ground that the appellant has provided the services of club or association services during the period April 2008 to March 2010 - Held that:- Issue is now covered by Tribunal decision in case of Vapi Waste and Affluent Management Company, (2012 (8) TMI 816 - CESTAT, AHMEDABAD) wherein it was held that consequent upon amendment made by Notification No.1/2012-S.T., club or association service provided by an association in relation to a common facility set up for treatment and recycling effluent or solid waste is exempted from the service tax. This notification has been given retrospective effect by Section 145 of Finance Act, 2012 from June, 2005. Therefore appellant is squarely covered by the exemption Notification and the activities undertaken by them is not liable to service tax - Decided in favor of assessee.
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2012 (9) TMI 668
Maintainability of appeal – limitation - appeal which was pending before the Commissioner (Appeals) was not an appeal filed by the assessee but an appeal wrongly filed by the department, at the relevant point of time there being no provision to file such an appeal – Held that:- since the original authority had passed an order on merits in favour of the appellant, he had no occasion to deal with the question of limitation. Question of limitation which has been raised by the appellant has not been dealt with by the jurisdictional Commissioner exercising revisionary power. matter remanded to the Commissioner for fresh decision
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2012 (9) TMI 667
CENVAT credit of the service tax paid by the appellant on a service imported from abroad. Prior to 18/04/2006, the date w.e.f. which Section 66A of the Finance Act, 1994 was enacted - held that:- When the assessee paid duty of excise on their excisable product, they utilized the above credit, which fact was also borne on the relevant returns filed with the Department. Thus the utilization of CENVAT credit was also known to the Department. - Demand is beyond normal period of limitation - Decided in favor of assessee. Revenue argued that availment of such irregular credit came to the knowledge of the department only during the course of audit of the accounts of assessees by the audit party. Had the audit of the accounts of the units not taken place, irregular availment of credit by assessees could not have been detected. - this allegation is clearly untenable.
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Central Excise
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2012 (9) TMI 640
Valuation of physician samples - under the provisions of Rule 8 of the Rules r.w.s. 4 of the Central Excise Act, 1944 OR prorata value of the sales pack manufactured and cleared - Held that:- The issue is now squarely covered against the assessee as per Larger Bench decision in the case of Cadila Laboratories Ltd. (2008 (9) TMI 98 - CESTAT AHEMDABAD) that the appellant is liable to pay the differential duty that arose during the material period - the assesee has to pay the interest on differential amount. As there is no dispute to the fact that the appellant was discharging the duty liability on the physician samples under the provisions of Section 4 of the Central Excise Act, 1944 the issue being of interpretation, the penalty imposed under Section 11AC on the appellant seems to be unwarranted.
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2012 (9) TMI 639
Return of rejected goods - re-import after export - credit taken on the basis own invoice - Held that:- As observed from the copy of the Bill of Entry the goods were re-imported for reprocessing (Exported earlier) without payment of duty under bond and at the time of re-import the goods after verifying the geniuses of the condition allowed the same without payment of duty by the Customs Authority. It is also facts that the said re-imported goods after reprocess, exported the same on payments of duty. Therefore, the in terms of Rule 16, Appellants have availed the Cenvat Credit on the 700kgs of goods (duty paid vide own invoice no. R/140 dated 12.2.07 at the time of its initial export), the duty paid character thereof does not change, which was later returned for reprocessing, intimated to the department It is not necessary that in all cases an invoice is required to be issued in respect of the inputs. Where the inputs are the goods which are rejected under Rule 16, there can be circumstances where the goods come back because the purchaser may not be able to retrieve the documents from bank on payment. In such a case goods come back without being delivered to the purchaser and there cannot be any invoice. Thus in this case since the importer abroad has returned only a portion of the goods and naturally he would not raise an invoice for this purpose since goods are being returned, in such a situation if no customs duty had been paid at the time of re-importation, the assessee would not have any document issued by others but can take credit only on the basis of his own invoice - in favour of assessee.
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2012 (9) TMI 638
Eligibility of availment of Cenvat credit during the period 01.11.2008 to 07.10.2009, when the appellant was un-registered and exported the final goods manufactured by them – rejection of refund claim - Held that:- Tribunal in the appellant's own case in respect of very same amount, has clearly held that the appellant is eligible for refund of the amount of CENVAT Credit paid on the inputs which are consumed in the manufacture of finished goods which are exported on observation that appellants did have an intention to avail cenvat credit and it was only a clerical lapse due to which failure to obtain registration and make proper claims has arisen. Further, also noted that refunds were made only after obtaining registration. Matter was sent back only for limited question of verifying the documents and also finalizing the quantum of refund due to the appellant in the said refund claim. Therefore, impugned order dwelling on the eligibility of CENVAT Credit of the duty paid on the inputs is clearly beyond our order. In view of the foregoing, order rejecting refund is unsustainable and liable to be set aside – Decided in favor of assesse.
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2012 (9) TMI 637
Cenvat credit - assessee had purchased the goods in the year 2001 and they had availed the credit - In the year 2006, the appellants had sold those goods and discharged the duty liability based on its depreciated value - department’s contention is that since the goods have been removed as such in the year 2006, the entire credit is required to be reversed by them as the period of clearance of the goods is prior to amendment of Rule 3(5) – Held that:- Rule 3(5) refers to the situation which may arise not necessarily in relation to any processing or acting upon the capital goods for any purposes but even for the purpose of discarding the capital goods. Being so, the expression “as such” in Rule 3(5) cannot be understood in the same way as is to be understood in relation to the use thereof in Rule 4(5)(a) – In favor of assessee
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2012 (9) TMI 636
Duty paying document - cenvat credit of service tax in case of GTA service - Whether the credit can be allowed on the basis of debit entry in the Cenvat credit account – Held that:- Payment of Service tax was not made through challan instead the payment was made through debit entry in the Cenvat credit account and the debit entry in the Cenvat credit account was made on the basis of LR i.e. Lorry receipt received by the respondents from the transporter - LR has all the details showing the name of consignor and consignee, serial number and in the note below it is stated that the Service tax to be paid by the consignee. Therefore, the details mentioned in the LR provided all the required information - cenvat credit allowed
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2012 (9) TMI 635
Demand of duty – clandestine removal of goods – Held that:- Once it was established by the assessee that all four units were engaged in the manufacture of similar product accompanying with the specific defence that the entire raw material for the purpose was primarily received at Ghaziabad unit - merely because the evidence in the form of challans and transfer documents from Ghaziabad unit to other three units was not produced, that will not be sufficient to reject the contention sought to be raised on behalf of the appellants - in case of clandestine removal, the onus lies upon the Department to prove the same with cogent evidence - appellant not indulged in suppression of production and clandestine removal - appeals succeed
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Wealth tax
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2012 (9) TMI 670
Non inclusion of value of the silver bars in the wealth of the assessee - confiscation order under the Smugglers & Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 was subsequently set aside in appeal and the appeal was pending on the date of valuation - Held that:- In the present case, undisputedly, there was an order of forfeiture of the subject assets, which was in operation during the period between 8.6.1979 to 24.6.1992 till it was set aside by the Appellate Tribunal. Thus, during the said period, which encompasses the valuation dates corresponding to the assessment years under consideration, the subject assets stood vested in the Central Government free from all encumbrances. During such period, though the assessee had challenged the order of forfeiture before the Appellate Tribunal for Forfeited Property, the assessee could not claim to be the legal owner of the subject assets nor could it be stated that the goods belonged to him. As for the purpose of computing the net wealth of an assessee what is to be taken into consideration is the aggregate value of all the assets, wherever located, belonging to the assessee on the valuation date. Thus, for the purpose of computing the net wealth of an assessee, the assets have to belong to the assessee on the valuation date corresponding to the said assessment year. In the present case, on each valuation date in relation to the assessment years under consideration, admittedly the subject assets stood forfeited. The forfeiture came to an end only on 24.6.1992 when the order of competent authority came to be set aside by the Appellate Tribunal for Forfeited Property. However, till then, the same stood vested in the Central Government. Under the circumstances, when the subject assets did not legally belong to the assessee during the period under consideration, the same could not have been included while computing his net wealth. As during the relevant valuation dates, the order of forfeiture had been stayed by the higher forum. In support of such contention, the learned counsel had placed reliance upon a communication dated 6.11.1992 addressed by the assessee to the Assistant Commissioner of Wealth Tax where it is nowhere stated therein that the High Court had granted interim stay against the order passed by the competent authority under section 7 of the Act. From the facts as emerging from the record, it is apparent that against the order passed by the competent authority under the SAFEMA, the assessee had preferred an appeal before the Appellate Tribunal for Forfeited Property but no order staying the order passed by the competent authority appears to have been placed on record - in favour of assessee.
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Indian Laws
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2012 (9) TMI 666
Violation of Article 14 of the Constitution of India - provision of Section 22-C(8) of the Legal Services Authorities Act, 1987 provides that where the parties fail to reach at an agreement under sub-section (7), the Permanent Lok Adalat shall, if the dispute does not relate to any offence, decide the dispute - the words members of the Lok Adalats were substituted by the words members of the Lok Adalats or the persons constituting Permanent Lok Adalats - Held that:- The establishment of Permanent Lok Adalats and conferring them jurisdiction upto a specific pecuniary limit in respect of one or more public utility services as defined in Section 22-A(b) before the dispute is brought before any court by any party to the dispute is not anathema to the rule of law. Instead of ordinary civil courts, if other institutional mechanisms are set up or arrangements are made by the Parliament with an adjudicatory power, in our view, such institutional mechanisms or arrangements cannot be faulted on the ground of arbitrariness or irrationality - if at all a party to the dispute has a grievance against the award of Permanent Lok Adalat he can always approach the High Court under its supervisory and extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. There is no merit in the submission of the learned counsel for the petitioner that in that situation the burden of litigation would be brought back on the High Courts after the award is passed by the Permanent Lok Adalat on merits. There is no merit in the submission of the petitioner that the service provider may pre-empt the consideration of a dispute by a court or a forum under special statute by approaching the Permanent Lok Adalat established under Chapter VI-A of the 1987 Act and, thus, depriving the user or consumer of such public utility service of an opportunity to have the dispute adjudicated by a civil court or a forum created under special statute. In the first place, the jurisdiction of fora created under the Special Statutes has not been taken away in any manner whatsoever by the impugned provisions. The Permanent Lok Adalats are in addition to and not in derogation of fora provided under Special Statutes. Secondly, not a single instance has been cited where a provider of service of public utility in a dispute with its user has approached the Permanent Lok Adalat first. The submission is unfounded and misplaced. The whole idea of having non-judicial members in a tribunal like Permanent Lok Adalat is to make sure that the legal technicalities do not get paramountcy in conciliation or adjudicatory proceedings. The fact that a Permanent Lok Adalat established under Section 22-B comprises of one judicial officer and two other persons having adequate experience in public utility service does not show any abhorrence to the rule of law nor such composition becomes violative of principles of fairness and justice or is contrary to Articles 14 and 21 of the Constitution of India - It is true that the award made by the Permanent Lok Adalat under 1987 Act has to be by majority of the persons constituting the Permanent Lok Adalat. In a given case, it may be that the two non-judicial members disagree with the judicial member but that does not mean that such majority decision lacks in fairness or sense of justice It is against public policy and well defined principles of judicial discretion to entertain or hear petitions relating to same subject matter where the matter was heard and dismissed on an earlier occasion - Writ dismissed.
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