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Showing 41 to 60 of 405696 Records
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2024 (4) TMI 1083
Legality of revision of order of Tribunal u/s 254 on ground of retrospective overruling - Penalty imposed u/s 271(1) if returned income is a loss - Revenue contended that order of Tribunal had been based entirely on the decision of the Supreme Court decision and the latter decision had been subsequently overruled by a larger Bench of the Supreme Court, thus there was a mistake apparent on the face of the record
HELD THAT:- The three appeals preferred by the Revenue in respect of assessment year 1993-1994, 1996-1997, 1997-1998 against the common order of the CIT appeals were allowed by the Income Tax Appellate Tribunal, Delhi Bench vide order [2009 (4) TMI 1064 - ITAT DELHI]. She has handed over the photostat copy of the order. It seems that in their Writ Petition(2012 (6) TMI 39 - DELHI HIGH COURT) filed before the High Court of Delhi, the petitioner did not lay challenge to the aforesaid order of the Tribunal which has attained finality.
Faced with this, learned counsel for the petitioner seeks and is granted one week’s time to have instructions. Post this matter for hearing on 23.04.2024 (NMD).
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2024 (4) TMI 1082
Violation of principles of natural justice - cryptic order - retrospective cancellation of GST registration of the petitioner - HELD THAT:- The order does not give any specific reasons for rejection, it merely states “The reply has been examined and the same has not been found to be satisfactory for the following reasons”. The entire order is thereafter blank and merely states that the application is rejected in accordance with the provisions of the Act. Said order does not give any particulars or details - Thereafter, impugned Show Cause Notice dated 02.03.2023 was issued to the Petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states “returns furnished by you under section 39 of the Central Goods and Services Tax Act, 2017” along with an observation stating, “failure to furnish returns for a continuous period of six months”.
The Show Cause Notice and the impugned order are also bereft of any details. Accordingly, the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.
In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant - it is not considered apposite to examine this aspect but assuming that the respondent’s contention is required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
The Petitioner does not seek to carry on business or continue the registration, the impugned order dated is modified to the limited extent that registration shall now be treated as cancelled with effect from 18.08.2021 i.e., the date when the petitioner filed an application seeking cancellation of GST registration - Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
Petition is disposed of.
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2024 (4) TMI 1081
Violation of principles of natural justice - cryptic order - retrospective cancellation of GST registration of the petitioner - HELD THAT:- The order does not give any specific reasons for rejection, it merely states “The reply has been examined and the same has not been found to be satisfactory for the following reasons”. The entire order is thereafter blank and merely states that the application is rejected in accordance with the provisions of the Act. Said order does not give any particulars or details - Thereafter, impugned Show Cause Notice dated 02.03.2023 was issued to the Petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states “returns furnished by you under section 39 of the Central Goods and Services Tax Act,2017” along with an observation stating, “failure to furnish returns for a continuous period of six months”.
The Show Cause Notice and the impugned order are also bereft of any details. Accordingly, the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.
In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant - it is not considered apposite to examine this aspect but assuming that the respondent’s contention is required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
The Petitioner does not seek to carry on business or continue the registration, the impugned order dated is modified to the limited extent that registration shall now be treated as cancelled with effect from 02.07.2022 i.e., the date when the petitioner filed an application seeking cancellation of GST registration - Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
Petition is disposed of.
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2024 (4) TMI 1080
Levy of penalty - goods were undervalued - HELD THAT:- This Court in the case of M/s Shambhu Saran Agarwal and Company v. Additional Commissioner, Grade-2 and others [2024 (2) TMI 187 - ALLAHABAD HIGH COURT] has categorically held imposition of penalty under Section 129 of the Act on the speculation that the goods are under valued cannot be allowed.
In the above case, this Court had referred to a judgment of Kerala High Court in Hindustan Coca Cola Private Limited v. Assistant State Tax Officer [2020 (3) TMI 1125 - KERALA HIGH COURT] to hold that imposition of penalty under Section 129 of the Uttar Pradesh Goods and Service Tax Act, 2017 (hereinafter referred to as "the Act") on the ground that the goods are under valued cannot be allowed. In such cases, it is for the officer intercepting the goods to detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers and nothing beyond the same.
The impugned orders are quashed and set aside - petition allowed.
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2024 (4) TMI 1079
Levy of Penalty u/s 129(3) of the Central Goods and Service Tax Act, 2017 - Errors in e-way bills - dispatch address mentioned in the e-way bill - Existence of Mens rea or not - HELD THAT:- A perusal of the order imposing penalty indicates that the original authority has stated that mens rea is not required for imposition of penalty. This view is not correct in law and the conclusion reached thereafter is obviously illegal - This Court in M/s Hindustan Herbal Cosmetics v. State of U.P. and Others [2024 (1) TMI 282 - ALLAHABAD HIGH COURT] held that mens rea to evade tax is essential for imposition of penalty.
The orders impugned in this writ petition cannot be sustained in the eyes of law. Accordingly, the orders are quashed and set aside - Petition allowed.
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2024 (4) TMI 1078
Levy of GST - Royalty - seigniorage fee paid by the petitioner to the Government - HELD THAT:- Reliance placed in the case of A.Venkatachalam v. Assistant Commissioner (ST), Palladam [2024 (2) TMI 488 - MADRAS HIGH COURT] where it was held that It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision.
In view of the said judgment, these petitions are liable to be disposed of on the same terms. Consequently, in these cases, the petitioner is permitted to submit his reply to the intimation within a maximum period of four weeks from the date of receipt of a copy of this order.
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2024 (4) TMI 1077
Credit of TDS - Disallowance of credit as it is not getting reflected in the appellant-assessee’s 26AS - assessee rectification application u/s 154 rejected - HELD THAT:- We find that there is a genuine hardship to the appellant-assessee in not getting the credit of the TDS particularly when the appellant-assessee cannot file the return of income for the AY 2011-12 claiming the credit of TDS because the assessee was not in existence in the AY 2011-12.
Technically, the AO is not able to give credit of the TDS in the AY 2012-13 as the same is not getting reflected in the assessee’s 26AS. Theoretically, the AO appears justified in not allowing credit of TDS in AY 2012- 13 but a way out has to be worked out by the AO to address the genuine hardship of the appellant-assessee and allow credit of TDS in the AY 2012-13 after verifying the facts of the case and by resorting to the provision of Section 119 of the Act if the appellant-assessee files application u/s Section 119(2)(b) of the Act to get address its grievance as per the law. Appeal of the assessee is allowed for statistical purposes
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2024 (4) TMI 1076
Foreign Tax Credit u/s. 90 - denial of tax credit paid in the source country - Form No.67 was not filed before the due date of filing of return of income - contention of the assessee is that the AO had accepted the claim of relief u/s 90 of the Act but in final computation, failed to allow relief, hence, it was a mistake apparent from the record and amenable to the provision of section 154 - HELD THAT:- As referring to rectification order and the Form No.67, we, hereby direct the AO to verify the claim of the assessee that Form No.67 was filed and the claim was allowed but in final computation, the same was not allowed. After verifying the facts, the AO would grant relief in accordance with law. Grounds raised by the assessee are accordingly, allowed for statistical purposes.
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2024 (4) TMI 1075
Penalty proceedings for a default committed by a deceased - proceedings to be continued against the legal representatives or not? - Levy of penalty u/s 271B for non-furnishing of Tax Audit Report [‘TAR’] within the prescribed time limit u/s 44AB r.w.s. 139(1) - HELD THAT:- As s/s (4) of section 159 of the Act only empowers recovery of ‘the tax’ liability to the extent of estate of deceased assessee succeeded by LR. The conjoint reading of s/s (1) and s/s (4) of section 159 suggests that in case of death of assessee, ‘the tax’ subject to estate of deceased assessee delved could only be recovered (if any) from the legal representative. Conversely nothing other than tax can be fastened to the estate succeeded by the LR.
The honourable High Courts and Apex Court in catena of judicial precedents has held that penalty proceedings are quasi-criminal in nature. In criminal jurisprudence, a crime dies with a man and the legal representative of the deceased offender or criminal cannot be penalised for the offences or crimes committed by the deceased. As such penalty proceedings are different and distinct in nature than tax while tax are price paid for buying civilisation whereas the penalties are levied for the contumacious conduct of the wrong doer therefore such penalty proceedings abate on the death of the assessee. If recovery of , penalty is permitted against the estate of deceased, then it would clearly lead to permitting the enforcement of crime against the right of LR in succeeded estate.
In view of the decision of Taraknath Gayen and others [1987 (5) TMI 37 - HIGH COURT OF CALCUTTA] & ‘Omwati Vs UOI’ [1971 (11) TMI 53 - HIGH COURT OF JUDICATURE AT ALLAHABAD] as held that, the penalty amount is not recoverable from the legal representatives of accused; as imposition of penalty is intended to penalise the accused, therefore, recovery of penalty from the legal representatives would amount to punishing the legal representatives. It is also in our knowledge that the co-ordinate benches in similar circumstance deleted the penalty in viz; ‘Bhuban Mohan Mitter Charitable Trust [1991 (12) TMI 100 - ITAT CALCUTTA-D] and in ‘Bhagwansingh Shriramsingh L/H Dinesh Bhagwan Singh [2006 (5) TMI 270 - ITAT MUMBAI]
Thus as per restriction placed in s/s (4) of section 159 of the Act and further adopting the reasoning laid in ‘Taraknath Gayen and others Vs CEGAT’ & & ‘Omwati Vs UOI’ (supra) we set-aside the impugned order and direct the Ld. AO to delete the penalty. Decided in favour of assessee.
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2024 (4) TMI 1074
Estimation of income - Bogus purchases - Second reopening assessment proceedings - addition @ net profit of 5.76% of the total annual turnover of the assessee has been estimated by CIT – A under first reopening assessment - in this second reassessment proceedings further information was received that assessee has further obtained purchases from suspicious dealers - addition made on the basis of information received from Sales Tax Department, Maharashtra -
Whether the addition is required to be made of alleged bogus purchases at the rate of hundred percent or the addition is subsumed in net profit rate already assessed in first reopening assessment?
HELD THAT:- It is an established principle that in case of such bogus purchases only profit embedded there in should be charged to tax if such purchases have resulted into sales.
In this case the alleged bogus purchases are only Rs. 11,58,195 whereas the already sustained addition is of ₹ 5,047,947/–. Thus, according to us the learned CIT – A is correct in not making any further addition to the total income of the assessee on account of alleged bogus purchases of ₹ 1,158,195/– for which the impugned reassessment order is passed. Accordingly we confirm the order of the learned CIT – A. Accordingly, both the grounds raised by the learned assessing officer are dismissed.
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2024 (4) TMI 1073
Revision u/s 263 - unsecured loan was raised during the year had not been shown in the receipt side - assessee had not furnished the audit report in Form 10B along with the return of income - Since income was claimed exempt u/s 10(23C)(iiiad) of the Act, it was contended that there was no need to file audit report in Form 10B - HELD THAT:- Assessee had duly filed name & address of the lenders, source of source fror the lenders , agricultural land holdings of the lenders to prove their creditworthiness, affidavits of the lenders duly confirming the fact of advancing loans to the assessee trust, PAN of the lenders and bank statements of the lenders before the ld. AO , among other details. Infact the assessee had also furnished the very same reply before the ld. PCIT in response to show cause notice issued by him in the course of revision proceedings u/s 263 of the Act. Hence these facts clearly go to prove that the ld. AO had indeed made adequate enquiries during the course of assessment proceedings and hence the invocation of revision jurisdiction by the ld. PCIT u/s 263 of the Act is not warranted at all in the instant case as it is based on incorrect assumption of fact that no enquiries were carried out by the ld. AO. Hence the initiation of revision proceedings u/s 263 of the Act on this issue is hereby quashed.
Eligibility for depreciation on assets as an application of income - We find that though the PCIT is right in stating that depreciation would not be eligible as an application of income after the amendment in 2015 in the Act, it would not have any implication in the assessment as income of the assessee would be exempt u/s 10(23C)(iiiad) of the Act. Hence the order of the AO cannot be termed as prejudicial to the interest of the revenue though it may be erroneous to this extent. Unless the two conditions are satisfied cumulatively, the ld. PCIT would be justified in invoking revision jurisdiction u/s 263 of the Act. Hence initiation of revision jurisdiction u/s 263 of the Act on the issue of depreciation is also quashed.
PCIT had sought to take up fresh issues with regard to non-verification of mess expenditure and salary, without even giving the basic pre-requisite show cause notice to the assessee, thereby violating the principles of natural justice. Hence the revision order passed u/s 263 of the Act on these two issues are hereby quashed.
Also though the ld. PCIT had made a casual observation that assessee’s gross receipts would exceed Rs 1 crore pursuant to inclusion of unsecured loan and thereby not eligible for exemption u/s 10(23C)(iiiad) of the Act, ultimately the ld PCIT had not directed the ld. AO to look into this aspect and this reason was not the ground on which the order of the ld. AO was treated as erroneous and prejudicial to the interest of the revenue by the ld. PCIT. Hence we refrain to offer our opinion on the said observation made by the ld. PCIT. Appeal of the assessee is allowed.
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2024 (4) TMI 1072
Validity of the assessment order passed u/s 143(3) - No return of income filled by assessee - Assumption of jurisdiction to make an assessment - whether a curable defect u/s 292BB - HELD THAT:- As provisions of section 143 read as a whole, makes it clear that assumption of jurisdiction to make an assessment u/s 143(3) is based on notice issued u/s 143(2), which gets triggered only upon filing of return of income either u/s 139(1) or in response to notice issued u/s 142(1) of the Act.
In the facts of the present appeal, undisputedly, on the date of issuance of notice u/s 143(2) there was no return of income filed by the assessee either u/s 139, or in response to notice issued u/s 142(1). There was no occasion for the AO to issue notice u/s 143(2) in absence of a return of income. More so, when assessee’s case was selected under manual scrutiny, which presupposes that the AO must have examined all the facts and materials available on record. The very initiation of assessment proceedings u/s 143(3) of the Act, suffers from serious jurisdictional error and infirmity.
Before us, DR has made an attempt to make out a case in favour of the Department by submitting that notice u/s 143(2) of the Act was issued based on Form 29B, Form 3CA and form 3CEB. We are not impressed with such submission.
The provision contained u/s 143(2) makes it clear that only upon filing of return of income proceedings could have been initiated. Certainly Form 29B, Form 3CA and Form 3CEB cannot be considered as return of income in terms of section 139 of the Act.
Though, in the assessment order, the AO has referred to only a single notice dated 23.09.2015 issued under section 143(2) however, in letter dated 27.12.2021, AO has referred to two more notices u/s 143(2) issued on 26.05.2016 and 25.07.2016. Even assuming that such notices were actually issued, however, they were issued prior to the filing of return of income on 26.12.2016.
As fairly well settled that an assessment order u/s 143(3) can only be passed based on a valid notice issued under section 143(2) - In this context, we may refer to a decision in case of PCIT Vs. Marck Biosciences Ltd. [2019 (4) TMI 215 - GUJARAT HIGH COURT].
As notice issued u/s 143(2) was prior to filing of return of income by the assessee, at which point of time, the provisions of section 143(2) could not have got triggered. Therefore, the very assumption of jurisdiction by the Assessing Officer was invalid. That being the case, section 292BB of the Act cannot come to the rescue of the Department. Notice issued under section 143(2) of the Act is invalid - Decided in favour of assessee.
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2024 (4) TMI 1071
Lack of jurisdiction of AO in issuing notice u/s.143 (2) - Change of residential address of the assessee - case was transferred to the office of Ward-1 (4), Gurgaon from ITO, Ward- 58 (2), New Delhi - Admission of Additional Grounds - as per assessee change of residential address of the assessee from Delhi to Gurgaon is of the knowledge of the AO, thus the ITO Ward-58(2) doesn’t have the power to issue notice u/s 143(2) - HELD THAT:- We are of the considered opinion that the notice issued u/s 143 (2) of the Act by an under the signature of the Ward- 58 (2), Delhi is found to have suffered from lack of jurisdiction, bad in law, having regard to the residence of the assessee lying and situated at Gurgaon in the state Haryana and thus, the same is hereby quashed. As the very basis and /or foundation of the assessment proceeding being the issuance of notice u/s 143 (2) is non est in the eyes of law, the consequential assessment order dated 22.12.2017 is found to have no legs to stand on and thus, accordingly, quashed.
Appeal of the assessee is allowed.
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2024 (4) TMI 1070
Addition u/s 68 r.w.s. 115BBE - Bogus LTCG - sale of equity shares alleged to be penny stocks - assessee during the impugned assessment year had declared these scrips and transactions in the return of income and generated loss - HELD THAT:- The assessee had made the transactions and generated loss through the transaction of scripts ACI and Tilak. The assessee’s holding was more than 2 years. There is no such direct communication reflected in the order of the Ld.AO that the entire transaction was made a sham transaction.
In the observation of recorded reasons, the Ld. AO mentioned that the transactions are undisclosed whereas during the assessment and appellate stages before the authorities were unable to substantiate that the entire transaction was not disclosed in the return. In recorded reason the ld. AO specifically mentioned that the transacted amount is not reflected in capital gain column of return filed U/s 139 of the Act. Whereas, the assessee declared the transaction as business transaction in return, not as capital gain. Respectfully, we rely on the order of Arvind Sahdeo Gupta [2023 (8) TMI 522 - BOMBAY HIGH COURT] for quashing of assessment order for wrong observation of the ld. AO.
The Hon’ble Bombay High Court in the case of PCIT vs. Ziauddin A Siddique [2022 (3) TMI 1437 - BOMBAY HIGH COURT] held that where (a) the transaction of purchase and sale of shares which is alleged to be a penny stock is done through Stock Exchange or through registered broker, the payments have been made through banking channel, STT is paid and the ld. Assessing officers has not criticised the documents and (b) assessee is not involved in price rigging, the transaction is genuine. -
CIT(A) had made the enhancement u/s 68 - AR only challenged the addition of CIT(A). Though the addition of the Ld.AO is duly quashed, so the enhancement by the CIT(A) has no leg to stand, so the amount is duly deleted. DR was not able to produce any contrary orders against the submission of the AR. So, the appeal order is duly set aside. The addition made by the AO and enhancement by the CIT(A) are deleted. Decided in favour of assessee.
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2024 (4) TMI 1069
AO/CPC jurisdiction u/s 143(1) to carry out 43B(a) disallowance - Disallowance of interest on Maharashtra Value Added Tax Act, 2002 [‘MVAT’] u/s 43B(a) of the Act made in view of clause 26(i)(B)(b) of Tax Audit Report - HELD THAT:- In the present case, from clause 26(i)(B)(b) of the TAR it was on face of the record before the Ld. AO/CPC that the appellant while computing its taxable income did fail to disallow the interest payable which remained unpaid by the expiry of time limit prescribed u/s 139(1) of the Act. Thus, impugned disallowance u/s 43B(a) of the Act carried out on the basis of return and accompany TAR finds support in ‘Khatau Junkar’ [1992 (2) TMI 67 - BOMBAY HIGH COURT] which the appellant also relied in its written submission.
Going a step further in ‘Rohan Korgaonkar Vs DCIT’ [2024 (2) TMI 1373 - BOMBAY HIGH COURT] their Hon’ble lordships have recently held that, once the principle involved in matter of disallowance is settled by binding judicial precedents, the circumstance that the disallowance is carried out u/s 143(1)(a) through prima-facie adjustment makes no difference. The principle that the item falling u/c (a) of section 43B of the Act is entitled for deduction on actual payment basis is settled by the catena of judicial precedents, therefore the disallowance thereof carried out u/s 143(1)(a) of the Act in view of ‘Rohan Korgaonkar’ [2024 (2) TMI 1373 - BOMBAY HIGH COURT] cannot be faulted with. In view thereof we find no infirmity with the orders of tax authorities in carrying out the disallowance through prima-facie adjustment u/c (iv) of u/s 143(1)(a) of the Act. The ground therefore stands dismissed.
Whether interest on sales-tax/MVAT is deductible as an expenditure only upon actual payment? - According to section 30(3) of MVAT Act, if any tax remains unpaid up to one month after the end of the period of assessment, then the dealer is liable to pay simple interest at the rates as specified from time to time, on such tax for each month or part thereof from the date immediately following the last date of the period for which the dealer has been assessed till the date of the order of assessment. Thus s/s 30 of MVAT Act the assessee dealer is exposed to payment of interest in twin situation viz; (i) for delay in getting registered and (ii) for delay in discharging of sales tax liability incurred thereunder. The plain reading of aforestated provision amply clarify the nature of interest as compensatory for delayed compliance and in no manner capable of suggesting it to be in the nature of penalties for non-compliance.
Now coming to the provisions of section 43B of the Act we note that, the clause (a) does not explicitly provides for the term ‘interest’, so has to fall for vanilla disallowance. On the other hand, the clause (a) is abundantly clear, plain, and unambiguous, prowess capable of giving flawless meanings to items specified therein. Therefore items specified therein should be given ordinary meaning without adding thereto or modifying them. The application of golden rule of interpretation requires the words of the statute must prima-facie being given their ordinary meaning. That is to say when the words of the statute are clear, plain and unambiguous, then it is to be given natural meaning, irrespective of its consequences.
Revenue’s proposition to read clause (a) of section 43B of the Act the terms taxes/duties so as to include therein the term ‘interest’ therein would be ferocious and therefore impermissible in view of the decision of the Hon’ble Apex Court in ‘Britania Industries Ltd. Vs CIT’ [2005 (10) TMI 30 - SUPREME COURT] wherein the matter of interpretation of fiscal laws, their Hon’ble Lordships have categorically led that, when the language of a statute is clear and unambiguous, the courts are to interpret the same in its literal sense and not to give a meaning which would cause violence to the provisions of the statute.
Thus referring to judicial precedents laid by Hon’ble Calcutta High Court in case of ‘Hindustan Motors Limited .[1995 (7) TMI 26 - CALCUTTA HIGH COURT] and SHANKAR TRADING CO P. LTD VERSUS CIT [2012 (1) TMI 91 - DELHI HIGH COURT] we hold that, in absence statutory provisions i.e. specific entry u/c (a), the interest liability incurred against delayed discharge of statutory liability is entitled for deduction u/s 37(1) of the Act without subjecting it disallowance u/s 43B(a) of the Act. The Revenue could hardly place on record any contrary decisions of Hon’ble Jurisdictional High Court thus warranting us to deviate from above. Consequently we set-aside the impugned order confirming the disallowance of interest payable on MVAT statutory liability u/s 43B (a) of the Act and direct the Ld. AO to delete the impugned disallowance being contra-legem. The ground number 2 stands accordingly allowed.
Levy of interest u/s 234A, 234B & 234C is mandatory and not at the discretionary of tax authorities - See Anjum H Ghaswala [2001 (10) TMI 4 - SUPREME COURT]
Appeal of assessee is partly allowed.
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2024 (4) TMI 1068
Revocation of the custom broker license - forfeiture of security deposit - penalty - goods exported were falling under SCOMET list - export of the same without obtaining the license from the DGFT - violation of Regulation 11(d), 11(e) and 11 (n) of CBLR, 2013 - HELD THAT:- To verify whether the export items as described in the export documents would fall under the SCOMET List, it is first required to first examine the amendment introduced in the SCOMET List. Notification No. 29/2015–20 dated 21.09.2017 was issued by the DGFT whereby amendments were introduced in Appendix –3 of SCOMET List.
On examining the description of goods as mentioned by the exporter in the invoice, packing list and shipping bill with the description given in the entry, there are no similarity found to connect the goods in question to fall in the amended entry. The components designed for such fermenters in the entry have been specifically provided as cultivation chambers designed to be sterilised or disinfected, cultivation chamber, holding devices or process control units, capable of simultaneously monitoring and controlling two or more fermentation system parameters. That is the reason why neither the appellant nor the Customs Authorities were able to ascertain that the goods are covered as fermenters or as components for which export license is required.
Since the goods exported do not fall in terms of the entry in the notification, there is no justification to penalise the appellant.
Violation of provisions of Regulation 11(d)? - HELD THAT:- The CHA was aware and had knowledge that the products falling under the SCOMET list required license from DGFT for its clearance but they were not aware that the fermenters and their components are falling under SCOMET list and export of the said items required export authorization for their clearance. From the export documents, it is apparent that the description of the goods is not such which would fall under the SCOMET list and therefore there was no scope for the appellant to advise the exporter for compliance of the export authorisation. Moreover, the amendment was introduced on 21.09.2017 and within two months thereafter the goods were exported and since it is an extremely technical matter, it appears that neither the CA nor the customs authorities were aware of its applicability. The Revenue has not clarified as to how the goods in question would fall under the entry of fermenters and components thereof nor the Adjudicating Authority has applied its mind to the respective shipping bills covering different items with reference to the description given in the entry - thus, the appellant who is merely a Customs House Agent cannot be expected to be an expert in SCOMET List and therefore the provisions of Regulation 11(d) cannot be invoked against the appellant.
Violation of provision of Regulation 11(e) of CBLR - HELD THAT:- The allegation on which the violation of Regulation 11(e) has been made out is the statement of the appellant where they have admitted that they never verified the product or parts manufactured in the factory nor verified the use of the export product and their parts. The allegation do not fall within the obligation as provided in Regulation 11(e) which requires the CHA to exercise due diligence to ascertain the correctness of information which he imparts to a client with reference to any work related to clearance of cargo baggage and hence, invocation of Regulation 11(e) is unsustainable - the appellant cannot be held guilty for violating Regulation 11 (e).
Violation of provision of Regulation 11(n) of CBLR - HELD THAT:- Regulation 11(n) requires the CHA to verify antecedent, correctness of Importer Exporter Code (IEC) number, identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. Here, also, Regulation 11(n) has been invoked on the same statement of the appellant that he was not aware that the fermenters and their components are falling under SCOMET list and the export of the said items required export authorisation for their clearance. These allegations are not relevant for the purposes of Regulation 11(n). Neither the Revenue has pointed out, nor the Adjudicating Authority has ascertained the actual violation in terms of Regulation 11(n), though the appellant claimed that in compliance to its obligations, they had verified the correctness of IEC code of the exporter, identified its client and its functioning as per the KYC norms as also the statutory documents issued by other Government Authorities - In the absence of any such allegations, it is unreasonable to say that the appellant had violated the provisions of Regulation 11(n) of the CBLR and hence the findings that the appellant failed to discharge their obligation under Regulation 11(n) is rejected.
In similar circumstances, this Tribunal in the case of M/s. Trinity International Forwarders [2023 (8) TMI 133 - CESTAT NEW DELHI] concluded that the Customs broker cannot be held guilty for violating the Regulation 11(d), 11(e) and 11(n) of CBLR, 2013 where the case of the Revenue was that the Customs Broker by filing the shipping bills with over-invoiced export values of the garments exported by the exporter so as to claim ineligible drawback. In that context, it was observed that the Customs Broker has no authority to inspect or examine the goods and the possibility of the Customs Broker suspecting that the goods may have been overvalued also does not arise.
Penalty - HELD THAT:- There are no specific discussion on the applicability of the parameters provided in the regulations so as to hold the appellant guilty of contravention thereof. The punishment of forfeiture of license is a very serious punishment affecting the livelihood of a person for all times to come, hence it was necessary for the Adjudicating Authority to have considered the issue of violation of the provisions of the Regulations on merits with an open mind as the punishment imposed on the appellant in the proceedings under the Customs Act was only penalty of Rs.20,000/- separately under both the Sections.
The appellant has not violated the obligations under Regulation 11(d), 11(e) and 11 (n) of CBLR, 2013 and therefore the punishment of revocation of the Customs Broker License, forfeiture of security deposit and imposition of penalty is unsustainable. Consequently, the impugned order deserves to be set aside - Appeal allowed.
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2024 (4) TMI 1067
Initiation of CIRP - Financial Creditor of Operational Creditor - Scope and Meaning of the term "Financial creditor" u/s 7(5) of IBC - security deposits under the agreements constitute financial debt or not - Invoking sub-section (5) of Section 60 of the IBC - HELD THAT:- Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the ‘service’ subject matter of the transaction. The written document cannot be taken for its face value. Therefore, it is necessary to determine the real nature of the transaction on a plain reading of the agreements. What is surprising is that for acting as a Sales Promoter of the beer manufactured by a corporate debtor, only a sum of Rs.4,000/- per month was made payable to the first respondent. Apart from the sum of Rs.4,000/- per month, there is no commission payable to the first respondent on the quantity of sales. Clause (6) provides for termination of the appointment by giving thirty days’ notice. Though clause (10) provides for the payment of the security deposit by the first respondent, it is pertinent to note that there is no clause for the forfeiture of the security deposit.
As there is no clause regarding forfeiture of the security deposit or part thereof, the corporate debtor was liable to refund the security deposit after the period specified therein was over with interest @21% per annum. Since the security deposit payment had no correlation with any other clause under the agreements, as held by the NCLAT, the security deposit amounts represent debts covered by subsection (11) of Section 3 of the IBC. The reason is that the right of the first respondent to seek a refund of the security deposit with interest is a claim within the meaning of subsection (6) of Section 3 of the IBC as the first respondent is seeking a right to payment of the deposit amount with interest. Therefore, there is no manner of doubt that there is a debt in the form of a security deposit mentioned in the said two agreements.
Coming back to the definition of a financial debt under sub-section (8) of Section 5 of the IBC, in the facts of the case, there is no doubt that there is a debt with interest @21% per annum. The provision made for interest payment shows that it represents consideration for the time value of money. Now, we come to clause (f) of sub-section (8) of Section 5 of the IBC. The first condition of applicability of clause (f) is that the amount must be raised under any other transaction. Any other transaction means a transaction which is not covered by clauses (a) to (e). Clause (f) covers all those transactions not covered by any of these sub-clauses of sub-section (8) that satisfy the test in the first part of Section 8. The condition for the applicability of clause (f) is that the transaction must have the commercial effect of borrowing. “Transaction” has been defined in sub-section (33) of Section 3 of the IBC, which includes an agreement or arrangement in writing for the transfer of assets, funds, goods, etc., from or to the corporate debtor. In this case, there is an arrangement in writing for the transfer of funds to the corporate debtor. Therefore, the first condition incorporated in clause (f) is fulfilled.
In the financial statement of the corporate debtor for the Financial Year 2016-17, the amounts paid by the first respondent were shown as “other long-term liabilities”. Therefore, if the letter mentioned above and the financial statements of the corporate debtor are considered, it is evident that the amount raised under the said two agreements has the commercial effect of borrowing as the corporate debtor treated the said amount as borrowed from the first respondent.
The NCLAT's view that the amounts covered by security deposits under the agreements constitute financial debt, is agreed upon. As it is a financial debt owed by the first respondent, sub-section (7) of Section 5 of the IBC makes the first respondent a financial creditor.
Appeal dismissed.
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2024 (4) TMI 1066
Initiation of CIRP - NCLAT admitted the application u/s 7 - NPA - default in repayment of dues - Relevant date of default - date of default should be the date of the Loan Recall Notice or not - scope of Section 10A of IBC - HELD THAT:- It is an admitted fact that the Corporate Debtor owes Rs. 46.80 crores to the financial creditor, though the Appellant has been claiming that as per the Statement Of Account (SOA) the Financial Creditor has attached incorrect and fabricated SOA. Without going into the exact amount of the debt, it is an admitted fact that the debt was Rs.46.80 crores as on the date of declaration of NPA i.e. 27.09.2019. This amount is more than the threshold of Rs.1 crore and is enough for initiating proceedings. There is no requirement to calculate and fix the exact amount of repayment.
Whether the date of NPA declaration (September 27, 2019) or the date of Loan Recall Notice (August 11, 2020) constitutes the default date? - HELD THAT:- In adherence to Reserve Bank of India (RBI) regulations, the classification of Non-Performing Assets (NPAs) serves as a pivotal measure for maintaining the financial health and stability of the banking sector. When a borrower defaults on loan payments for a stipulated period, typically 90 days, the loan account is rightfully classified as an NPA. This classification isn't arbitrary; it's a well-defined threshold indicating a lapse in repayment obligations - In the present case, a loan instalment due on June 30, 2019, remains unpaid. Following the regulatory protocol, on September 27, 2019, marking the 90th day of default, the loan account was rightly categorized as an NPA. This classification is not an arbitrary punishment but rather a consequence of a fundamental breach of repayment terms.
Crucially, the onus lies on the borrower to rectify the default and regularize the loan account. Unfortunately, in this instance, the borrower, despite ample opportunity, failed to address the defaulted payments, thus perpetuating the default status. Such inaction cannot be condoned or overlooked - the bank is well within its rights to pursue its options for the outstanding amounts owed by the borrower.
In the instant case the default was occurring 90 days prior to the NPA declaration (September 27, 2019). It is difficult to accept the argument of the Appellant that this date should not be treated as the date of default.
The remedies stipulated for events of default in the Sanction Letter primarily focus on the acceleration of maturity and the enforcement of security interest, such as filing a Recovery suit before the Debt Recovery Tribunal (DRT) and enforcing security interest under the SARFAESI Act, 2002. Notably, there is no mention of resolution under the IBC. Hence, relying on events of default and their corresponding remedies outlined in the Sanction Letter does not bolster the CD's case and this line of argument cannot be relied upon - Once the CD defaulted and the loan accounts were classified as NPAs, a legal recourse was well within the Bank's statutory rights. Pursuing resolution under the IBC 2016, which serves as a specialized law governing the resolution of distressed entities, was a legitimate course of action for the Bank.
The loan accounts of the Corporate Debtor were officially classified as Non-Performing Assets (NPA) on September 27, 2019, following 90 days of non-payment, thereby triggering a default event. Despite subsequent partial payments made by the borrower, the NPA status and default persisted, indicating a continuous state of default. Consistent with established judicial precedents and the specific circumstances of the case, the date of NPA classification serves as the valid "Date of Default" for initiating insolvency proceedings. Even after the NPA classification, the borrower remained in default. Consequently, September 27, 2019, the date of NPA classification, stands as the "date of default" under the Insolvency and Bankruptcy Code (IBC), superseding any subsequent events, such as the loan recall notice issued on August 18, 2020.
There are no discernible flaws in the orders issued by the Adjudicating Authority; hence, they are upheld without any alteration - Appeal is dismissed.
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2024 (4) TMI 1065
Delayed filing of appeal - relevant date for calculation of time limitation - from the date of pronouncement of the Judgment or from the date of uploading of the judgement - Maintainability of section 9 application - initiation of CIRP Proceedings - HELD THAT:- Under the NCLAT Rules, the provision for preferring an Appeal is contemplated, under section 61, which provides for the time period during which appeal could be filed before the Appellate Tribunal i.e. within the 30 days of passing of the Order, the same could be registered only based on the Certified Copy of the Order upon being produced as per Rule 22, as certified copy has be filed of along with the Appeal - The issue would be as to whether the Free Copy which has been issued under Rule 50 of the NCLT Rules, cannot be taken as to be the Certified Copy under the Provisions of section 22(2) to enable to file an appeal under section 61.
It has not been the case of the Appellant, that the Appeal was accompanied with the Certified Copy as contemplated under Rule 22 of the NCLT Rule and that the Certified Copy would be as provided under sub section 9 of section 2 of the NCLT Rules, which could be taken as to be the basis for the purpose of determining the period of limitation. The limitation to file appeal would be determined only from the date of pronouncement of the Judgment i.e, dated 31.10.2023, uploading of the Impugned on 09.11.2023 it becomes insignificant. It is admitted case of the Appellant that he has applied for the free copy only on 14.11.2023 by presenting an application before the Registry of the court.
The limitation for filing an Appeal has to be considered from the date of pronouncement of Judgment and not the date on which the Appellant received the Certified Copy, but since he applied Certified Copy on 21.03.2024 the Appeal will not be within the period prescribed under Proviso sub section 2 of Section 61 of the Code. Because, the Appeal itself for its registration was presented before the Registry on 26.12.2023, that too despite of the fact, that the Appellant had already received the Free Copy on 14.11.2023. Even, according to the case of the Appellant, since he received the knowledge and the Free Copy of the Judgment was received by him on 14.11.2023, the appeal since presented on 26.03.2024, would be barred by limitation.
As Condone Delay Application carries no justification as to why the Appeal was filed on 26.12.2023 i.e. beyond the prescribed period of limitation under Law. Even, according to the Appellant himself, the appeal has been filed with 12 days delay. The Appeal is barred by limitation, hence the Condone Delay Application i.e. IA No.95/2024 would stand rejected and consequences there to the Company Appeal (AT) (CH) (Ins) No.29/2024, M/s. Whitehand Services Vs M/s. RD Buildtech and Developers (Karnataka) Pvt. Ltd. would too stand rejected.
Appeal dismissed.
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2024 (4) TMI 1064
Settlement of belated claims - Condonation of delay in filing the claim - direction to Resolution Professional to admit the claim of the Appellant’s in the category of Financial Creditor - Since the Resolution Plan had already been approved by the CoC, the Adjudicating Authority rejected the claim of the Appellant by the impugned order - whether claims are barred or not in terms of the provisions of IBC and Regulation 12(2) of the CIRP Regulations and also various judicial precedents? - HELD THAT:- In the instant case the date of RFRP issue date is prior to the date of COC meeting which has approved the Resolution plan. Even if later date is taken to the advantage of the Appellant as per above provision, which is later than 90 days, it will not help the Appellant due to peculiar facts of the case, where the claim has been filed after the approval of Resolution Plan by the COC.
For condonation of delay in filing the claims, the Appellant has tried to rely upon Suo Motu Writ Petition (C) No. 3 of 2020 titled “In Re: Cognizance for Extension of limitation” of Hon’ble Apex Court [2020 (5) TMI 418 - SC ORDER]. The protection with regard to extension of limitation granted by the Hon’ble Supreme Court commences from 15.03.2020 and grants protection to cases only where limitation would have expired during the period of 15.03.2020 till 28.02.2022. In the instant case, the time period available with the Appellants, even after 90 days, expired on 13.01.2020, much before the Covid-19 crises began, meaning that the protection granted by the Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 cannot be relied upon to seek refuge.
The issue regarding the belated claims is further enunciated in Pratap Technocrats (P) Ltd. vs. Monitoring Committee of Reliance Infratel Limited, [2021 (8) TMI 553 - SUPREME COURT], wherein the Hon’ble Apex Court has concluded that the jurisdiction of the Adjudicating Authority under Section 31(1) is to determine whether the resolution plan, as approved by the CoC, complies with the requirements of Section 30(2). The NCLT is within its jurisdiction in approving a resolution plan which accords with the IBC. There is no equity-based jurisdiction with the NCLT, under the provisions of the IBC.
In the instant case belated claims have been considered upto 90 days and also of those whose information exists in CRM database, even though they have not filed the claims. The Appellant has filed its claims after 540 days in terms of Section 15 of the Code and approximately two months after the approval of the plan from the CoC on 07.05.2021. The IBC is a time bound process and the Appellant cannot be allowed to reopen this chapter and unleash the hydra headed monster of undecided claims on the Resolution Applicant. Belated claim of the Appellant could not have been accepted by the RP after approval of plan by the Committee of Creditors - Appellant could not have been allowed by the Adjudicating Authority as the CoC in its commercial wisdom had approved the resolution plan on 07.05.2021 itself and the said resolution plan provides for specific treatment of belated claims, if any.
Whether on the basis the materials on record, it can be concluded that the Appellant is a homebuyer or not? - HELD THAT:- Pertinently, the Allotment Letter and the Buy Back Agreement mention different unit numbers: while the Allotment Letter mentions the unit no. D2- 601, the Buy Back Agreement mentions unit no. D2-2002. Further, there is no proof of actual disbursement of the sum of Rs. 50,00,000/- by the Appellant to the Corporate Debtor, such as bank statement, audited accounts, etc. Further, the said payment is not recorded in the Corporate Debtor’s books of accounts. All the above facts do not lend credence to the Appellant’s assertion that she is a genuine homebuyer. In fact, the Appellant herself filed the Claim in Form-C as a Financial Creditor, and not in Form CA as a Homebuyer. Further, the Appellant’s name also does not find mention in the ‘List of Homebuyers who have not submitted Claims’ published by the Resolution Professional.
The claim that the Corporate Debtor has received benefit from the allotment of the Appellant, which now stands void and in compliance of Section 65 of the Indian Contract Act, 1872, the Respondents are liable to restore the benefit received from the allotment of units is not borne out of the facts of this case. As per the records of the Corporate Debtor, there exists no allotment in the Appellant and nor has any acceptable evidence been produced for the receipt of Rs. 50 Lacs by the Corporate Debtor.
From the materials on record, it is noticed that in compliance with the provisions of IBC, the Resolution Professional has undertaken various activities relating to collation and verification of the claims and upon due verification of the books of the account of the Corporate Debtor, it duly reflected the units qua which the claims have been received and the units for which claims have been not received - there are no substance in the claim of the Appellant that the resolution professional has failed to carry out statutory duties as prescribed under Section 25 of the Code.
The claim of the Appellant is that since approval of Resolution Plan is pending before the Adjudicating Authority, its claim can be considered on merits. This issue is examined in detail basis the facts of the case, wherein the Appellant seeks condonation of 540 days and basis the current position of law. It becomes unsustainable to accede to his request to allow his belated claim to be considered, particularly in the background that there is no acceptable material on record to suggest actual disbursement of Rs.50 lakhs to the Corporate Debtor and more so when the Appellant itself has filed Form – C and not CA raising its claim.
Overall, the delay in filing the claim, lack of credible evidence, and inconsistencies undermine the Appellant's case. The Adjudicating Authority's decision to reject the belated claim is upheld, as it aligns with the time-bound nature of CIRP proceedings and the absence of legal grounds for indulgence.
Appeal dismissed.
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