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2024 (7) TMI 1182
Tax on income of certain domestic companies u/s 115BAA - Rate of tax charged @ 40% OR 22% when the assessee has exercised the option u/s 115BAA(5) - denial of benefit of lower rate of tax provided u/s 115BAA on the ground that the assessee has not opted for falling under this scheme by filing Form 10IC - HELD THAT:- Sub-section (5) of section 115BAA provides that nothing contained in section 115BAA of the Act shall apply if the option is exercised by the person in the prescribed manner on or before the due date specified under section 139(1) for furnishing the return of income for any previous year relevant to the assessment year commencing on or after 1st April, 2020 and it is also provided that such option once exercised shall apply to subsequent years.
2nd proviso to section 115BAA(5) provides that once the option has been exercised for any previous year, then it cannot be subsequently withdrawn for the same or any other previous year.
Now in the instant case, the fact is not disputed at the end of revenue authorities that the assessee opted for section 115BAA for the first time for A.Y. 2020-21 and Form 10IC filed on 07.02.2021 and further the assessee was allowed the option exercised for lower tax rate for A.Y. 2020-21.
Once the assessee has validly opted for 115BAA of the Act for A.Y. 2020-21 and revenue authorities having not found any error in such valid claim and has allowed the option exercised for lower tax rate for A.Y. 2020-21, then in my humble understanding, the assessee was not required to exercise the option for the subsequent assessment year under the provision of section 115BAA(5) of the Act, unless the first option is rendered invalid due to violation of any condition contained in sub-clause (ii) or sub-clause (iii) of clause (a) or clause (b) of section 115BAB(2) of the Act.
Since there is no violation at the end of assessee for A.Y. 2020-21 and the valid option has been exercised u/s 115BAA for A.Y. 2020-21, the assessee is eligible for lower rate of tax for the subsequent assessment years also subject to the other conditions provided under the Act. Assessee appeal allowed.
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2024 (7) TMI 1181
Deduction u/s 80IB(7A) - income on sale of the shop credited in the Profit & Loss Account is business income derived from multiplex - HELD THAT:- The legal definition of ‘owning’ of the property means having the title to a property in the owner name. This title grants him the right to possess, use, and transfer the property as deem fit. The legal owner of the property has control over its management, development and potential sale.
Assessee loses both ownership and operating power over the shop as integral part of the multiplex theatre at the time of earning income from sale/transfer of the shop. Hence, we find force in the argument and contention of the Sr. DR that the shop which sold was though built by the appellant/assessee; however, the shop was neither owned nor operated as an integral part of multiplex theatre by the appellant/assessee at the time of accrual/receivable of income on sale/transfer of the shop.
No merit in the contention of the Ld. AR that the similar disallowance of deduction under section 80IB(7A) of the Act has not been made in AY 2007-08 in scrutiny assessment because the appellant/assessee has shown income on sale/transfer of the shop under the head “Capital Gains” in AY 2007-08.
Hence, there is no precedent of consistency of assessing the income accrued/received on sale/transfer of the shop under the head “Business income”. Therefore, the case law relied upon in this regard by the Ld. AR is of no relevance. Decided against assessee.
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2024 (7) TMI 1180
Validity of reassessment proceedings - proper jurisdiction to issue notice - assessment order has not been passed by the person issuing the notice u/s 148 - curable defect u/s 292BB or not? - HELD THAT:- As we find that as on the date of issue of notice u/s 148, the Assistant Commissioner of Income Tax did not have the pecuniary jurisdiction.
It is very clear that the jurisdiction as on the date of seeking approval was not with the ACIT because returns of non-corporate assessee upto Rs. 20,00,000/- was with Income Tax Officer. The total income for assessment year 2017-18 as per the income tax return acknowledgement was Rs. 4,40,070/-. Therefore, the proper jurisdiction was with the ITO Ward 4(1), Nagpur. Thus, it is clear that the notice was issued by a non-jurisdictional officer and the assessment being conducted pursuant thereto cannot be held to be valid.
Subsequent transfer of assessment records by ACIT Circle, Nagpur to ITO Ward 4(1) Nagpur is also illegal, since transfer of case can only be done u/s 127 of the IT Act, 1961. The defect is incurable and is not amenable to be corrected under Section 292BB also. Accordingly, we find no merit to interfere with the cogent order passed by the CIT(A). In fact, upon perusal of the judgment of Ashok Devichand Jain v. Union of India & Ors [2022 (3) TMI 1466 - BOMBAY HIGH COURT] we find that it is in favour of the assessee.
Thusnotice issued u/s 148 is clearly without jurisdiction and consequent assessment order has no legal legs to stand upon. Decided in favour of assessee.
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2024 (7) TMI 1179
LTCG in respect of development agreement entered for development of land - HELD THAT:- We find that the matter is already covered by the Hon’ble ITAT, Nagpur Bench, in case of Shri Ajay Trivedi [2024 (2) TMI 1403 - ITAT NAGPUR] holding that there is no transfer u/s. 2(47)(v) of the Act and no capital gain is chargeable thereon in the year under consideration - we absolutely find no compelling reason to differ with the decision taken in the case of the brothers who were also the co-signatories to the joint development agreement as held as per the said agreement, the owners has permitted the said developer to develop the property belonging to the owners only as a licensee which did not have the effect of transfer of property to the licensee.
The developer has given possession of the assessee's share in June, 2017 which is also not disputed by the DR. CIT(A) clearly recorded that the assessee offered the capital gain in the year in which share in the constructed area is given to the assessee, which is subjected to tax in A.Y. 2018-19 which is also not disputed by the ld. DR. If we accept the contention of the ld. DR that the capital gain was rightly determined by the AO in A.Y. 2012-13, certainly, it amounts to double taxation, having offered the same in A.Y. 2018-19, as rightly pointed by the AR.
Addition in the bank account - AR strenuously argued that the rental income from house property was received during the year - HELD THAT:- Accepting assessee submission we direct the addition as income from house property.
Loan receipts - asessee as submitted that Rs. 1,70,000/- has been received by the assessee from his daughter and wife. The bank statement of daughter was enclosed. Thus, the genuineness, identity and correctworthyness is never in doubt. However, as far as his wife is concerned, he could not submit any document. But, in view of the fact that it is a loan from his own wife, we accept the same to be duly explained in view of the fact that the amount is negligible and further normally wives help husband in distress.
Balance unexplained addition - It is quite possible that a person can always have some minimum savings for which perhaps no detailed explanation is required. It is also a fact that the case pertains to financial year 2011-12 and as on date 12 years have passed. So it may not be possible for a person to meticulously remember such minuscule transactions which have transpired about such a long period ago. So, we deem it fit not to make any separate addition of Rs. 90,625/- as well as Rs. 1,70,000/- towards loan received from the relatives. In effect, only a sum of Rs. 90,237/- is considered to be taxable. The appellant gets a relief of Rs. 2,75,188/-. In view of dismissal of appeal of department, Ground Nos. 1 & 2 have become of academic importance and we need not delve on the same. In the result cross objection of the assessee is partly allowed.
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2024 (7) TMI 1178
Denial of Exemption u/s 11 - assessment of trust - undisclosed income declared under the PMGKY Scheme - AO calculated total cash withdrawals and bogus corpus donations based on incriminating documents and extrapolating the available data - AO concluded that the unaccounted cash thus generated was not available with the assessee trust on survey action, thus said cash was diverted to the trustees and other for investments in bullions and properties before commencement of PMGKY as well as before survey action - AO further concluded that the assessee violated the basic objects for which it is established and recognized /approved u/s. 12 and 10(23C) - as stated amount of undisclosed income declared under the PMGKY Scheme should not be included in the total income of the assessee.
HELD THAT:- Simply participation in some amnesty scheme like PMGKY does not absolve the assessee from the wrongdoing. Intent of any amnesty scheme is to comply and rectify previous non-compliance.
In the judgement of Union of India v. Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] held that mens rea (intention) is an essential ingredient of fraud and that heavy penalties can be imposed for fraudulent acts. In the present case, we have no hesitation to say that the intent was to defraud the object of the trust.
In case of CIT v. Suresh N. Gupta [2008 (1) TMI 396 - SUPREME COURT]. discussed the principles of amnesty schemes and held that such schemes aim to promote voluntary compliance and cannot be equated with fraudulent conduct.
Thus, in the present case, the stand of assessee that their participation in PMGKY is absolving them from defaults is not correct.
CIT(A) failed to provide specific reasons demonstrating how the assessee was meeting the objects of the trust. Given the systematic fraudulent activities uncovered, the accounts of the trust cannot be relied upon. Additionally, the principle of res judicata does not apply in income tax proceedings, and each assessment year must be evaluated based on its facts and circumstances. Therefore the Ld.CIT(A)’s contention that AO has granted credit of PMGKY in A.Y. 2014-15 cannot be the basis to decide the merit of denial of exemption u/s 11 of the Act.
The trust's consistent involvement in fraudulent activities was evident from the systematic recovery of staff salaries, bogus corpus donations, and other manipulative practices. The admission of undisclosed income under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) itself is an acknowledgment that the trust deviated from its objects and violated the conditions of Section 13. Furthermore, the tax paid under PMGKY represents a gross misuse of the trust’s funds, which were supposed to be applied exclusively for charitable purposes.
The present case involves direct evidence of the trust's fraudulent activities, including cash recoveries from salaries and bogus corpus donations, which provide a reasonable basis for the AO's extrapolation. Unlike Nepute Reality, where extrapolation was challenged for lack of direct evidence, the evidence here is robust and systematic.
AO’s estimates are not merely assumptions but are grounded in substantial and corroborative evidence of systematic fraud and misappropriation of funds by the trust, providing a strong basis for the extrapolation of income.
We conclude that the evidence presented by the AO, including the systematic recovery of staff salaries, bogus corpus donations, and other fraudulent activities, constitutes violations under Sections 13(1)(c) and 13(1)(d). The trustees' direct involvement in fraudulent activities, admission of the same during the course of survey and disclosing unaccounted cash transaction in PMGKY and gaining direct benefit from these activities disqualifies the trust from exemptions under Sections 11 and 12.
CIT(A)'s failure to specifically justify how the trust met its objects, coupled with the unreliable accounts and the consistent fraudulent activities by trustees, further supports this conclusion. The admission of undisclosed income under PMGKY and the misuse of trust funds to pay taxes under the scheme are clear indicators of deviation from charitable objectives.
Revenue’s appeals are allowed to the extent that the exemptions under Sections 11 and 12 are denied, and the additions based on the AO’s findings are confirmed.
AO is directed to recompute the income of the assessee in accordance with Section 164 of the Income Tax Act. Since the trust is found to have violated the provisions of Sections 13(1)(c) and 13(1)(d) of the Act, resulting in the denial of exemptions under Sections 11 and 12 of the Act, the income of the assessee trust should be taxed at the maximum marginal rate as specified under Section 164(2) of the Act. This recalculation should exclude any benefits of exemptions previously claimed under Sections 11 and 12, and all additions made on account of unaccounted income and bogus expenses should be included in the taxable income. The AO should take care in avoiding duplication of addition as pointed out by Ld.CIT(A) and give due credit of income disclosed in PMGKY with taxes paid.
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2024 (7) TMI 1177
TP Adjustment - international transaction of payment of guarantee fees to AE - HELD THAT:- We observe that the assessee demonstrated that the effective borrowing cost, including the guarantee fee, was (11.75%) lower than the bank's quoted interest rate (16%), thus justifying the economic rationale for the guarantee fee.
TPO did not present compelling evidence to establish that the guarantee fee was unwarranted. The benefits derived, as seen in lower interest rates and favorable operating margins, substantiate the transaction's arm's length nature.
For A.Y. 2009-10, the Tribunal had deleted a similar addition, justifying the payment of guarantee commission. This decision was upheld by the Hon’ble Gujarat High Court [2018 (7) TMI 2349 - GUJARAT HIGH COURT] which noted the consistency of the assessee's operating margin and the benefit of lower borrowing costs compared to bank rates, thereby justifying the guarantee fee.
The present case mirrors the facts and circumstances of A.Y. 2009-10, where the addition was deleted by the Tribunal and upheld by the Hon’ble Gujarat High Court. Consistency in judicial decisions is crucial to maintain legal certainty and fairness.
Thus, we find that the TP adjustment made by the AO/TPO and upheld by the DRP is unjustified. The addition on account of the guarantee fee payment to AE is hereby deleted. Ground raised by the assessee is allowed.
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2024 (7) TMI 1176
Estimation of income - Bogus purchases - CIT(A) who determined the profit @ 5.47% on the total purchases - HELD THAT:- It is a case where the appellant company has produced sufficient evidences in respect of the purchases made by it. Sufficient evidences have also been produced in respect of actual movement of the goods by filing the copy of the transport receipt, copy of Form C, trip sheet, e-way bill, kantaparchi, weighing slip, transportation bills, vehicle RC status.
In fact it has also filed the GST paid by it by way of Reverse Charge Mechanism applicable on transportation charges. The assessee has also produced evidences regarding the expenses relating to the freight which has been duly accounted in the books of account and which has not been doubted by the AO and in fact deduction of the same has also been allowed. There is no evidence whatsoever even to suggest that the payment made to the suppliers have been routed back to the assessee in any form. The supplier’s bank account quoted by the assessing officer nowhere shows that cash has been withdrawn from these accounts. On the contrary, the payments have been made to the various parties.
The appellant company has also submitted the detailed analysis of the stock register, yield, production, sale, complete quantitative details.
Revenue has not doubted on quantitative details of sale declared by the appellant company which has also been accepted. The profit earned by the appellant company from these sales have also been taxed.
CIT(A) has also endorsed above contention of the appellant company. However, the ld. CIT(A) having endorsed the entire contentions of the assessee erred in directing to apply gross profit rate on the purchases which defies logic. CIT(A) having not pointed out any defect in any of the document or explanation submitted by the assessee in respect of the purchases made by it, the entire addition has to be deleted.
Assessee has duly discharged their onus relating to purchases made by it from those purchase which have not been doubted by the AO by submitting the necessary evidence in support thereof. Hence, we decline to interfere with the order of the ld. CIT(A) to the extent of deletion of addition made on account of alleged bogus purchases.
Thus, abundant evidences furnished by the assessee in order to substantiate the genuineness of the purchases, there was nothing whatsoever for the ld. CIT(A) to sustain gross profit addition on alleged purchases over and above the gross profit declared by the assessee. Gross profit determined by the CIT(A) is directed to be deleted.
Addition made u/s. 56(2) - Addition of difference in purchase price and the stamp duty value of the property purchased by the assessee - Estimation of value of assets by Valuation Officer - HELD THAT:- Addition has been made u/s 56(2)(x) of the Act, in such circumstances also, the addition made by the AO and confirmed by the CIT(A) is bad in law and liable to be deleted in the absence of the valuation being referred to the DVO for determination of the value of the property. It is pertinent to note here the provisions of Section of 56(2)(x) which also states that in case the assessee disputes the stamp duty value of the immovable property, the AO has no option but to refer the same to the Valuation Officer - CIT(A) has gone wrong in interpreting the word “may” so as to hold that assessing officer has an option to make or not to make a reference to the DVO. It is pertinent to note here that the assessee has repeatedly submitted that it was a distressed sale and therefore the value of such immovable property was less than the stamp duty value.
The submission of the assessee has been arbitrarily ignored by the AO as well as by the CIT(A) and no efforts had been made to find out the value of the property either by the AO or CIT(A). In such circumstances of the case where the assessee has been continuously stating that the fair market value of the property is much lower than the stamp duty value, the AO has to mandatorily refer the valuation of the property to the Valuation Officer and having failed to do so, the addition made by the AO is unsustainable and liable to be deleted. There are a number of judgments on this issue wherein it has been held that once the assessee has disputed the stamp duty value and has submitted the valuation report, AO is duty bound to refer the valuation to DVO in case he proposes to make an addition. Having failed to do so, the addition is not sustainable and liable to be deleted.
Addition made by AO and confirmed by CIT(A), in the absence of reference to the DVO is unsustainable and hence liable to be deleted. Decided in favour of assessee.
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2024 (7) TMI 1175
Seeking grant of bail - import of prohibited goods - e-cigarettes - mis-declared goods - recovery of 64084 pieces of E- cigarettes along with 8 unbranded bottles (10 ml each) and 113 bottles (60 ml) of “Tokyo brand” liquid refill of e-cigarettes - HELD THAT:- Evidently, the applicant is not a proprietor of, or otherwise connected with, M/s. Shreeji Corporation, the entity which had imported the subject consignment. Nor the applicant is connected with M/s. Perfecto Logistics, the Customs broker. The applicant allegedly operates M/s.Dinshaw Shipping Agency, another customs brokerage firm.
The gravamen of indictment against the applicant is that the applicant instead of submitting the documents through M/s. Dinshaw Shipping Agency, which was put on alert list, had imported the prohibited goods through other firms and the co-accused. Prima facie, it appears that the complicity of the applicant is sought to be established primarily on the basis of the statements of the co-accused. Evidently, on the own showing of Respondent No.1, the applicant is neither an importer, nor CHA or ICE in respect of the subject consignment. The money trail is pressed into service as the evidence of the complicity of the applicant.
The situation which thus obtains is that there is prima facie no material to show the involvement of the applicant with the subject consignment, either as an importer or CHS or ICE. The applicant is sought to be roped in on the basis of the statements of the co-accused. There does not appear such credible material as to make out a prima facie case against the applicant so as to warrant his custodial interrogation.
In the event of the arrest of the Applicant – Mohamad Hanif Papa Shaikh in connection with the investigation at Special Investigation Intelligence Branch (Import), Jawaharlal Nehru Customs House, Uran, the Applicant be released on bail on furnishing a PR bond in the sum of Rs.50,000/- with one or two sureties in the like amount.
Bail application allowed.
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2024 (7) TMI 1174
Fraudulent availment of Integrated Goods and Services Tax (IGST) refund as well as drawback benefits - infarction of Regulation 10 (n) of CBLR - CESTAT observed that suspension of the license of the appellant was a “proportionate penalty” - HELD THAT:- The CESTAT has clearly committed a patent illegality in construing suspension to be a penalty which is otherwise contemplated under the CBLR 2018. It is pertinent to note that suspension is a measure which can be adopted by the respondents in situations where they be of the opinion that immediate action is required to be taken against a CB pending investigation and inquiry as is contemplated under Regulation 16 - the CESTAT has in effect handed down an order as a result of which an order of suspension would continue in perpetuity. The impugned is thus rendered unsustainable on this score alone.
A reading of Regulation 10 (n) reveals that the CB would not be in violation of its obligations if he has relied on “reliable, independent, authentic documents, data or information” such as the IEC and GSTIN which are issued by the Director General of Foreign Trade [DGFT] and GST Officers respectively. Furthermore, Regulation 10 (n) does not necessitate a physical verification of the veracity of the exporter.
There are merit in the contention of the appellant that the CESTAT committed a manifest illegality in holding that the appellant was guilty of having failed to discharge the obligation placed in terms of Regulation 10 (n) of CBLR 2018 - It is thus apparent that the judgment handed down by the CESTAT is patently erroneous and cannot be sustained.
The order of the CESTAT dated 03 October 2023 is set aside - appeal allowed.
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2024 (7) TMI 1173
Payment of maintenance charges including electricity charges - payment of dues arising from essential services supply during CIRP period - electricity charges - propriety of the directions issued by the Adjudicating Authority that the RP shall be free to take coercive steps with regard to the non-payment of maintenance charges including the electricity charges of the common area and make the payment to the NPCL - HELD THAT:- It is an undisputed fact that when the RP took over the charge of the Corporate Debtor, there was shortfall in maintenance charges collected from the Home Buyers and an outstanding electricity due payable to NPCL. In the present case since the Corporate Debtor was admitted into CIRP and RP had been appointed, the responsibility to discharge the pending payments of maintenance charges including electricity dues fell on the RP in terms of the statutory construct of IBC. It is also an admitted fact that in terms of Section 11(4)(d) of RERA Act, the Corporate Debtor was obligated to provide essential services including electricity supply till the maintenance of the project was taken over by the association of allottees.
Besides the RP placing the issue of maintenance charges and electricity dues before the CoC for its deliberations and consideration, it is also found that the RP, in all fairness, had from time to time sent communications to the allottees regarding the electricity overdue amount and emphasised the need to clear the outstanding dues of NPCL to avoid disconnection of electricity supply - the communications though not an exhaustive list, clearly depicts that the RP had been making bonafide efforts to apprise the allottees of the need to clear the outstanding electricity dues to stave off the stark possibility of electricity disconnection.
There are no credible ground which has been brought before us by the Appellants to substantiate any impropriety, procedural or otherwise, to have been committed by the RP in placing the correct facts before the allottees and the CoC members regarding the need to enhance the maintenance charges and need to clear the cascading electricity dues to avoid any possible power disconnection by the NPCL. In the given facts of the case, since it was the prime responsibility of the RP to run the Corporate Debtor as a going concern, it was entirely appropriate on the part of the RP to seek the approval of the CoC in the determination of maintenance fees and recovery of electricity dues - After having been present in the CoC meetings and exercised their voting rights on the determination of the maintenance fees and electricity dues, the allottees cannot question the authority of the CoC to have made these business decisions. It goes without saying that the commercial decision of the CoC is paramount and nonjusticiable and every dissatisfaction cannot partake the character of a legal grievance.
Whether payment of electricity charges being an essential service, such amount can be accounted towards CIRP costs and that the Corporate Debtor is not liable to pay the amount till the completion of the period of moratorium? - HELD THAT:- This issue has been squarely covered by the judgement of this Tribunal in Shailesh Verma vs Maharashtra State Electricity Distribution Company [2022 (9) TMI 143 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI]. This Tribunal by making a contextual and purposive interpretation of statutory provisions of moratorium and its subsequent amendment by Act 1 of 2020 had held that while benefit of essential services should be continued, there should not be any default in the discharge of the dues arising therefrom.
In the present case, the RP has admitted that electricity supply by NPCL, being in the nature of supply of essential goods and services, was necessary to be continued so as to protect and preserve the value of the Corporate Debtor and hence dues arising from electricity supply require to be discharged. This subject matter has been considered and deliberated at length by the CoC from time to time in its various meetings and resolutions passed to collect the outstanding amount from the allottees to square off the dues of NPCL - There is no prohibition or bar imposed by the IBC towards payment of dues arising from essential services supply during CIRP period nor is there any statutory provision which stipulates that the Corporate Debtor is not liable to pay such amounts till completion of the period of moratorium.
There are no infirmity in the impugned order of the Adjudicating Authority holding that the Corporate Debtor through the RP was obligated to make payment of the electricity dues as approved by the CoC and apply coercive measures to collect the same to make payment to the NPCL - appeal dismissed.
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2024 (7) TMI 1172
Power of the High Court or Sessions Court to grant an interim order of stay of operation of an order granting bail till the disposal of the application for cancellation of bail under Sub-Section (2) of Section 439 of the Code of Criminal Procedure, 1973 - Sub-Section (3) of Section 483 of Bharatiya Nagarik Suraksha Sanhita, 2023 - HELD THAT:- When a person is arrested, the rights guaranteed by Article 21 of the Constitution of India get substantially curtailed. The law permits arrests of the accused as provided in the CrPC or the BNSS. The effect of the grant of bail under the provisions of Sections 437 and 439 of the CrPC (Sections 480 and 483 of the BNSS) is that the liberty of the undertrial accused is restored pending the trial, subject to the accused complying with the conditions of bail. When the High Court or Sessions Court stays such an order, it amounts to taking away the liberty granted under the order of bail. When an application for cancellation of bail is filed, the High Court or Sessions Court should be very slow in granting drastic interim relief of stay of the order granting bail.
The undertrial is not a convict. An interim relief can be granted in the aid of the final relief, which could be finally granted in proceedings. After cancellation of bail, the accused has to be taken into custody. Hence, it cannot be said that if the stay is not granted, the final order of cancellation of bail, if passed, cannot be implemented. If the accused is released on bail before the application for stay is heard, the application/proceedings filed for cancellation of bail do not become infructuous. The interim relief of the stay of the order granting bail is not necessarily in the aid of final relief.
An exparte stay of the order granting bail, as a standard rule, should not be granted. The power to grant an exparte interim stay of an order granting bail has to be exercised in very rare and exceptional cases where the situation demands the passing of such an order - Liberty granted to an accused under the order granting bail cannot be lightly and causally interfered with by mechanically granting an exparte order of stay of the bail order.
The exparte order staying the order of bail passed without considering merits cannot continue to operate for one year without the appellant getting a hearing on the issue of continuation of the interim order. All Courts have to be sensitive about the most important fundamental right conferred under our Constitution, which is the right to liberty under Article 21.
The appellant has made out a case in terms of Section 45(1)(ii) of the PMLA on the power to grant bail - There are no allegation of the misuse of liberty granted under the bail order in the said application.
The impugned orders passed by the High Court granting the stay of the order granting bail, is set aside - appeal allowed.
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2024 (7) TMI 1171
Money Laundering - criminal conspiracy - taking illegal money to influence a public servant and for exercise of personal influence with public servant and abuse of official position by public servant against accused persons - constitutional vaidity of Section 50 (2) of Prevention of Money Laundering Act, 2002 - ultra vires and violative of Articles 14, 20 and 21 of Constitution of India and Section 132 of Indian Evidence Act, 1872 - HELD THAT:- In the present case, during the course of investigation by ED, Satish Babu Sana and Pradeep Koneru in their respective statements recorded under Section 50 of PMLA, admitted having paid crores of rupees to Moin Akhtar Qureshi through his employee Sh. Aditya Sharma for obtaining illegal favor from govt. servant(s) after using his influence. Aditya Sharma was also confronted with the facts and evidences on record, who confirmed the monetary transactions received by him. The same were also found in tandem with the contents of BBM messages retrieved by forensics lab, CERT-In. These amounts were found to be sent for Hawala Transactions through Delhi based Hawala Operators which reflected in the BBM messages of Aditya Sharma and Ex. CBI Director AP Singh.
Satish Babu Sana and Pradeep Koneru have, thus, prima facie committed offence of money laundering as defined in Section 3 of the PMLA, 2002 by directly or indirectly indulging in, knowingly assisting, knowingly a party and actually involved in all or any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property.
The petitioners have challenged the constitutionality of Section 50 of PMLA, which has already been put to rest by the Hon’ble Supreme Court in its Three Judge Bench decision in Vijay Madanlal Choudhary Vs. UOI [2022 (7) TMI 1316 - SUPREME COURT] wherein it is held that 'We fail to understand as to how article 20 (3) would come into play in respect of process of recording statement pursuant to such summon which is only for the purpose of collecting information or evidence in respect of proceeding under this Act. Indeed, the person so summoned, is bound to attend in person or through authorised agent and to state truth upon any subject concerning which he is being examined or is expected to make statement and produce documents as may be required by virtue of sub-section (3) of section 50 of the 2002 Act. The criticism is essentially because of sub-section (4) which provides that every proceeding under sub-sections (2) and (3) shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the IPC. Even so, the fact remains that article 20 (3) or for that matter section 25 of the Evidence Act, would come into play only when the person so summoned is an accused of any offence at the relevant time and is being compelled to be a witness against himself. This position is well-established.'
Admittedly, in the present case, the petitioners in the case registered by the CBI were arrayed as the witnesses to a case under scheduled offences. However, during the process of investigation, case under the provisions of PMLA has been registered wherein they have been arrayed as accused - The ratio of law laid down by the Hon’ble Supreme Court in Vijay Madanlal, clearly spells out that it may happen in cases that a person who is witness in offences related to scheduled offences, during his interrogation, may put-forth some material which would indicate his involvement in the commission of offence under PMLA. This Court in a catena of decisions has already held that proceedings under the scheduled offences and PMLA are separate and distinct and have no binding upon each other.
Having regard to the Supreme Court’s decision in Vijay Madanlal Choudhary and the fact that the petitioners are involved in the case of money laundering, it is found that proceedings under PMLA have been rightly initiated against them. The petitioners have challenged their summoning, which in our opinion is just and proper to unearth the roots of the money trail - Finding no merit in the averments raised by the petitioners, these petitions and pending applications are accordingly dismissed.
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2024 (7) TMI 1170
Validity of provisional attachment order - no notice issued to the petitioner, who was the lawful owner of the property - violation of principles of natural justice - HELD THAT:- When the records before the Registering Authorities, as well as the Revenue Authorities, reveal that the petitioner herein is the lawful owner of the property, there was a duty cast on the Adjudicating Authority to issue a notice, before confirming the provisional attachment under Section 5 of the Act. In the absence of any such notice, the entire exercise of attaching the petitioner's property, would be in violation of the mandatory requirements of serving the provisional attachment order under Section 5, as well as the prior show cause notice under Section 8(1) of the Act, on the petitioner, apart from violation of the principles of natural justice and therefore cannot be legally sustainable.
In the case of R. AMARABALAN VERSUS DIRECTORATE OF ENFORCEMENT (CHENNAI ZONE) , JOINT DIRECTORATE OF ENFORCEMENT (CHENNAI ZONE) , [2022 (4) TMI 1619 - MADRAS HIGH COURT] a Coordinate Bench of this Court had dealt with a similar situation and set aside the attachment over the property therein.
When the petitioner had lawfully purchased the property on 28.11.2018, much before the Provisional Attachment Order dated 29.05.2019 and has been in peaceful possession and enjoyment of the same, the subsequent attachment under Section 5 (1) of the Act and the confirmation under 6 of the Act, without prior notice, cannot be legally sustained.
The impugned impugned Provisional Attachment Order passed by the respondent, which was subsequently confirmed by the Adjudicating Authority - Petition allowed.
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2024 (7) TMI 1169
Seeking extension of an interim bail which was granted to him by the learned Trial Court - grant of interim bail sought on the ground of medical condition of his wife who was suffering from “acute calculus cholecystitis” in her gall bladder and had been advised to undergo a “laparoscopic cholecystectomy” - main argument of the applicant now is that the applicant has been advised to undergo surgery for his left knee namely “Arthroscopic Medial Meniscal Repair Surgery” - HELD THAT:- In the opinion of this Court, the medical condition of the applicant wherein he has been advised to undergo a surgery of left knee cannot be categorized as “life-threatening situation”, and the surgery which is to be undergone by the applicant is not of such nature which necessitates the applicant's release on interim bail only. For the same, the applicant can be taken to the concerned hospital, for him to undergo the surgery while in custody, as per the scheduled date.
Even during the course of arguments, learned Senior Counsel for the applicant had prayed that in case interim bail is not granted to the applicant, he be allowed to get his surgery performed while being in custody, and learned Special Counsel for the Directorate of Enforcement had stated that he had no objection to this prayer made by the applicant.
This Court notes that since the applicant had surrendered on 17.02.2024, after his extension application was rejected by the learned Trial Court vide order dated 16.02.2024, the date which was scheduled for the surgery of the applicant i.e. 26.02.2024 has already passed.
Considering the medical condition of the applicant and medical documents filed on record, this Court is of the opinion that the present applicant can be allowed to undergo the required surgery while being in custody of the Jail Superintendent. However, a perusal of the documents filed on record also reveals that the date of surgery has not been re-scheduled which was earlier scheduled for 26.02.2024. Thus, the applicant will be at liberty to get the date of the surgery rescheduled and thereafter move a fresh application before this Court for seeking appropriate directions.
Petition disposed off.
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2024 (7) TMI 1168
Liability to pay service tax - Commercial or Industrial Construction Services - main contention put forward by the appellant is that the buildings constructed by the appellant are educational institution buildings and not primarily used for commerce or industry - HELD THAT:- The Board vide its Circular dt. 17.9.2004 has clarified that the assessee is not liable to pay service tax for construction of educational institutions as educational institutions are not commercial in nature - In the present case, the construction services are provided to non-profit bodies (Trust) and constructions carried out are for educational institutions.
The Tribunal in the case of M/s.R.R. Thulasi India Pvt.Ltd. [2024 (7) TMI 1067 - CESTAT CHENNAI] had occasion to analyse the very same issue in which the Board circular was taken into consideration. It is noted by the Tribunal that the said Board Circular dt. 17.9.2004 has not been withdrawn and was still in force during the disputed period. The Tribunal held that the demand under CICS cannot sustain in respect of construction services provided for construction of educational institutions.
The demand cannot sustain - the impugned order is set aside - Appeal allowed.
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2024 (7) TMI 1167
Deficiency in construction - delay in handing over the flats to the appellants - forfeiture of opportunity to file written statement - forfeiture of opportunity to file a written statement - HELD THAT:- Under Annexure P-18 order, this Court declared that the first respondent had forfeited its right to file a written statement and then permitted, rather, directed to proceed further without the written statement of the first respondent-builder. True that even then its right to participate in the proceedings was protected, presumably, taking into account the position of law in that regard.
What is the impact of forfeiture of opportunity to file written statement? - HELD THAT:- All the provisions in the Code of Civil Procedure, 1908, (CPC) are not proprio vigore applicable to proceedings before Consumer Forums created under the Consumer Protection Act, 2019, except to the extent it is provided under Section 38 (9) of the Consumer Protection Act. Be that as it may, in the absence of specific provisions dealing with the consequence of forfeiture of the right to file a written statement, it is only appropriate to refer to the provisions and positions dealing with such situations in the CPC to know the general law on this question - The rigour of the rule of pleadings is evident from Rule 7 of Order VI, CPC, which mandates that ‘no pleading shall, except by way of amendment, raise any new ground of claim or contain any allegation of fact inconsistent with the previous pleadings of the party pleading the same’.
There is no case for the first respondent that it sought permission to cross - examine Kaushik Narsinhbhai Patel who filed affidavit of evidence and produced documentary evidence. At any rate, no such case was put forth by the first respondent and no grievance of denial of such opportunity was also raised - the first respondent could be permitted only to argue the legal questions arising based on authorities and provisions of law as also regarding lapses or laches and the consequential non-admissibility or otherwise of evidence, let in by the appellants.
Whether NCDRC had given weight to any such pleadings and contentions taken by the first respondent in its written submissions and/or whether the decision of NCDRC is based on any fact, factors or data furnished by the first respondent beyond the extent permissible on account of the legal trammel of forfeiture of its opportunity to file a written statement? - HELD THAT:- Though the action on the part of the first respondent who suffered Annexure P- 18 order, in bringing on record its case and contentions to resist the case and contentions of the complainants, cannot be appreciated, the contention of the appellants based on the same became inconsequential. As stated earlier, in view of Annexure P-18 order, we are also not going to advert to any case, claims or contentions of the first respondent raised in its reply and objection filed in this proceeding, except to the legally permissible limit, in case any such material is available on record - Though the first respondent participated in the proceeding before the NCDRC, it could not bring-forth anything admissible in view of the impact of forfeiture under Annexure P-18 order.
This appeal is allowed in part by modifying the formula formulated under paragraph 8 of the impugned judgment by NCDRC in the matter of payment of compensation for delay in handing over possession of flats and it is ordered that the liability of the developer to pay interest at the rate of 6% per annum shall be from the due date for possession fixed as above viz., from September, 2014 till the date on which the respective complainant-buyers are offered possession.
Application disposed off.
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2024 (7) TMI 1166
Application filed by the Election Commission of India seeking further directions regarding data submission - ECI did not retain a copy of the data which was collated by it since it was being placed before this Court in sealed custody - HELD THAT:- The judgment of the Constitution Bench in ASSOCIATION FOR DEMOCRATIC REFORMS & ANR. VERSUS UNION OF INDIA & ORS. [2024 (2) TMI 812 - SUPREME COURT (LB)] required the State Bank of India (SBI) to furnish to the ECI all details of the Electoral Bonds purchased, and, as the case may, redeemed by political parties, including the date of purchase/redemption, name of the purchaser and the denomination of the Electoral Bond purchased. It has been submitted that SBI has not disclosed the alpha-numeric numbers of the Electoral Bonds.
The Registry is directed to issue notice to SBI, returnable on 18 March 2024. Additionally, it is also directed the presence of a Senior Officer of SBI who is responsible for the management and storage of details of Bonds purchased and redeemed on the next date of hearing.
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2024 (7) TMI 1165
Non-supply of relevant documents that have been relied by the respondent no. 1-bank, at the time of issuance of the impugned SCN - Categorization of account/name as “Fraud”, as per Reserve Bank of India (RBI) Guidelines - seeking permission to allow inspection, and furnish all supporting/relied upon documents - HELD THAT:- Failure to supply relevant documents, is a serious one, as without supplying the documents that have been relied upon in the said SCN, it would not be possible to give an effective and proper reply to the said SCN by the petitioner. Non-supply of the underlying documents, at the time of issuance of a SCN, would have the effect of directly impinging upon the right of representation of a party in terms of Principles of Natural Justice. The Principles of Natural Justice have to be strictly followed, in order to give a party an efficacious opportunity to represent its case suitably and adequately. The same cannot be reduced to an empty formality by not affording an appropriate opportunity to a party, by not giving access to the relevant documents, that form the basis of issuance of a SCN.
This Court in the case of Shantanu Prakash v. State Bank of India and Others, [2024 (5) TMI 1323 - DELHI HIGH COURT], has held that 'it is imperative that the relevant documents that form the basis of issuance of a SCN, ought to be provided to the concerned party in order to enable such a party to raise its defense effectively. Such fundamental right of a party cannot be taken away by denying a proper opportunity to submit an efficacious reply, which would not be feasible in the absence of requisite documents that form the core foundation of a SCN.'
Thus, it is imperative that the petitioner is supplied the complete underlying documents, as relied upon in the SCN dated 20th February, 2024, to allow the petitioner to make an effective reply.
The respondent-bank shall provide the Investigation Report dated 18th January, 2024, along with full Annexures, to the petitioner - respondent-bank shall also provide the Stock and Receivables Audit Report, along with full Annexures, to the petitioner - petition disposed off.
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2024 (7) TMI 1164
Estimation of income - Bogus purchases - HELD THAT:- The matter is covered by the Co-ordinate Bench of ITAT, Mumbai in assessee’s own case for AY 2009-10 wherein profit rate of 4% has been directed to be applied on the alleged bogus purchases.
As in the case of Mohammed Haji Adam & Co. [2019 (2) TMI 1632 - BOMBAY HIGH COURT] had held to restrict the addition to the extent of bringing the gross profit rate on purchases at the same rate of other genuine purchases. In the present case, assessee has claimed that he had earned gross profit rate of 4.13%. Accordingly, we direct the AO to apply the rate of 4% on the alleged bogus purchases. Appeal of the assessee is partly allowed.
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2024 (7) TMI 1163
Exemption on molasses manufactured and cleared for captive consumption - benefit of N/N. 67/95-CE dated 16-03-1995 - eligibility for credit availed on inputs/input services / capital goods.
The department was of the view that the benefit of the Notification No.67/95 is available only when the final products suffer duty and the appellant is not eligible to avail the benefit of notification for the reason that the above mentioned products are non excisable goods, as per Section 2 (d) of the Central Excise Tariff Act 1944.
HELD THAT:- The very same issue was considered by the Tribunal in the appellant's own case for the earlier period in in Final Order No. 40789-40799/2014 dated 20.11.2014 [2014 (11) TMI 919 - CESTAT CHENNAI]. It is submitted that rectified spirit and extra neutral alcohol were classified under subheading 220490 prior to 01.03.2005 at nil duty. After restructuring of Tariff with effect from 01.03.2005, rectified spirit, extra neutral alcohol etc. were cleared without payment of duty as exempted goods by Notification No. 03/2005-CE dated 24.02.2005 and Notification No. 12/2012 dated 17.03.2005. The adjudicating authority has denied the benefit of Notification No. 67/2005 on the view that after the restructuring of Tariff, the rectified spirit and extra neutral alcohol were not mentioned in the Tariff. It has been consistently held by Tribunals and High Courts that after restructuring of Tariff, no item has been excluded from the Tariff. The Board Circular No. 808/5/2005-CX dated 25.02.2005 was also relied. It has been clarified by Board that rectified spirit and extra neutral alcohol are covered under subheading 22 07 2000 after restructuring of the Tariff. Thus, it will be covered under Chapter 22.
The above decision of the Tribunal has been affirmed and upheld by the Hon’ble Apex Court as reported in Commissioner of CE & ST versus Dharani Sugars & Chemicals Ltd. [2022 (3) TMI 274 - SC ORDER].
The demand, interest and penalties cannot sustain. The impugned order is set aside - Appeal allowed.
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