Valuation of imported goods - glass chatons - rejection of value in terms of Rule 12 of the Customs Valuation Rules, 2007 - enhancement of value - contemporaneous imports as well as NIDP data not considered - HELD THAT:- First of all, the Appellant has not been put to notice as to why the transaction value cited by him is not acceptable to the Department. After this, Rule 4 to Rule 12 of CVR, 2007 have to be followed sequentially to arrive at the value of the imported consignment. In this case, this procedure also was not followed. The NIDP data gathered by the Appellant for such identical/similar goods shows that the price adopted by the Appellant is actually more than the price at which the other importer has imported the goods.
It is not found that the value arrived at by the Revenue is a realistic and legally sustainable value - impugned order set aside - appeal allowed.
Oppression and Mismanagement - shareholding slightly less than the threshold of 10% shareholding required for filing Petition under Sections 241 & 242 as per provisions of Section 244 of the Act - HELD THAT:- It is apparent that each branch of the family is represented in the Company and for resolution of any dispute, it will be better that each branch of the family is represented in the proceeding and is heard. We feel no prejudice shall be caused to anyone if the impleadment application is allowed. Wherever the Court is of the opinion that by adding any party, it would be in a better position to effectually and completely adjudicate upon the controversy, it is proper to exercise judicial discretion in impleading the said party. The Appellants herein are daughters of late Mr. Tarsem Singh and sister of Respondent No. 3, against whom allegations of Oppression and Mismanagement have been made. The Appellants have a defined subsisting, direct and substantive interest in resolution of the controversy and are necessary and expedient to be impleaded in the said Petition.
The Appellants are Shareholders of the Respondent No. 1 Company and are family members of the other Shareholders. They are concerned with the affairs of the Company and their arraignment as party to the proceedings would facilitate an effective, efficacious, just and fair adjudication of the case. It is held that they are proper and necessary party and their impleadment will assist in arriving at the correct decision in C.P. No. 129/ND/2019 pending with NCLT.
Maintainability of section 7 application - nearly two years have gone by in the interregnum - HELD THAT:- After the application under Section 7 is heard and disposed of on merits, should it become necessary to do so, the parties would be at liberty to take recourse to all appropriate proceedings in accordance with law. At that stage, should it become so necessary, this Court will enquire into both the merits and maintainability. However, we also clarify that the issue of maintainability shall stand concluded by the impugned order dated 17 November 2023 insofar as the National Company Law Tribunal “NCLT” and NCLAT is concerned.
Since the application under Section 7 is pending for over two years, the NCLT is requested to take up the application at the earliest possible date and to endeavour an expeditious disposal within two months.
Deed of Compromise/settlement dated 04.10.2023 entered into by respondent no. 1 – Rustagi Projects Pvt. Ltd. and the appellant – Anuj Sharma, is taken on record - Parties will be bound by the terms and conditios mentioned in the Deed of Compromise/settlement dated 04.10.2023.
However, the appellant – Anuj Sharma/respondent no. 1 – Rustagi Projects Pvt. Ltd. shall pay the Corporate Insolvency Resolution Process (CIRP) costs, as may be determined by the National Company Law Tribunal. In the event the costs are not paid, it will be open to the adjudicating authority/NCLT to take appropriate steps for recovery of the amount in accordance with law.
Liquidation Order - whether issuance of Form-G decision cannot be taken by CoC to liquidate the Corporate Debtor? - HELD THAT:- On looking into the resolution passed by the Committee of Creditors, CoC has given reasons as to that there are no employees, no business, no registered office, no filing of annual account of the MCA since 31.03.2011, no returns and no transactions since 2017. The scheme of the IBC as delineated by Section 33 sub section 2 empower of Committee of Creditors to take a decision to liquidate after constitution of Committee of Creditors.
It is true that the decisions of the CoC to liquidate has to be with reasons and that cannot be arbitrarily done but in the present case when looked into the resolution of the CoC it is clear that there was objective consideration by the CoC for taking a decision to liquidate.
Since SLP having been dismissed and review having also dismissed on the said submission the hearing of the appeal cannot be adjourned. It goes without saying that any order passed by Hon’ble Supreme court is binding by this tribunal and Adjudicating Authority, in event any such order is passed in the Curative Petition - in view of the order which we are passing in this appeal the subsequent application has become infractuous and has to be closed.
The order passed by Adjudicating Authority dated 31.08.2023 is set aside - appeal allowed.
Seeking issuance of fresh Form G - Resolution Applicant has submitted his revised plan - Resolution Professional in the Information Memorandum has also mentioned about dispute regarding the property - HELD THAT:- The Adjudicating Authority has taken in consideration the fact that properties shall come to the kitty of the Corporate Debtor, whose value is much more than the entire plan value submitted by the Resolution Applicant, hence, order was issued for issuance of Form G - the observation of the Adjudicating Authority as made in Para 19, 20 and 21 of the impugned order, agreed upon, which was sufficient reason for issuance of fresh Form G. However, we are of the view that some time ought to have been fixed by the Adjudicating Authority for completion of the entire process - while affirming order of the Adjudicating Authority, further direction is given that entire process including consideration of Resolution Plan shall be completed within a period of three months from today.
The present is not a case where the Adjudicating Authority has directed for any valuation of the assets of the Corporate Debtor. Present is a case where during the CIRP process under the orders of the High Court of Delhi properties worth value of approx. Rs.3 Crores have been added to the assets of the Corporate Debtor on basis of which the Adjudicating Authority took the view that fresh Form G should be issued so that interested Resolution Applicants may know that the value of the Corporate Debtor has increased.
It goes without saying that the Appellant shall be entitled to submit his Expression of Interest in response to Form G issued by the Resolution Professional - appeal disposed off.
Initiation of CIRP - authentication of default as contemplated in Regulation 21, not taken - information of default not filed with the information utility - HELD THAT:- In the present case no authentication of the default having been obtained by the Financial Creditor, application under Section 7 was not liable to be admitted. The Adjudicating Authority committed error in admitting Section 7 application without there being any authentication of default as per Regulations 2017.
Whether application filed by the Financial Creditor deserves to be rejected on account of non-filing of record of default with information utility? - HELD THAT:- Regulation 20(1A) cannot be read to mean that after the said amendment brought in regulation w.e.f 14.06.2022 an application filed under Section 7 which is not supported by information of default from an information utility is to be rejected and if the Financial Creditor has filed other evidence to prove default which is contemplated by the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the said application has not to be considered - even after amendment of Regulation 20 by insertion of Regulation 20(1A) w.e.f 14.06.2022, Financial Creditor is entitled to file evidence of record of default as contemplated by Regulation 2A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - there are no substance in the submission of the Appellant that since Financial Creditor has not filed the record of default from an information utility, Section 7 deserves to be rejected - the Adjudicating Authority has correctly repelled the contention of the Appellant that in absence of a record of default recorded by information utility, the application filed under Section 7 may not be admitted.
Nidhi Kumar was fully empowered to nominate, constitute and appoint any one as lawful attorney of the bank at New Delhi. Pawan Sharma himself was Senior Manager, Zonal Stressed Assets Recovery Branch - there are no error in filing the application duly signed by Pawan Sharma supported by Affidavit of Pawan Sharma and submission of the Appellant that NCLT has no jurisdiction to entertain application filed by Pawan Sharma is to be rejected.
There are no substance in any of the submissions raised by the Counsel for the Appellant to interfere with the impugned order of the Adjudicating Authority - There is no merit in the Appeal - appeal dismissed.
Initiation of CIRP - NCLT admitted the application - No outstanding dues - Squaring off of loans - case of appellant is that entire outstanding duty along with unsecured loans belonging to Shankar Khandelwal, his wife Guman Khandelwal and their concerns were squared off against outstanding debts and adjustment paying off balance outstanding in terms of LLP Agreement - HELD THAT:- From the LLP Agreement dated 31.12.2015, it becomes clear that the Respondent Shankar Khandelwal resigned on 31.12.2015 to be effective from 01.04.2016 and the balance sheet of Corporate Debtor LLP was necessary to be drawn accordingly to settle his dues. It is also noteworthy that all outstanding of Guman Builders and Developers Pvt. Ltd and Guman Furniture & Services Pvt. Ltd., was agreed to be adjusted to the account of outstanding partner i.e., the Respondent Shankar Khandelwal.
The Respondent Shankar Khandelwal filed an application under Section 7 of Code alleging non-payment of financial debt of Rs. 38,73,94,501/- which has been disputed by the Appellant stating this to be highly inflated amount due from the Corporate Debtor whereas the only Rs. 5,16,55,842/- was due and payable to the Respondent Shankar Khandelwal by the Corporate Debtor at the time of his retirement from the LLP - the pleadings of the Appellant is accepted that based on combined examination of Ledger and balance sheet it is proven that all dues towards the Respondent Shankar Khandelwal stand settled.
It is also noted that the allegations of the Appellants that the Respondent Shankar Khandelwal is allegedly attempting to recover tainted money from Corporate Debtor, which is forming a part of the proceeds of crime. Even if the alleged loan is found to not be a part of the proceeds of crime, any attempts towards recovery of the amount would have to be adjudicated by a civil court under a recovery suit. The intent of IBC is not to facilitate recovery for creditors - it is agreed that once all outstanding dues have been paid by the Corporate Debtor to the Respondent Shankar Khandelwal, disputed claims if any, can be raised in suitable other legal forum and IBC can not be used for such recovery proceeding.
The main basis contained in the Impugned Order for admission of the Application under Section 7 of the Code is that the Corporate Debtor failed to show any valid proof that debt due and payment to the Respondent Shankar Khandelwal was paid in his individual capacity - No amount of financial debt was due to the Respondent Shankar Khandelwal on the date of filing of the Application under Section 7 of the Code before the Adjudicating Authority. Therefore, the Adjudicating Authority has patently erred in admitting the Application filed by the Respondent Shankar Khandelwal vide its Impugned Order dated 13.10.2021.
The Adjudicating Authority erred in passing the Impugned Order dated 13.10.2021 admitting application under Section 7 of the Code and therefore Impugned Order deserves to be set aside accordingly - Appeal allowed.
Seeking enlargement of petitioner on bail - siphoning of government funds - played an active role in floating shell companies in the said process - HELD THAT:- A perusal of the provision of Section 19 and 45 of PMLA goes to show that the Public Prosecutor has to be given an opportunity to oppose the application for bail, and where the Public Prosecutor opposes the application for bail, duty cast on the Court is that it should be satisfied whether there are reasonable grounds to believe that the person accused is not guilty of such offence and that he is not likely to commit any offence while on bail. The said provision is analogous to Section 37 of the NDPS Act, 1985 - if the Court comes to conclusion that there are reasonable grounds for believing that the person accused is not guilty of such offence and the second condition is that he is not likely to commit any offence while on bail.
In the aforesaid identical case in Sanjay Raghunath Agarwal’s case [2023 (4) TMI 874 - SUPREME COURT], lodging of the prosecution complaint is sequel to the registration of the FIR in the predicate offence way back in the year 2021. In the present case on hand also, no charge sheet has been filed in the predicate offence for the last more than 15 months. The petitioner has been in jail from 04.03.2023. It is the first offence insofar as the petitioner is concerned. There are no other complaints registered as against him. The said argument gives room to say that second condition in clause (2) of sub-section (1) of Section 45 of the PMLA would be satisfied. In the aforesaid circumstances, continued incarceration of the petitioner, is not justified.
In respect of a query raised by the investigating agency, the petitioner herein gave response to each and every question that has been asked for. Prosecution complaint was also filed on 01.05.2023. The petitioner was arrested on 04.03.2023 and since then he is in judicial custody. Time and again, petitioner is continuously attending before the investigating agency and co-operating with the investigation. This Court is of the opinion that it is not necessary to detain the petitioner in jail further. In view of the aforesaid facts and circumstances, this Court feels that request of the petitioner for grant of bail can be considered, however, on certain conditions.
The petitioner shall be enlarged on bail on his executing a personal bond for a sum of Rs. 50,000/- with two sureties each for the like sum to the satisfaction of the I Additional Sessions Judge-cum- Metropolitan Sessions Judge, Visakhapatnam. On release, the petitioner shall co-operate with the investigating agency and shall attend before the investigating agency once in a week i.e. on every Friday between 10.00 AM and 5.00 PM.
100% EOU - Recovery of Customs Duty, Central Excise Duty alongwith interest and penalty - standard input output norms (SION) - Diversion of polyvinyl chloride (PVC) resin, procured from abroad and sourced indigenously, without payment of duty in terms of notification no. 52/2003-Cus dated 31st March 2003 and notification no. 22/2003-CE dated 31st March 2003.
HELD THAT:- The question that begs answer is the extent to which the ‘norms’, borrowed for its empirical acceptability and contextual validity, can be stretched to presume inclination to misuse exemption intended for fulfillment of ‘net foreign exchange (NFE)’ earning. As it is noticed, ‘standard input output norms (SION)’, designed for another and later scheme in the Foreign Trade Policy (FTP), was grafted into the already existing ‘export oriented unit (EOU)’ scheme in the same policy without any alterations in structuring. Again, the grafting narrowed down the existing latitude in empowering of customs authorities to track usage of ‘duty exempt’ materials and even to the extent of prescribing ‘tolerance’ for ‘waste’ arising in the production process. Once again, as we have noticed supra, the distinction lay in employing of the ‘norms’ to limit import of ‘raw materials’ physically at the threshold for the purpose of export promotion scheme while employing it as a template for determining deviations when ‘raw materials’ are not physically available any longer and, consequently, cannot be accorded the rigour, by subsequent adoption, for presumption of diversion with penal consequence in the case of ‘export oriented units (EOU)’ in the Foreign Trade Policy (FTP).
A case of diversion cannot be made out without reference to the movement of the goods alleged to have been diverted.
Recovery, intended by the impugned notifications, of duty liability, for non-conformity with the ‘standard input output norms (SION)’, on post-procurement evaluation - HELD THAT:- The ‘norms’ are an estimate of most commonly used ‘raw materials’ for a specific product; its utility did not lie in ‘mathematical precision’ which was not sine qua non for authorization of quantity limits for ‘duty exempt’ imports. Such precision, therefore, is not to be presumed for monitorial oversight and, concomitantly, such ‘intra mural’ correlation, between enumerations on one side of the ’norms’, cannot also be insinuated for any purpose whatsoever - recovery of duty in the event of excessive usage in comparison with actual production is also limited to each of the ‘raw materials’ on the logical premise of non-optimal deployment which the exchequer is not obliged to subsidize. The ascertaining of compliance with the second limb, of condition 3(d) of first paragraph of notification no. 52/2003-Cus dated 31st March 2003, as well as in condition 4(a) of first paragraph in notification no. 22/2003-CE dated 31st March 2003 is limited to each of the ‘raw materials’ in isolation from the rest of the mix. That, then, should be the test for allowing the relief sought by appellant-Commissioner.
The adjudicating-Commissioner has, on the other hand, noted that ‘plasticizer’ imparts flexibility to products of resinous origin and that the manifold variations of goods, within the product groupings, manufactured by the appellant does not lend itself to acceptance of the proposition in the show cause notice that consumption of ‘plasticizer’ should govern restrictions on use of ‘polyvinyl chloride (PVC) resin’ for determining recovery of ‘duty foregone’ at the time of procurement. The grounds enumerated for relief sought by appellant-Commissioner have not put forth any contention to override this conclusion. Mere reproduction of extracts from the notification coupled with reiteration of the proposition in the notice is not tenable surrogate either - there are no valid ground to hold that any part of ‘duty foregone’ is recoverable for the reasons offered in the appeal of jurisdictional Commissioner of Customs.
There is no evidence available, even remotely proximate, to suggest that ‘polyvinyl chloride (PVC) resin’ procured by the appellant-assessee had reached any user/trader. There is no ground to infer that ‘polyvinyl chloride (PVC) resin’ has been used in excess of that indicated in the ‘norms’, as adopted, for monitorial oversight of ‘actual user’ access to ‘duty exempt’ privilege.
The pleas of appellant-Commissioner fail - appeal of M/s Responsive Industries Ltd is allowed.
Validity of SCN - Non-supply of relied upon documents and statements - grievance is that there are certain documents which are sought to be referred by the Designated Officer in the show cause notice, namely statement of one of the transporters - HELD THAT:- It is opined that the adjudication of the show cause notice can be taken forward, by permitting the petitioner to urge all contentions in relation to the show cause notice. Also certain material as pointed out by the petitioner i.e. the statement of one of the transporters recorded during enquiry, needs to be provided to the petitioner, so that the petitioner can take appropriate plea before the adjudicating officer on the case being made out by the department against the petitioner so that, the adjudicating officer can consider such plea of the petitioner in adjudication of the show cause notice.
Accordingly, request of the petitioner to provide that statement of the transporter as made in the letter dated 17 November 2023 needs to be complied by the Adjudicating Officer, within a period of two weeks from today - The adjudicating officer, after furnishing to the petitioner the documents, shall fix a convenient date when the petitioner can be heard on the show cause notice and thereafter, proceed to pass an order in accordance with law. Let show cause notice be decided within a period of eight weeks from today.
Cancellation of GST registration of the premise - availment of of input tax credit without there being any corresponding movement of goods - non-application of mind - HELD THAT:- A bare reading of the provision would clearly demonstrate that the invocation of the provisions of Sub-Section 2(a) of Section 29 of the A.P.G.S.T. Act, is available only in the event of there being a determination by a competent Tribunal or Court holding that the registered dealer has in fact contravened the provisions of the Act.
It is not in dispute and it is clearly admitted by the learned Government Pleader that the petitioner firm is a going concern, implying and meaning thereby that the petitioner is also providing livelihood to others. In the event, their registration is cancelled, it would automatically result in closure of business and would sound a death knell to the productivity of the petitioner resulting in loss of livelihood, not only to the management, but also to such other persons employed by them.
Validity of show cause notice (SCN) u/s 73 - demand based on improper Audit Report u/s 65(3) - Violation of principles of natural justice - petitioner had no ‘not less than 15 working days’ of statutory period to file the response to the SCN for Audit u/s 65 - HELD THAT:- Section 65 (3) of Andhra Pradesh Goods and Services Tax Act, 2017 clearly provides that the registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed - Rule 101 (4) of the Rules, 2017, thus also provides that the proper officer may inform the registered person of the discrepancies noticed, if any, as observed in the audit and the said person may file his reply and the proper officer shall finalise the findings of the audit, after due consideration of the reply furnished.
In the present case, the notice does not comply with sub-section (3) inasmuch as there is no clear ‘not less than 15 working days’ time prior to the conduct of audit. The audit has been finalized on 29.09.2023 based on the revised notice, which notice though revised on 04.09.2023 itself, but was uploaded on 14.09.2023. As such the registered dealer had the information of the notice on 14.09.2023 - From that date upto 29.09.2023, there are no clear 15 working days. The findings have been finalized by the Audit Officer within the statutory notice period, without waiting for completion of the statutory notice period. The petitioner’s reply is dated 28.09.2023, which though reached on 03.10.2023, was submitted within the statutory period, and even it be taken that it could not reach in time, as it was sent on 28.09.2023, the audit could not be finalized and the audit report could not be submitted on 29.09.2023.
In the present case, what is found from perusal of the show cause notice under Section 73, is that there is a reference of the Audit Report dated 29.09.2023, and therefore, it cannot be said that in the present case the show cause notice is independent of the audit report. It is based on the audit report, which in turn is not in accordance with the statutory provisions but is in violation of the principles of natural justice as also the due procedure of law.
The impugned show cause notice under Section 73 of the Act is set aside - respondent authorities/competent authorities are directed to pass fresh order/report on the audit, after taking into consideration the petitioner’s reply dated 28.09.2023 received on 03.10.2023 and consequent there upon to proceed further in accordance with law - petition allowed in part.
Interest on the claim of the refund -petitioners could not file the return of income claiming refund in time and such return was filed after condoning delay by the respondent under section 119(2)(b) - interest on the compensation amount is paid for acquisition of the agricultural land of the petitioners - TDS deducted under wrong section as correct section for deduction of tax at source is section 194A and not section 194C - HELD THAT:- It is not in dispute that the amount of refund is already paid to the petitioners and therefore, as a natural corollary, the petitioners are entitled to have the right to get interest on such amount of refund claim.
Even as per sub-section(2) of section 244A of the Act, 1961, as it existed during the relevant AY 2013-2014, when the proceedings resulting in the refund are not delayed for reasons attributable to the assessee whether wholly or in part, the period of the delay so attributable only can be excluded from the period for which interest is payable under subsections (1) or (1A)or (1B) to section 244A of the Act, 1961.
In the facts of the case, the words "or the deductor, as the case may be," which is inserted with effect from 01.04.2017 would not be applicable as the petitioners have been permitted to file the refund claim for the AY 2013-2014 after condonation of delay and such delay in claiming the refund cannot be said to be attributable to the petitioners as the petitioners were not made aware about the deduction of tax at source by the deductor in absence of issuance of Form No. 16-A which was mandatorily required as per Rule 31(3) of the Rules.
In view of the foregoing reasons, the petitions succeed and are accordingly allowed. The respondent is directed to grant interest on the refund claim from the date of deposit of the TDS till the date of refund as per the provisions of section 244A of the Act, 1961. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order. Rule is made absolute to the aforesaid extent.
Validity of Reopening of assessment - Sanction for issue of notice u/s 151 - whether valid approval was granted in terms with Section 151? - What are the essential requirements for initiation of a reassessment proceedings under Section 147 of the Act of 1961 and to what extent the Court under Article 226 can interfere? - HELD THAT:- First, the power to be exercised by the authority to grant the approval for issuance of the notice under Section 148 is not a mere formality but is an important safeguard against any arbitrary exercise by the Income Tax Officer to reopen reassessment proceedings. The second aspect is that Section 151 of the Act of 1961 specifically mandates who would be the authority inasmuch Sub-Section (1) of Section 151 of the Act of 1961 relates to issuance of notice under Section 148 after the expiry of the period of 4 (four) years from the end of the relevant assessment year and the authority would be the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner who had to arrive at the satisfaction on the reasons recorded by the Assessing Officer for issuance of such notice. On the other hand, in respect to all other cases, i.e. up to four years, the authority would be the Joint Commissioner which is the authority defined in Section 2(28C). It is also pertinent that the Act of 1961 does not stipulate that the power which had been entrusted by the Act to an Officer can be exercised by any superior officer.
Whether the non-communication of the entire satisfaction note would vitiate the reassessment proceedings? - For conferment of jurisdiction, the recording of reasons is no more essential but recording of reasons would only be essential in terms with Sub-Section (2) of Section 148 for the Assessing Officer to issue any notice under Section 148. It is also pertinent herein to take note of that the words ‘he, may, subject to the provisions of Section 148 to 153’ as appearing in Section 147, makes the legislative intent further clear that for assessing or reassessing such income and also any other income chargeable to tax which had escaped assessment, the Assessing Officer has to do so or for that matter exercise the jurisdiction by satisfying the mandate of Section 148 to 153.
This Court also finds it relevant to mention that the provisions of Section 147 as well as the provisions of Section 148 to 153 do not mention that the reasons so recorded prior to issuance of notice under Section 148 is required to be furnished to the assessee. As decided in S. Narayanappa [1966 (9) TMI 36 - SUPREME COURT] there is no requirement in any of the provisions of the Act or any Section laying down as a condition for initiation of proceedings that the reasons which induced to the Commissioner to accord sanction to proceed under Section 34 must also be communicated to the assessee.
Furnishing of the reasons is not required as per the provisions of the Act of 1961 and the said aspect had been judicially also accepted.
Now therefore the question arises as to why the Supreme Court in the case of GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] had observed that the reasons upon being requested has to be furnished which would provide an opportunity to the assessee to file objection against such reasons and further the Assessing Officer has to pass an order on the said objection and thereupon proceed - From a perusal of the said judgment in the case of GKN Driveshafts (India) Ltd. (supra), it would clearly show that the said judgment is not an authority that the reassessment proceedings would be nullified for not furnishing the reasons. It is the opinion of this Court that if an objection is filed on the basis of the reasons so provided and the said objection is rejected, then it may be a good ground for the assessee to assail the assessment/reassessment order in an appeal. However, the reassessment proceedings cannot be nullified by way of writ petition on the ground that the reasons in the entirety was not furnished. The rationale behind the said opinion of this Court is taking into account that it is well settled that the existence of the belief is justiciable whereas the sufficiency of the reasons for forming the belief is not. Therefore, if an assessee has to challenge the existence of the belief, the same can be done so in a proceedings under Article 226 of the Constitution which is also well settled. Further, it is also the opinion of this Court that the existence of the belief cannot be challenged before the Assessing Officer as it touches upon his own jurisdiction. However, as the sufficiency of reasons for forming the belief cannot be challenged in a proceeding under Article 226 of the Constitution, the assessee would have a right to file objections against the sufficiency of the reasons for forming the belief by the Assessing Officer. It is in that context, the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) made the said observations.
Bogus LTCG - exemption u/s10(38) denied - assessee sold shares (penny stocks) as identified by SEBI and Investigation Wing, Kolkata during FY 2010-11 - HELD THAT:- From the reasons so recorded as above noted and reading conjointly with the computation of income with the detail so given in the reasons for issuance of notice under Section 148 of the Act of 1961, it cannot be said that there was no existence of reasons to believe that the income had escaped assessment. Further to that, the reasons so assigned were neither vague nor indefinite. The reasons had a live link for the formation of the requisite belief. This Court during the course of hearing inquired with the learned counsel for the Petitioner as to how certain shares were shown in the computation of the income as purchased at nil value whereas were sold at certain amounts. The learned counsel for the Petitioner submitted that they were bonus shares which had no purchase costs. He however admitted that in the computation of the income, the same were not reflected as bonus shares issued at nil value. Under such circumstances also this Court is of the opinion that there existed reasons to believe for reopening of the assessment.
Non-compliance to Section 151 - The plea of non-compliance of Section 151 of the Act of 1961 is plea challenging the very reassessment proceedings and in the opinion of this Court, the said plea had to raise specifically in the pleadings else entertaining such plea on oral submissions would violate the principles of natural justice.
This Court finds it relevant to refer to a judgment of the Supreme Court in the case of S.S. Sharma and Others Vs. Union of India and Others[1980 (11) TMI 171 - SUPREME COURT] wherein the Supreme Court observed that the Court should ordinarily insist on the parties being confined to their specific written pleadings and should not permit deviation from them by way of modification or supplementation except through the well known process of formally applying for amendment. It was further observed that if undue laxity and a too easy informality is permitted to enter the proceedings of a Court, it will not be long before a contemptuous familiarity assails its institutional dignity and ushers in chaos and confusion undermining its effectiveness. It was categorically observed that oral submissions raising new points for the first time tend to do grave injury to a contesting party by depriving it of the opportunity to which the principles of natural justice hold it entitled of adequately preparing its response.
In view of the above settled propositions and the facts that the Petitioners in all the writ petition above have not taken the plea of non-compliance to Section 151 of the Act of 1961, the same cannot be allowed to be raised by way of an oral submissions.
LTCG - Deduction u/s 54B - investment in purchase of new agricultural land was made by the assessee not in his own name, but in the name of his wife - interpretation of “exemption clause” - HELD THAT:- It will be apt to refer the decision rendered by the Supreme Court in the matter of Mangalore Chemicals and Fertilisers Limited vs. Deputy Commissioner of Commercial Tax and Others [1991 (8) TMI 83 - SUPREME COURT]wherein it has been observed that the choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language.
Wife of the appellant cannot be termed as an ‘assessee’ as per Section 2 (7) of the IT Act. So enlarging the scope of the assessee as defined under Section 2(7) to envelope the wife of the appellant to envelop the transaction to “exemption” would amount to superseed the legislative requirement and the spirit of the provision.
When the person who claimed “exemption or concession” he has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved.
Plain reading of Section 54B would show that the benefit is available to the assessee and when the exemption is demanded. In absence of any ambiguity the scope of definition of ‘assessee’ cannot be enlarged so as to include the wife of the assessee. In other words, the exemption clause has to be construed strictly.
Applying the well settled principles of law and for the reasons mentioned hereinabove, the ITAT was justified in holding that the deduction under Section 54B of the IT Act cannot be allowed to the assessee as the land was not purchased in his own name. Decided against assessee.
TP Adjustment - Comparable selection -ALP for calculating the interest payable on NCDs - assessee’s contention was that the Ld. TPO has selected the comparable companies having secured debentures and / or not in the Solar Power Sector - HELD THAT:- As not disputed by the Revenue that the assessee has issued NCDs as unsecured and had agreed the rate of interest of 13%. The key criteria for determining the interest rate is the risk involved. When the loan given is unsecured, the risk is higher and there would be a higher rate of interest. In our considered view, the relationship of a holding / subsidiary is not the criteria for determining the interest with respect to secured / unsecured debt instruments.
We find from the submissions of the AR that when the filters of secured or guaranteed are applied in the list of comparables, the rate of interest and the 65th percentile worked out to 14.25% which is over above the interest rate paid by the assessee. Further, when the companies in the Wind / Thermal Power Sectors are excluded, the 65th percentile worked to 14.25% which is over and above the interest rate paid by the assessee company.
As relying on V R Surat (P.) Ltd [2023 (8) TMI 631 - ITAT SURAT] and Vena Energy KN Wind Power (P.) Ltd[2022 (12) TMI 712 - ITAT BANGALORE] Revenue has not brought any material / case / any contrary decision before us. Therefore, respectfully following the above decisions, we are of the considered view that the rate of interest charged by the assessee company is at Arm’s Length basis and therefore the ground No. 1 & 2 raised by the assessee are allowed.
Revision u/s 263 - Incorrect claim of weighted deduction u/s 35(1)(ii) allowed by AO on donation made - assessee had pointed out that this claim was duly examined during assessment proceedings when the assessee had placed relevant documents proving its eligibility to the claim of and even the genuineness of the claim by furnishing documents pointing out that the donation had been made through banking channels and the donee Institute had furnished receipts and certificates issued by CBDT showing that it was approved for receiving donations u/s. 35(1)(ii) - HELD THAT:- A very important fact which emerges is that the Institute, to which donation was made by the assessee during the impugned year and weighted deduction claimed thereon u/s. 35(1)(ii) of the Act, was not approved for the said purposes for the impugned year.
The fact on record available with the Ld.CIT is that the approval granted to the said Institute expired on 31/03/2006. Impugned year before us is A.Y 2015-16. The Advisory issued by the CBDT in December-2018 brought this fact to the notice of all its Field Officers. Therefore, the fact on record was that the said Institute was not approved for receiving donations u/s. 35(1)(ii) of the Act during the impugned year.
Thus there can be no two views that when the assessment order was passed by the AO, assessees claim to weighted deduction u/s 35(1)(vii) of the Act was impermissible in law. And it is a foregone conclusion therefore that the allowance of the said claim in assessment framed was patently incorrect. The assessment order was obviously in error in having allowed a patently ineligible deduction to the assessee.
This is probably the simplest and most straight forward example /instance of an assessment order being erroneous causing prejudice to the Revenue, for a valid exercise of revisionary jurisdiction.
All arguments of assessee against the revisionary order passed by the Ld.CIT fail and are of no consequence in the backdrop of the fact, as noted above by us, that the assessee was not eligible to claim weighted deduction on the said donation u/s 35(1)(ii) of the Act.
Even if the assessee and the AO had bonafidely claimed and allowed respectively the deduction based on documents furnished by the said Institute, the fact still remains that the claim was not allowable as per law. What is material for claiming deduction is its eligibility as per law and not the intention with which it is claimed, whether bonafidely or malafidely. Even a bonafidely claimed deduction if found ineligible in law, it cannot be allowed to the assessee.
Also on a patently ineligible claim there can be no question of the AO taking a plausible view in allowing assesses claim. As approval was not inexistence after 31/03/2006 and the said Trust was subsequently receiving donations fraudulently. The subsequently issued advisory of the CBDT only reiterates the fact of donations to the said institute being ineligible for deduction to donors u/s. 35(1)(ii) of the Act.
In view of the above, we have no hesitation in upholding the order of the Ld.CIT holding the assessment order erroneous for having allowed a patently ineligible claim of weighted deduction to the assessee. Decided against assessee.
Addition in an intimation order u/s 143(1) - AO/CPC jurisdiction to make an adjustment in an Intimation Order u/s. 143(1) -exemption claimed u/s 10 was denied and treated as profits and gains of business or profession.HELD THAT:- According to the provisions of section 143 (1) (a) of the act where the total income or loss is required to be computed adjustment prescribed in clause number (i) to (vi) can be made only after giving an intimation to the assessee for such adjustment either in writing or in electronic mode. We do not find any such intimation is given to the assessee of such adjustment holding that the claim of exemption made by the assessee is incorrect. Therefore, such adjustment is made in contravention of the provision of section 143 (1) of the Act and hence, it is not sustainable.
Even otherwise on the merits of the issue we find that exemptions claimed by the assessee is with respect to dividend from mutual fund which is exempt under section 10 (35) of the income tax act, interest from tax free bond which is exempt under section 10 (15) of the Act and the long-term capital gain on consolidation of mutual funds which is exempt under section 10 (38) of the act. Therefore, even otherwise the impugned income in dispute is exempt which is confirmed by the ld. CIT (A) also.
Therefore, as the impugned adjustment is without intimation to the assessee and further the income is held to be exempt by the CIT (A) , we do not find any reason to sustain the intimation passed u/s 143(1) of The Act . In view of this Ground no 1 is allowed.
The Supreme Court dismissed a Civil Appeal due to a gross delay of 444 days in filing it. The delay was not satisfactorily explained. Questions of law can be raised in another case.
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