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• 2009 (5) TMI 927
  
  Issues Involved:
  1. Legality and validity of the penalty under Section 271(1)(c) of the IT Act, 1961.
  2. Justification of the penalty levied by the AO.
  3. Application of mind by the AO while levying the penalty.
  4. Distinction between penalty proceedings and assessment proceedings.
  5. Penalty based on estimated additions.
  6. Concealment of income.
  7. Satisfaction of the AO while levying the penalty.
  8. Penalty based on conjectures and surmises.
  9. Reasonable opportunity of being heard before levying the penalty.
  
  Detailed Analysis:
  
  1. Legality and validity of the penalty under Section 271(1)(c) of the IT Act, 1961:
  The assessee contended that the order of the CIT(A) confirming the penalty of Rs. 2,05,140 under Section 271(1)(c) was illegal, invalid, and void ab initio. The Tribunal examined whether the penalty was levied following the legal requirements and whether the AO recorded specific findings regarding the concealment of income or furnishing inaccurate particulars.
  
  2. Justification of the penalty levied by the AO:
  The assessee argued that the penalty levied by the AO was not justified. The AO had treated the enhanced cash sales recorded in the cash book as undisclosed cash introduced into the books. The Tribunal noted that the AO had observed discrepancies between the sales recorded in the cash book and the sales bills, indicating the introduction of undisclosed cash.
  
  3. Application of mind by the AO while levying the penalty:
  The assessee contended that there was no application of mind by the AO while levying the penalty. The Tribunal emphasized that the AO must independently consider the facts and evidence during penalty proceedings and not solely rely on the findings of the assessment order. The AO should have provided a clear-cut finding regarding the default of the assessee.
  
  4. Distinction between penalty proceedings and assessment proceedings:
  The Tribunal reiterated that penalty proceedings are distinct and independent from assessment proceedings. The findings in the assessment order lay the foundation for penalty but do not automatically justify its imposition. The Tribunal cited various judicial precedents to support this view, including the judgments of the Gujarat High Court in New Sorathia Engineering Co. vs. CIT and Manu Engineering Works vs. CIT.
  
  5. Penalty based on estimated additions:
  The assessee argued that the penalty was levied based on estimated additions, which is not permissible under the law. The Tribunal noted that the AO had made additions based on discrepancies in the sales figures, treating them as undisclosed cash. However, the penalty should be levied only if there is clear evidence of concealment or furnishing inaccurate particulars.
  
  6. Concealment of income:
  The Tribunal examined whether there was any concealment of income by the assessee. It observed that the AO had treated the enhanced cash sales as undisclosed cash introduced into the books. However, the AO did not provide specific findings regarding the concealment of income or furnishing inaccurate particulars in the penalty order.
  
  7. Satisfaction of the AO while levying the penalty:
  The Tribunal emphasized that the AO must record satisfaction regarding the concealment of income or furnishing inaccurate particulars before levying the penalty. The penalty order must clearly state whether the penalty is for concealment of income or for furnishing inaccurate particulars. Failure to make a specific charge renders the penalty order invalid.
  
  8. Penalty based on conjectures and surmises:
  The assessee argued that the penalty was levied based on conjectures, surmises, and suppositions. The Tribunal noted that the AO must provide concrete evidence and specific findings to justify the penalty. Mere discrepancies in the sales figures without clear evidence of concealment or furnishing inaccurate particulars are not sufficient grounds for imposing a penalty.
  
  9. Reasonable opportunity of being heard before levying the penalty:
  The assessee contended that the AO did not allow a reasonable and proper opportunity of being heard before levying the penalty. The Tribunal emphasized that the principles of natural justice must be followed, and the assessee should be given a fair opportunity to present their case before the penalty is imposed.
  
  Conclusion:
  The Tribunal allowed the appeal filed by the assessee, holding that the penalty order was invalid due to the AO's failure to provide specific findings regarding the concealment of income or furnishing inaccurate particulars. The Tribunal reiterated the importance of independent consideration of facts and evidence during penalty proceedings and emphasized the distinction between penalty and assessment proceedings.

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• 2009 (5) TMI 926
  
  Issues Involved:
  
  1. Jurisdiction to entertain and adjudicate the dispute.
  2. Plaintiff's locus standi to file the suit.
  3. Applicability of force majeure clause.
  4. Allegations of fraud and their impact on the letter of credit.
  5. Applicability of Uniform Customs and Practice for Documentary Credits (UCP 600).
  6. Balance of convenience and irreparable injury.
  
  Issue-wise Detailed Analysis:
  
  1. Jurisdiction to entertain and adjudicate the dispute:
  The defendant argued that the court lacks jurisdiction as the letter of credit/contract is subject to Swiss law and the plaintiff is not a party to the letter of credit. The court held that the jurisdiction is excluded under the arbitration clause 22.4 of the Sales contract, and arbitration proceedings have already been initiated in London.
  
  2. Plaintiff's locus standi to file the suit:
  The defendant contended that the plaintiff, being a receiver of the goods and not a party to the financial terms of the letter of credit, lacks locus standi. The court agreed, stating that the plaintiff does not have the locus standi to seek an injunction on the realization of the letter of credit as it is not a party to the letter of credit.
  
  3. Applicability of force majeure clause:
  The plaintiff argued that the force majeure clause in the main contract should be read into the letter of credit, thus preventing its invocation. The court found that the force majeure clause is part of the underlying contract and not the letter of credit, which is governed by UCP 600 norms. Therefore, the force majeure clause cannot be invoked against the confirming bank.
  
  4. Allegations of fraud and their impact on the letter of credit:
  The plaintiff alleged fraud by the defendant in dispatching the goods despite being informed of the force majeure situation. The court held that for fraud to be an exception to the non-interference rule, it must be of an egregious nature and known to the bank. In this case, the confirming bank had no knowledge of the alleged fraud, and the plaintiff failed to establish a prima facie case of fraud of egregious nature.
  
  5. Applicability of Uniform Customs and Practice for Documentary Credits (UCP 600):
  The court emphasized that the letter of credit is governed by UCP 600 rules, which state that the bank is not concerned with the terms of the underlying contract unless they are part of the letter of credit. The bank's obligation is to honor the letter of credit upon presentation of complying documents, irrespective of disputes in the underlying contract.
  
  6. Balance of convenience and irreparable injury:
  The court found that the balance of convenience does not lie in favor of the plaintiff. The letter of credit is an independent contract, and the plaintiff's attempt to invoke the force majeure clause to avoid payment was not justified. The court held that the defendants would suffer irreparable loss if the interim order continued, and the plaintiff could seek damages if the underlying contract was eventually found to be frustrated or vitiated by fraud.
  
  Conclusion:
  The court vacated the ex parte ad interim order dated 6th April 2009, dismissed the plaintiff's application for an injunction, and allowed the defendant's application for vacation of the ex parte ad interim order. The case was listed for further proceedings before the Joint Registrar.

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• 2009 (5) TMI 925
  

  Treatment to sale of shares - Capital gain or business income - Principles of Res Judicata - frequency of transaction - Whether the activity of the assessee constitute the activity as a business or as an investor? - Assessee is indeed in dealings in investment in shares in past for many years. The main thrust of the argument of the learned counsel is that no borrowed funds are used for purchasing the shares which were held as an investment.

  HELD THAT:- On the perusal of the balance sheet filed by the assessee, we find that the assessee has shown the investment in shares under the head 'Investment' and not as 'stock-in-trade'. It is true that the principles of res judicata do not apply to income-tax proceedings as each and every assessment year is treated as a separate one. As in strict sense, what is decided in one year may not apply in the following year, but, where a fundamental aspect for permeating through the different assessment years has been found as a matter of fact one way or the other, and parties have allowed such position to be sustained then as held by the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT[1991 (11) TMI 2 - SUPREME COURT], the position should not be allowed to change in the subsequent year merely because on the same set of facts, different view is possible. Another aspect to be considered here is that the assessee has not borrowed any money for making the investment in the shares. Moreover, the assessee is consistently holding shares as an investment which is always accepted by the AO in the past. In our opinion, there is no justification for treating the activity of the assessee of purchase and sale of the shares as a 'business' merely on reason of the volume of the transactions.

  As per well settled principles of law, the frequency of the transactions cannot be per se decisive - We answer this issue in favour of the assessee and direct the AO to treat the profit and gain on the sale of the shares as a capital gain and not as a business income.

  As both the authorities below have only considered whether the profit declared on the sale of the shares is to be assessed as a business income, both the authorities have not considered the another plea of the assessee as well as computation of the short-term capital gain and long-term capital gain declared by the assessee.

  We, therefore, consider it fit to restore this issue for the limited purpose of verifying the quantum of short-term capital gain as well as long-term capital gain as declared by the assessee to the file of the AO whether the same has been correctly computed. At the same time, the AO is also directed to consider the claim of the assessee regarding concessional rate of tax u/s. 111A in respect of short-term capital gain as well as u/s. 112 in respect of long-term capital gain and accordingly, work out tax liability of the assessee.

  Assessee's appeal is allowed.

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• 2009 (5) TMI 924
  
  Issues Involved:
  1. Justification of CIT(Appeals) in canceling the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961.
  2. Whether the penalty order was barred by limitation.
  3. Whether the charge of concealment of income or furnishing inaccurate particulars of income was raised against the assessee.
  
  Summary:
  
  Issue 1: Justification of CIT(Appeals) in canceling the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961
  
  The main grievance of the revenue was whether the CIT(Appeals) was justified in canceling the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961. The assessee had declared gifts aggregating to Rs. 19.02 lakh from six persons, which the AO added to the income due to unsatisfactory evidence. The Tribunal had reversed the CIT(Appeals) order and restored the addition. The AO initiated penalty proceedings and levied a penalty of Rs. 6,67,602/- for furnishing inaccurate particulars of income. The CIT(Appeals) allowed the appeal of the assessee, which led to the revenue's appeal before the Tribunal.
  
  Issue 2: Whether the penalty order was barred by limitation
  
  The assessee argued that the penalty order was barred by limitation u/s 275(1)(a), which requires the penalty order to be passed within one year from the end of the financial year in which the order of the CIT(Appeals) was received by the Commissioner. The Tribunal held that the order was passed within the time prescribed by the statute u/s 275(1)(a), as the time limit is six months from the end of the month in which the order of the Tribunal is received by the Commissioner.
  
  Issue 3: Whether the charge of concealment of income or furnishing inaccurate particulars of income was raised against the assessee
  
  The Tribunal found that the AO had initiated penalty proceedings u/s 271(1)(c) and mentioned the applicability of Explanation-1, which covers both concealment of income and furnishing inaccurate particulars. The Tribunal concluded that the assessee failed to substantiate the explanation regarding the gifts, and the evidence provided was not credible. The Tribunal upheld the AO's penalty order, stating that the CIT(Appeals) erred in deleting the penalty.
  
  Conclusion:
  
  The Tribunal allowed the revenue's appeal, set aside the order of the CIT(Appeals), and restored the AO's order imposing the penalty. The order was pronounced in the open court on 29.05.2009.

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• 2009 (5) TMI 923
  
  Issues involved: Appeal against order u/s 263 of IT Act for assessment year 2001-02 challenging depreciation on goodwill and leasehold rights.
  
  Depreciation on Leasehold Rights: Assessee claimed depreciation on leasehold rights based on detailed submissions regarding the nature of the asset and provisions of the Income Tax Act. Assessing Officer disallowed depreciation on leasehold rights in the assessment order, citing reasons. However, no comments were made on the depreciation claimed on goodwill. The Commissioner issued a show cause notice to revise the assessment order, contending that granting depreciation on goodwill was erroneous and prejudicial to revenue. Assessee objected, arguing lack of evidence of Assessing Officer's consideration on goodwill depreciation. Tribunal held that the Assessing Officer had detailed explanations on the claim and allowed it in previous years, indicating application of mind. It was concluded that the Commissioner's assumption of jurisdiction u/s 263 lacked validity, as the Assessing Officer had considered the claim of depreciation on goodwill.
  
  Depreciation on Goodwill: Goodwill depreciation was acquired for a specific consideration, including various commercial rights. The Assessing Officer did not comment on the depreciation claimed on goodwill in the assessment order. The Commissioner sought to disallow depreciation on goodwill, stating lack of evidence of Assessing Officer's consideration on the issue. Tribunal found that the Assessing Officer had detailed explanations on the claim and allowed it in previous years, indicating application of mind. The Tribunal vacated the Commissioner's order, ruling that there was no basis to conclude that the Assessing Officer did not apply his mind to the claim of depreciation on goodwill. The appeal was allowed based on the lack of validity of jurisdiction, without making any observation on the merits of the claim.

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• 2009 (5) TMI 922
  
  Issues involved:
  The appeal questions the correctness of the judgment by Rajasthan High Court regarding various substantial questions of law related to Income-tax Act, 1961.
  
  Applicability of section 43B:
  The dispute revolves around the applicability of section 43B of the Income-tax Act, 1961. The High Court concluded that this provision is not applicable to the case for the assessment year 1994-95. The judgment also extends to assessment years 1991-92 and 1992-93.
  
  Deletion of additions by ITAT:
  The ITAT deleted certain additions made by the Assessing Officer, including the addition of &8377; 5,51,262 for unpaid bottling fee and &8377; 38,442 for research and development expenses. The High Court affirmed the findings of ITAT on these deletions, emphasizing commercial considerations and business expediency.
  
  Depreciation on research and development assets:
  The Division Bench of the High Court upheld the findings of ITAT regarding the allowance of depreciation on research and development assets related to a closed business of the assessee-company. The assets were deemed not used during the previous year, and the decision was based on a subsequent agreement dated 10-4-1992.
  
  Technical service charges dispute:
  The additional issue in the case pertained to technical service charges. The High Court found that the new agreement in April 1992 was not a means to reduce tax liability but was a legitimate expenditure based on business expediency and commercial considerations. The Tribunal and High Court's findings were upheld, dismissing the revenue's challenge.
  
  Conclusion:
  The Supreme Court disposed of the appeal, affirming the decisions of the ITAT and the High Court on various issues related to Income-tax Act, 1961. The judgment emphasized the importance of commercial considerations and business expediency in determining tax liabilities.

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• 2009 (5) TMI 921
  
  Issues Involved:
  1. Whether a pure civil dispute can be a subject matter of a criminal proceeding under Sections 420, 467, 468, and 469 of the Indian Penal Code.
  2. Validity of the Chief Judicial Magistrate's cognizance of the offence without assigning reasons.
  3. Applicability of the principle of res judicata in criminal proceedings.
  4. Distinction between civil wrongs and criminal wrongs in the context of the dispute.
  
  Detailed Analysis:
  
  Issue 1: Civil Dispute as a Criminal Proceeding
  The core question was whether a pure civil dispute could be a subject matter of a criminal proceeding under Sections 420, 467, 468, and 469 of the Indian Penal Code. The Court observed that the appellants and respondents were co-sharers in a joint family property and the dispute was primarily about the extent of their respective shares. The Court emphasized that such disputes should be determined only in a civil suit. It was noted that the execution of a sale deed by the appellants, claiming a one-third share, would not bind the complainant-respondent and could be contested in a civil court. The Court cited the case of Shanti Kumar Panda v. Shakuntala Devi, stating that a decision by a criminal court does not bind the civil court, while a decision by a civil court binds the criminal court. It was reiterated that civil and criminal proceedings could run simultaneously, but the result in one would not bind the other (P. Swaroopa Rani v. M. Hari Narayana @ Hari Babu).
  
  Issue 2: Cognizance by the Chief Judicial Magistrate
  The appellants argued that the Chief Judicial Magistrate did not assign any reason while taking cognizance of the offence, indicating non-application of mind. The Court agreed, stating that the Chief Judicial Magistrate should have reflected his application of mind in his order. The Court cited State of Karnataka and Anr. v. Pastor P. Raju and Pawan Kumar Sharma v. State of Uttaranchal, emphasizing the necessity for the Magistrate to apply his mind to the contents of the chargesheet.
  
  Issue 3: Principle of Res Judicata
  The respondent contended that the High Court's order dated 17.10.2005 should operate as res judicata. The Court rejected this view, clarifying that the principle of res judicata has no application in criminal proceedings. The principle, as outlined in Section 11 of the Code of Civil Procedure, does not apply to cases of this nature.
  
  Issue 4: Civil Wrong vs. Criminal Wrong
  The Court distinguished between civil wrongs and criminal wrongs, noting that a wrong committed by a person could give rise to both civil and criminal actions. However, when the dispute constitutes only a civil wrong, the courts should not permit harassment through criminal proceedings. The Court observed that the allegations made did not satisfy the ingredients of an offence under Section 420 of the Indian Penal Code, as there was no fraudulent or dishonest intention at the time of making the promise or representation. The Court cited V.Y. Jose v. State of Gujarat and Anr., stating that a misrepresentation from the very beginning is a sine qua non for constituting an offence of cheating.
  
  Conclusion:
  The Supreme Court allowed the appeal, emphasizing that the dispute was essentially civil in nature and should be resolved in a civil court. The Court directed the concerned civil court to expedite the disposal of the pending civil suit. The judgment underscored the necessity for judicial officers to apply their minds when taking cognizance of offences and reiterated the distinction between civil and criminal wrongs.

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• 2009 (5) TMI 920
  

  Computation of capital gains - Transfer of shares - Extinguishment of rights - Share Purchase Agreement - Principle of Interpretation - Whether Share is a Immovable or movable Assests? - Revenue's contention is that on account of substantial extinguishment of rights in pursuance to share purchase agreement, the transfer took place on 27-1-2005 - assessee's claim is that when the delivery of shares was over and all the covenants contemplated in the share purchase agreement became irrevocable on 1-4-2005 then only transfer was complete and, accordingly, the investment made by the assessee in the specified securities within six months reckoned from 1-4-2005 entitled the assessee for exemption u/s 54EC.

  HELD THAT:- It is well settled Principle of interpretation that no word in an statute is superfluous and each word has to be assigned specific meaning in the context in which it is used. We further find lot of substance in the argument of ld. Counsel in this regard with reference to inclusion of Clause (v) in the definition of transfer u/s 2(47) only with reference to immovable property and not with reference to movable property.

  In the present case when final delivery of shares took place on 1/15-4-2005 and, therefore, in view of the decision in the case of M. Ramaswamy [1983 (7) TMI 15 - MADRAS HIGH COURT] and Rajgiri Rubber and Produce Co.[1993 (2) TMI 67 - KERALA HIGH COURT]), in our opinion, transfer of shares took place on 1/15.4.2005. This view is fully supported by the decision of the Hon'ble Supreme Court in the case of Shellate VR v. P.J Thakkar [1974 (7) TMI 78 - SUPREME COURT] wherein, it was held that procedure required by law was to be complied with and, accordingly, delivery of share certificate along with transfer deed had to be handed over to purchaser in order to complete the transfer.

  Regarding extinguishment of rights - We have already held that a case of sale and that of extinguishment of right are mutually exclusive. However, in any view of the matter, we are of the opinion that it could not be said that there was extinguishment of rights on 27-1-2005 because extinguishment of rights implies that the right cannot be revived. However, till the time the right is revocable, it could not be said that there was extinguishment or rights. At best it can be said to be a case of suspension of rights till all the requirements for completing the sale were over. It was only on execution of second amendment to share amendment to share purchase agreement on 1.4.2005 that the Escrow agreement and the power of attorney became incapable of being revoked,, modified or altered unilaterally by the sellers .Therefore, prior to this date, the sellers had the right to revoke the share purchase agreement.

  Further Section 372A Clause (c) of the Companies Act mandates that a company cannot acquire by way of subscription, purchase or otherwise the securities of any other body corporate unless previously authorized by the special resolution passed in a general meeting. Admittedly, this special resolution was passed by the Dabur India Ltd. on 28.3.2005. Therefore, in any case, prior to this date, it cannot be said that shares of assessee were acquired by Dabur India Limited. The share is a movable property and is governed by sale of Goods Act.

  Now coming to the Circular No. 704. This circular deals with two situations. Firstly, shares listed on stock exchange and transfer taking place through brokers. Secondly, transactions taking place directly between the parties and not through stock exchange. We are concerned with the second situation.

  This clearly shows that the date of contract of sale will be the date which the parties have agreed to. No other date can substitute the date as declared by the parties. In the present case, the date of contract of sale as understood by the parties is 1.4.2005 and the same cannot be substituted by the date of share purchase agreement because completion date was specified in Article 6 of the Share purchase agreement, which was not later than 4.4.2005 or such other later date that was mutually agreed in writing. As per Article 6, on the completion date the attorney was to receive letters of discharge from the lenders recording the unconditional and irrevocable discharge of the guarantees and the cancelled the original guarantees. This occurred on 1.4.2005.

  Therefore, the date of contract of sale as declared by the parties in the share purchase agreement was 1.4.2005. The directors resigned on the date as per the said Article. Therefore, the contract was completed on fulfillment of conditions contemplated in Article 6 which took place on 1.4.2005. Thus, from the very beginning, the parties had declared the date of contract of sale subject to fulfillment of conditions and, therefore, on the date of fulfillment of above conditions, the date of contract of sale crystallized.

  We are, therefore, of the opinion that this circular in no way prejudice the assessee's claim. It is pertinent to note that Dabur India Limited, the purchaser has also recognized the purchase of shares in F.Y. 2005-06 and not F.Y. 2004-05. The CIT(A) has observed that the entire sale consideration but the fact is that it was not the entire sale consideration as the assessee had received on completion of sale.

  In view of the above discussion, we are of the opinion that as the transfer of shares of target companies was completed on 1/15-04-05, the capital gains were to be taxed in AY 2006-07 and there is no merit in including the income from capital gain on sale of shares of target companies in the A.Y 2005-06. Ground Nos. 1, 2& 3 stand allowed.

  Long term capital gains - Difference between the sale price of shares and its book value as consideration towards non-compete fees - AO, restricted the long term capital gains to the book value of the share and treated the balance amount towards non-compete fees u/s 28(va) - CIT(A) confirmed the AO's action.

  HELD THAT:- We are of the opinion that the basis adopted for assigning consideration towards non-compete fees was not correct. Admittedly, assessee on her own was not carrying on business and it was the company in which she was share holder was carrying on the business. Thus, it is evident that where capital asset is in the nature of right to carry on business, then the same will come within the ambit of capital gain tax. Thus, Section 28(va) would be attracted where the assessee was carrying on business and not where assessee only had right to carry on business in the form of capital asset.

  Further as per Circular No. 763 the amendments were made in Section 55(2)(a) to bring extinguishment of right to manufacture, produce or process any article or thing or right to carry on any business within the ambit of capital gain tax.

  Similarly Circular No. 8 of 2002 explaining the provisions of Finance Act, 2002 by which Clause (va) was inserted in Section 28, clarifies that receipts for transfer of rights to manufacture, produce or process any article or thing or right to carry on any business, which are chargeable to tax under the head capital gain would not be taxable as profits and gains of business. Thus, the difference between the sale consideration and true value of shares was chargeable as capital gains.

  We have already held that the date of transfer of shares was 1/15-4-2005 and the investment in the specified securities had, accordingly, been made within the specified period. Therefore, in any view of the matter, no tax was payable This ground is accordingly allowed.

  Expenditure towards transfer of shares of the targeted companies - CIT(A) confirmed the A.O's action inter-alia observing that the assessee had failed to submit as to how its share of expenses on account of Ambit was arrived, when other sellers were also involved. As regards payment to Economic Law Practice also CIT(A) observed that charges related to joint purpose of drafting , negotiating etc - HELD THAT:- The ld. Counsel the paper book wherein the copy of bills of Ambit Corporate finance and Economic Law Practice were enclosed. The bills are in the name of assessee, therefore, the deduction had rightly been claimed by the assessee. This ground is accordingly allowed.

  In the result, the assessee's appeal is allowed.

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• 2009 (5) TMI 919
  
  Issues Involved:
  The appeal under s. 260A of the IT Act, 1961 assails the concurrent findings of CIT(A) and the Tribunal regarding additions made in respect of share capital received from forty persons.
  
  Issue 1 - Share Capital Treatment:
  The AO failed to provide adequate details for making additions in respect of all shareholders who had confirmed the transaction. The Tribunal applied the ratio from CIT vs. Sophia Finance Ltd., stating that once shareholders are identified and have invested money for shares, no additions are justified. The Tribunal found the AO's treatment of share capital as unexplained cash credit based on surmises and conjectures, leading to the deletion of the additions by the CIT(A).
  
  Issue 2 - Legal Precedents:
  Referring to CIT vs. Divine Leasing & Finance Ltd., the Supreme Court affirmed that if share application money is received from alleged bogus shareholders, the Department can proceed to reopen individual assessments. The Court agreed with the Tribunal's concern over the AO's failure to provide specific comments on shareholders other than the nine from Bombay, noting the AO's reliance on surmises and conjectures rather than factual evidence.
  
  The judgment highlights the importance of establishing the source of share capital and the need for the AO to conduct thorough inquiries before treating transactions as unexplained cash credits. Legal precedents emphasize the role of evidence over suspicion in tax assessments, underscoring the burden of proof on the assessee and the authorities to substantiate their claims.

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• 2009 (5) TMI 918
  
  Issues Involved:
  1. Legality of the detention orders under Section 3(1) of the PIT-NDPS Act.
  2. Application of mind by the detaining authority.
  3. Interpretation of 'illicit trafficking' under Section 2(e) of the PIT-NDPS Act.
  4. Relevance of Supreme Court judgments and their applicability.
  5. Interplay between NDPS Act and NDPS Rules.
  6. Personal liberty and preventive detention.
  
  Detailed Analysis:
  
  1. Legality of the Detention Orders:
  The petitions challenged the detention orders passed by the Joint Secretary to the Government of India under Section 3(1) of the PIT-NDPS Act. The petitioners were detained for allegedly engaging in the illegal trading of psychotropic substances. The court examined whether the detention orders were legally valid and concluded that the orders were not justified as the alleged activities did not constitute 'illicit trafficking' under the PIT-NDPS Act.
  
  2. Application of Mind by the Detaining Authority:
  The petitioners argued that the detaining authority did not consider the bail orders properly, reflecting a non-application of mind. The court found that the detaining authority failed to consider the Supreme Court judgment in Rajesh Kumar Gupta, which was crucial for determining the legality of the petitioners' activities. The court emphasized that the detaining authority must meticulously follow the procedure established by law, especially when personal liberty is at stake.
  
  3. Interpretation of 'Illicit Trafficking':
  The court examined whether the export of the psychotropic substances by the petitioners constituted 'illicit trafficking' under Section 2(e) of the PIT-NDPS Act. It was noted that the substances were not listed in Schedule-I of the NDPS Rules, and therefore, their export did not fall under the prohibited activities defined as 'illicit trafficking'. The court concluded that the petitioners' activities did not amount to 'illicit trafficking' as per the legal definitions.
  
  4. Relevance of Supreme Court Judgments:
  The petitioners relied on the Supreme Court judgment in Rajesh Kumar Gupta, which held that the export of psychotropic substances not listed in Schedule-I of the NDPS Rules does not constitute an offense under the NDPS Act. The respondents argued that this judgment was not applicable. The court, however, found the judgment relevant and binding, emphasizing that the Supreme Court's interpretation of the law must be followed.
  
  5. Interplay Between NDPS Act and NDPS Rules:
  The court analyzed the interplay between the NDPS Act and the NDPS Rules, particularly Rules 53 and 58. It was determined that Rule 58, which requires export authorization, is subject to Rule 53, which prohibits the export of substances listed in Schedule-I of the NDPS Rules. Since the substances in question were not in Schedule-I, Rule 58 did not apply, and the petitioners' activities were not prohibited under the NDPS Act.
  
  6. Personal Liberty and Preventive Detention:
  The court highlighted the importance of personal liberty and the need for strict adherence to legal procedures in cases of preventive detention. It was stressed that preventive detention should not be used as a punitive measure and must be justified within the constitutional and legal framework. The court referred to various judgments underscoring the protection of personal liberty against arbitrary detention.
  
  Conclusion:
  The court allowed the writ petitions, setting aside the detention orders dated 27.02.2009 and 13.03.2009, directing the release of the petitioners. It was concluded that the detention orders were not justified as the alleged activities did not amount to 'illicit trafficking' under the PIT-NDPS Act, and the detaining authority had failed to apply its mind properly. The court reiterated the importance of safeguarding personal liberty and ensuring that preventive detention is used only in clear and undisputable cases.

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• 2009 (5) TMI 917
  
  Issues Involved:
  1. Whether filing of an affidavit by a government employee constitutes misconduct under Service Rules.
  2. Whether the State Government or district authority can take disciplinary action for filing an affidavit in court without proceedings initiated under Section 195 IPC, 340, and 341 Cr.P.C.
  3. Whether a different view taken by the punishing authority without serving a show cause notice or recording reasons is sustainable under law.
  4. Whether government employees have the right to file affidavits in court and if so, whether they can face disciplinary action for such actions.
  
  Detailed Analysis:
  
  1. Filing of Affidavit as Misconduct:
  The court examined whether filing an affidavit by a government employee constitutes misconduct under Service Rules. Rule 3(1) and 3(2) of the U.P. Government Servant Conduct Rule 1956 require government servants to maintain absolute integrity and devotion to duty. Rule 8 restricts government servants from giving evidence without prior sanction, except in judicial inquiries. The court held that filing an affidavit in a court does not fall under misconduct unless the court itself records an adverse finding. The court emphasized that assisting the court in dispensation of justice is a duty of every citizen, including government employees.
  
  2. Disciplinary Action Without Court Proceedings:
  The court analyzed whether the State Government or district authority could take disciplinary action for filing an affidavit without proceedings initiated under Section 195 IPC, 340, and 341 Cr.P.C. The court referenced statutory provisions and previous judgments, concluding that only the court has the authority to take action for perjury or false evidence. The court held that the disciplinary authority's action was not justified as it usurped the court's power to determine the veracity of the affidavit.
  
  3. Different View by Punishing Authority:
  The court considered whether the punishing authority's different view without serving a show cause notice or recording reasons is sustainable under law. The court cited Supreme Court judgments, stating that if the disciplinary authority disagrees with the inquiry officer's findings, it must record its tentative reasons and provide the delinquent officer an opportunity to represent. The court found that the disciplinary authority failed to do so, rendering the order of punishment violative of the principles of natural justice.
  
  4. Right to File Affidavits:
  The court examined whether government employees have the right to file affidavits in court and whether they can face disciplinary action for such actions. The court affirmed that every citizen, including government employees, has the right to assist the court in dispensation of justice. The court held that filing an affidavit or making a statement in court does not constitute misconduct unless the court records an adverse finding.
  
  Conclusion:
  The court concluded that filing an affidavit by the petitioners did not constitute misconduct under Service Rules. The disciplinary authority's action was not justified as it failed to follow due process and usurped the court's power. The court quashed the impugned orders of dismissal from service and directed the petitioners to be restored in service with all consequential benefits.
  
  Judgment:
  The writ petition was allowed, and the impugned orders of dismissal from service were quashed. The petitioners were ordered to be restored in service with all consequential benefits within one month from the receipt of the certified copy of the order.

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• 2009 (5) TMI 916
  
  Issues involved: Challenge to the Judgment passed by the Customs, Excise and Service Tax Appellate Tribunal regarding excisability and classification of Rubberised Nylon Tyre Cord Fabrics.
  
  Summary:
  The High Court of Karnataka heard an appeal by the assessee challenging the Tribunal's Judgment on excisability and classification of Rubberised Nylon Tyre Cord Fabrics. The Tribunal extensively discussed the legal questions raised in the case, citing the Supreme Court's decision in MRF Tyres Ltd. v. UOI. The Tribunal found that the excisability and classification of the fabrics were well-established. The statement of the appellant's advocate was also considered, where they agreed to pay duty under a specific chapter but requested to keep the issue of marketability open for future cases. However, the Tribunal rejected this request, stating that they could only decide on issues within the present appeal's scope. The Tribunal affirmed the order of assessment based on the appellant's submission, leading the High Court to dismiss the appeal for lack of merit.

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• 2009 (5) TMI 915
  

  Whether in an occasional case delay occurs which is inexplicable in normal circumstances?

  Whether delay, should result in the negation of the state's claim and at the cost of the interest of the members of the public whose cause has not been carefully espoused?

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• 2009 (5) TMI 914
  
  Supreme Court dismissed the appeal in the case with citation 2009 (5) TMI 914 - SC. Judges were S.H. Kapadia and Aftab Alam.

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• 2009 (5) TMI 913
  
  Issues Involved:
  1. Legitimacy of the respondent-employee's travel in First Class.
  2. Refusal to arrange payment to employees.
  3. Playing cards with RPF Rakshaks while on duty.
  4. Irresponsibility in dealing with agitators and refusal to receive "Control Message"/"Memo".
  5. Refusal to accept the memo from superiors.
  6. Allegation of demanding a 1% commission for payment of pay allowances.
  
  Detailed Analysis:
  
  Issue 1: Legitimacy of Travel in First Class
  The learned Single Judge concluded that the respondent-employee was instructed by higher authorities to travel by train for disbursing cash, and there was no reservation in the second class compartment. The charge could not be proved as there was no finding that the respondent was not entitled to travel in First Class. The judge noted, "the ultimate finding on charge No.1 as arrived at by the inquiry officer is not supported by evidence on record and is totally perverse."
  
  Issue 2: Refusal to Arrange Payment
  The learned Single Judge referred to departmental circulars, particularly office circular No.23 of 1969, which required the presence of a Gazetted Officer for payments over Rs. 500. The respondent's refusal to make payments without a Gazetted Officer present was deemed justifiable and not misconduct. The judge concluded, "mere error of judgment or lack of tact on the part of the employee could not make him liable to face disciplinary proceeding."
  
  Issue 3: Playing Cards with RPF Rakshaks
  The learned Single Judge found the evidence insufficient to prove that playing cards constituted misconduct. The judge stated, "the respondent did nothing which may fell within the mischief of either of the above clauses of Rule 3 of the Rules 1966."
  
  Issue 4: Irresponsibility and Refusal to Receive "Control Message"/"Memo"
  The judge found that the respondent's failure to convince agitators was not misconduct but noted that he did refuse to receive the "control message." The judge concluded that this failure did not warrant major punishment.
  
  Issue 5: Refusal to Accept Memo
  The judge found this charge proved, but emphasized that it did not justify major punishment.
  
  Issue 6: Allegation of Demanding 1% Commission
  The learned Single Judge found the charge based on hearsay and lacking concrete evidence. The judge noted, "such a serious charge of corruption requires to be proved to the hilt as it brings civil and criminal consequences upon the concerned employee." The evidence was deemed insufficient to sustain the charge.
  
  Conclusion:
  The learned Single Judge directed the disciplinary authority to impose a minor penalty for charges 4 and 5. The Division Bench upheld the findings of the learned Single Judge and noted the prolonged period of litigation, directing the payment of 50% back wages and all consequential benefits to the respondent-employee.
  
  Supreme Court's Decision:
  The Supreme Court agreed with the lower courts, noting that the disciplinary proceedings were based on insufficient evidence and that the charges, except for the refusal to accept the memo, did not warrant major punishment. The court directed the appellants to pay 50% of the pay and allowances without interest until the respondent reached superannuation and arrears of retiral benefits with 9% interest within three months. The court emphasized the need to end the respondent's prolonged mental agony and harassment.

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• 2009 (5) TMI 912
  
  Issues Involved:
  1. Conviction under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988.
  2. Evidence of demand and acceptance of illegal gratification.
  3. Reliability of witness testimonies.
  4. Presumption under Section 20 of the Act.
  
  Issue-wise Detailed Analysis:
  
  1. Conviction under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988:
  The appellant was convicted by the Special Judge under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988, and sentenced to rigorous imprisonment and fines. The High Court of Kerala upheld this conviction and sentence.
  
  2. Evidence of demand and acceptance of illegal gratification:
  The prosecution's case centered on the appellant, a Lower Division Clerk, demanding Rs. 25 from Manaf for delivering a driving license in book form. Manaf reported this to the Vigilance Unit, leading to a trap where phenolphthalein powder was applied to currency notes. The trap party, including independent witnesses and a constable, proceeded to the appellant's office. Upon receiving a signal from Manaf, the trap party recovered the currency notes from the appellant's shirt pocket, which tested positive for phenolphthalein.
  
  3. Reliability of witness testimonies:
  The complainant, Manaf, was not examined during the trial, and the investigating officer (PW-12) did not explain his absence. The court noted that without Manaf's testimony, there was no substantive evidence to prove the demand for the bribe. The prosecution did not rely on the testimonies of other witnesses present during the raid (PW-3 to PW-8) or the panch witnesses (PW-1 and PW-2). PW-10's testimony, which suggested the complainant offered money to the appellant, was deemed insufficient to establish the demand. The evidence of PW-1 and PW-2 was also found unreliable, with PW-1 being declared hostile and PW-2 suffering from health issues affecting his memory.
  
  4. Presumption under Section 20 of the Act:
  The High Court drew a presumption under Section 20 of the Act, assuming the appellant accepted illegal gratification. However, the Supreme Court noted that this presumption should not be drawn if the gratification is trivial. In this case, the alleged demand was only Rs. 25, which the Court deemed too trivial to infer corruption. Therefore, the High Court's reliance on this presumption was unjustified.
  
  Conclusion:
  The Supreme Court concluded that the prosecution failed to prove the demand and acceptance of the bribe beyond a reasonable doubt. The evidence lacked quality and credibility, making it unsafe to convict the appellant. Consequently, the appeal was allowed, the conviction and sentence were set aside, and any fines paid were ordered to be refunded. The appellant's bail bonds were also canceled.

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• 2009 (5) TMI 911
  

  Whether the person is a juvenile or not within the meaning of Section 2(k) of the Juvenile Justice Act, 2000 ?

  Whether a male person who was above 16 years on the date of commission of the offence prior to 1st April, 2001, would be entitled to be considered as a juvenile for the said offence if he had not completed the age of 18 years on the said date?

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• 2009 (5) TMI 910
  
  Issues Involved:
  
  1. Interpretation of the amendment in the Narcotic Drugs and Psychotropic Substances Act, 1985 by the Narcotic Drugs and Psychotropic Substances (Amendment) Act, 2001.
  2. Retrospective effect of the Amending Act.
  3. Quantum of sentence considering the amendment.
  
  Issue-wise Detailed Analysis:
  
  1. Interpretation of the Amendment in the Narcotic Drugs and Psychotropic Substances Act, 1985:
  
  The primary issue in this appeal revolves around the interpretation of the amendment made in the Narcotic Drugs and Psychotropic Substances Act, 1985 by the Narcotic Drugs and Psychotropic Substances (Amendment) Act, 2001. The amendment introduced definitions for "commercial quantity" and "small quantity" and made changes to Section 21 of the Act, which prescribes the punishment for contravention in relation to manufactured drugs and preparations. The amended Section 21 differentiates the punishment based on the quantity of the narcotic drug involved, with varying degrees of imprisonment and fines.
  
  2. Retrospective Effect of the Amending Act:
  
  The appellant contended that the Amending Act, being beneficial to the accused, should have a retrospective effect. However, the court held that the quantum of punishment should be as per the law prevailing at the time of the commission of the offence and the date of conviction. The court emphasized that a substantive provision should be presumed to have prospective operation unless specifically provided otherwise by the Parliament. The court cited the principle that all statutes should be presumed to have prospective operation only.
  
  3. Quantum of Sentence Considering the Amendment:
  
  The appellant's counsel argued that the court should consider the amendment while determining the quantum of sentence, given that the appellant had been in custody for a long period. The court, however, rejected this argument, stating that as on the date of the commission of the offence and the date of conviction, there was no distinction between a small quantity and a commercial quantity. Therefore, the question of inflicting a lesser sentence by reason of the provisions of the Amending Act did not arise. The court also referred to the proviso appended to Section 41(1) of the Amending Act, which categorically provides that the amendment shall not have any effect on pending appeals, indicating that concluded trials should not be reopened.
  
  Supporting Judgments and Precedents:
  
  The court referred to several judgments to support its decision:
  
  - State Through CBI, Delhi v. Gian Singh: The court discussed the implications of an expired statute and the application of a subsequent statute with a more lenient sentence.
  - Basheer alias N.P. Basheer v. State of Kerala: The court noted that applying the amended Act to cases where trials had concluded could result in retrials, defeating the objective of avoiding delay in trials.
  - Amarsingh Ramjibhai Barot v. State of Gujarat: The court reiterated that the minimum punishment under Section 21(c) of the Act is ten years with a fine of Rs. 1,00,000.
  - The Superintendent, Narcotic Control Bureau v. Parash Singh: The court opined that the Amending Act did not create any new offence.
  - E. Micheal Raj v. Intelligence Officer, Narcotic Control Bureau: The court noted that this decision did not provide a ratio and did not consider the effect of the amendment.
  
  Conclusion:
  
  The court concluded that the Amending Act cannot be said to have any retrospective effect and dismissed the appeal accordingly. The appellant's conviction and sentence, as per the law prevailing at the time of the commission of the offence, were upheld.

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• 2009 (5) TMI 909
  
  The Supreme Court in the case of 2009 (5) TMI 909 - SC, with judges S.H. Kapadia and Aftab Alam, condoned the delay, issued notice, and stayed the penalty amount until further orders.

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• 2009 (5) TMI 908
  
  Issues Involved:
  1. Legality of reopening the assessment u/s 147 for the assessment year 1994-95.
  2. Legality of assessing interest u/s 244A in the assessment year 1994-95.
  3. Justification of charging interest u/s 234B without a specific order by the Assessing Officer.
  
  Summary:
  
  Issue 1: Legality of reopening the assessment u/s 147 for the assessment year 1994-95

  During the course of submissions, learned counsel for the appellant did not press the question of law regarding the legality of reopening the assessment u/s 147. Therefore, this issue was dismissed as not pressed.

  Issue 2: Legality of assessing interest u/s 244A in the assessment year 1994-95

  Similarly, the question of law regarding the assessment of interest u/s 244A was not pressed by the appellant's counsel and was dismissed as not pressed.

  Issue 3: Justification of charging interest u/s 234B without a specific order by the Assessing Officer

  The appellant-assessee contested the imposition of interest u/s 234B, arguing that there was no specific order by the Assessing Officer for charging interest, and thus it could not be included in the demand notice. The Tribunal had noted that the Assessing Officer did not order for interest to be charged u/s 234B in the assessment order u/s 143(3). However, the Tribunal concluded that the amendment in the Income Tax Act applicable retrospectively from 1.4.1989 made the provision of section 234B mandatory, and thus the interest was applicable.

  The Court held that the provisions of section 234B are mandatory and do not require specific mention in the assessment order. The interest can be incorporated in the demand notice as it is automatically applicable by force of law for periods after 1.4.1989. The Court found that the judgment in Vimla Stores was Per Incuriam as it did not consider the mandatory provisions of section 234B. The Court agreed with the Tribunal's view and dismissed the appeal, holding that the interest u/s 234B was correctly imposed.

  In conclusion, the appeal was dismissed, and the question was answered against the assessee and in favor of the Revenue. There was no order as to costs.

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