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2022 (7) TMI 1210
TP Adjustment - ALP determination - assessee claimed that if CUP method is applied for determining the arms length price of international transaction of brokerage and commission earned, downward adjustment to the extent of 50% is required to be granted to the assessee - HELD THAT:- Rule 10 B (1) (a) (ii) of the income tax rules 1962 also allowed adjustment to the prices which could materially affect the price in the open market.
Further guidelines (2022) at paragraph number 2.17 also suggest that in considering whether controlled and uncontrolled transaction is comparable, regard should be held to the effect on price of broader business functions other than just product comparability. Where the differences exist between the controlled and uncontrolled transaction is on between the enterprises undertaking those transactions, it may be difficult to determine reasonably accurate adjustment to eliminate the effect on price. However such difficulties should in all fairness be adjusted reasonably but that should not preclude the application of cup method. In the present case for earlier years the learned and CIT – A has granted adjustment to the extent of 40%, which is been upheld by the coordinate benches in case of the assessee for earlier years, we also direct the learned assessing officer/transfer pricing officer to adjust and grant benefit of 40% discount to the assessee.
Comparability analysis - AO/TPO/ CIT(A) should have considered both overseas and domestic independent clients -As now assessee has submitted the details, wherein the third party rates are charged by the assessee for clearing house trading is 0.25% and adjustment on account of volume marketing etc. at the rate of 50% makes the arms length price of the brokerage at 0.13%. The assessee has charged the brokerage of 0.14% from Mauritius entity and 0.21 % from UK entity. Therefore, final amount of adjustment is in case of clearing house trades.
With respect to the delivery versus Payment towards third party rates charged by assessee is 0.38% and after deduction of 50% it comes to 0.19%. Assessee has charged from Mauritius Associated Enterprises 0.14 % and from UK Associated Enterprises of 0.22%, looking to the volume of trade, the adjustment with the UK entity is Rs. Nil and with Mauritius entity is Rs. 9,59,202/-. AO is directed to verify the same and computation of arms length price has directed the above. Accordingly, ground no. 1.4 of the appeal is allowed with above direction.
Transaction of charging of brokerage commission income from its associate enterprise is at arm’s length price for the reason that third party brokerages namely Motilal Oswal Securities Limited and ICICI Brokerage Services Limited have charged higher brokerage rates to these associate enterprises - We find that in case of 19 transactions, the ICICI brokerage Securities Limited on clearing house transaction has charged 0.1% as commission rate and also 0.05%. There is a difference of almost 3 times between the lowest rates charged and the highest rate charged by the ICICI brokerage Securities Limited. Coming to the Motilal Oswal Securities rate, the identical situation is depicted. In two of the transactions there is a nil rate of commission and in three of the transactions it is at 0.16%.
There is no justification for such wide variants in the rates. With respect to the DVP rates, the assessee has only given a single instance where the commission expenditure is merely Rs.15,542/-. No justification is coming from the side of the assessee with respect to such a wide variance in the rates. Further, 40% deduction granted by the ITAT also covers such issue. The reliance on the decision First Credit ITES (P.) Ltd. (2022 (5) TMI 1423 - ITAT MUMBAI] also do not apply to the facts of the case as the issue in that case related to the adoption of other method where the authentic quotes were accepted. In the present case, the huge rate variants do not inspire any confidence in the data submitted by the assessee. Further assessee cannot change the benchmarking and comparability analysis at his own whims and fancies. Accordingly, ground no. 1.1 is dismissed.
Addition of overseas support services received from its associate enterprises - Issue decided in favour of assessee as per assessee own case for assessment year 2000 – 01 and 2001 – 02.
Disallowance of remuneration paid to Mr. Ashith Kampani under Section 40A(2) - HELD THAT:- As we find no infirmity in the order of the learned CIT(A) in deleting the disallowance which has been confirmed by ITAT in assessee’s own case for earlier years. We also find that the learned Assessing Officer has not given any reason that why the above remuneration is excessive and unreasonable looking to the legitimate needs of the business. Further, the approval granted under the companies Act cannot use for making disallowance under the income tax Act, for the reason that both the enactments have different objects and reasons. Accordingly, ground no. 3 is dismissed.
Disallowance u/s 14A - CIT(A) held that Rule 8D applies only with A.Y. 2008-09. He therefore, upheld the disallowance of only ₹1 lacs - HELD THAT:- There is no change in the facts and circumstances of the case and further Rule 8D of the Rules does not apply for this year also. Respectfully following the order of the co-ordinate Bench in assessee’s own case, we upheld the order of the learned Commissioner of incometax (Appeal). Accordingly, ground no. 4 is dismissed.
Addition u/s 40(a)(ia) - Disallowance of transaction charges lease line charges and VSAT charges paid by assessee to the Stock exchanges - HELD THAT:- We find that now this issue is squarely covered by the decision of Hon'ble Supreme Court in case of CIT vs. Kotak Securities Limited [2016 (3) TMI 1026 - SUPREME COURT] wherein it has been held that these are the standard facilities and no tax is required to be deducted for the reason that these are the services not specifically sought by the user but are standard services. In view of this, we do not find any infirmity in the order of the learned CIT(A) in deleting the above disallowance.
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2022 (7) TMI 1209
Validity of Assessment u/s 153A - Scope of amendment - HELD THAT:- As the assessee not able to demonstrate how the condition laid down u/s 153A of the Act has not been fulfilled. More so, assessee is dis-entitled to agitate the issue with regard to the validity of the search proceedings in view of the amendment to section 132 of the Act by insertion of explanation by Finance Act, 2017 with retrospective effect from 1.4.1962 - In view of the above retrospective amendment, we are inclined to hold that the assessee is precluded from challenging the validity of invoking jurisdiction u/s 153A of the Act. Accordingly, this ground of assessee is dismissed.
Addition of unproved debts - Addition u/s 68 - HELD THAT:- Primarily, u/s 68 of the Act, assessee has to explain any credits found in the books of accounts maintained by assessee in the previous year relevant to the assessment year concerned and assessee not required to explain the credits which are not appearing in his books of accounts - assessee not required to explain the credits appearing in the books of accounts of some other party u/s 68.
In the present case, assessee has already explained the credits an amount of Rs.57.11 lakhs which is appearing in its books of accounts for which CIT(A) have no quarrel and he has accepted to that extent. He has sustained the addition over and above Rs.57.11 lakhs, which has appeared in the books of accounts of the creditors. CIT(A) not justified in sustaining addition which is not appearing in the books of accounts of the assessee and which is appearing in the books of accounts of the creditors. Accordingly, we delete the addition of Rs.17.64 lakhs also sustained by the Ld. CIT(A).
Addition of unproved loans - HELD THAT:- As these entries are wrongly posted to the account of Rajendra Runwal, Bangalore and only a clerical mistake cropped up while maintaining the books of accounts of the assessee. The assessee produced a copy of ledger account and also confirmation letters which are kept on record - We have also carefully gone through the ledger account of Shri Rajendra Runwal. The assessee has to also explain from whom it has received this amount. Once the assessee proved that it is wrongly posted to the account of Mr. Rajendra Runwal instead of some other party, the addition to be deleted. In view of this, we delete this addition of Rs.51 lakhs. Accordingly, this ground of appeal of assessee is allowed.
Addition as income from sale of lands - HELD THAT:- We are inclined to delete the addition on the reason that there was no cross examination of parties concerned and also AO relying on only oral statement of Shri Kuppendra Reddy to make this addition deleted. Accordingly, the ground of assessee’s appeal is allowed and revenue’s appeal is dismissed.
Addition of unproved loans in the name of Venkataramana without giving opportunity to the AO as required under Rule 46A of the I.T. Rules, 1962 - HELD THAT:- These facts have not been doubted by the AO. If he has any doubt regarding the genuineness of these credits, he could have issued summons to the concerned party before making such addition. He has not carried out necessary enquiry and Shri Venkata Ramana was the representative of Sapphire Infrastructure company. The Ld. CIT(A) at first appellate stage considered confirmation letter from that party, and to delete the addition. The assessee vide its letter dated 23.11.2011 filed before the CIT(A) confirmed that these details/information being submitted are the ones which were already filed/submitted during the search, post search and assessment proceedings and no new details/information being filed. As such the evidence furnished by the assessee before CIT(A) cannot be considered as an additional evidence and on that basis the addition is deleted. Being so, we do not find any infirmity in the order of Ld. CIT(A) and the same is confirmed. This ground of appeal of revenue is dismissed.
Accrued income in the hands of the assessee - HELD THAT:- The mere receiving of amount does not create any legal enforceable right to receive the same. Hence, without any right to receive the said amount, it cannot be treated as income of the assessee only on receipt basis. Such a right accrues only when the other party has either agreed to pay the amount in accordance with terms of MOU or as per verdict by an appropriate forum or arbitration, only then the income could be charged to tax as there was accrual of income. Where an assessee does not have any legal enforceable claim on the amount so received, the basis of taxability cannot be receipt basis. Even if the assessee treated it as income in its books of accounts, it is not material where the income is not accrued to the assessee to tax the same on receipt basis.
The conduct of the assessee in treating an income in a particular manner is a material fact whether income had accrued or not. Although the conduct of the assessee is relevant whether income had accrued or not, yet the ipse dixit of the assessee cannot be the last word. What had accrued must be considered from the point of view of the probability of improbability of accrual in realistic manner. The amount if it is received without entitlement to receive the same, it has to be held that there was no accrual of income to the assessee as the necessary events for accrual of income has not materialized.
In the present case in our opinion it is to be held that the income will accrue to the assessee only when the assessee acquires right to receive that income by completion of project undertaken by the assessee and by simply receiving the amount from the parties itself cannot be treated as income of the assessee. It is only advance received by assessee which is nothing but liability and cannot be treated as income of the assessee in these asst. years.
We are of the opinion that the lower authorities are not justified in taxing an amount of Rs.7 crores as accrued income in the hands of the assessee. The same is deleted and this ground of the appeal of the assessee is allowed.
Addition towards sum received towards sale consideration - HELD THAT:- These impugned receipts are part and parcel of consideration received from M/s. Shobha Developers as evidenced from MOU entered with M/s. Shobha Developers vide MOU cited (supra), wherein assessee received an amount and we have already held that this condition laid down in MOU has not been fulfilled and there is a pending litigation between the parties as discussed in immediate earlier ground with regard to deletion of addition of Rs.7 crores. On similar lines, we are of the opinion that Ld. CIT(A) is justified in deleting the addition.
Addition towards sale of land by Narasimha Murthy - A.O held that the appellant violated the provisions of section 40A(3) of the Act and allowed expenditure made disallowed - HELD THAT:- Before the A.O., the assessee has accepted that it has been the transaction of assessee carried out by Sri C.N. Murthy on its behalf. The only argument of the assessee before the lower authorities that only the net income from this transaction is to be computed after working out the further expenditure of construction of road and also there are various other expenditure to be considered to arrive at net income from this transaction. In our opinion, this plea of the assessee is valid. A.O. cannot overlook certain expenditure incurred relating to this transaction and he has to give due deduction to all the expenditure incurred in relation to the receipt of this sale consideration. A.R. submitted that the net income arouse from this transaction only at Rs.4, 64,635/-.
We direct the AO to give due credence to the all expenditure incurred by assessee in relation to impugned property purchased by Smt. Rajya Lakshmi vide sale deed dated 27.7.2007. The assessee has to furnish all the details to the AO with regard to the expenditure incurred with regard to this receipt of Rs.26 lakhs. The AO has to decide it fresh after giving opportunity of hearing to the assessee and to tax the only net income arise out of this transaction This ground of appeal of assessee is partly allowed for statistical purposes.
Net income on sale deed of said property - HELD THAT:- As there was no execution of absolute sale deed in this case, as such, we direct the AO to tax the net income from this transaction only on actual registration of sale deed of said property. In our opinion, since there was no registered sale deed was executed in the case of 3 acres and 8 guntas there is only registered sale agreement and execution of GPA along with handing over of possession of property. Thus, after receiving entire sales consideration and execution of sale deed, it is to be considered as a transfer and the gain on this account to be brought to tax in that assessment year only. However, the lower authorities have been brought to tax the gain by in this assessment year under consideration which is incorrect. This part of the ground of appeal of the assessee is allowed.
Addition on protective basis - HELD THAT:- The contract between the assessee and M/s. Shobha Developers has not materialized and it is subject matter of litigation before arbitration and it is pending for award as such addition cannot be made even on protective basis. Accordingly, we dismiss this ground raised by revenue.
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2022 (7) TMI 1208
Unaccounted investment towards the purchase of the property - element of payment of cash to the outgoing Doctors - cash component in making payment towards the consideration of the property for consideration of the hospital - CIT-A deleted the addition - addition made by the Ld. AO since on the basis of the statement made by this doctors admitting cash payment for the purchase of the land in question - HELD THAT:- As we have already discussed on the observation made by the Coordinate Bench on the identical issue involved in this matter in DR KEYUR PARIKH & OTHERS VERSUS ASSTT COMMISSIONER OF INCOME TAX & OTHERS [2013 (11) TMI 1242 - ITAT AHMEDABAD]relation to the addition on the ground of unaccounted investment for the purchase of land whereby and whereunder it has been repeatedly hold that there was no evidence found in the possession of Revenue to hold that assessee had in fact made unaccounted investment towards the purchase of the property or was there any element of payment of cash to the outgoing Doctors, we at this stage find no reason to deviate from such stand taken by the Coordinate Bench in holding otherwise.
We note that since the issue has already been decided there is no basis of agitating the same issue repeatedly by the Revenue in repeated litigation. We, therefore, find no ambiguity in the order passed by the Ld. CIT(A) in deleting the addition passed by the Revenue in view of the order passed by the Coordinate Bench in holding no unaccounted investment found towards purchase of the property in question. We, therefore, upheld the same. The Revenue’s appeal is, thus, found to be devoid of any merit and hence dismissed.
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2022 (7) TMI 1207
Reopening of assessment u/s 147 - AO received information from the DGIT(Inv), Mumbai revealing hawala transactions in bogus purchases - HELD THAT:- As the learned lower authorities have not made any disallowance or addition pertaining to the sole reason of reopening. That being the case, we quote CIT vs. Jet Airways [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] that such reopening is not sustainable as held that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147.
In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee.
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2022 (7) TMI 1206
Addition u/s 36(1)(va) on a/c of delayed payment of PF & ESI - delayed deposit of employees’ contribution to PF and ESIC on the ground that the same were deposited beyond the due date prescribed in the said Act - HELD THAT:- We find the co-ordinate benches of the Tribunal are now consistently taking the view that no disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) can be made on account of delayed payment of PF and ESIC, if such payments are made before the due date of filing of the return. It has further been held in these decisions that the amendment to section 43B as well as section 36(1)(va) r.w.s. 2(24)(x) by the Finance Act, 2021 are prospective and not retrospective in nature. Since, the assessee in instant case has admittedly paid the employees’ contribution to PF and ESIC before the due date of filing of the return, therefore, we set aside the order of the CIT (A)/NFAC and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.
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2022 (7) TMI 1205
Unexplained cash credit u/s. 68 - CIT-A deleted the addition - HELD THAT:- CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by the CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We note that various adverse inferences drawn by A.O. in assessment order have been correctly dealt with in his appellate order and does not call for any interference. We are in agreement with the findings and reasoning recorded by CIT(A) in his appellate order reproduced hereinabove deleting the addition in the case of assessee.
Considering totality of facts and circumstances in the case of assessee and considering legal evidence on record. We hold that that addition made by A.O. is unjustified and unsustainable. We uphold the order of CIT(A) deleting addition made in the assessment framed. Grounds of appeal 1 to 5 of revenue are dismissed.
Addition u/s. 69C on account of unexplained expenditure - expenditure on account of commission paid for bringing back money in his books as bogus long term capital gain - HELD THAT:- The very premise for which the addition is made has been held to be not correct and thus consequent addition made by A.O. for alleged expenditure is unjustified and unsustainable. It is seen that the A.O. has made adverse inference which is not based on any material or evidence on record. A.O. has not even stated as to whom the aforesaid money is paid so as to constitute the expenditure incurred which may require to be explained by assessee. It is settled position of law the onus is on A.O. to show first that the expenditure is incurred and question of same required to be explained by assessee arises thereafter. In the first place there being no evidence of expenditure incurred by assessee, the question of any addition for the same does not survive. The addition made by A.O. is unjustified and unsustainable. We therefore hold that there is no case for making any addition u/s. 69C - Addition made by A.O. has correctly been deleted by learned CIT(A).
Gain on sale of land - capital gain or business income - HELD THAT:- The assessee has sold properties and surplus arising on the same has been declared as long term capital gain at the hands of assessee. The computation of income indicates that the surplus shown in the return is under the head long term capital gain. The properties sold by assessee are held for more than 36 months is undisputed fact on record. The investment made by assessee is recorded in books of account as investment being capital assets. A.O. has referred to statement of assessee as reproduced in assessment order at page 20 to conclude that the assessee has admitted that he is carrying on business in real estate. The assessee was questioned in the statement as to what is the source of your livelihood.
The statement read as a whole does not indicate that the assessee has admitted as observed by A.O. in assessment order i.e. he is engaged in the activity of business in property. The adverse inference drawn by A.O. in assessment proceedings is unjustified. It is noted that one of the property sold was owned and held for around 9 1/2 years and another property sold was owned and held for 6 years. Property owned and held was enjoyed for deriving agricultural income which is accepted in the case of assessee. Both the properties are held as co-owner. On above factual position it cannot be concluded that surplus arising is business income as held by A.O. In case of assessee property having been held for more than 36 months as investment indicates that the intention of acquisition of property was to hold the same as capital assets and thus surplus arising on the same is correctly declared to be assessable under the head long term capital gain. We therefore hold that no fault can be found with regard to income declared under the head long term capital gain on sale of property. CIT(A) has correctly directed to accept long term capital gain and not assess income as business income.
We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. We find no merit in appeal of revenue. - Decided in favour of assessee.
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2022 (7) TMI 1204
Assessment u/s 153A - Whether any incriminating material found during the course of search? - AY 2009 -10 - HELD THAT:- As mentioned in the judgement of jurisdictional High Court in the case of Delhi International Airport Pvt. Ltd. [2021 (11) TMI 928 - KARNATAKA HIGH COURT] it is clear that, in case of persons searched, the assessment for those assessment years where the assessments are concluded as on the date of search, cannot be disturbed unless incriminating material pertain to such assessment year is found and seized during the course of search. Hence, in our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2009-10 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. Accordingly, we quash the assessment for the assessment year 2009-10.
For AY-2010-11 and AY 2011-12 - Addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. In our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2011-12 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income.
AY 2012-13 - In this assessment year 2012-13, though there was no seized material, time limit to issue notice u/s 143(2) of the Act is not lapsed. The assessment is pending, which is abated and it is not a concluded assessment. Being so, the AO validly assumed jurisdiction u/s 153A of the Act consequent to the search action u/s 132 of the Act so as to frame the assessment u/s 153A of the Act. Accordingly, framing of assessment u/s 153A of the Act for the assessment year 2012-13 is valid.
Unexplained opening balance - HELD THAT:- In this case, the addition was made only on the reason that opening capital has not been explained by the assessee in the relevant assessment year. In our opinion, AO cannot make any addition on the basis of carry forward opening balance. In case had he any doubt, he could have questioned only in the earlier assessment year prior to assessment year 2007-08 not in the assessment year 2007-08. Accordingly, addition made by AO is deleted.
Treatment of agricultural income as taxable income in assessment year 2007-08, 2008-09 & 2011-12 - HELD THAT:- AO not brought any material to suggest that the income declared by the assessee as an agricultural income is earned from any other unknown sources. AO made an allegation that assessee has not filed details of agricultural land owned, crafts cultivated in various seasons, gross income earned out of agricultural operations, details of expenditure income to earn that income and that the evidences, details of crop sold and not income earned and copies of RTC of the properties.
In our opinion, in case of such assessments framed u/s 153A of the Act as held by the Delhi bench in the case of Ashok Kumar Tyagi [2022 (3) TMI 899 - ITAT DELHI] it is not possible to treat the agricultural income as non-agricultural income without any seized material. Further, in a proceeding u/s 153A of the Act, addition has to be made on the basis of incriminating material found as a result of search. Since the decision of the assessment officer to treat the agricultural income as income from other sources which is not based on incriminating material seized during the course of search action, no addition or disallowance could be made.
Adhoc disallowance of expenditure debited to the P&L account - HELD THAT:- As carefully gone through the cash book for these assessment years and also ledger extracts filed by the assessee before us. Admittedly, these are the regular books of accounts maintained by assessee produced before the AO and only after going through the P&L account, the AO disallowed these expenditures debited to the P&L account at 50% as not incurred wholly and exclusively for the purpose of business. To come to that conclusion, the AO have no material which is inappropriate. Accordingly, we will delete this addition made in all these assessment years on adhoc basis. This ground of appeal of the assessee is allowed in all the above appeals.
Correct head of income - treating of income offered under head “Capital Gain” OR "business income" - HELD THAT:- In this case, admittedly assessee treated the purchase of agricultural land as capital asset and on relinquishment of the same in favour of Shri Kempegowda, the income resulted was treated as Capital gain. However, the AO without any material came to conclusion of the assessee holding the property as stock in trade and arrived at business income instead of capital gain disclosed by the assessee. If there was no material in the hands of AO to consider as this transaction as adventure in the nature of trade, we are of the opinion that the land was held by assessee as capital asset for investment, the income generated from this transaction on entering into a relinquished deed, the income has to be considered as short term capital gain and not as business income. This view of ours is supported by the order of the coordinate bench of Hyderabad in the case of M/s. SSPLL Ltd. [2013 (7) TMI 18 - ITAT HYDERABAD] - Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us.
Loss on sale of property - loss has not been treated as capital loss - HELD THAT:- In case of another property situated at Gollahalli whereas the assessee has sold 21 sites for a total consideration of Rs.92,11,500/-The assessee computed the short term capital gain of Rs.25,64,072/-. The AO treated it as business income. The income generated is treated as business income. The assessee filed additional evidence for this assessment year producing the ledger account of development expenses and copy of vouchers and prayed that the issue may be remitted. Without prejudice to our finding on legal issue for the purpose of completion of the proceedings, we remit this issue to the file of AO for fresh consideration relating to both transactions as discussed in earlier para in this order in earlier assessment years under consideration.
Unexplained investment - HELD THAT:- The assessee has taken this plea before lower authorities that the payment is accounted in his books of accounts. However, Ld. CIT(A) sustained the addition. In our opinion, there is no necessity of making such addition when the transaction is duly reflected in the books of accounts as shown in the ledger extract in page no.170 of the paper book. Accordingly, we delete this addition.
Unexplained cash credit addition - HELD THAT:- After hearing both the parties, we are of the opinion that this issue was not properly examined of the addition and proper enquiry has not been made. Hence, the issue may be remitted to the file of AO. We accede to the request of the assessee’s counsel. Accordingly, this issue remitted to the AO to decide afresh after making proper enquiry and giving opportunity of hearing to the assessee.
Addition based on seized document in search - HELD THAT:- The suspicion in the minds of the revenue authorities that the assessee made certain payments as per the loose slips cannot be reason to make an addition. In the absence of concrete evidence brought on record by the authorities concerned, the addition cannot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that authorities have to follow the principles of natural justice and the discovery of the documents in the form of loose slips not enough to make an addition without giving an opportunity of cross examination of the concerned parties. The lose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, this issue remitted to the AO for fresh consideration to decide in the light of above observations.
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2022 (7) TMI 1203
Deduction u/s. 80IB(10) - whether the assessee is entitled to deduction u/s.80IB(10) with respect to the profits on sale of flats which was earmarked the land owners and which was sold on their behalf at their request by the assessee? - HELD THAT:- The assessee has entered into agreements whereby the land owners wanted the assessee to sell the flats that were to be allotted to them as per the terms mentioned therein the consideration is paid towards the land, the super built up area which is the land owner’s out of 37% of the undivided right as per the original agreement entered into with the assessee. Thus the argument of the ld AR that the consideration paid by the assessee to the landowners is nothing but due amounts paid for purchase of the land which forms part of the overall cost of the project developed by the assessee has merits. Further as per the provisions of section 80IB(10), the profit derived from ‘such housing project’ is eligible for deduction which need to be considered in total, subject to other conditions mentioned in the said section.
A plain reading of section 80-IB(10) evidently makes it clear that deduction is available in a case where an undertaking develops and builds a housing project on the profits derived from such housing project. In the given case the profit from the sale of flats earmarked for the land owners is also derived by the assessee from the development and building of the housing project. In view of the above discussion we are of the considered view that the assessee is entitled claim deduction u/s.80IB(10) on the profits derived from sale 22 flats earmarked for the land owners. The appeal is allowed in favour of the assessee.
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2022 (7) TMI 1202
Capital gain computation - adoption of value as deemed consideration u/s. 50C as against the actual sale consideration of the impugned property u/s 50C - HELD THAT:- In the present case, it is noted that the Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2) of the Act despite specific prayer made by the assessee at the first stage. AO and the CIT(A) have also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we hold that the CIT(A) was not justified in confirming the action of the AO in adopting deemed sale consideration in violation of section 50C(2) of the Act.
The failure of the AO to follow the procedure as prescribed under section 50C (2) in particular, and therefore, the CIT(A) action in confirming such order is held unjustified and against law by sustaining stamp duty value of property Rs. 11,19,40,441/- as deemed sale consideration u/s. 50C against actual sale consideration and fair market value Rs. 8,81,00,000/-. Accordingly, the AO is directed to adopt the value of sale consideration at Rs. 8,81,00,000/- of the subject property for the purpose of computation of Long Term Capital Gains.
Allowability of deduction to the assessee u/s. 54F - appellant has ownership of more than one residential house - HELD THAT:- Admittedly, the AO had accepted the contention of the assessee that the said residential houses are unsold properties of the trading business of the assessee and the assessee himself has reflected the seven residential house properties as stock in trade in his books of account and thus it is not disputed by the AO that the aforesaid seven house properties were accounted for by the assessee in his books of accounts as stock in trade. Thus, in our considered opinion, the said residential houses cannot be taken as capital asset within the meaning of Section 2(14) - it cannot be held that the assessee owned more than one residential house as on the date of transfer of the impugned properties. It is also not disputed that the assessee had purchased new house property within specified period as per provisions of Section 54 of the Act and the conditions stipulated u/s. 54F stands fulfilled by the assessee. Thus, taking into consideration, the facts, circumstances of the case and written submissions of the assessee, we feel that the ld. CIT(A) has been justified in judiciously allowing the deduction u/s. 54F of the Act, to the assessee and therefore, we concur with the findings of the ld. CIT(A). Thus Ground No. 1 of the Department is dismissed
Sustaining gain from sale of building of discontinued business treated as short term capital gain in terms of Section 50 - HELD THAT:- Even if Section 50 is to be applied as per the dictum of the AO, then full value of the consideration had to be reduced from the complete block of WDV i.e. all building (Jodhpur and Jaipur). However, the AO had reduced the WDV of Jodhpur in his assessment order where as he should have reduced the WDV of both the places of Jodhpur and Jaipur meaning thereby the AO has treated separate building from block of depreciable asset. In view of the matter, we feel that there has been lacuna on the part of the lower authorities in applying Section 50 of the Act, on building of Jodhpur. Thus, consideration peculiar the facts, and circumstances of the case, it would not be justified to approved the findings of the lower authorities. We find merit in the contentions of the appellant and therefore, accept the prayer of the appellant that provisions of section 50 of the Act are not applicable in the case of the assessee and thus, the Ground No. 2 of the assessee is allowed.
Addition of notional rent on old unusable house - HELD THAT:- It is noted from the available record that the assessee had 07 buildings at Jawahar Nagar which were held by the assessee as stock in trade for trading purpose. The conditions of the house building was very old, dilapidated condition and not fit for habitable purposes. AO also deployed his Inspector to inspect the conditions of the building whose report was silent on the evidences produced by the assessee during the assessment proceedings which approved the validity of the submission of the Assessee as to the state of affairs of the building. It is also imperative to mention that the case of Ansal Housing Finance & Leasing Co. Ltd. (2009 (8) TMI 846 - ITAT MUMBAI] cited by the authorities below does not apply to the facts of the present case. As in the case of M/s. Ansal Housing Finance & Leasing Co. Ltd. (Supra) there was a new building ready to use in for habitable purpose whereas in the assesses case it was a damaged/dilapidated and inhabitable building. Therefore, the finding of the AO/CIT(A) based on decision of Ansal Housing Finance & Leasing Co. Ltd. are devoid merit. Considering the facts and circumstances of the case we do not incline to agree with the findings of the ld. CIT(A). Thus, the Ground No. 3 of the assessee is allowed.
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2022 (7) TMI 1201
Deemed dividend addition u/s 2(22)(e) - Whether trade advances in the nature of commercial transactions do not fall within the ambit of Section 2(22)(e)? - HELD THAT:- We make it clear that the assessee’s detailed paper book contains his “JDA” with the company as therein suggests that the assessee as well as the company along with other owners/shareholders had to open/operate an escrow account with joint signatures in which the corresponding sale proceedings had to be deposited to be disbursed to the developers. Mr. Shingte sought to clarify at this stage that no such Escrow account had been opened which means that the said stipulation stood rendered frustrated.
We are unable to accept the assessee’s arguments as it is clear not only from a perusal of case records as well as the CIT(A)’s findings but also from the evidence on record that the impugned sum(s) over and above the balance payable by the company represent the latter’s accumulated profits only. We make it clear that the learned CIT(A) has also discussed a catena of case law regarding assessee’s contention that the impugned addition deserves to be restricted to its 34% stake only
AO’s action treating the advances received from the company as business income already stands deleted. We hold that the same has no bearing on the instant issue of deemed dividend whose application stands sufficiently proved qua the loan and advances coming from the company side to his account. We accordingly uphold the impugned identical deemed dividend addition in assessee’s twin appeals. These two cases fail accordingly.
Disallowing set-off which already has been taxed as deemed dividend - Faced with this situation and keeping in mind the fact that we have upheld Section 2(22)(e) addition in preceding paragraphs, we are of the view that larger interest of justice would be met in case if the Assessing Officer readjudicates the assessee’s instant solitary substantive grievance in this third assessment year 2014-15 afresh as per law. We order accordingly. We make it clear that the assessee shall be at liberty to file all the relevant details in consequential proceedings. This last appeal is allowed for statistical purposes, therefore.
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2022 (7) TMI 1200
Legality of the the late fees charged in the adjudication order - delay in filing the Bill of Entry - applicability of time limitation for filing of bills of entry as per Section 46(3) of the Customs Act, 1962 - HELD THAT:- Section 46(3) of the Act that an Importer is to present a Bill of Entry for home consumption or for warehousing in the prescribed form before the end of the next day following the day on which, the vessel carrying the goods arrives at a customs station at which such goods are to be cleared. There is a proviso which allows a period of thirty days for presentation of an advance bill of entry. The second proviso is the one, applicable here, which provides that where the Bill of Entry is not presented within the time, and the proper officer is satisfied that there was no sufficient cause for such delay, the Importer shall pay such charges for late presentation of the Bill of Entry as may be prescribed.
In the present case, it is observed that the Respondent-Company had filed the Bill of Entry No.9375854 for the entire quantity on 20th April, 2017 within the prescribed time limit and as such, there was no objection to the same. It had also paid the entire duty for 98450 metric tons of Goonyella C Coking Coal, even though, 1,341 metric tons had not landed in Marmagao but had landed in Jaigad and as soon as the amendments to the IGM were approved by the Appellant on 14th March, 2018, again the Respondent-Company filed the Bill of Entry on the very same day in respect of 1,341 metric tons - The second proviso clearly invests a discretion on the Authorities while considering levy of late payment charges as imposed on the Respondent-Company. The satisfaction for sufficiency of cause is a subjective satisfaction which has to be exercised judiciously. The Assessing Officer has based on technicalities and without any judicious application of mind, levied the late payment charges which have been rightly set aside by the Appellate Authority and the Tribunal. By no stretch of imagination, it can be said that the Respondent-Company has not acted bona fide.
The entire confusion was due to the short landing of 1,341 metric tons of Goonyella C Coking Coal at Marmagao though full duty in respect of which has been paid by the Respondent-Company and even after it was found out that 1,341 metric tons was landed in Jaigad, the Respondent-Company has taken efforts to get the IGM amended and no sooner the the IGM was amended, the Bill of Entry in respect thereof was filed on the same day within time. This shows the Respondent Company’s eagerness to be on the right side of the law. We are satisfied that the Respondent-Company has shown its bona fides by all these actions.
There are no fault with the order of the Appellate Authority or the Tribunal - the Appeal does not raise any substantial question of law and is accordingly dismissed.
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2022 (7) TMI 1199
Maintainability of appeal before the High Court - Imposition of ADD - DI Pipes originating in or exported from China - Request for second sunset review - case of appellant that the claim of respondents regarding the likelihood of recurrence of the injury, in the event of cessation of ADD, was not made out - HELD THAT:- CTA, inter alia, provides for levy of additional duty (equal to excise duty for the time being leviable on like articles produced or manufactured in India), countervailing duty (CVD); safeguard duty and ADD. This is apparent on a bare perusal of Sections 3, 8(B), and 9(A) of the said Act i.e., CTA - Insofar as anti-dumping is concerned, both CTA and the 1995 Rules provide for a mechanism for initiating an investigation, albeit in the prescribed manner, provided the affected party i.e., the complainant meets the requisite parameters, as provided in the CTA and the attendant rules.
The review, concerning the imposition of ADD, is provided in sub-section (5) of Section 9A of the CTA, read with Rule 23 of the Rules. The review can be carried out by the DA, either on its own initiative or upon a request being made in that behalf by an interested party under sub-rule (1A) of Rule 23 of the 1995 Rules - sub-rule (1B) of Rule 23 provides, that ADD can be imposed for a period not exceeding five years from the date of its imposition unless the DA comes to a contrary conclusion.
Once the investigation is commenced, the DA is obliged to inquire as to the existence, degree and effect of the alleged dumping in relation to the import of the subject article. The investigation, thus, requires the DA to identify the article and also submit findings, provisional or otherwise, to the Central Government concerning the normal value, export price and margin of dumping concerning the article under investigation, and that, such dumped article is causing injury or threatens injury to an industry established in India or would bring about material retardation in the establishment of such an industry in India - clearly, the nature of the inquiry, even in the first instance, when a decision is to be taken concerning the imposition of ADD, requires the DA to keep all the aforesaid facets in mind, before it can recommend to the Central Government, the amount of ADD which is to be imposed in a given case. It is, to our minds, a decision, which is industry-specific, being a remedial measure, that, the Central Government may take to preserve the interests of the domestic industry.
The provisions of sections 35G and 35L of the CE Act are pari materia with the provisions of section 130 and section 130E(b) of the 1962 Act. Under section 35G of the CE Act, an appeal lies to the High Court from every order passed in appeal by the Appellate Tribunal, if it involves a substantial question law under section 35G(1), save and except when the order concerns "determination of any question having a relation to the rate of duty of excise or the value of goods of the purposes of assessment”. The appeal, thus, relating to the rate of duty or the value of goods for the purposes of assessment, under section 35L(b) of the CE Act lies to the Supreme Court. It is in this context, that matters concerning exigibility to tax, were required to be dealt with by the Supreme Court, under Section 35L(b) of the CE Act.
If the Court were to conclude, that the activity did not fall within the four corners of the concerned statute, no tax/duty would be leviable. Likewise, if an activity or the subject goods are so classified to fall in an entry, different from the one which the revenue propounds, more often than not, it would impact the rate of duty. Such a situation may also arise when one is dealing with an exemption notification. Its impact may lead to a situation, where the assessee may either become the beneficiary of a concessional rate of duty, or even a nil rate of duty - However, this is not the situation that arises for consideration in the instant case. The second sunset review, that the DA has carried out, relates to the ascertainment of whether or not withdrawing ADD would be injurious to the domestic industry i.e., will the withdrawal lead to continuation or recurrence of injury.
There is one last aspect that is required to be dealt with. Mr Ramesh Singh had also raised an objection with regard to the tenability of the appeal on the ground that it was not preferred by the Principal Commissioner or Commissioner of Customs as provided in section 130(2) of the 1962 Act. It is required to be borne in mind, that the provisions of the 1962 Act and the rules and regulations made thereunder become applicable by virtue of sub-section (8) of section 9A of the CTA. A plain reading of sub-section (2) of section 130 of the 1962 Act would demonstrate, that the appeal to this Court could be preferred either by the Principal Commissioner of Customs or Commissioner of Customs or even “other party” aggrieved by any order of the Tribunal. The DA, to our minds, would if nothing else, fall within the category of “other party”. Therefore, this objection is without merit, and hence is rejected.
The preliminary objection taken by the respondents, as regards the maintainability of the instant appeal, cannot be sustained - Registry is directed to list the appeal, for further directions, on the date
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2022 (7) TMI 1198
Liability of a Customs Broker - liability as per Regulation 17(9) of the Customs Broker Licensing Regulation 2013 - whether payment of differential amount duty, by the respondent to the appellant does not prove admission of liability and involvement of the respondent functioning as importer itself? - statements made by the director of the respondent admitting the offence and the involvement thereto binds the respondent company - doctrine of proportionality - HELD THAT:- In terms of clause (d) of Regulation 11, the respondent was bound to advise his client to comply with the provisions of the Act and in case of non-compliance, the respondent should bring the matter to the notice of the Customs Authorities. In terms of clause (n) of Regulation 11, the respondent has to verify the antecedents, the correctness of the importer, exporter code no. identity of his client and functioning of his client at the declared address by using reliable, independent, authenticate document, data or information. Admittedly, the conduct of the respondent clearly shows that he has breached the said provision.
It is also noted the legal principle of Preponderance of Probabilities which is required to be applied and not proof beyond reasonable doubt. Bearing this in mind, when we examine the order passed by the licensing authority dated 21.09.2017 by which the license was revoked, the statement of Shri Subhasish Bhattachariya, Director of the respondent company recorded under Section 108 of the Act on 03.09.2016, 05.09.2016 and 11.11.2016 were taken note of. There is a clear admission that there was a mis-declaration in the weight of the imported consignment, and that the weigh bridge operator of CONCOR-CFS Kolkata used to ask staff of the respondent about the declared weight in the Bill of Lading or IGM and used to issue weighment slip matching with the declared weight. Further he had stated that the customs authorities never checked the weight of the packing materials of the bills of the old and used clothing but relied on the declaration in the imported documents. Further he had stated that after examination by the customs, the weighment slips were destroyed by the respondent company. Shri Marinmoy Das, another Director of the respondent in his statement under Section 108 of the Act recorded on 15.09.2016 stated that no weighment slips were found from their office by the DRI as they were destroyed as per the instructions of the importer because the weight of the consignment were not as per declaration.
The manipulated weighment slips were not only handed over to the representatives of the respondent and the actual weight and 6 containers were available in the computer installed in the Weigh Bridge. The weigh bridge operator has specifically implicated the Director of the respondent and the G Card holder who dealt with the cargo on behalf of the respondent. The statement recorded from the transporter shows that the declared weight of the container is much less than the actual weight. The importers did not respond to the summons issued under Section 108 of the Act and the same were returned undelivered with remark “not found/ not existed”. Therefore, the licensing authority concluded that the said importers are paper firms and the respondent has kept the department in the dark about the identity of his client and thus allowing them to evade customs duties. Furthermore, the respondent company had deposited a sum of Rs. 65.40 lakhs by 26 demand drafts stated to be on behalf of the importers - the tribunal has picked holes in the evidence brought on record by the licensing authority which not only probabilises but also establishes the violation committed by the respondent thereby giving no room for interference.
It is pointed out that licence granted to the respondent is to expire on 22.07.2022 and in the event this Court does not agree with his submissions, the relief as granted by the Hon’ble Supreme Court can be considered in the case of the respondent.
The order passed by the tribunal suffers from errors of law and perversity calling for interference - the appeal filed by the revenue is allowed and the substantial questions of law are answered in favour of the revenue.
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2022 (7) TMI 1197
Seizure of goods - Gold Jewellery - the only allegation against the petitioner is that he did not follow the Standard Operating Procedure (SOP) dated 29.03.2016 - allegation of Advance Authorization Scheme through circular trading of gold jewellery exported under the guise of exhibition from India through hand carry and subsequently smuggling Gold jewellery into India under the garb of reimporting the said jewellery without the required documents and permissions - HELD THAT:- It is not in dispute that in certain matters pending before the Supreme Court, challenge has also been laid to the amendments brought about in the Customs Act, 1962 via the Finance Act, 2022. Therefore, this aspect of the matter is also receiving the attention of the Supreme Court.
It is relevant to note that in the counter-affidavit filed in the abovementioned writ petition, averments have been made by the respondents, in rebuttal, vis-à-vis the SOP dated 29.03.2016. These are captured on page 2 of the counter-affidavit - Although, no rejoinder has been filed, Mr Gautam has attempted to explain that the stand taken by the respondents would not withstand scrutiny.
Although a DPC was convened in December 2021, the writ petitioner was not considered.
Mr Gautam says that the official respondents could consider the following: (i) Expedite the adjudicatory process vis-à-vis the writ petitioner, given the fact that the charges against him fall in a narrow compass; (ii) Consider the writ petitioner’s representation for convening a Review DPC - Mr Harpreet Singh says that both requests will be considered as per law and having regard to the facts obtaining in the matter.
The writ petition can be disposed of.
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2022 (7) TMI 1196
Seeking release/return of the detained goods - Gold Bangles, weighing 150 grams - prohibited goods or restricted goods - passenger staying abroad for more than six months - HELD THAT:- It is not in dispute that the petitioner is working in Singapore for the past 3 ½ years and he is having a valid Work Permit Card issued by the Republic of Singapore and is also having a Bank Account in Singapore. As could be seen from the Detention/Seizure of Passengers Baggage Receipt issued by the third respondent, the petitioner had left India on 02.10.2018 to Singapore and returned to India again after 3 ½ years i.e., on 01.05.2022, which shows that for the past 3 ½ years, the petitioner was working in Singapore and he is also having a valid Work Permit Card issued by the Republic of Singapore. The petitioner came to India to attend the family marriage and for that purpose, he was carrying three gold bangles in his bag and not concealed the same in his baggage or on his body. Further, there is no declaration slip obtained from the petitioner and there is no specific rebuttal on the petitioner's assertion that no declaration slip is obtained from him. In fact, he was orally declared by the Customs Officers that he is carrying 3 gold bangles, totally weighing 150 grams for his family marriage, is not specifically denied. Further, it is not in dispute that the petitioner has returned from Singapore after 3 ½ years.
A statement has been recorded from him on 01.05.2022, which has been immediately refuted on 02.05.2022, as could be seen from the records. The petitioner had consistently taken a stand that he has been working in Singapore and got work permit and is also having a Bank Account for crediting his salary. With his earnings, he had purchased three gold bangles. He had also produced the invoice of the gold bangles to the authorities. Further, there is no concealment of gold in a baggage or body, which prima facie, shows that there is no smuggling and at the most, it is seized for non-declaration. Added to it, adjudication proceedings is yet to be completed.
The Delhi High Court in Vaibhav Sampat More vs. National Investigation Agency, Through its Chief Investigation Officer [2022 (6) TMI 220 - DELHI HIGH COURT] held that import of gold is not prohibited, but restricted subject to prescribed quantity on payment of duty. Thus, import of gold is not prohibited, but restricted subject to prescribed quantity on payment of duty.
Section 125 of the Customs Act, 1962, gives rights to the owner or from whom the goods have been seized to redeem such goods on payment of fine. Further, this Court consistently held that goods can be handed over on executing 50% of the Bank guarantee on the duty amount. In view of the same, this Court directs the petitioner to execute 50% of the Bank guarantee in lieu of customs duty and on execution of the Bank guarantee, the respondents are directed to hand over the gold bangles to the petitioner, within two weeks from thereon. It is for the respondents to proceed with the adjudication proceedings to save the revenue to the Nation. The adjudication proceedings shall be completed within a period of three months from the date of receipt of a copy of this order.
Petition disposed off.
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2022 (7) TMI 1195
Validity of summons issues - SEZ unit - Impact of proceedings under PML Act over Customs Act - allegation of diversion of duty free gold clandestinely diverted duty into the domestic market and exported fake ornaments made from little quantity of gold by mis-declaring them as studded jewellery. - Seeking to declare the action of the respondents in summoning the petitioners under Section 108 of the Customs Act, 1962, as illegal and contrary to the provisions of the Cr.P.C. - seeking to direct the respondents to record the statement of the petitioners through video conferencing - Sections 4, 5, 160 and 161 of Cr.P.C. and Section 108 of the Customs Act, 1962 - HELD THAT:- Not only under Section 104(3) relating to arrest, but also under Section 105(2) relating to search of premises it was specifically mentioned that the Code of Criminal Procedure is applicable. Under Section 108(3) prviso, it is stated that the exemption under Section 132 of the Code of Civil Procedure shall be applicable. Thus, wherever the concerned provisions are applicable, it is specifically stated in the Act.
In the PML Act, there is a specific provision under Section 65 stating that the provisions of Cr.P.C. are applied insofar as they are not inconsistent with the provisions of the said Act to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under the Act. But, there is no such specific provision in the Customs Act, 1962, applying the Code of Criminal Procedure to all the provisions relating to the stages of investigation, trial etc.
Admittedly, the Hon’ble Apex Court observed in the case of POOLPANDI VERSUS SUPERINTENDENT, CENTRAL EXCISE [1992 (5) TMI 147 - SUPREME COURT] that it was not at the whims of the person that the investigation should be done at his or her convenience. Hence, the petitioners could not take shelter of the judgment of the Delhi High court when it was not in accordance with the judgment of the Hon’ble Apex Court.
Whenever a statute creates a new offence and also sets up a machinery for dealing with it, the provisions of Cr.P.C. relating to the matters covered by such Statute would not be applicable to the said offences. The Customs Act was enacted in 1962 and had created the offences under Chapter-XVI and the manner of enquiry and investigation are prescribed in Chapter-XIII. The Customs Act is enforced only by the Customs Officers by its own machinery. The Customs Officers are empowered with the power of investigation as contemplated under Chapter-XIII of the Customs Act, 1962 - The Customs Officer is not a police officer as per the judgment of the Hon’ble Apex Court in STATE OF PUNJAB VERSUS BARKAT RAM [1961 (8) TMI 28 - SUPREME COURT] and the statement made before him by a person who is arrested or against whom an enquiry is made are not covered by Section 25 of the Indian Evidence Act.
As summoning of the petitioners by the respondents would not amount to taking any coercive steps like arresting them or prosecuting them, but only to proceed forward with the investigation and, however, as the learned Additional Solicitor General of India also conceded that they were not insisting on the presence of petitioners No.1 and 2, it is considered fit to allow the petition with regard to petitioner Nos.1 and 2 and to dismiss the petition with regard to petitioner Nos.3 to 5. The petitioners No.3 to 5 are directed to comply with the summons and to give their statements in person and to co-operate with the investigation in the interest of justice.
The Writ Petition is partly allowed.
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2022 (7) TMI 1194
Dismissal of Application filed under Section 9 of the IBC by the Appellant - direction to Adjudicating Authority to issue SCN under Section 65(1) to the parties for appropriate action - related party transaction or not - HELD THAT:- The loan sanction order which has been placed before us indicates that along with the Corporate Debtor who was Applicant for the loan, the Director of the Operational Creditor Mr. Jhurani was also co-applicant. Thus, when both the Operational Creditor and the Corporate Debtor were Applicants, it cannot be seen how the Operational Creditor can claim payment of fee for procuring the loan.
We in the present case are considering the initiation of the CIRP, the Adjudicating Authority had sufficient reason to believe that debt itself is doubtful. No error has been committed by the Adjudicating Authority in refusing to initiate the CIRP on such suspicious debt. Thus, the order of the Adjudicating Authority refusing to initiate CIRP cannot be faulted and we affirm the said order passed by the Adjudicating Authority.
Show-cause notice under Section 65(1) of the IBC - HELD THAT:- The notice has been issued consequent to the impugned order passed, to which the parties were entitled to file reply. Learned Counsel for the Appellant submits that the Appellant has already filed a Reply to show-cause notice and Learned Counsel for the Respondent submits that he has also filed a Reply to the show-cause notice. Order under Section 65 after considering the show-cause notice are yet to be passed by the Adjudicating Authority. We only observe that while passing the order under Section 65, the Adjudicating Authority shall consider the Reply given by the Respondent and shall not be influenced by any observation made in the impugned order.
Appeal dismissed.
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2022 (7) TMI 1193
Seeking directions to the Respondents to provide for and make good to the Corporate Debtor for the losses caused due to the Respondent’s indulgence in fraudulent transactions - Section 66 of the IBC - HELD THAT:- The Respondent Nos. 9 and 10 were not the officers of the Corporate Debtor so as to any punishment can be awarded on them under Section 69. The direction in paragraph 29 insofar as Respondent Nos. 9 and 10 (Appellants before us) for prosecution under Section 69 is deserves to be set aside and is hereby set aside.
Both the Appeals are partly allowed insofar as direction in paragraph 29 for instituting prosecution under Section 69 against the Appellants is concerned - Appeal disposed off.
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2022 (7) TMI 1192
Rejection of application seeking consideration of his resolution plan submitted - HELD THAT:- The CoC authorized the leader of lenders to submit the common view before the NCLT that the CoC is of the final view that no further opportunity should be given to prospective resolution applicant (PRA), as he has failed to provide desired comforts to the lenders for the acceptable terms in resolution plan, which could be successfully implemented.
Looking at the total circumstances of the case, including the views of joint lenders and also at the fact that the CoC did not wish to consider any further revised resolution plan as he had failed to provide required comfort to the lender banks by submitting/revising the resolution plan despite being provided with enough opportunities to do so, it is opined that such decision is within the ambit of commercial wisdom of the CoC.
The statutory scheme given in the IBC regarding the time period of CIRP in section 12 of IBC stipulates that a total of 330 days could be spent in obtaining prospective resolution plan. In the present case, approximately 559 days are over since the initiation of CIRP till the date of Impugned Order and enough opportunities have already been given to the prospective resolution applicant to provide resolution plan without success - the Adjudicating Authority has not erred in passing the Impugned Order, and while passing the order it has considered the views of the CoC as well as the lapse of stipulated time period of more than 330 days in the CIRP.
Appeal dismissed.
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2022 (7) TMI 1191
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - list of charges appearing in the Applicant’s/Corporate Debtor’s Master Data, in respect of the immovable property even though in the Applicant's/Corporate Debtor's audited accounts there is no immovable property reflected - did the default occur? If yes, then when? - HELD THAT:- It is apparent that there is no dispute to the fact that the Corporate Debtor was in need of funds and had approached the Financial Creditor for financial support. Subsequently, the Financial Creditor invested in the Corporate Debtor in the form of ICD, between 29 November, 2016 to 08 March, 2017. However, be that as it may there is no agreement on record which would support the terms and conditions upon which that transaction took place between the parties.
With respect to the question of default, it is pertinent to mention that the Financial Creditor is relying on the letter dated 09 January, 2019, whereas, as per the contention of the Corporate Debtor, only letter sent by the Financial Creditor to the Corporate Debtor is letter dated 08 May, 2020.
The notice dated 08 May, 2020 by the Financial Creditor nowhere mentioned of their previous letter dated 09 January, 2019. It is also relevant to divulge that, albeit, the Balance Sheet as on 31 March, 2019 of the Corporate Debtor at page 36 of the Petition reflects the name of the Financial Creditor under the heading of Long- Term borrowings, but mere entry in the Balance Sheet cannot be construed as default; neither, the Independent Auditors report talks about any such default by the Corporate Debtor.
For initiation of a CIRP under section 7 of the Code, one of the pivotal point is the establishment of default. However, in this instant application the authencity of the letter dated 09 January, 2019 as relied on by the Financial Creditor, which would be the cornerstone for initiation of CIRP against the Corporate Debtor, is itself under consideration before the Ld. CJM. It is also pertinent to mention that the proceeding before this Adjudicating Authority is summary proceeding, we cannot call on for the trial of the parties to substantiate their evidences relied on.
Thus, there is a debt and default, which are that win ingredients to warrant initiation of CIRP proceedings in terms of section 7 of the Code, against the Corporate Debtor - petition dismissed.
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