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2023 (9) TMI 1688
Failure to elicit the most viable commercial plan, preventing the CoC to bring about an effective resolution of the corporate debtor - material irregularity been committed by the RP and the CoC in rejecting the resolution plan of the CRP or by the Adjudicating Authority in approving the resolution plan of SRA-Vama - on account of the rejection by RP of the claims filed by the UTGST and AC-CGST, the resolution plan of Vama, as approved by the Adjudicating Authority, meet the requirements under applicable law or not.
Whether any material irregularity been committed by the RP and the CoC in rejecting the resolution plan of the CRP or by the Adjudicating Authority in approving the resolution plan of SRA-Vama? - HELD THAT:- There are no doubt that the CRP did not submit their EOI on time either in the first or second round of Form G. However as and when it was received the RP had apprised the CoC. Besides being non-serious and casual about complying with timelines stipulated in the IBC, even while submitting their EoI they had failed to adhere to mandatory requirements of RFRP. Even the EMD payment was made belatedly and that too for Rs. 2.25 crore as against requirement of Rs 2.5 crore. The CoC deliberated upon the matter and ultimately passed the resolution not to consider the non-compliant plan of CRP in the interests of the corporate debtor and this was communicated to CRP. There are no lapse or irregularity on the part of the RP or the CoC in not entertaining the belated and defective plan of CRP.
Section 30 of the IBC which deals with submission of Resolution Plan and sub-section (6) states that “the resolution professional shall submit the Resolution Plan as approved by the Committee of Creditors to the Adjudicating Authority”. In the present case, the RP after approval of the plan by the CoC filed an application before the Adjudicating Authority seeking approval of the Resolution Plan under Section 31 of the Code. Section 31 deals with approval of Resolution Plan - The Adjudicating Authority in turn on its part has clearly recorded in the first impugned order that on examination of the resolution plan of Vama it has found that no provision of law appears to have been contravened and that there is compliance to Regulations 38 and 39 of CIRP Regulations, 2016. It has also noted that interests of all stakeholders have been taken care of. CRP has failed to point out the contravention of any provision by the CoC in approving the plan.
The CoC has meticulously evaluated the matrix in approving the plan of Vama and the sole member of CoC having 100% voting share has already approved the plan in their commercial wisdom as contemplated under the law. That being the case, the Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC nor deal with the merits of Resolution Plan unless it is found it to be contrary to the express provisions of law and against the public interest. There is neither any material regularity nor contravention of any provisions of law by the CoC and the plan has been rightly approved by the Adjudicating Authority.
The IBC provides for an initiation of timely resolution of the corporate debtor and in the instant case the resolution plan having already been approved by the CoC and the Adjudicating Authority and implemented by the SRA, it cannot now be open to interference on an appeal preferred by an unsuccessful resolution applicant. It is equally significant to note that following the rejection of the plan of CRP by the CoC, CRP accepted the EMD refund and did not approach the Adjudicating Authority objecting to the resolution plan. It is, therefore, clear that CRP did not challenge the resolution plan before the Adjudicating Authority at the right point of time and raking up the matter belatedly.
Thus, no case has made by CRP to establish any procedural or material irregularity committed by the RP/CoC in rejecting their EoI and that the challenges raised by the CRP clearly fall within the domain of commercial wisdom of the CoC which is non-justiceable. Nor has CRP been able to establish any contravention of law by the Adjudicating Authority in approving the resolution plan of Vama.
Whether on account of the rejection by RP of the claims filed by the UTGST and AC-CGST, the resolution plan of Vama, as approved by the Adjudicating Authority, does not meet the requirements under applicable law? - HELD THAT:- There has been no dereliction of duty on the part of the RP in rejecting the belated claims of UTGST and AC-CGST. It is not found that any error or irregularity on the part of RP to have rejected the belated claims of UTGST and AC-CGST. Furthermore, the Adjudicating Authority in the first impugned order has taken note that the resolution plan submitted by the SRA – Vama has taken into account the interest of government authorities and provided for appropriate treatment of admitted government dues. The Resolution Plan submitted by the Vama has dealt with the claims of Operational Creditors to the extent of Rs. 10 lakhs besides earmarking an additional sum of Rs. 25 lakhs for all the Government Department claims and undertaken to pay all the PF dues at actuals based on the outcome of an ongoing legal case at Delhi High Court with respect thereto. Thus, the approval of resolution plan of SRA-Vama by Adjudicating Authority, which was approved by the CoC with 100% vote share, does not suffer from any material or procedural infirmities.
Conclusion - i) No case has made by CRP to establish any procedural or material irregularity committed by the RP/CoC in rejecting their EoI and that the challenges raised by the CRP clearly fall within the domain of commercial wisdom of the CoC which is non-justiceable. ii) The approval of resolution plan of SRA-Vama by Adjudicating Authority, which was approved by the CoC with 100% vote share, does not suffer from any material or procedural infirmities.
There are no illegality in either the first or second impugned order of the Adjudicating Authority which may warrant any interference in the exercise of our appellate jurisdiction - All appeals are dismissed.
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2023 (9) TMI 1687
Revision u/s 263 - admissibility of deduction claimed u/s 80P(2)(a)(i) and section 80P(2)(d) - HELD THAT:- Certainly, relying on various judicial pronouncements and principal of mutuality transactions carried out with known members and general public are not entitled for the benefit of section 80P(2)(a)(i) of the Act.
As far as deposits with other cooperative banks whatever may be the form, income arising to the assessee is squarely covered by the provisions of section 80P (2) (d). The main foundation of the case as laid down by the Ld. PCIT is based on section 80P (4), which is in the nature of a proviso restricting the claim of a cooperative society u/s. 80P if the cooperative society is a cooperative bank or cooperative societies possess a license from the RBI to do the banking business. In this case, assessee is neither a cooperative bank nor a cooperative society possessing a license from the RBI to do banking business.
Assessee is fully entitled for deduction u/s. 80P (2) (a)(i) on the transaction entered into with the members of the society. As far as transactions and consequent earnings with non-members are concerned that has already been taxed by the AO in his assessment order so to this extent as far as applicability /charging of section 80P(2)(a)(i) is concerned, we do not find any perversity in the order of AO.
As far as assessee’s claim u/s. 80P(2)(d) assessee is entitled for the same as assessee is not falling in section 80P(4) which is applicable only in the case of cooperative banks /cooperative societies having licences from RBI to do banking business. The whole foundation as laid down by the Ld. PCIT is on wrong appreciation of the facts and misinterpretation of relevant sections.
Thus, we are not in agreement with the order of PCIT. Accordingly, the grounds raised by the assessee are allowed.
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2023 (9) TMI 1686
Bogus purchases - no confirmation of sundry creditors given - AO issued summons U/s 131 to the four parties but Summons in respect of three parties were returned unserved with the remarks “No such person/ No such address/ Incomplete address” - HELD THAT:- There is no dispute that specific requests were made by the AO, during the course of the scrutiny assessment proceedings to furnish confirmations from the impugned parties but no confirmation was filed by the assessee nor any such confirmation is filed before us.
Even the copy of ledger account has not been filed in the case of Dawar Exclusive. It is also an undisputed fact that the Prop. of Dawar Exclusive has categorically denied of having done any transaction with the assessee. There is a gross mismatch between the ITR details filed by the assessee in respect of impugned parties as pointed out by the AO mentioned elsewhere.
As assessee has miserably failed to establish the genuineness of the purchases. Since, the purchases have been treated as bogus it would be a futile exercises to make addition again in respect of the corresponding sales. Considering the facts of the case from all possible angles, we are inclined to confirm the assessment. Decided against assessee.
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2023 (9) TMI 1685
Petitioner's right as a suspended director of a corporate debtor is protected by section 14 of the Insolvency and Bankruptcy Code, 2016 - moratorium provisions prohibiting recovery of property occupied or possessed by the corporate debtor - HELD THAT:- The receiver appointed in a particular suit is nothing more than the hand of the Court, so to speak, to hold the property of the litigants whenever it must be kept in the grasp of the Court in order to preserve the subject matter of the suit pendente lite and the possession of the receiver is simply the possession of the Court. To such an extent is this the case that any attempt to disturb that possession, without the leave of the Court, is a contempt of Court. The receiver's possession is on his behalf and for the benefit of all the parties to the suit in which he is appointed. The property in his hands is in custodia legis for the person who can make a title to it. He is not appointed for the benefit of strangers other than parties to the suit. He has no estate or interest himself, and his power to manage is created by the Court's order appointing him and binding on persons before the Court.
On meaningful reading of Section 14(1)(d), it is clear that recovery of property by owner/lessor where such property is “occupied by” corporate debtor is not permissible when a moratorium under IBC is declared. Section 14(1)(d) does not deal with any of the assets or legal right or beneficial interest in such assets of the corporate debtor, but what is referred to therein is the "recovery of any property". Moreover, the bar under clause (d) is attracted only when the owner or lessee is seeking recovery of property. In the facts of the case, the receiver is seeking property from an agent of the receiver on default of payment of royalty amount. Such proceedings cannot termed as proceedings for the recovery of property by the owner or lessee.
The object of the Insolvency and Bankruptcy Code, 2016, is to resolve insolvency and bankruptcy cases involving an insolvency professional's appointment to manage the debtor's affairs and the resolution of the case transparently and efficiently. The purpose of such an act is to recover the dues of the corporate debtor and calculate the value of the assets so that if ultimately it is found that the company is to be revived, the appropriate recommendation shall be made to the appropriate Court for the revival of such company. However, possession of the receiver's agent cannot be termed as an asset of a company. Applying section 14 of the IBC to the receiver's agent would amount to reading something into statute that the legislature never intended.
In so far as the locus of suspended directed to agitate rights of the corporate debtor is concerned, such issue does not rise for consideration in the facts of the case as it is already held that the position of an agent of the receiver cannot be termed as possession or occupation contemplated by Clause 2 of Sub-Section (1) of Section 14 of the IBC.
Conclusion - Possession of the receiver's agent cannot be termed as possession within the meaning of Clause (d) of Section 14(1) of the IBC.
In view of the undisputed fact of failure to pay Rs. 2,89,30,000/- towards the royalty amount by the corporate debtor, the exercise of discretion by the Court cannot be faulted. There is no merit in the writ petition - Petition dismissed.
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2023 (9) TMI 1684
Abatement of appeal - Liability of service tax - Business Auxiliary Service - payment of commission to foreign agency for facilitating the procurement of machinery - approval of Resolution Plan under sub-section (1) of section 31 of the Insolvency and Bankruptcy Code, 2016 (Code) - HELD THAT:- It is found from the copy of the order of the NCLT, Chennai dated 26.3.2019 that in this case NCLT has approved the Resolution Plan of the Resolution Professional. The plan is hence binding on the Corporate Debtors and other stakeholders involved. As per the non-obstante clause of Section 238 of the Code ibid the provisions of the Code will have an overriding effect if there are any inconsistencies with any of the provisions of the law for time being in force.
The appeal "abates" due to the binding effect of the Resolution Plan under the IBC - matter disposed off.
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2023 (9) TMI 1683
Income deemed to accrue or arise in India - reimbursement of expenses qua marketing fees, frequent flyer programme, guest programme and reservation fees received by the respondent/assessee cannot be treated as fee for technical services, in terms of Article 12(4) of the Indo-Singapore DTAA and under Section 9(1)(vii) - HELD THAT:- This issue stands covered by the following judgments Sheraton International Inc. [2009 (1) TMI 27 - DELHI HIGH COURT], Sheraton International Inc. [2023 (5) TMI 1435 - DELHI HIGH COURT] and Starwood Hotels & Resorts Worldwide Inc. [2022 (11) TMI 1492 - DELHI HIGH COURT]
Therefore, according to us, no substantial questions law arises for consideration.
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2023 (9) TMI 1682
Seeking extension on stay of recovery of outstanding demand - HELD THAT:-While considering the initial stay application filed by the assessee, the Tribunal had granted conditional stay vide order dated 09.09.2022, which was subsequently extended vide order dated 17th March, 2023.
Cause for non-disposal of the corresponding appeal is not attributable to the assessee. We are informed, now the appeal is fixed for hearing on 08.11.2023. Since, there is no change in the facts and circumstances of the case, based on which stay was earlier granted, we are inclined to extend stay on recovery of outstanding demand for a further period of 180 days from the date of this order or till the disposal of the corresponding appeal, whichever is earlier. Stay application is allowed.
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2023 (9) TMI 1681
Income chargeable to tax in India or not - payment made by the assessee to its foreign entity towards use of overall ICT infrastructure - DTAA between India and Netherlands - Scope of amended DTAA provisions - HELD THAT:- On a perusal of the amendment to Article 12(4) of the DTAA effective from 01-04-1998, it is clear that the term ‘Royalties’ means payment received as a consideration for the use or right to use any copyright including any patent, trademark, design or model for information concerning industrial, commercial or scientific experience.
The hitherto inclusion of payment for use of industrial, commercial or scientific equipment constituting ‘Royalties' under para 4(b) of article 12 as per Para (III) in para 4(b) has been omitted w.e.f. 01-04-1998.
Since the assessment year involved is 2012-13, on a pertinent query as to whether the DTAA was further amended vide any Notification, AR answered it in negative by placing on record a copy of the DTAA.
When we consider the copy of original DTAA with the copy of the DTAA as now given, it is seen that after clause VII of the Protocol in the originally filed DTAA, there is a heading ‘Amending Notification No. SO 693(E), dt. 30-08-1999’ and thereafter mention is made of the Paras (III) and (VI) which are under consideration.
No reason could be adduced as to why there was change in the text of two copies of the DTAA. DR expressed his inability to point out if any further amending notification was also issued in respect of the DTAA having impact on the ambit of Article 12(4) from 1998 up to the financial year relevant to the A.Y. 2012-13 under consideration.
It would be just and fair if the impugned order on this issue is set aside and the matter is restored to the file of the AO for examining the position of the DTAA prevailing for the assessment year under consideration and then deciding the issue by treating the amount paid by the assessee as a consideration for use of the overall Infrastructure facility of VIBV.
If the amending notification dated 30-08-1999 is the last notification, in that situation, the case will fall under Para (VI) and not Para (III), making the amount not chargeable to tax in the hands of VIBV. In the otherwise scenario, the AO will examine the effect of such further amendments, if any, to Article 12(4) to the DTAA for deciding the issue in the right perspective. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings. The originally order passed u/s.254(1) is amended to this extent.
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2023 (9) TMI 1680
Taxability in India of an amount received as salary income -determination of assessee’s residential status - assessee has claimed that the salary income was not received by her towards any service exercised in India, but was received in USA - HELD THAT:-We find that the assessee has not brought on record before the departmental authorities necessary and relevant material such as TRC, evidences regarding earning of salary income outside India and evidence regarding stay outside India during the entire year etc.
In our view, aforesaid evidences are vital for deciding the claim of the assessee. Since, assessee has submitted before us that as on date she is in possession of TRC issued by the competent authority, we are inclined to restore the issue to the AO for de novo adjudication so as to enable the assessee to furnish TRC and any other credible evidence to establish her claim of treaty benefit and also that the salary income did not arise or deemed to have arisen in India in terms of section 5(2)(a) of the Act.
AO is directed to consider the evidences in proper perspective and decide the issue accordingly after providing reasonable and due opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.
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2023 (9) TMI 1679
Addition u/s 56(2)(vii)(b)(ii) - difference in the stamp value of the property and sale consideration has to be assessed under Income from other sources - as argued assessee has made payments for purchase of property through account payee cheques and complied with the provisions of the Act.
HELD THAT:- We find that in the appellate proceedings before the CIT(A), the assessee has mentioned about the understanding and the oral agreement fallowed by the payments in the F.Y 2012-13 through banking channel and the provisions of Sec. 56(2)(vii)(b)(ii) of the Act are complied.
Whereas the submissions of the assessee on the disputed issue made before the CIT(A) are emerged for the first time and the A.O has to examine the facts and the nature of transactions. Accordingly, to meet the ends of justice, we set aside the order of the CIT(A) and restore the entire disputed issues to the file of the Assessing officer to examine and verify the issues discussed above. Appeal filed by the assessee is allowed for statistical purposes.
Penalty u/s 271(1)(b) - assessee has not disclosed the reasonable cause for non compliance to the notice u/s 142(1) - HELD THAT:- We found that the submissions made by the Ld. AR are realistic and when the assessment was completed u/s 143(3) r.w.s 263 of the Act, the penalty u/s 271(1)(b) of the Act cannot be imposed.
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2023 (9) TMI 1678
Additions u/s 143(1)(a)(iv) - late deposit of ESI/EPF of employee share - HELD THAT:- We find that the issue is no more res integra as Hon’ble Apex Court has conclusively decided the issue in the case of Checkmate Services P. Ltd [2022 (10) TMI 617 - SUPREME COURT] that no infirmity in AO's action in the addition u/s 36(1)(va) in the total income of the appellant.
Hence no infirmity in the order of the CIT (A) and uphold the same. Appeals filed by the assessee are dismissed.
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2023 (9) TMI 1677
Adjustments made u/s. 143(1)(a)(iv) while processing the return of income u/s. 143(1) - powers/scope given to CPC, Bangalore through section 143(1) - HELD THAT:- Neither assessee’s response to proposed adjustment was considered, nor application u/s. 154 of the Act was disposed of, these falls in the violation of proviso 1 and 2 of the section 143(1) and makes whole action null and void. Further, as the case of assessee was scrutinized u/s. 143(2) and assessment order u/s. 143(3) was passed, technically the doctrine of merger comes into picture, therefore the impugned adjustment by CPC gets merged into order passed u/s. 143(3) of the Act and order passed u/s. 143(3) only survives.
As far as reporting by Tax Auditor is concerned, maybe he has been appointed by the assessee, still his independence is always assumed and he is always free to give his own legal opinion, but the same is not binding on assessee or revenue.
Thus, final order in this case is assessment order passed by AO u/s. 143(3) r.w.s. 144B and not the intimation/order passed by CPC, Bangalore u/s. 143(1). Effectively, when order passed by AO u/s. 143(3) r.w.s. 144B of the Act is final and therein no such addition is there, whole issue becomes academic including the appeal order passed by the Ld. CIT (A) U/s. 250 of the Act. In the result grounds of appeal raised by the assessee is allowed.
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2023 (9) TMI 1676
Maintainability of the writ petition under Article 226 read with Section 482 of the Criminal Procedure Code (Cr.P.C.) to challenge the LOC - Rejection of request to revoke the Look Out Circular (LOC) - summoning of the petitioner under section 50 of PMLA on suspicion alone.
Whether the summoning of the petitioner under section 50 of PMLA on suspicion alone is legally permissible? - HELD THAT:- In the instant case, there is no cognizable offence registered against the petitioner nor a non-bailable warrant is issued against the petitioner. The petitioner is summoned solely on the ground that his brother has been implicated as an accused in the scheduled offences and under the PMLA, and also alleging that his father had transferred 50,000 GBP which is the proceeds of the crime to a third party.
Section 50 is a crucial provision and states that a person, who is being summoned for investigation must be provided with a written notice specifying the nature and the reasons for it. While the said provision does not explicitly use the term " Probable cause", it emphasizes the importance of providing valid reasons and grounds for summoning an individual. The purpose of this provision is to protect the right of the person being summoned and ensure that investigation is not arbitrary. The summoning of a person repeatedly without probable cause or reasonable ground and only on the ground of suspicion alone is not in accordance with the principles of due causes and fairness.
LOC cannot be issued solely on the ground that the petitioner has not provided information to the convenience and satisfaction of the respondent No. 2, and in the absence of any material that the petitioner was aware of the transactions between his father and one Mr. Hanish Patel, the petitioner cannot be repeatedly summoned to give information to suit the convenience of the prosecution - It is well established in law that a person can be summoned to give statements during the course of investigation only when there exists a reasonable ground to believe that the said person has knowledge or information with regard to the commission of a crime. The principle of reasonable suspicion/ probable cause is fundamental to the criminal justice system and it ensures that persons are not subjected to investigation or summoned to give statements during the course of investigation which would otherwise result in violating the principles of fairness, justice and the Rule of Law, more so when the petitioner has cooperated with the investigation.
The Hon'ble Supreme Court in the case of SELVI AND OTHERS -VS- STATE OF KARNATAKA, [2010 (5) TMI 907 - SUPREME COURT] with reference to Article 20(3) and 161(2) Cr.P.C., has held that these provisions protect the accused, suspects and witnesses from being compelled to make self incriminating statements and the person concerned has right to remain silent on questions which may incriminate him.
Therefore, in the absence of any reasonable suspicion leave alone probable cause, the LOC issued for securing the presence of the petitioner for recording further statements would be arbitrary and violate the fundamental rights enshrined under Article 21 of the Constitution of India.
Maintainability of the writ petition under Article 226 read with Section 482 of the Criminal Procedure Code (Cr.P.C.) to challenge the LOC - HELD THAT:- The proceedings initiated under the provisions of PMLA against the brother of the petitioner is the basis for issuing LOC and any action taken or order passed under PMLA can be challenged by invoking inherent jurisdiction under Section 482 Cr.P.C or under Article 226 r/w Section 482 Cr.P.C to prevent the abuse of the process of law/or to secure the ends of justice. Hence, the fundamental right of the petitioner to travel abroad as enshrined in Article 21 of the Constitution of India is infringed by the respondent No. 1 in the course of investigation under the provisions of PMLA. The petitioner has been restrained from travelling abroad for a period of 1 year 10 months spreading over from January 2021 till date. Therefore, the contention of the learned ASG that the LOC can only be challenged under Article 226 and not under 482 Cr.P.C. is not acceptable.
Conclusion - The continuation of the LOC against the Petitioner indefinitely on the ground of suspicion alone will be an abuse of process of law and also the object of LOC.
Petition allowed.
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2023 (9) TMI 1675
Challenge to impugned order on the ground that the same has been passed beyond the limitation prescribed under Section 28 (9) of the Customs Act, 1962 - HELD THAT:- The show cause notice, dated 26.12.2014, had to be examined in the light of Section 28 (9) as it stood prior to the amendment w.e.f. 29.03.2018. Therefore, the show cause notice was required to be adjudicated within six months from the date of issuance of such notice. The above limitation was qualified with expression '' Wherever, it is possible, to do so''. Prima facie, it appears that the Department was not precluded from adjudicating the show cause notice beyond six months.
If it is the case of the Department that the pendency of the Appeal before CESTAT against the Order-in-Appeal dated 30.08.2015 was a reason for not passing orders earlier, it remains to be explained, as to why, the impugned order has been passed eventhough the petitioner's appeal is still pending adjudication before CESTAT - This ought to have been explained properly in the impugned order. Admittedly, the impugned order passed by the third respondent is bereft of such reasons. Only in the counter affidavit filed in this Writ Petition, the respondents have stated that the delay was on account of the pendency of the Appeal before the CESTAT for the earlier Bills of Entry, dated 10.10.2014.
Conclusion - The indifference of the concerned officer to complete the adjudication within the time period as mandated, cannot be condoned to the detriment of the assessee.
This Court is inclined to interfere with the impugned order by quashing the same and remits the case back to the third respondent to pass a fresh order on merits - petition allowed by way of remand.
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2023 (9) TMI 1674
Validity of assessment u/s 153A - HELD THAT:- As the assessment order passed u/s 143(3) r.w.s. 153A of the Act for all the assessment years under appeal are liable to be quashed in view of the decision of the Hon’ble Supreme Court [2023 (4) TMI 1056 - SUPREME COURT] as well as subsequent instructions notified by the CBDT Instruction No. 1 of 2023 dated 23.08.2023 vide letter F. No. 279/Misc./M-54/2023-ITJ. Accordingly, the additional grounds raised by the Revenue for the assessment years 2010-11, 2011-12 and 2012-13 are dismissed.
Addition made towards disallowance of expenditure towards special salary & commission charges - As we are of the opinion that the additions made by the AO are unwarranted, which was rightly deleted by CIT(A). Thus, we find no infirmity in the order of the ld. CIT(A) on this issue. Accordingly, the ground raised by the Revenue is dismissed for the assessment years under appeal.
Addition u/s 40(a)(ia) - Payment made to contractors w/o deducting TDS - assessee has submitted that the contract-labourers are in the muster roll of the assessee and are covered by the ESI/PF Act - HELD THAT:- No incriminating material like contract agreement, etc. was brought on record. CIT(A) has observed that the AO was misled by the statement given by Shri Murugesan as reported in the appraisal report and never bothered to examine the liability of the assessee to deduct tax at source independently with reference to the facts of the case. In view of the above undisputed facts, the ld. CIT(A) has rightly deleted the disallowance made u/s 40(a)(ia) of the Act by holding that the assessee has directly engaged labourers borne in the Provident Fund records and made payments through the head labourer and therefore, there was no liability to TDS. CIT(A) has rightly deleted the disallowance made under section 40(a)(ia).
Addition on brought notes - purchases made through bought notes - HELD THAT:- By considering the submissions that inasmuch as the entire amount was offered to tax as bought note purchases and the same was credited in the profit & loss account, which the Assessing Officer wrongly mentioned in the assessment order as ₹.1,74,32,430/-, thereby adding a further sum of (₹.1,74,32,430 – 1,71,32,430) ₹.3,00,000/- was not called for. Considering the above facts, we find that the ld. CIT(A) has correctly deleted the addition of ₹.3,00,000/-, which was erroneously added to the total income of the assessee. Thus, the ground raised by the Revenue is dismissed for AY 2011-12.
Disallowance of expenditure by cash purchase - CIT(A) deleted addition - HELD THAT:- We find that no cash payment was made by the assessee. Moreover, all the purchase of copras are through agent and the payments were made to these agents through banking channel i.e., RTGS. No reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue is dismissed for the assessment years under appeal.
Disallowance of expenditure violating the provisions of Section 40A(3) and bogus purchase - HELD THAT:- CIT(A) has noted from the assessment order that the AO has admitted the fact that payments were made through RTGS. AO has not made a mention in the assessment order that for the purchase of copra, cash payments were made by the assessee and moreover, the AO has also not disputed the purchase of copra. CIT(A) has rightly observed that the disallowance by treating the RTGS payments as cash payment was not correct and consequently, deleted the addition for the assessment year 2012-13.
AO failed to establish that the assessee made purchases by paying cash. It is a fact that the entire payments were made by the assessee through RTGS to its agent. It is a mere allegation by the Assessing Officer that the assessee purchased the copras by paying cash. The assessee, in fact, made payments through RTGS only. In turn, the agents issued bearer cheques according to their convenience. Therefore, AO was not justified in invoking the provisions of section 40A(3) in the case of the assessee - ground raised by the Revenue is dismissed.
Addition made towards suppression of purchase along with estimated gross profit - HELD THAT:- AO took the value of purchases as appearing in the SAP from May 2011 to March 2012 (i.e., for 11 months) and compared the figures of purchases as taken from the parties ledgers from April 2011 to March 2012 (12 months), In effect the Assessing Officer, by mistake compared the 11 months' figures of the assessee with that of 12 months' figures of the parties. Naturally there is every likelihood of arriving at a variation.
Based on this (wrong) methodology the AO arrived at the suppression of purchases. Thus CIT(A) has observed that the addition was due to erroneous adoption of purchase figures, the AO made an huge unwanted addition and thus, the CIT(A) was reluctant to sustain the addition. We also find that the AO was not able to establish suppression of purchases made by the assessee.
Suppression of closing stock - HELD THAT:- Assessee has duly submitted the reconciliation statement and reasons for the difference before the AO which was unfortunately not considered. Before the ld. CIT(A) the assessee has produced copy of the actual value of closing stock (with quantity) as furnished to the Central Excise Department. After considering the detailed written submission filed by the assessee as was submitted before the Assessing Officer, which was not considered by him, the ld. CIT(A) observed that the closing stock as on 31.03.2012, as reported in the return of income by the assessee do not warrant any further alteration and it shows the correct position as on that date. Accordingly, the ld. CIT(A) deleted the addition towards suppression of stock correctly. - ground raised by the Revenue is dismissed.
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2023 (9) TMI 1673
Validity of Reopening of assessment - petitioner contends that, though reply with documents is filed upon receipt of notice u/s 148A(b) the impugned order is passed primarily on the ground that the petitioner has not furnished the reply - HELD THAT:- If the provisions of Section 148A of the IT Act do not stipulate that the reply must be filed within the time allowed in the notice under Section 148A[b] of the IT Act but the response is filed before the date of order u/s 148A (C), the second respondent should have been considered. Crucially, in the present case, the observation is that the Assessee has not filed any reply at all. Therefore, this Court must intervene and allow the petition on this limited ground directing the second respondent to consider the reply and pass proceedings afresh under Section 148A(d) of the IT Act with the Department being entitled to all consequential extension in the limitation.
Thus order passed u/s 148A(d), the Notice u/s 148 and all the impugned consequential demands/penalty notices are quashed.
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2023 (9) TMI 1672
Failure to abide by the requirement of the pre-show cause notice consultation as provided in Master Circular dated 10th March, 2017 - demand of duty involves more than Rs. 50,00,000/- - HELD THAT:- The respondent authorities are directed to undergo the process of pre-consultation keeping the impugned show-cause notice/order in original in abeyance and place the outcome of such pre-consultation on record before the next date of hearing. Such exercise shall be completed within four weeks.
Stand over to 26th October, 2023.
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2023 (9) TMI 1671
Validity of adjudication order - Petitioner’s representation not properly considered and dealt with - difference between non-consideration of the objection/ submission - Constitutional validity of retrospective amendment to Rule 61 of the WBGST Rules, 2017 - HELD THAT:- Learned Additional Government Pleader submits that before passing the impugned order, ample opportunity of hearing was given to the petitioner and principles of natural justice was observed and the impugned order contained detailed reasons and discussion. If petitioner is not satisfied with the sufficiency of the reasons recorded by the Adjudicating Authority which is based on findings and evidence. This court in exercise of Constitutional writ jurisdiction under Article 226 of the Constitution of India cannot act as an Appellate Authority and substitute the reasoning and findings of the Adjudicating Authority with its own.
Furthermore, the impugned order is an appealable order and it is not a case of the petitioner that the alternative remedy available to the petitioner is not speedy and efficacious.
Following the abovementioned reasons, this court does not inclined to interfere with the impugned adjudication order. However, since Constitutional validity of retrospective amendment to Rule 61 of the WBGST Rules, 2017 has been challenged in this writ petition, this writ petition will be heard only on this issue upon exchange of affidavits by the parties.
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2023 (9) TMI 1670
Allotment of shares on a "preferential basis by way of private placement," pursuant to an order under Sections 241-242 of the Companies Act, 2013 - adherence to Section 62(1)(c) of the Act, along with the applicable Companies Act (Share Capital and Debentures) Rules, 2014 or not - HELD THAT:- Section 62 (1) (c) specifies ‘issuance of share capital to any persons, if it is authorised by a said Resolution, whether or not these persons including the persons referred to in Clause (a) or Clause (b) either for cash or for consideration other than cash, if the price of such shares is determined by the valuation report [of a registered valuer, subject to the compliance with the applicable provisions of Chapter III and any other conditions as may be prescribed]. Merely because the direction given by NCLT does not specifically mention the fulfilment of mandatory requirements of Section 62 (1) (c), it cannot be said that those Provisions need not be complied with as it has not been specifically mentioned in the ‘directions’ and the same has been confirmed by both NCLAT and the Hon’ble Apex Court. Under Rule 13 (g) of the Companies (Share Capital and Debentures), Rules 2014 and Rule 12 (7) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 framed under the said Provision, details the procedure to be followed in this regard.
It is not in dispute that the shares were allotted at face value of Rs. 10/- each without conducting any valuation. It is significant to mention that the Appellants have convened an Extraordinary General Meeting on 15/06/2017 to discuss the agenda of amendment to the Company’s Memorandum of Association for increasing the authorised share capital of the 1st Appellant Company. A perusal of the Notice dated 20/05/2017 shows a reference to legal advice provided for the dispensation of the requirement for the shareholders approval - As per Sections 242(5) and 242(6) of the Companies Act, only such Orders which specifically provide for alteration to Memorandum of Association would be deemed to have been passed in accordance with Law and the Company accordingly needs to take steps to put the Order into effect.
The Hon’ble Delhi High Court in the matter of ‘SAS Hospitality Pvt. Ltd. Vs. Surya Constructions Pvt. Ltd.’ [2018 (12) TMI 1123 - DELHI HIGH COURT] has held that any dispute pertaining to rectification of Register of Members can be decided under Section 59 of the Act.
This Tribunal is of the earnest view that the issue regarding cancellation of allotment of shares to the 2nd Appellant would fall within the scope and ambit of Section 59 of the Act. As regarding the submission of the Learned Counsel for the Appellants that NCLT has wide scope of powers under Section 241 and 242 of the Act and any direction given in this Section would not contemplate compliance to Section 62 (1) (c) of the Act, cannot be sustained. It is held that even if NCLT has directed allotment of shares under Section 241 and 242 of the Act, the procedural requirements in respect of such allotment, has to be met.
Conclusion - This Tribunal is of the earnest view that allotment of shares leading to alteration in the Register of Members can be challenged before the NCLT under Section 59 of the ‘Act’. Finally, it is observed that the issue which has attained finality is the ‘allotment of shares’ and not the ‘procedure to be adopted for allotment’.
Appeal dismissed.
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2023 (9) TMI 1669
Valuation of Arms Length Price (ALP) of the Specified Domestic Transactions (SDT) between the assessee and its Associated Enterprises (AEs) for purchase of trading goods - Effect of clause (i) of section 92BA omission - AO had made a reference to Transfer Pricing Officer u/s. 92CA of the Act to determine ALP with respect to SDT u/s. 92BA(1) - HELD THAT:- We are of the view that Coordinate Benches have taken a view that since clause (i) of section 92BA stands omitted from the provision and omission of such is to be construed as if it never existed in the Statute Book and if it never existed in the Statute Book, then, no Arm's Length Price is required to be determined for a transaction with specified persons in section 40A(2)(b) of a domestic transaction. If no Arm's Length Price is required to be determined, then, no reference was required to be made.
See Texport Overseas Pvt. Ltd. [2019 (12) TMI 1312 - KARNATAKA HIGH COURT] wherein held when clause (i) of section 92BA having been omitted by the Finance Act, 2017, with effect from 01.07.2017 from the Statute the resultant effect is that it had never been passed and to be considered as a law never been existed. Hence, decision taken the Assessing Officer under the effect of section 92BI and reference made to the order of Transfer Pricing Officer TPO under section 92CA could be invalid and bad in law. Appeal of the assessee is allowed.
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