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2022 (6) TMI 1434
Initiation of legal action or proceedings in respect of any debt against Personal Guarantor during moratorium period - Section 96 of IBC - HELD THAT:- The presence of the term ‘and’ in the section should be read as a conjunctive one, which joins clause 1(a) of the section with clause 1(b) and infers that interim moratorium commences against all the debts (including his personal debt) and the creditors of the debtor are barred from initiating any legal proceedings in respect of any debt. Hence, the interim moratorium restrains any ongoing or fresh legal action or proceeding in respect of any debt pertaining to the Personal Guarantor.
The application by IFCI was filed on 29 September, 2021, whereas, the application by SBI was filed on 09 July, 2021, which indicates that the interim moratorium against the personal guarantor commenced from 09 July, 2021.
Application allowed.
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2022 (6) TMI 1433
TP Adjustment - determination of ALP in a case of services rendered by an AE and the benchmarking process - evidence for rendering services and demonstrating the benefit that the assessee received from the services rendered by the AE to the assessee - plea of the assessee has been that documentary evidence furnished by it has not been examined by the TPO, who has merely come to the conclusion that the assessee failed to prove the nature of services rendered by the AE for which the assessee made payment.
HELD THAT:- There is force in the arguments of assessee, in as much as the TPO as well as the DRP ignored the documentary evidence filed by the assessee and have proceeded on the assumption that these details were general in nature and did not prove the rendering of services by the AE. It is also equally true that the bulk of evidence filed by the assessee have to be corelated with type of services rendered and it is necessary for the assessee to explain as to how these emails show that services were rendered by the AE. It is only on such analysis being provided by the assessee, can the TPO proceed to examine the rendering of services as well as benefit that the assessee might derive.
In the matter of coming to the conclusion on the benefit that the assessee received, clear evidence cannot be insisted upon and the overall business scenario and type of services rendered have to be looked into. We also notice that similar payment made to the very same AE for similar services under the very same agreement, has been accepted to be at Arm’s Length in AY 2017-18 & 2018-19. We are, therefore, of the view that it would be just and appropriate to set aside the issue with regard to determination of ALP to the AO/TPO for fresh consideration in the light of law as explained above and the other observations in this order. The AO/TPO will afford opportunity of being heard to the assessee in the set aside proceedings, before deciding the issue.
Determination of ALP in respect of international transactions whereby assessee paid a sum for Brand Promotion Expenses - HELD THAT:- We find that the TPO in the impugned assessment year i.e., AY 2013-14, on identical facts has taken a contrary view, which is to the effect that there is an element of indirect control. The DRP has not rendered any finding on this issue. We are of the view that, in the light of order of the TPO for AY 2016-17, the issue requires fresh examination by the TPO. We, therefore, set aside the order of the TPO and direct re-examination of the issue, whether FIFOTL can be considered as an AE?
TP adjustment of Specified Domestic Transaction in respect of Sales Promotion Expenses for payment made to United East Bengal Football Pvt Ltd - HELD THAT:- As the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA of the Act.
We notice that the co-ordinate bench in the case of Textport Overseas [2017 (12) TMI 1719 - ITAT BANGALORE] has restored the matter to the file of the A.O. with the direction to examine the claim of expenditure in accordance with the provisions of section 40A(2) of the Act. Following the same, we restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act.
Accordingly, following the binding decision rendered by Hon'ble High Court of Karnataka in the case of Texport Overseas P Ltd [2019 (12) TMI 1312 - KARNATAKA HIGH COURT] we hold that the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA.
Depreciation on goodwill - assessee has submitted that it has acquired the brewery from Karnataka Breweries & Distilleries Ltd. through a process of demerger and acquisition and the difference between the cost of acquisition and the fair value of the assets is recognized as goodwill in the books of the assessee - AO disallowed the depreciation stating that the claim was not allowed in the earlier assessment year also - HELD THAT:- The coordinate Bench of this Tribunal in the assessee’s own case for AY 2007-08 [2016 (9) TMI 1527 - ITAT BANGALORE] has held that depreciation on goodwill is not allowable based on the facts of the case of assessee. Respectfully following that decision, we hold that depreciation on goodwill is not allowable. Accordingly, these grounds are dismissed.
Disallowance of expenses u/s. 14A - HELD THAT:- It is settled law that disallowance u/s. 14A cannot exceed the amount of exempt income earned by the assessee. Thus we hold that the disallowance should be restricted to the amount of exempt income earned by the assessee. We direct accordingly.
Disallowance of year end provisions u/s. 40(a)(ia) - AO disallowed the said amount stating that tax ought to have been deducted as of 31.3.2012 and only for remittance the assessee has time till the date of filing of the return which the assessee failed to comply - HELD THAT:- In the present case, we notice that the assessee has furnished the details of subsequent deduction of tax from the year end provisions and the details of payment made before the due date for filing the return of the assessee’s PB. Thus we remand this issue back to the AO to verify the details of payments and tax deducted and allow the expenditure where the TDS is remitted to the Government account on or before the due date for filing the return of income. The assessee may be given a reasonable opportunity of being heard.
Disallowance u/s 43B - disallowing provision of service tax on sponsorship services and penalty on service tax - HELD THAT:- AO while arriving at the difference between the amount mentioned in the tax audit report (as not paid before the due date for filing the return of income) and the amount already disallowed by the assessee i.e., the difference between had arrived at an amount of Rs.3,50,30,965 which is wrong, whereas the correct amount is Rs.3,15,30,965. Further the assessee has already disallowed Rs.1,90,33,176 as penalty on service tax which fact has not been considered by the AO resulting in double disallowance to that extent. We, therefore, direct the AO to recompute the disallowance taking into consideration the above two disallowances already considered by the assessee in the computation and also correct the transposition error while arriving at the disallowance.
Taxing capital receipt - AO has taken the market price of the shares of the assessee company which were allotted as a gain in the hands of the assessee - HELD THAT:- We hold that there is no income arising in the hands of the assessee for the notional profit computed by the AO. Hence the addition is deleted.
Directions to verify and allow the credits for MAT and TDS while recomputing the income of the assessee.
Computing the ALP considering the +/- 5 percent variation from the arm's length price as permitted under Section 92C(2).
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2022 (6) TMI 1432
Addition to income declared - difference in figures between Schedule SI (Income that are subject to a special rate of tax) and Schedule CG (capital gain) and Schedule OS (Other source) - HELD THAT:- AO has ignored schedule BFLA (Brought Forward Loss Adjustment) while making addition. In Schedule CG the STCG on Shares/Units on which STT was paid which is to be taxed only at 15% is shown as Rs.1,41,384 whereas this figure after BFLA of Rs.33,007 is Rs.1,08,733. Similarly in Schedule SI, LTCG on others of Rs.5,52,538 is claimed as taxable at 20% and the corresponding figure in Schedule CG is shown at Rs.7,62,220. This figure after BFLA of Rs.2,09,682 is Rs.5,52,538.
Thus it is clear that if schedule BFLA is considered then there will not be any discrepancy. Assessee did not participate in the proceedings before CIT(A) and could not explain this aspect. This aspect requires examination by the AO and therefore the issue has to be set aside to the AO for fresh consideration. AO will look into the schedule BFLA also and thereafter decide the issue afresh after affording the assessee opportunity of being heard.
Credit for taxes paid in US - As one of the requirements is that the assessee has to file Form 67 which was filed before the AO only after the date of intimation u/s 143(1). Filing of Form No.67 is only a procedural requirement and therefore that cannot be the basis to deny credit for taxes paid in US. AO shall consider the claim of the assessee for credit for taxes paid in USA also in the set aside proceedings. AO will afford opportunity of being heard to the assessee in the set aside proceedings. Allow appeal of the assessee for statistical purposes.
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2022 (6) TMI 1431
Reopening of assessment u/s 147 - procedure laid down u/s 148A - scope of new provisions substituted by the Finance Act, 2021 - section 148 notice issued on or after 1st April, 2021 - eligibility of reasons to believe that income chargeable to tax had escaped assessment - HELD THAT:- As decided by Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] case the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.
The present batch of writ petitions would stand disposed of in terms of the judgment of the Supreme Court in Ashish Agarwal (supra). However, there shall be no order as to costs.
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2022 (6) TMI 1430
Classification of goods sought to be imported - spot coolers - prohibited goods or not - to be classified under the sub-heading 84186990 of the Customs Tariff Act, 1975 or not? - HELD THAT:- Spot cooling is a process that delivers conditioned air directly to a production line worker using spot coolers. Spot coolers work by sucking in the air around them and sending it across a closed-loop coil which contains refrigerant. The coil not only cools the air but also reduces its humidity. After the air passes over the coil, the supply vent pumps cold air back out into the room. The cooler releases any excess heat up through a flexible tube usually connected to a ceiling vent or pointed out of a window or door.
Thus, it is established that the spot coolers are compressor-based refrigeration systems. The basic principle is similar to that used in a car or a household air conditioner, i.e., reducing the temperature of the air by sending it across a closed-loop coil which contains a refrigerant. In this system, the air also gets dehumidified as it gets cooler. Therefore, spot coolers cool and dehumidify their immediate surroundings.
The impugned goods are fitted with a motor-driven fan/blower and a unit that changes both the temperature and, by condensation, the humidity of the air. As per HSN notes, these machines may be in the form of single units encompassing all the required elements or they may be in the form of "split systems" which operate when connected together. In the present case, the impugned apparatus is in the form of a single portable unit. Therefore, the goods appear to be classifiable under heading 8415.
The essential conditions to be satisfied by the goods for classification under heading 8415 which the impugned devices satisfy. Therefore, the goods under consideration do not merit classification under sub-heading 84186990.
In regards to DGFT Notification No. 41/2015- 2020, dated 15th October 2020. it is to be noted that the said notification pertains to foreign trade policy and specifically to the import policy of India. The subject matter of advance rulings in customs, as specified in section 28H (2) of the Customs Act, 1962, does not cover foreign trade policy.
The spot coolers merit classification under sub-heading 84158290 of the first schedule of the Customs Tariff Act, 1975.
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2022 (6) TMI 1429
Wilful disobedience - construction rampantly going on in blatant violation of the order of the High Court - HELD THAT:- The government departments are no exception to the consequences of wilful disobedience of the orders of the Court. Violation of the orders of the Court would be its disobedience and would invite action in accordance with law. The orders passed by this Court are the law of the land in terms of Article 141 of the Constitution of India. No Court or Tribunal and for that matter any other authority can ignore the law stated by this Court. Such obedience would also be conducive to their smooth working, otherwise there would be confusion in the administration of law and the respect for law would irretrievably suffer. There can be no hesitation in holding that the law declared by the higher court in the State is binding on authorities and tribunals under its superintendence and they cannot ignore it.
In any case, no law is necessary to state that insofar as the Tribunals are concerned, they would be subordinate to the High Court insofar as the territorial jurisdiction of the High Court is concerned. A reference in this respect was also made to the judgment of the Constitution Bench of this Court in the case of L. CHANDRA KUMAR VERSUS UOI. [1994 (12) TMI 321 - SUPREME COURT].
Thus, it was not appropriate on the part of the learned NGT to have continued with the proceedings before it, specifically, when it was pointed that the High Court was also in seisin of the matter and had passed an interim order permitting the construction. The conflicting orders passed by the learned NGT and the High Court would lead to an anomalous situation, where the authorities would be faced with a difficulty as to which order they are required to follow.
The continuation of the proceedings before the learned NGT for the same cause of action, which is seized with the High Court, would not be in the interest of justice - Appeal disposed off.
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2022 (6) TMI 1428
Diversion of income by overriding charge - amount transferred to Statutory Reserve Fund in compliance with the mandatory provisions of Section 45 IC read with Section 45Q of the RBI Act - HELD THAT:- We are of the firm view that when the income by way of profit, as in the present case, is received and then reflected as part of the total income, deduction is not permissible. Therefore, the authorities below were justified in disallowing the deduction claimed by the assessees for the amount transferred to reserve fund in compliance with the mandatory provisions of the RBI Act, which do not call for any interference by this court. Accordingly, the main issue stands answered against the assessees.
MAT Computation - AO added the fund transferred to the statutory reserve to the total income of the assessees, while computing the taxable income under section 115JB, which was also affirmed by the appellate authorities - HELD THAT :- Section 115JB states that for computing the book profit, the amount meeting out the liabilities other than ascertained liabilities, has to be added. The statutory reserve fund based on the RBI guidelines, is not based on any ascertained liabilities and hence, it has to be added for arriving at the book profit under section 115 JB. At this juncture, it would be relevant to refer to the decision of the Delhi High Court in SREI Infrastructure Finance Ltd [2015 (2) TMI 545 - DELHI HIGH COURT] wherein, an identical question of law as raised herein it was clearly stated that the reserve is the amount of profit which is retained for use in business, when difficulty arises and on the basis of our earlier findings and from the very language of section 45 IC, this court comes to a conclusion that the amount transferred by the assessees herein, to the statutory reserve as mandated under the provisions of the RBI Act, is not an allowable deduction in computing the assessable income under the provisions of the Act under the regular computation and computation of book profits under section 115JB, as the case may be and therefore, the orders of the authorities below, do not call for any interference. Accordingly, the consequential issue is also decided against the assessees.
Bad debts written off as deduction u/s 36(1)(vii) - Once the bad debts are written off by debiting the same in the profit and loss account and by giving a corresponding credit in the loans and advances/debtors on the asset side of the balance sheet, the requirement under law is satisfied. It is not necessary to make corresponding entry towards each individual account separately to qualify as a valid write off. The department has not disputed the entries in the profit and loss account and balance sheet.
Tribunal failed to see that once the sums written off in the books maintained for the purpose of Income Tax Act and debited in the profit and loss account and satisfied the other requirement as held in Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT], it is suffice to hold that the assessees are entitled to the allowance. In such view of the matter, we are of the opinion that the Tribunal rightly deleted the disallowances made by the assessing officer - Decided in favour of the assessees.
Nature of expenses - royalty paid to the holding company - whether to be treated as revenue expenses? - AO disallowed the royalty amount and allowed depreciation at 25% by holding that the expenditure incurred is for acquiring intangible asset and would thus amount to capital expenditure - HELD THAT:- Every expenditure incurred to acquire some right over intangible asset, cannot be ipso facto termed as capital expenditure. The nature of the assets, right, information or technical know-how that is transferred, must be such that without which the transferee could never commence the business. As rightly contented by assessees, the benefit granted by the licensor is not enduring in nature in the present cases. The assessing officer without appreciating the terms of the licence agreement and ascertaining the nature of the expenditure incurred by the assessee companies, disallowed the deduction of royalty payment and allowed the depreciation at 25% treating it as capital expenditure. However, the appellate authorities, while deleting the disallowances made by the assessing officer, have rightly treated the royalty payment as revenue expenditure. Once the payment of royalty is treated as revenue expenditure, automatically, it goes without saying that the assessees would be entitled to 100% deduction. Therefore, we need not interfere with the orders passed by appellate authorities. Accordingly, the substantial questions of law relating to royalty, are answered in favour of the assessees.
Employees Stock Option Plan ( ESOP) expenditure - AO disallowed the said claim and added the same back to the total income of the assessee companies - HELD THAT:- This court comes to a conclusion that the Tribunal was correct in holding that the ESOP expenditure is revenue in nature and the assessee is entitled for deduction. Accordingly, the orders passed by the Tribunal in deleting the disallowances of ESOP expenses by the assessing officer, do not require any interference in these appeals. Resultantly, this issue stands answered in favour of the assessees.
Loss on sale of investments / Diminution in value of investments - assessees claimed deduction for the value of investments written off due to fall in their value / loss on sale of investments, which was disallowed by the assessing officer on the ground that it is capital in nature - HELD THAT:- This court is of the opinion that Government securities are only stock-in-trade and not capital investment and the loss, if any, on sale of them cannot be treated as capital loss and hence, the assessees are entitled for deduction of loss on sale of investments / diminution in value of investments. Therefore, the Tribunal was right in deleting the disallowances made by the assessing officer and the same need not be interfered with. Accordingly, the issue raised by the Revenue qua loss on sale of investments/ diminution in value of investments, stands answered in favour of the assessees.
Loss arising out of Derivatives / hedging transactions in foreign exchange - whether the Tribunal was right in holding that the loss arising out of derivatives / hedging transactions in foreign exchange, is an allowable deduction in computing the business income of the assessees? - HELD THAT:- As per section 2 (7) of the Sale of goods Act, “goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;”
No person other than the authorised dealer can deal with foreign currency except with the permission of the RBI under section 8 of the Foreign Exchange Regulations Act, 1973 or Section 3 of the Foreign Exchange Management Act, 1999.
As the foreign currency cannot be called as “commodity” as well, the hedging contracts are not speculative and hence, Section 43(5) is not applicable. Though the assessing officer examined the issue in detail, he erred in treating the transactions done by the assessees as speculative transactions and disallowing the claim made by them. On the other hand, the appellate authorities rendered concurrent findings in favour of the assessees, to the effect that the derivative contracts, foreign exchange swap transactions against fluctuations in interest rate are hedge transactions and the loss arising out of the same is allowable as business loss. Such findings of the appellate authorities cannot be found fault with and therefore, the same are hereby confirmed. Accordingly, this issue stands answered against the Revenue.
Disallowance u/s 14A r/w Rule 8D - mandation of recording satisfaction - HELD THAT:- In the instant cases, the assessing officer made disallowances u/s 14A r/w Rule 8D, but there was no reason recorded by him, as to why he was not satisfied with the claim made by the assessees. Further, there was no examination by the assessing officer about the nature of investment by the assessees in their subsidiary companies and expenditure incurred by them. The CIT(A)/Tribunal pointed out certain errors committed by the assessing officer, accepted the contentions raised by the assessees and directed the assessing officer to modify the disallowances under section 14A, by the orders impugned herein.
Such course adopted by the appellate authorities cannot be countenanced, when the mandatory procedure envisaged under section 14A r/w Rule 8D has not been complied with. Without holding that, in the absence of specific findings and reasons, the question cannot be addressed. Though, it is trite law that any question of law affecting the rights of the parties would not by itself be a substantial question of law, this court is of the opinion that in the absence of specific findings on fact and adherence to the procedure, the substantial questions of law on the issue ought not to be decided. Thus sets aside the orders of the appellate authorities and remands the matter to the assessing officer.
Interest u/s 234D - The Tribunal in [2016 (1) TMI 1433 - ITAT CHENNAI] while rejecting the contentions of the assessees, held that interest under section 234D is on par with the interest charged under section 234A or 234B or 234C of the Act and that, the Government has not advanced any money to the assessees so as to call it as a loan; the interest levied on the assessees is compensatory and it cannot be allowed as a business deduction, while computing the business income.
This court finds no reason much less valid reason to interfere with the findings so rendered by the authorities below, as the interest was levied on the amount refunded to the assessees, which they are not legally entitled to and for the period during which they were holding the same and hence, the same is not eligible for deduction. Therefore, this issue relating to disallowance of interest under section 234D, is decided against the assessees.
Disallowance u/s 40(a)(ia) - Assessee did not adduce any evidence to support their claim and also in view of the settled legal position that the liability to deduct tax at source is mandatory and a person who does not adhere to the said statutory obligation, has to suffer the consequences which are stipulated in the Act itself, this court does not find any reason much less valid reason to disagree with the findings so rendered by the authorities below, qua disallowance u/s 40(a)(ia) of the Act.
Alternative plea that the amount disallowable is only 30% of the expenditure in view of the amendment to section 40(a)(ia) by Finance (No. 2) Act, 2014 - The proviso to section 40(a)(ia) of the Act as inserted by the Finance Act, 2014 does not apply to the case at hand pertaining to the assessment year 2012-13 and hence, the contention of the assessee for curative benefit with reference to the said proviso does not hold good. Having considered the rival contentions, the Tribunal was of the view that the amendment restricting the disallowance to 30% of the expenditure, came into effect only with effect from 01.04.2015 and the assessment year under consideration was 2012-13 and hence, the said amendment was not applicable to the case of the assessee. Accordingly, the alternative plea raised by the assessee was rejected by the Tribunal. The said view of the Tribunal appears to be just and proper and it needs no interference by this court, in the light of the judgment of the Hon'ble Supreme Court in Shree Choudhary Transport Company [2020 (8) TMI 23 - SUPREME COURT] as clearly observed that the amendment to section 40(a)(ia) by the Finance No. 2 Act 2014 with effect from 01.04.2015, is applicable only from the assessment year 2015-16.
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2022 (6) TMI 1427
Capital gain computation - fair market value of assessee’s capital asset - HELD THAT:- As we note with the able assistance coming from the Departmental side that this taxpayer had neither transferred any “land nor a building” as specified u/s.50C(1) but only its lease hold rights in the ‘CIDCO’ area.
We thus hold that such a leasehold rights are nowhere covered u/s.50C(1) going by specified categories therein as per stricter interpretation recently reiterated in Commissioner of Customs Vs. Dilip Kumar and Co [2018 (7) TMI 1826 - SUPREME COURT] We accordingly reject the Revenue’s instant sole substantive grievance.
Unaccounted cash component - Revenue vehemently argued that both the learned authorities have gone by the seized material as clearly indicating cash “paid to Jai Ganesh Co-operative members” - It further invokes the necessary presumption of correctness given to the such seized documents u/s 292C as well - As no substance in Revenue’s forgoing arguments supporting the impugned addition. This is for the precise reason that the alleged seized document itself rebuts the presumption in assessee’s favour once its members only had received the payment who are separately assessable in their individual capacity(ies). We further make it clear that the learned lower authorities have nowhere quoted any other cogent evidence since they have only gone by above seized document. We accordingly accept the assessee’s sole substantive grievance.
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2022 (6) TMI 1426
Refund of CENVAT Credit - HELD THAT:- Admittedly, the identical issue has been raised by the petitioner for prior periods as well. In fact, for one such prior period, the petitioner had suffered an adverse order before the CESTAT, which order has been followed by the First Appellate Authority for the subsequent period as well. It is as against the order of the First Appellate Authority as aforesaid that the present writ petition has been filed.
Pending writ petition, the order of the CESTAT relied upon by the Appellate Authority has been reversed in CMA. Nos. 1933 to 1935 of 2018 at the petitioner's instance, on 20.08.2019 and, it is this order that holds the field as on date. In such circumstances, the order of first Appellate Authority that takes a contrary view is not liable to be sustained and the same is set aside.
Petition allowed.
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2022 (6) TMI 1425
Unexplained investment - Department was in possession of the incriminating documents in the form of MOU seized during the course of search proceedings which clearly showed the name of the assessee and share of the assessee in the said property - co-owners of the property has admitted the fact of unexplained investment in accordance with his share in the property in the statement recorded on oath - CIT(A) deleted the addition - AO made addition by taking a view that as per MOU, the assessee was having 24% share in the land and Param Properties was having 4% share - HELD THAT:- CIT(A) noted that extrapolation on the basis of part period or part value is not permissible. CIT(A) further noted that no evidence during the course of search or statement of any person which proved that the assessee had paid Rs. 1.50 crore for purchase of land. AO made addition without having any documentary or oral evidence.
AO made addition without any basis of evidence. There is no document found during the course of search which may contain details of payment of Rs. 1.50 crore paid by assessee for purchase of land. On the basis of the said observation, the CIT(A) deleted the entire addition. We find that the Ld. CIT(A) on proper appreciation of fact correctly held that the additions made by the assessing officer is not based on evidence on record. No contrary facts or law is brought to our notice to take other view, hence, we affirm the order of Ld. CIT(A). in the result, the grounds of appeal raised by the revenue are dismissed.
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2022 (6) TMI 1424
Bank is a nominee or transferee of the shares or not?
Seeking an injunction restraining defendant nos. 1 and 2 and their servants and agents from participating in an Extraordinary General Meeting (EGM) of the defendant no.3 (Company) scheduled on 24th June, 2022 and from exercising any right including voting rights in respect of the suit shares - seeking permission to exercise voting rights in respect of the suit shares at the said EGM - seeking restraint on defendant nos. 1 and 2 and their servants and agents or nominees from interfering or seeking participation in the management of the affairs of the Company.
HELD THAT:- That interim application was scheduled to be heard by this court but was withdrawn only to pursue a Review Petition in view of certain additional facts that had come to the knowledge of the applicant. The plaint was amended and the Review Petition is pending. There was a controversy whether the Review Petition was moved at all, but today it is pointed out that the Review Petition has been listed on board. There is no reason why the plaintiff/applicant has not moved that court since the issue is sought to be reopened on the basis of additional disclosures and fact thus their application could have been made in the Review.
However, despite pendency of the Review Petition, the attempt of the applicant is now to once again seek relief which was part of IAL 4778 which was withdrawn - no case is made out for ad-interim relief on the basis of the arguments advanced - The Review Petition continues to be pending. Contentious issues have been raised as to the legal capacity of the bank since the applicant has contended that the bank is not a nominee but an alleged transferee. The applicant has not made out a prima facie case nor is the balance of convenience favouring grant of relief. No irreparable harm is likely to be caused to the plaintiff/applicant. There is no occasion to once again consider grant of relief which was part of IAL 4778 which was consciously withdrawn to pursue the Review Petition which is still being pursued.
Ad-interim relief is refused - List per CIS.
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2022 (6) TMI 1423
Validity of revision notice of assessment - refund alongwith interest on delayed refund - no personal hearing granted - violation of principles of natural justice - HELD THAT:- This court in KIRBY BUILDING SYSTEMS INDIA LIMITED VERSUS DEPUTY COMMISSIONER (CT), CHARMINAR DIVISION, HYDERABAD AND OTHERS [2011 (8) TMI 1049 - ANDHRA PRADESH HIGH COURT] allowed the writ petition and set aside the revisional order dated July 29, 2011. The matter was remanded back to the revisional authority to pass fresh orders in accordance with law. Though respondent No. 2 had issued notices dated November 10, 2011 and March 24, 2012 for hearing, which was attended to by the petitioner, no order of revision came to be passed.
When the revisional order was set aside by this court, the consequence was that the original assessment order stood restored and continues till date since no fresh order of revision has been passed on remand - it is evident that when an order of assessment, re- assessment, rectification or revision of an assessment is made following an order of any court, the same is required to be made within three years from the date of receipt of such order by the prescribed or revising authority.
The respondent No. 2 directed to refund Rs. 40,00,000/- to the petitioner with interest at 6% per cent. per annum to be computed from June 21,2017 when the petitioner first raised the demand for refund. Let the refund along with interest be paid by respondent No. 2 to the petitioner within a period of three (03) months from the date of receipt of a copy of this order.
Petition disposed off.
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2022 (6) TMI 1422
Revision u/s 263 - distinction between lack of inquiry and inadequate inquiry - Second revision orders - As per CIT AO failed to make an enquiry as to why the assessee has offered net income and not the gross income - HELD THAT:- Action at the end of the ld. Pr. CIT is not justifiable. He has exercised the powers without analytically examining the report. The reason for taking the first two reasons together was for appreciating this factual aspect. On reason no. 2, the ld. Pr. CIT did not go through the record that earlier 263 proceedings were initiated against the assessee and those were dropped. What made him to again initiate the proceedings, is not discernable. There was no fresh information about this aspect and the same aspect has already been considered by his predecessor. It suggests that there was no application of mind at the end of the ld. Pr. CIT.
Enquiry was initiated on the premises that the assessee has not included in its disclosed income. When the assessee has demonstrated that it has disclosed the income and it is part the computation of income then, the ld. Pr. CIT changed the scope of enquiry and held that it is not discernable as to how the Assessing Officer has accepted this return. He should not have allowed the expenditure relatable to earning of this income. It suggests that he has initiated the action without properly analyzing the record and the computation of income filed by the assessee. In other words, a show-cause notice to the assessee would have been in different terms.
CIT wanted to verify the inclusion of the income. The assessee has demonstrated that it has offered tax on net basis and income has to be offered on net basis only. Nothing remains to be explored on the ground that as to how the gross income was not offered. It is not the case of the revenue that the assessee has claimed excessive expenditure or the expenditure were not to be granted to the assessee. Therefore, to our mind the impugned order is not sustainable because the ld Pr. CIT failed to make a complete analysis of the record. Nothing is available on the record which authorizes the ld. Pr. CIT to take action u/s 263 of the Act
Commission payment - AO has made an enquiry during the assessment proceedings. The cognizance of the letter written by the DDIT Mumbai was taken up and it was explained by the assessee in its reply. The reference of this letter in the reply of the assessee would suggest that it must have been brought to the knowledge of the AO.
There could not be any occasion of the assessee to make reference of this letter in his reply which suggest that these details were discussed by the AO and thereafter he exercised his discretion. The grievance of the ld. Pr. CIT is that the AO has accepted this stand of the assessee without any verification or enquiry. This reasoning is factually incorrect as the case on hand does not reflect inadequate/non-enquiry at the behest of the AO. The assessment order cannot be set aside on this reasoning by invoking Section 263.
Appeal of the assessee is allowed.
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2022 (6) TMI 1421
Revision u/s 263 - second round of litigation - non-service of notice as agitated in first round of litigation - HC earlier [2018 (5) TMI 701 - CALCUTTA HIGH COURT] allowed the appeal on the ground that the contention advanced by the assessee with regard to non-service of notice was not specifically considered by the tribunal and order passed by the tribunal was set aside and the matter was remanded to the tribunal to re-consider the issue - HELD THAT:- On remand, the tribunal has taken up the matter and we find that factual exercise had been done by the tribunal and all the records placed by the department were considered and the tribunal was satisfied that there has been gross violation of principles of natural justice. Accordingly, the appeal filed by the assessee was allowed.
The revenue has challenged this order by filing the present appeal and from the memorandum of grounds, we find that the revenue seeks to convert this Court as if it is a second appellate Court over the findings of the tribunal. The present appeal, being one under Section 260A of the Act, what is required to be seen is as to whether any substantial question of law arises for consideration and the jurisdiction of this Court is not to reappreciate the factual conclusion arrived at by the tribunal. As pointed out earlier, the tribunal, after the matter was remanded, has done an elaborate factual exercise and decided in favour of the assessee. Thus, we find that there is no question of law much less substantial question of law arises for consideration in this appeal. Decided against revenue.
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2022 (6) TMI 1420
Maintainability of writ petition under Article 226 of the Constitution - Seeking forbearance from investigating under PMLA on the premise that the investigation is without jurisdiction - round tripping transactions between the Indian and the overseas entities - HELD THAT:- The jurisdiction of this Court under Article 226 of the Constitution is a basic feature of the Constitution of India and cannot be taken away even by a constitutional amendment - In that view of the matter, it cannot be contended, with any degree of seriousness, that a High Court does not possess the inherent jurisdiction to issue a writ in an appropriate case. It is also well settled that the High Court can issue a writ of mandamus to stop an investigation where it is found that the investigating officer was misusing his powers of investigation.
Nevertheless, the existence of jurisdiction is one aspect, and the manner of its exercise is quite another. The power of a High Court to issue high prerogative writs like a mandamus, certiorari, etc., flows from its plenary power under Article 226 of the Constitution of India and is discretionary in nature. Therefore, it does not imply that because the High Court is vested with jurisdiction to issue an appropriate writ, it must necessarily follow that a writ must issue in all cases. The remedy is discretionary in nature and must be exercised in consonance with sound judicial principles.
On perusing the order in MANOHAR LAL SHARMA VERSUS THE PRINCIPAL SECRETARY & OTHERS [2014 (7) TMI 1380 - SUPREME COURT] passed by the Supreme Court. What is discernable is that the CBI is conducting a Courtmonitored investigation into the coal block allocations, by issuing various directions from time to time. The Court had taken note of the fact that a Special Judge had been notified by the Chief Justice of the Delhi High Court to try the coal block allocation cases.
It is noticed that the CBI and the Enforcement Directorate have been periodically filing detailed status reports of the various prosecutions conducted by them.
Coming to the allegation of “round tripping” which was strenuously pursued by the learned Additional Solicitor General, it is necessary to briefly notice the import of this expression. “Round tripping” can be defined as a practice by which funds are transferred from one country to another and transferred back to the origin country for purposes like black money laundering or to get the benefit of tax concession/evasion/avoidance from countries like Mauritius, which enjoy low taxes, etc. - even according to the Enforcement Directorate, no mining was carried out and on the other hand, RKM Company had expended funds from its coffers on mine development activities. Once it is held that RKM Company had not derived any benefit from the allocation of the coal block, it follows that the corpus delicti of the offence viz., the proceeds of crime, does not exist.
The allegation of round-tripping, even assuming there is one, as alleged by the Enforcement Directorate, is a criminal activity, falling within the domain of Foreign Exchange Management Act (FEMA), there is no arrest provision under the provisions of FEMA, whereas, threat of arrest looms large in an investigation under the PML Act with bail conditions being very stringent.
The Enforcement Directorate cannot exercise its powers of investigation to discover the existence of a predicate offence under the FEMA or the Customs Act.
Thus, in the absence of there being any predicate offence under the Customs Act, 1962, for the present, and the fact that the alleged offence under the FEMA, 1999, is not a predicate offence under the PML Act, 2002, it follows that there cannot be any offence of money laundering under Section 3 of the PML Act, 2002 qua these offences.
A writ of mandamus is issued restraining the Enforcement Directorate from exercising its powers under the PML Act, 2002, qua the investigation of alleged money-laundering in respect of these offences alone - Petition disposed off.
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2022 (6) TMI 1419
Accrual of income - reliance on documents seized in search - as contented documents seized during the course of search and seizure proceedings and marked as A/1/MKP from the assessee reflected the amount collected on behalf of the co-operative societies and the said amount is not an income in the hands of the assessee.
HELD THAT:- To a pointed question of this Court, with regard to the above finding recorded by this Court, Shri Seshachala, in his usual fairness, did not deny that the judgment in [2016 (6) TMI 644 - KARNATAKA HIGH COURT] and connected case, has attained finality. In view of the admitted facts, the Assessing Officer, the First Appellate Authority and ITAT having concurrently recorded findings of the fact against the assessee, the question of law framed in this appeal are answered in favour of the revenue and this appeal is dismissed.
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2022 (6) TMI 1418
Penalty u/s. 271B - Delay in submitting the audit report - HELD THAT:- AO shows that the delay in submitting the audit report was on account of delay in obtaining audit report from the statutory auditors. It is fairly admitted that the statutory auditors is appointed by the Registrar of Co-operative Societies and not by the assessee.
Assessee has sufficient and reasonable cause for delay in obtaining the audit report. It is also an admitted fact that the audit report was available before the AO, when the assessment was done. This being so, we are of the view that it is a fit case for deletion of penalty u/s. 271B - As penalty levied by the AO u/s 271B of the Act and confirmed by the ld CIT(A) stands deleted. Decided in favour of assessee.
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2022 (6) TMI 1417
Professional Misconduct - Compliance with SAs and Maintenance of Audit Quality - Promotion of Public and Investor confidence and Effectiveness in Deterring Auditors and Audit Firms from violating the applicable Accounting and Auditing Standards - sanctions and penalties.
Compliance with SAs and Maintenance of Audit Quality - HELD THAT:- CA Gulshan Jham is a qualified professional but the serious non-compliances of the Companies Act and Standards on Auditing on his part have been not what was expected from him as the Auditor. The primary function of the Auditor is to achieve the necessary audit quality and compliance with SAs. The charges proved have shown the failure of the CA to discharge this duty. A critical, questioning attitude, an unwillingness to be satisfied by merely superficial explanations, not concluding on material matters without rigorous verification from more than one angle, diligent and methodical cross verification, proper planning and the meticulous execution of the audit plan etc are fundamental to audit quality. The audit of this listed Company has been done by the CA most casually with no regard to the law, and professional and ethical standards. The CA has failed in his duties as the auditor.
Promotion of Public and Investor confidence and Effectiveness in Deterring Auditors and Audit Firms from violating the applicable Accounting and Auditing Standards - HELD THAT:- Audited financial statements are the basic inputs for innumerable transactions in the economy. A breakdown, or severe damage, to the trust and confidence that the public and investors have in financial statements, would have ramifications that go far beyond the limited activities of an auditee company. As professionals, auditors are expected to judge the significance of the operations of the entity they audit for the larger financial and economic sectors and accordingly calibrate their approach and procedures. The auditor's duty of exercising due diligence is owed to the users of the financial statements - Where the auditors have shown to be not diligent in considering these factors, appropriate penalties would follow that should be effective, proportionate and dissuasive. It is also essential that the penalty imposed has a suitable deterrent effect on other auditors and, at the same time, sends out a message to the Public and the Investor Community that such misconduct will not be allowed to escape lightly.
Nature and size of the Audit Firm - HELD THAT:- The CA in this case is a very small proprietorship firm not having any other listed company audit. Based on the principle of proportionality, the sanctions are being made keeping in mind the nature and size of the audit firm and the fact that he has accepted all the charges.
Penalties and Sanctions - HELD THAT:- Considering the fact that professional misconduct has been proved and considering the nature of violations and principles of proportionality, the NFRA, in the exercise of its powers under Section 132(4)(c) of the Companies Act, 2013 orders:
(i) Imposition of a monetary penalty of Rs. 100,000 (One Lakh only) upon CA Gulshan Jagdish Jham.
(ii) In addition, CA Gulshan Jadish Jham is debarred for one year from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2022 (6) TMI 1416
Revision u/s 263 - anonymous donations receipts - as submitted there was a survey in the premises of the assessee on notice did not contain any query in regard to anonymous donations received by the assessee much less the donation - HELD THAT:- CIT (E) in his order u/s.263 of the Act had directed the AO to examine the donors and make proper enquiry and redo the assessment but the AO instead of doing the verification has practically rejected the assessee’s contention and has made addition representing 30% of the donations received treating the same as anonymous donations.
We are not going into the merits of the consequential order passed u/s.143(3) r.w. 263 r.w.s 144B - However, a perusal of the original assessment order clearly shows that no examination of the issues has been done. This being so, the ld CIT (E) is very much in his powers to direct the AO to examine the same. No error in the order of the ld CIT (E) has been pointed out by assessee. This being so, the order of ld CIT(E) passed u/s.263 stands upheld.
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2022 (6) TMI 1415
Non-inclusion of GST amount in the tender - main contention against the impugned judgment is that Clause 3.3.3 of notice inviting tender is incorrectly and erroneously interpreted - HELD THAT:- In this intra court appeal the respondent/corporation demonstrates how the findings in the judgment are erroneous warranting an interference. The respondent/corporation is the maker of the tender conditions. Clause 3.3.3 in clear terms excludes GST component. Inviting the GST component while interpreting subsequent clauses is impermissible. Being the maker, in the event of arguable ambiguity, the benefit of ambiguity is extended not to the maker but the other party.
The learned single judge has judiciously used his discretion and allowed the writ petition declaring that the terms and conditions in Ext.P1 shall govern the contract and that respondents 2 and 3 have to pay the GST component against the bill raised by the petitioner. The decision cited by the counsel for the appellant only prohibits the writ court from interfering in any contractual matter and the interference in the auction procedure when the decision making process is arbitrary and for any extraneous consideration. In this case, the learned single judge has not gone into the complexities of the clauses in the notice inviting tender nor substituted any interpretation other than those explicitly provided in the clause.
The learned single judge was right in declaring that the GST component was not to be included as per clause 3.3.3 of Ext.P1 and the direction to pay the GST component by respondents 2 and 3 is in tune with the clauses of Ext.P1 and hence there are no grounds to interfere with the judgment of the learned single judge, and hence the writ appeal is dismissed.
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