TMI Tax Updates - e-Newsletter
January 4, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Law of Competition Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. New Year New Rules An executive study of 10th amendment in CGST Rules

   By: MANOJ SHARMA

News

1. Implementation of Rule-59(6), as amended, on GST Portal

2. Auction for Sale (Re-issue) of (i) ‘4.56% GS 2023’, (ii) ‘5.74% GS 2026’, (iii) ‘6.67% GS 2035’, and (iv) ‘6.99% GS 2051’

3. SPMCIL pays dividend of ₹ 240.41 crore to Government of India for FY 2020-21 in compliance of DIPAM guidelines

Notifications

GST - States

1. S. R. O. No. 2/2022 - dated 31-12-2021 - Kerala SGST

Amendment in Notification G.O.(P) No.62/2017/TAXES dated 30th June, 2017

2. S. R. O. No. 1018/2021 - dated 31-12-2021 - Kerala SGST

Seeks to bring in force sub-rule (2), sub-rule (3), clause (1) of sub-rule (6) and sub-rule (7) of rule 2 of the Kerala Goods and Services Tax (Ninth Amendment) Rules, 2021

3. S. R. O. No. 1017/2021 - dated 31-12-2021 - Kerala SGST

Kerala Goods and Services Tax (Tenth Amendment) Rules, 2021.

4. S. R. O. No. 1/2022 - dated 31-12-2021 - Kerala SGST

Seeks to amend Notification G.O.(P) No.72/2017/TAXES dated 30th June, 2017

5. F.12(1)FD/Tax/2021-99 - dated 31-12-2021 - Rajasthan SGST

Seeks to amend Notification No F.12(56)FD/Tax/2017-Pt-I-49 dated 29.06.2017

6. F.12(1)FD/Tax/2021-98 - dated 31-12-2021 - Rajasthan SGST

Seeks to amend Notification No F.12(56)FD/Tax/2017-Pt-I-40 dated 29.06.2017

7. F.1-11 (91)-TAX/GST/2021 (PART-III) - dated 28-12-2021 - Tripura SGST

Seeks to notify 01.01.2022 as the date on which provisions of section 108, 109 and 113 to 122 of the TSGST (4th Amendment) Act, 2021 shall come into force.

8. F.1-11 (91)-TAX/GST/2021 (PART-III) - dated 28-12-2021 - Tripura SGST

Seeks to bring sub-rule (2) and sub-rule (3), clause (i) of sub-rule (6) and sub-rule (7) of rule 2 of the TSGST (Eighth Amendment) Rules, 2021 into force w.e.f. 01.01.2022.

9. F.1-11 (91)-TAX/GST/2021 (PART) - dated 28-12-2021 - Tripura SGST

Corrigendum to the Notification No.14/2021-State Tax (Rate) dated 02.12.2021

10. F.1-11(91)-TAX/GST/2021(PART) - dated 18-12-2021 - Tripura SGST

Seeks to notify section 4 and 5 of the TSGST (Fourth Amendment) Act, 2021 w.e.f. 01.08.2021

11. F.1-11 (91)-TAX/GST/2021 (PART) - dated 18-12-2021 - Tripura SGST

Seeks to appoint 01.06.2021 as the day from which the provisions of section 6 of TSGST (Fourth Amendment) Act, 2021, bring in force

12. 14/2021-State Tax (Rate) - dated 2-12-2021 - Tripura SGST

Seeks to amend Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017

13. 13/2021-State Tax (Rate) - dated 1-11-2021 - Tripura SGST

Amendment in Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017

14. 12/2021-State Tax (Rate) - dated 7-10-2021 - Tripura SGST

Seeks to exempt TGST on specified medicines used in COVID-19, up to 31st December, 2021

15. 11/2021-State Tax (Rate) - dated 7-10-2021 - Tripura SGST

Amendment in Notification No. 39/2017-State Tax (Rate), dated the 9th November, 2017

16. 10/2021-State Tax (Rate) - dated 7-10-2021 - Tripura SGST

Amendment in Notification No. 4/2017- State Tax (Rate), dated the 29th June 2017

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CDMRD/DNP/CIR/P/2022/01 - dated 3-1-2022

Options on Commodity Futures - Product Design and Risk Management Framework – Modification in exercise mechanism

2. SEBI/HO/CFD/SSEP/CIR/P/2022/003 - dated 3-1-2022

Schemes of Arrangement by Listed Entities - Clarification w.r.t. timing of submission of NOC from the lending scheduled commercial banks/ financial institutions/ debenture trustee

Highlights / Catch Notes

Income Tax

• Tribunal Confirms Validity of Assessment Order; Revenue's Appeal Dismissed Due to Adequate Inquiry by Assessing Officer.

  Case-Laws - HC : Revision u/s 263 by CIT - the Tribunal was satisfied on facts that the Assessing Officer has inquired into the matter to the extent required the documents were available with the Assessing Officer and, accordingly, held that the assessment order cannot be treated to be erroneous or prejudicial to the interest of revenue - Revenue appeal dismissed - HC
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• Court Overturns Unexplained Cash Additions Due to Oversight in Verifying Advance Payments in Sale Deeds.

  Case-Laws - AT : Unexplained cash deposits - Our aforesaid conviction that the lower authorities before rejecting the assessee’s claim of having received the sale consideration prior to the execution of the respective sale deeds ought to have carried out necessary verifications from the purchasers is all the more strengthened by the fact that the CIT(A) had himself admitted that the sale deeds did make a mention about the money being given in advance - Additions deleted - AT
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• Tax Additions u/s 68 Deleted Due to Lack of Cross-Examination Opportunity in Bogus LTCG Case.

  Case-Laws - AT : Assessment u/s 153A - beneficiary of bogus LTCG - Addition u/s 68 - onus to prove - The whole basis of making additions is third-party statement and no opportunity of cross-examination has been provided to the assessee to confront these parties. As against this, the assessee’s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. - Additions deleted - AT
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• Corpus Fund Misused; Depreciation Deducted Incorrectly; Unregistered Society's Fund Treated as Income u/ss 12A/12AA.

  Case-Laws - AT : Exemption u/s 11 - If the corpus has been received by the assessee for a designated purpose, the same should have utilized for that purpose only and if depreciation is charged, depreciation should be reduced from the corpus fund as well as from the fixed assets. Whereas the assessee has reduced from the current year’s receipts - Since the society is not registered u/s 12A/12AA of the Act, in our considered view, the AO/CPC has right in making the addition treating the corpus fund receipts/donations as income and the CIT(A) has confirmed the same by analyzing the issue elaborately. - AT
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• Penalties u/ss 271D and 271E Not Applicable for Journal Entries Due to Reasonable Cause u/s 273B.

  Case-Laws - AT : Levy of penalty u/s.271D/271E - transaction by passing a journal entry - proof of reasonable cause u/s 273B - the business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same - AT
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• Section 153A: Only Search-Discovered Material Valid for Tax Assessment Additions, External Info Considered Supplementary.

  Case-Laws - AT : Validity of Assessment u/s 153A - The information obtained from outside agencies which was confronted with the assessee during the search cannot be considered as incriminating material found during search proceedings. It can only be considered as additional information in case it is found proper, can be used to make addition during assessment proceedings and cannot be used as the information found during search. There two aspects are completely different and gives different connotation. The information found during search alone can be considered for making addition u/s 153A of the Act. - AT
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• Supreme Court: Charitable Institutions Can Carry Forward Deficits u/s 11 of Income Tax Act for Future Exemptions.

  Case-Laws - AT : Assessment u/s 153A - Exemption u/s 11 - Carry forward of the deficit being excess of expenditure over income to the subsequent years - the Hon’ble Supreme Court has held that the excess expenditure incurred by the charitable institution in the earlier years could be allowed to be set off against the subsequent years by invoking section 11. - Claim allowed - AT
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Customs

• Court Rules Technical Issues Shouldn't Block MEIS Incentives for Exporters with Unchallenged Entitlements and Authenticity of Exports.

  Case-Laws - HC : Merchandise Export from India Scheme (MEIS) - Amendment in the shipping bill - entitlement to incentives on the realized Free On Board (FOB) value of exports - No technicality can mar the right of the parties which otherwise accrued under the substantive law. Here when genuineness of the export and entitlement of petitioner otherwise is not in any manner disputed, this technical glitch shall in no manner hamper the request of the petitioner of getting benefit. - HC
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• Clandestine Charge Chrome Removal: Unreliable Evidence from Production Extrapolation Raises Concerns in Customs Assessments.

  Case-Laws - HC : Clandestine removal - Charge Chrome - reliable evidence or not - To simply extrapolate the production figures of one company to determine whether there has been a suppression of production figures by another may neither be a safe or a reliable method of determining what should be the acceptable ratio of production of Charge Chrome and Charge Chrome Slag. - HC
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Indian Laws

• High Court to Quash Proceedings: Petitioners Not Liable for Cheque Dishonor Due to Insufficient Funds Under Vicarious Liability.

  Case-Laws - HC : Dishonor of Cheque - insufficiency of funds - vicarious liability of the accused - As the petitioners are not the persons, who had drawn the cheque and they were not shown as the persons who were maintaining the account in the bank and that they had issued the subject cheques in discharge of their liability, continuation of the proceedings against them is considered as an abuse of process of law and as such liable to be quashed.- HC
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• Cheque Dishonor Case: Lack of Evidence u/s 138 Weakens Claim of Legally Enforceable Debt for Insufficient Funds.

  Case-Laws - HC : Dishonor of Cheque - insufficient funds - legally enforceable debt or not - Unless the cheques which were returned for 'insufficient funds' were proved to have been issued for legally enforceable debt, the action taken under Section 138 of N.I.Act will fail. Since the complainant did not prove that he had procured funds from his alleged friends and relatives by way of examining them, that would shift the preponderance of probabilities in favour of the accused. So it is unbelievable that the complainant had lent a huge sum in a short span of 40 days and that too to a person like the accused who is his casual acquaintance. - HC
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IBC

• Resolution Applicant Liable for Dues in Information Memorandum; Other Dues Extinguished Post-Approval u/s 31.

  Case-Laws - Tri : Rejection of claim of the Applicant - It has been made abundantly clear that the Resolution Applicant can be made liable for the dues which are forming part of the Information Memorandum and once the Resolution Plan is approved by this Adjudicating Authority, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. - Tri
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• Applicant's Claim Dismissed Due to Delay; Filed After CoC Approved Resolution Plan During CIRP.

  Case-Laws - Tri : Rejection of claim made by the Respondent/RP - Even though liberty was granted for the Applicant to file a fresh Application, the Applicant has been keeping silent and sleeping over a period of one year and only at the fag end of CIRP when the Resolution Plan in respect of the Corporate Debtor is in the offing and after the same was approved by the CoC, the Applicant has preferred the present Application, which in any case, is devoid of any merits. - Tri
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Central Excise

• Court Grants 50% Waiver for Pre-Deposit of Central Excise Duty; Full Waiver Request Denied by Commissioner.

  Case-Laws - HC : Seeking a complete waiver of the pre-deposit of Central Excise duty - In the present case, the adjudication order has been passed by the Commissioner after complying with all the procedural requirements. - Suffice it to note that in the context of the demand amount, and the nature of activity carried on, the partial waiver of 50% of the demanded amount for the purposes of predeposit cannot be held to be harsh or unreasonable. - HC
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• CENVAT Credit Approved for Construction Services in Effluent Treatment Plant Setup; Exclusion Clause Misinterpretation Overturned.

  Case-Laws - AT : CENVAT Credit - input service - construction services used by the appellant for setting up of Effluent Treatment Plant - since modernization, renovation or repair and maintenance, even after exclusion category, continue to remain in inclusion clause of definition, credit cannot be denied - the adjudication order deciding the matter on the basis of exclusion category is beyond the scope of show cause notice. - AT
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VAT

• Court Rules Secured Creditors Have Priority Over Tax Dues Under SARFAESI Act, Section 26E vs. VAT Act, Section 48.

  Case-Laws - HC : Recovery of tax dues - secured creditor - priority of charge over the subject properties in terms of Section 48 of the VAT Act as against the provisions of Section 26E of the SARFAESI Act - As on date, no material is placed on record by the respondent state authorities to remotely suggest that any challenge has been made by the State to the proceedings of SARFAESI Act which has finally culminated into the execution of deed of assignment in favour of the petitioner holding him as a secured creditor. - the State cannot have prior charge over the secured assets, more particularly, as it transpires from the records that the mortgage deed was executed much prior in point of time before the outstanding dues of the Sales Tax had become due - HC
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• High Court Rules Hajmola Candy Taxable as Ayurvedic Medicine, Recognizing Assessee's Trade License and Product Qualification.

  Case-Laws - HC : Levy of Sales tax - Hajmola candy - taxable as an Ayurvedic medicine or not - assessee had satisfactorily demonstrated that the product in question was an Ayurvedic Medicine, for which the assessee possessed a trade licence. - HC
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Case Laws:

• GST

• 2022 (1) TMI 98
  Reimbursement of differential tax amount arising out of change in tax regime from Value Added Tax (VAT) to Goods and Service Tax (GST) - grievance of the Petitioner is that in view of the introduction of the GST, Petitioner is required to pay tax which was not envisaged while entering into the agreement - HELD THAT:- The Government has now come out with a revised guidelines in this respect in supersession of the guidelines issued vide Finance Department letter dated 7th December, 2017. He has filed Additional Counter Affidavit of Opposite Party-authority in similar cases annexing the revised guidelines relating to works contract under GST issued by the Government of Odisha, Finance Department. In that view of the matter, the Petitioner shall make a comprehensive representation before the appropriate authority within four weeks from today ventilating the grievance. If such a representation is filed, the authority will consider and dispose of the same, in the light of the revised guidelines dated 10th December, 2018 issued by the Finance Department, Government of Odisha, as expeditiously as possible, preferably within a period of three months from the date of receipt of the certified copy of this order - If the Petitioner will be aggrieved by the decision of the authority, it will be open for the Petitioner to challenge the same. Petition disposed off.

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• Income Tax

• 2022 (1) TMI 97
  Revision u/s 263 by CIT - assessee had credited a sum as sundry income in the profit and loss account and for the purpose of computation of partner s salary allowable u/s 40[b] and said income being income from other sources should be excluded from the book profit and the assessee has debited in profit and loss account on PWC Global Service charges and the same is not allowable as it has no direct or indirect nexus in running and functioning of business of the assessee and, therefore, the amount should be disallowed - HELD THAT:- Tribunal after examining the benefits found that detailed submissions and materials were available on record with regard to the sundry income credited in the profit and loss account and the AO has secured the required details and has not made any adverse observation in its order. Therefore, the Tribunal concluded that the AO was satisfied that the income in question had direct nexus with the business of the assessee and, therefore, had to be regarded as income from business. Tribunal found that it is not disputed that income from sale of scrap, foreign exchange fluctuation gain are inextricably linked to the professional income and have to be regarded as income from profession. With regard to the payment of service charges to M/s. Price Water House Coopers, the required details were filed by the assessee and looked into by the Assessing Officer, who has raised the specific queries on those charges. Tribunal was satisfied that necessary inquiries were made by the Assessing Officer. Furthermore, the Tribunal specifically noted that similar charges have been allowed as a direction in the earlier years and, hence, there was no reason for the Assessing Officer to doubt the nexus of those expenses with the business of the assessee. With regard to payment of policy premium to cover risk damages owing to professional negligence, the Tribunal held that it has direct nexus to the business of the assessee. In this regard, the Tribunal has noted the submissions of the assessee that similar expenditure had been allowed during the assessment years 2005-06 to 2008-09. Therefore, the Tribunal was satisfied that necessary inquiries were made and the order passed by the Assessing Officer cannot be treated to be erroneous nor prejudicial to the interest of revenue. Tribunal also held that merely by stating that there is no inquiry by the Assessing Officer would not be sufficient for the CIT to assume jurisdiction under Section 263 of the Act but a finding has to be rendered as to how and in what manner the inquiry was required to be done which the Assessing Officer had failed to do. With regard to the payment of service charges to Price Water House Coopers services the Tribunal noted that the assessee vide letter dated 25.3.2014 had given the proper explanation which found place in the paper book filed, which were the materials already available on record. Thus, the Tribunal was satisfied on facts that the Assessing Officer has inquired into the matter to the extent required the documents were available with the Assessing Officer and, accordingly, held that the assessment order cannot be treated to be erroneous or prejudicial to the interest of revenue.- Decided against revenue.

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• 2022 (1) TMI 96
  Exemption u/s 80IB(10) - HELD THAT:- The assessee is a Government of West Bengal undertaking and is engaged in the development of housing projects which was initially done by the housing Department of the Government of West Bengal and in the year 1972 the respondent was established and projects were developed by the respondent by constructing LIG/MIG and HIG flats for sale to the general public. The CIT(A) on going through the facts found that the income of the respondent/assessee is only from sale of flats. CIT(A) also examined as to whether the observation of the assessing officer that the assessee did not make such a claim in the original return but only in the revised return was considered for its correctness as to whether the same could have been a ground to reject the revised return and deny the claim for exemption. CIT(A) noted that the earning of interest was not from the first degree source and the same could not be shown by the assessee as income from other sources in the original computation and hence revised computation was filed by the assessee during the course of assessment proceedings and that the reason for rejecting the same as assigned by the assessing officer was incorrect. CIT(A) rightly noted the decision in CIT vs. Calcutta National Bank Ltd. [ 1959 (4) TMI 2 - SUPREME COURT] wherein held that business is a word of very wide connotation and applying the said decision to the facts of the case it was held that the income should be treated as business income. The tribunal on its part, examined the correctness of finding recorded by the CIT(A) and approved by same. More importantly, the tribunal noted that the assessing officer himself has allowed deduction under similar circumstances while completing the assessment for the assessment year 2006-07 u/s 143(3) of the Act - Tribunal was right in rejecting the revenue s appeal.

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• 2022 (1) TMI 95
  Unexplained cash deposits - source of income - Addition on account of cash deposited in Bank treating the same as income from undisclosed sources - HELD THAT:- We are unable to persuade ourselves to subscribe to their view that the assessee had not received any part of the sale proceeds qua the sale of the properties in question prior to the date of execution of the respective sale deeds. CIT(A) had clearly admitted that the sale deeds did mention about the money having been given in advance. But after so observing, the CIT(A), was of the view, that as the sale deeds were silent as to when and in what manner the sale consideration was given to the assessee as an advance, therefore, his unsubstantiated claim of having received part/full sale consideration qua sale of the properties in question did not merit acceptance. Insofar the reasoning given by the CIT(A) for declining the assessee s claim of having sourced part of the cash deposits in his bank accounts out of the part/full sale consideration qua the sale of the properties in question that were received prior to the date of execution of the respective sale deeds, we are afraid that the same is based on a half-hearted approach by him to the issue in hand. Having observed that the sale deeds did make a mention about money given to the assessee in advance, the CIT(A), in our considered view could not have summarily rejected the assessee s claim of having received part/full sale consideration prior to the date of the execution of the respective sale deeds. Apart from that, we find that it is not even the case of the department that the sale consideration received by the assessee on sale of the respective properties had been channelized by him for making some other investment and/or incurring of any other expenditure. Our aforesaid conviction that the lower authorities before rejecting the assessee s claim of having received the sale consideration prior to the execution of the respective sale deeds ought to have carried out necessary verifications from the purchasers is all the more strengthened by the fact that the CIT(A) had himself admitted that the sale deeds did make a mention about the money being given in advance - we are of the considered view, that there is substance in the claim of the assessee of having received part/full sale consideration qua sale of the properties in question and the same had wrongly been rejected by the lower authorities. We, thus, in the backdrop of our aforesaid observations set-aside the order of the CIT(A) and vacate the addition made by the A.O. - Decided in favour of assessee.

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• 2022 (1) TMI 94
  Disallowance of expenditure incurred on failed IPO ( failed public issue) - Whether CIT(A) erred in concluding that failed IPO expenditure are covered by section 35(D)(2) instead of section 37 or section 28/29 of Income Tax Act, 1961 - whether expenditure on failed public issue should be allowed proportionately? - HELD THAT:- The issue in the present appeal is no more res-integra as the issue is decided in assessee s own case[ 2021 (6) TMI 1082 - ITAT PUNE] following the decision of the Hon ble Jurisdictional High Court in the case of CIT Vs. Nimbus Communication Ltd. [ 2011 (12) TMI 696 - BOMBAY HIGH COURT ] and CIT Vs. M/s. Essar Oil Limited [ 2008 (10) TMI 649 - BOMBAY HIGH COURT ] in favour of the assessee company. Disallowance u/s.14A r.w.r. 8D - HELD THAT:- As decided in own case [ 2021 (6) TMI 1082 - ITAT PUNE] well settled position of law that while computing the amount of disallowance under clause (iii) of Rule 8D(2) of the Rules, the average value of investments which yielded the exempt income alone to be considered for the purpose of arriving at average value of investment as envisaged therein - this ground of appeal is remitted to the file of the Assessing Officer to calculate the amount of disallowance under clause (iii) of Rule 8D(2) on the above lines indicated above. Thus, this ground of appeal is partly allowed. Deduction paid towards Education Cess under Finance Act while computing the taxable income - HELD THAT:- We note that the assessee paid Education Cess while computing the taxable income under normal provision of the I.T. Act. The Hon ble High Court of Bombay in the case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT ] was pleased to hold that the Education Cess is an allowable expenditure as per the provision of the I.T. Act. That therefore, from the legal perspective, the issue of education cess is an allowable expenditure as per provisions of Section 40(a)(ii) of the Act and placing reliance on the decision of the Hon ble Bombay High Court (supra.), we direct the Assessing Officer to allow deduction in respect of Education Cess paid by the assessee. Accordingly, the additional ground raised by the assessee is allowed.

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• 2022 (1) TMI 93
  Exemption u/s 11 - intimation passed u/s 143 (1) - appellant submits that intimation u/s 143(1) merges with order u/s 143(3) and hence the appeal against intimation u/s 143(1) becomes infructuous - HELD THAT:- Appeal before CIT (A) was against an intimation passed u/s 143 (1) of the act. Subsequently the assessment order u/s 143 (3) of the act has also been passed. In assessment order u/s 143 (3) of the act the assessee has been granted benefit of accumulation of total income. Therefore, the directions now issued by the learned CIT -A , after passing of the order by the learned assessing officer u/s 143 (3) of the act, (which was not subject matter of appeal before CIT (A)), will tantamount to giving direction to the assessing officer in the order passed u/s 143 (3) of the Act. Ld CIT (A) does not have any authority to give direction in orders which were not before him. Even otherwise the assessee has already filed such forms before the due date of filing of the return of income and is in conformity with the provisions of Section 11 (2) (C) of the act. Therefore, we do not find any reason for the learned CIT - A to give any such direction to the learned assessing officer. - Decided in favour of assessee.

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• 2022 (1) TMI 92
  Chargeability as Fees for technical services - test of make available - HELD THAT:- The technical knowledge, experience, skill etc. should not get exhausted in the service itself. Something should be provided in such a manner that the receiver may use it after its receipt. If certain technical or consultancy services etc. are provided by one, which get exhausted in the process of providing such services, they do not make available any technical knowledge, experience, skill etc., to the other. Extantly, we are confronted with a situation in which the assessee provided technical or consultancy services through its two employees which were consumed in the provision of services itself and nothing was made available to TTL or TML for afterwards use. The PVR clearly refers to certain deliverables by TTL to TTM, such as, Vehicle Configuration (VC) with all necessary components required to construct the full VC for the X101Aa (Vista FL LHD and FL LHD NCAP 3 star) VTS and Manufacturing Feasibility Considerations, which refer to making available the requisite design or engineering to TML. Unlike TTL, there is no reference to any deliverables in the PVR by the assessee either to TTL or TML, which further fortifies that services rendered by the assessee are albeit in realm of technical services but are not made available to anyone. Whereas the provision of Engineering and Design services by TTL to TML satisfy the test of make available , the provision of services by the assessee to TTL fall short of the same and hence they do not fall within the definition of `Fees for included services under Article 12(4) of the DTAA. Going with the mandate of section 90(2) of the Act, it is the definition of `Fees for Included services under the DTAA which would prevail over the definition of `Fees for technical services u/s.9(1)(vii) of the Act. Since the assessee did not receive any Fees for Included services under Article 12(4) of the DTAA to TTL, the sum of Rs. 52.73 lakh, can t be charged to tax as Fees for Technical services. We have observed above that the assessee categorically stated before the AO that it did not have any Permanent Establishment in India, which point has not been controverted by the Officer. In the absence of the assessee having any PE in India as per Article 5 of the DTAA, the amount received from TTL cannot be considered as Business profits in terms of Article 7. We, therefore, hold that the amount of Rs. 52.73 lakh is not chargeable to tax. This ground is allowed. Taxability of Software License fees - After analyzing the identical issue in the backdrop of similar expression as used in Article 12(3), it has been held that ownership of copyright in a work is different from the ownership of the physical material in which the copyrighted work may happen to be embodied. Parting with copyright entails parting with the right to do any of the acts mentioned in section 14 of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of the licensed computer software product over which the licensee has no exclusive rights, no copyright is parted with. Adverting to the facts of the extant case, it is seen that the disputed receipt of Rs. 65.28 lakh from TTL is on account of sale of Software license and not for parting with the copyright of the software. Since facts of the present case are similar to those considered and decided by the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] , respectfully following the precedent, we hold that the amount cannot be brought within the ambit of Royalties under Article 12 of the DTAA. Ergo, its taxability is not magnetized. This ground is accepted.

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• 2022 (1) TMI 91
  Assessment u/s 153A - beneficiary of bogus LTCG - Addition u/s 68 - onus to prove - HELD THAT:- Upon perusal of all the documents, it is quite discernible that the assessee had furnished all the requisite documentary evidences to substantiate the transactions and discharged the primary onus as required under law to establish the genuineness of the gains so earned during the year. No defect has been pointed out by the revenue in documentary evidences furnished by the assessee. Therefore, the onus had, thus, shifted on revenue to disprove assessee s claim and establish with cogent evidences that the transactions were non-genuine transactions through which assessee s unaccounted money has flown back to assessee in the garb of bogus capital gains. We find that except for general findings of investigation wing and third-party statements on the basis of which it has been alleged that the scrip of Unisys was penny stock, there is nothing in the kitty of the revenue to prove the assessee s involvement in manipulating the prices of the scrip. No exchange of cash between the assessee and the various exit providers could be proved. Therefore, the onus as casted upon revenue to dislodge the assessee s claim, remain un-discharged. The proposition that additions made purely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law stem from the decision in Omar Salay Mohamed Sait [ 1959 (3) TMI 2 - SUPREME COURT] wherein it was held that the suspicion however strong could not partake the character of legal evidence as held in Umacharan Shaw Bros. [ 1959 (5) TMI 11 - SUPREME COURT] . The additions made on mere presumptions could not be sustained and there must be something more than mere suspicion to support the assessment as per the decision in Dhakeshwari Cotton Mills Ltd. [ 1954 (10) TMI 12 - SUPREME COURT] . The assessment should not be based merely on suspicion or guess work but on legitimate material from which reasonable inference of income could have been drawn. Addition u/s 68, in our considered opinion, is not sustainable in view of the fact that credit in assessee s bank account represents sale proceeds of shares sold in recognized stock exchange through registered stock broker. The sale transactions have taken place through recognized stock exchange and the money was received in settlement through banking channels. The assessee had delivered the shares from his demat account to the broker, who, in turn, paid sale consideration to the assessee. In such a case, there could be no doubt as to fulfillment of primary ingredients of Sec.68 viz. identity of the payer, their creditworthiness and the genuineness of the transactions. The source of credit received in the bank account could not be held to be unexplained unless it was established that assessee s own money was routed in his bank account in the garb of Capital gains. The whole basis of making additions is third-party statement and no opportunity of cross-examination has been provided to the assessee to confront these parties. As against this, the assessee s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. Hence, going by the factual matrix and respectfully following the binding judicial precedents as enumerated in the order, the additions made by Ld. AO and confirmed by Ld. CIT(A), are not sustainable in the eyes of law. Therefore, we are inclined to delete the same. We order so. Consequentially, the addition of estimated commission also stands deleted. Resultantly, the appeal, on merits, stand allowed. Assessment u/s 153A - As we find that subsequent to framing of assessment u/s 143(3) r.w.s. 153A, Ld. AO came into possession of tangible material in the shape of investigation wing report which indicated possible escapement of income in the hands of the assessee. In our opinion, at this stage, nothing more was required to reopen the case of the assessee. Therefore, we concur with the findings of Ld.CIT(A) as given in the impugned order, in this regard. The legal ground, thus raised, stand dismissed.

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• 2022 (1) TMI 90
  Disallowance to 2% of cost of material - assessee has failed to discharge it s onus as per section 37 - HELD THAT:- All the necessary particulars pertaining to these three heads of material cost, construction and other expenses involving varying sums. It is an admitted fact that the CIT(A) has simply reproduced assessment findings while restricting these three heads of disallowance(s) to a paltry percentage ranging between 1 to 2% (supra). The fact also remains that both the learned lower authorities are fair enough in not pinpointing any kind of abnormal trend in the assessee s corresponding expenditure claims as well. Faced with this situation and in larger interest of justice, we are of the opinion that the Assessing Officer s action disallowing 20% of cost of material, 10% of construction and other expenses involving disallowance of 28,19,8.54 and 6 (in crores) deserved to be partly upheld to the extent of 50% thereof on lumpsum basis with a rider that the same shall not be treated as a precedent. We make it clear that we have partly reversed the CIT(A) s findings under challenge and restore the three impugned disallowances to the extent of 50% of the corresponding sums added in the assessment order. Necessary computation shall follow as per law.

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• 2022 (1) TMI 89
  Estimation of income - bogus purchases - Lower authorities have allowed 75% of the very purchases in the assessment order itself - HELD THAT:- This assessee is a trader in TMT Bars with corresponding sales involving M/s. Nimbus Industries Ltd. qua the very purchase(s) difference. It had the difference amount admitted as business income and stood assessed as such. Coupled with this, this assessee has filed detailed paper book containing all the relevant details of the alleged bogus entity M/s. Highland Industries Ltd. along with the fact that it had paid the corresponding purchase amount through banking channel only. The Revenue s endeavor herein seeking to restore 25% of purchases on estimation basis thereby accepting the balance 75% component in case to the very supplier as well as in assessing 100% sales therefrom as correct suffers from mutually contradictory stands. We thus conclude that the CIT(A) has rightly restricted the impugned 25% bogus purchases disallowed to the extent of profit element only going by the corresponding book results which have nowhere been rejected till date. The Revenue s sole substantive grievance is therefore rejected.

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• 2022 (1) TMI 88
  Addition u/s 68 read with Section 115BBE - HELD THAT:- Opening balance was not confirmed from any closing balance of the earlier period by the assessee before the Revenue Authorities. It is an admitted fact that the assessee has not filed return of income for Assessment Years 2013-14 and 2014-15 and there was no Balance Sheet Profit Loss Account before the AO who verified the opening balance for the present Assessment Year. From the perusal of the records before us, the Ld. AR submitted that the same can be demonstrated before the Assessing Officer by the assessee. Therefore, we are remanding back this issue to the file of the Assessing Officer for adjudicating the issue afresh. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. Ground no. 2 is partly allowed for statistical purposes. Addition of cash sales - Assessee has also not fully established as to how the cash sales are genuine as the records produced before us which were already produced before the AO has not been taken into consideration properly by the AO - It will be appropriate to remand back this issue to the file of the AO for fresh adjudication after verifying the evidences produced before the AO. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground no. 3 is partly allowed for statistical purposes.

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• 2022 (1) TMI 87
  Addition u/s 68 - assessee was doing share trading business and the cash was deposited/withdrawn for the business. The peak credit only can be added, in place of total cash deposited in Bank A/c. - HELD THAT:- At the time of hearing and after going through the order of the CIT(A), it emerges that the details of IPOs were not produced before the CIT(A) and before the Assessing Officer. The cash deposits and its source as well as related supporting evidences were not produced by the assessee before the Assessing Officer as well as before the CIT(A). The assessee has filed additional evidence before us. Therefore, it will be appropriate to remand back the matter to the file of the Assessing Officer for proper adjudication of the additional evidence produced before us along with details of IPOs. After verification of the source of cash deposit as well as the genuineness of the transactions, the Assessing Officer may decide the case of the assessee as per the due process of law.

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• 2022 (1) TMI 86
  Exemption u/s 11 - application in form No. 10A seeking registration u/s 12AA was pending before the CIT(E) - Addition of corpus fund receipts/donations as income - HELD THAT:- On the assets side of the balance sheet, we find that the assessee has invested in different assets and from the fixed assets, the assessee has charged depreciation in the P L Account. If the corpus has been received by the assessee for a designated purpose, the same should have utilized for that purpose only and if depreciation is charged, depreciation should be reduced from the corpus fund as well as from the fixed assets. Whereas the assessee has reduced from the current year s receipts as per the P L Account submitted at page 4 of paper book. Since the society is not registered u/s 12A/12AA of the Act, in our considered view, the AO/CPC has right in making the addition treating the corpus fund receipts/donations as income and the CIT(A) has confirmed the same by analyzing the issue elaborately. Therefore, we uphold the order of the CIT(A) and dismiss the grounds raised by the assessee on this issue.

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• 2022 (1) TMI 85
  Addition u/s 68 - HELD THAT:- In this case AO has made addition u/s. 68 only on the basis of surmise and conjunctures. CIT(A) has given a finding that all transactions are routed through the demat account. The transactions are through banking channels, the gain is also a small amount. AO has not even bothered to find out what is the gain and what is the cost price. Without any application of mind he has added the entire amount an addition u/s. 68. CIT(A) on the other hand given a finding that the gain from this scrip of SVC Resource Ltd is amounting to only Rs. 1,329/-. Moreover, nowhere AO has mentioned that assessee has been named by the SEBI for penalizing or any order has been passed against the assessee. In these circumstances addition on the basis of conjunctures and surmise has been rightly deleted by the Ld. CIT(A). - Decided against assessee.

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• 2022 (1) TMI 84
  Additions u/s 68 - unexplained cash credit - HELD THAT:- CIT(A) has granted substantial relief to the assessee as against the addition of unexplained deposit. In assessment order, the Ld.CIT(A) finally sustained an addition. As evident, even in the remand report also certain amount were found to have remained unconfirmed. The inference drawn by the Ld.CIT(A) on the unconfirmed/unexplained deposit is reasonable. Hence, I do not find any infirmity in the order of the Ld.CIT(A). Accordingly, we uphold the same.- Decided against assessee.

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• 2022 (1) TMI 83
  Penalty u/s 271(1)(c) - defective notice u/s 274 - HELD THAT:- We find that the notice in this also is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. Hence following case of MOHD. FARHAN A. SHAIKH [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law. As regards, the merit of issues in penalty, we find that a very small amount of addition has been finally sustained by ITAT on an estimate basis. The Ld. CIT(A) has erred in holding that huge additions are there. On the facts and circumstances, we are of the opinion that assessee cannot be visited with the rigors of penalty u/s. 271(1)(c). Hence, the penalty is liable to be deleted on merits also. Assessee appeal allowed.

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• 2022 (1) TMI 82
  Delayed payment of employees contribution to PF and ESI paid after the due dates prescribed in the relevant Statutes but before the due date of filing of return under section 139(1) - HELD THAT:- A similar issue relating to the disallowance on account of delayed payment of employees contribution towards PF and ESI was involved in the case of Lumino Industries Limited and after considering the relevant provisions of the Income Tax Act as amended from time to time as well as the relevant judicial pronouncements on the issue, this Tribunal in the case of Lumino Industries Limited [ 2021 (11) TMI 926 - ITAT KOLKATA] . We delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of delayed payment of employees contribution towards PF and ESI - Decided in favour of assessee.

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• 2022 (1) TMI 81
  TP Adjustment - determination of ALP of international transaction in the nature of payment of management fees - Selection of MAM - HELD THAT:- It is pertinent to mention here that there is no dispute on the legal proposition that if the TPO finds that the method applied by the appellant is not appropriate, it can carry out his own analysis however he has to follow the methodology as provided in Chapter-X of the Income-tax Act. As further be noted that the starting point for applying the CUP method as per the transfer pricing provisions is availability of the price of the same product or service in uncontrolled conditions and according to that the ALP of the product or service can be ascertained. Thus, the action of TPO of applying CUP method and at the same considering the value of such transaction as Nil in absence of comparable uncontrolled transactions, is in itself contradictory and without any basis/logic. Therefore, the contention of the TPO to apply CUP method as MAM is not tenable under the law. Hence, based on above, we disapprove the action of CIT(A) treating the management services provided by the AE to the appellant as duplicate service and consequent determining its ALP at Nil. The appellant succeeds on other grounds raised before us. The transfer pricing adjustment made by the TPO and upheld by CIT(A) is hereby deleted.

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• 2022 (1) TMI 80
  Levy of penalty u/s. 271(1)(c) - whether the notice was issued for incorrect particulars of income or for both, the proceeding cannot be initiated? - HELD THAT:- Notice imposing the penalty was vague, imprecise and incapable of clear understanding, therefore, the proceeding initiated on such notice is liable to be quashed. In view of the above, we are of the considered opinion that the penalty initiated against the assessee are also liable to be quashed. We may further mention that the assessee being loss making company, is not going to gain anything by wrongly declaring the loss on sale of asset as revenue loss instead of capital loss as in our view it is tax neutral. Therefore, no malafide intention to conceal the income or particulars of income can be attributed to the assessee. For the above said purpose, we may further relied upon the decision of the Hon ble Supreme Court in the matter of Price Water Cooper Pvt. Ltd. [ 2012 (9) TMI 775 - SUPREME COURT] for the said purposes. Respectfully following the decision of the Hon ble Supreme Court and on merit also we are of the opinion that the penalty imposed on the assessee is also liable to be deleted. In the result, the penalty imposed against the assessee is deleted on account of vague and improper notice as well as on merit. - Decided in favour of assessee.

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• 2022 (1) TMI 79
  Entitlement of exemption u/s 11 12 - Poof of charitable purposes u/s 2(15) - assessee is a regulatory body created by State Government u/s 22 of Gujarat Town Planning and Urban Development Act (GTPUDA), 1976 for proper development of specified area in the state as ensured by the State Government - HELD THAT:- The assessee s case is squarely covered by the order passed in own case [ 2020 (4) TMI 755 - ITAT AHMEDABAD] and [ 2021 (1) TMI 1043 - GUJARAT HIGH COURT] in holding the activities of the assessee for charitable purposes under Section 2(15) of the Act and the consequential benefits under Section 11 12 of the Act. We find no reason to deviate from the stand taken - Hence, respectfully relying upon the same we hold, that the assessee is entitled to the benefit of the claim under Section 11 12 of the Act for the year under consideration and hence the order passed by the Ld. CIT(A) in favour of the assessee as impugned before us is according to us just and proper so as to warrant interference and the same is, thus, hereby confirmed. The appeal preferred by the Revenue is found to be devoid of any merit and, therefore, dismissed.

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• 2022 (1) TMI 78
  Disallowance on account of late payments towards EPF and ESI u/s 36(1)(va) before furnishing the return of income under section 139(1) - HELD THAT:- Since the facts involved in the present case are identical to the facts involved in the case of Mohangarh Engineers and Construction Company [ 2021 (8) TMI 563 - ITAT JODHPUR] and in the case of Bikaner Ceramics Private Limited, Bikaner[ 2021 (9) TMI 1319 - ITAT JODHPUR] . So respectfully following the aforesaid referred to order, the disallowances sustained by the Ld. CIT(A) are deleted.

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• 2022 (1) TMI 77
  Penalty u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT:- In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 . It is true, that assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other s defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.Thus, it is clear that where assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice, not striking off irrelevant matter would vitiate penalty proceedings. In the preset case notices two limbs are mentioned viz (i) concealed the particulars of income and (ii) furnished inaccurate particulars of income. The assessing officer has not ticked any of the limbs in the notice issued u/s 271(1)(c) of the Act therefore penalty proceedings are bad in law. On the identical facts our view is fortified by the judgment of the Hon`ble Gujarat High Court in the case of Jyoti Ltd, [ 2013 (7) TMI 173 - GUJARAT HIGH COURT] , wherein it was held where Assessing Officer in order of penalty did not come to a clear finding regarding penalty being imposed on concealment of income or on furnishing inaccurate particulars of income, Tribunal was justified in setting aside impugned penalty order. Thus, respectfully following the judgment of the Hon`ble Bombay High Court and Hon`ble Gujarat High Court, we delete the penalty. - Decided in favour of assessee.

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• 2022 (1) TMI 76
  Levy of penalty u/s.271D/271E - transaction by passing a journal entry - proof of reasonable cause u/s 273B - HELD THAT:- Assessee has given complete explanation of the transactions before the ld. Addl. CIT by way of detailed explanation together with the purpose of passing a journal entry including relevant journal entry passed in the books of accounts of the assessee company. The same are not reiterated for the sake of brevity herein as they are already forming part of the records. Hence it could be safely concluded that these entries were passed out of business constraints and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, this business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same As in the case of Triumph International . [ 2012 (6) TMI 358 - BOMBAY HIGH COURT] still the observations made by the Hon ble Delhi High Court on the genuineness of the transactions in the ordinary course of business and the element of reasonable cause thereon, would still remain applicable and would have more persuasive value. In view of our aforesaid observations and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the ld. CIT(A) had rightly held that no penalty u/s.271D/271E of the Act could be levied in respect of transactions. Accordingly, the grounds raised by the Revenue are dismissed.

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• 2022 (1) TMI 75
  Validity of Assessment u/s 153A - whether addition made in the absence of any incriminating material found in the course of search, no addition could be made and proceedings under section 153A be initiated? HELD THAT:- As observe from the record that a search and seizure operation under section 132 (1) of the Act was conducted on the assessee and his related entities. Accordingly notice under section 153A of the Act was issued and served on the assessee and in response assessee filed his return of income - addition was made by the assessing officer during this assessment year pertains to a bank account in HSBC, Geneva. The relevant information on the bank account was not found during search proceedings nor found in the possession of the assessee. However, during search proceedings, the assessee was confronted with the Base Note which the Income Tax Department obtained under exchange of information between French government and Indian government under the provisions of DTAA. The investigation wing and the assessing officer heavily relied on the information contained in the Base Note which they have confronted with the expectation that assessee will accept the information contained in the Base Note. However, the assessee has denied the ownership of any bank account opened in the HSBC Bank, Geneva and denied the information on the base note except the personal informations. It is fact on record that the addition was made in the assessment under section 143(3) read with section 153A only based on the information contained in the base note, which was not the material found, during search, in the possession of the assessee or in the places where search were conducted. The addition made by the assessing officer wholly based on the information contained in Base Note which was not the material found during the search proceedings either in possession of the assessee or found in the premises were search conducted. The information obtained from outside agencies which was confronted with the assessee during the search cannot be considered as incriminating material found during search proceedings. It can only be considered as additional information in case it is found proper, can be used to make addition during assessment proceedings and cannot be used as the information found during search. There two aspects are completely different and gives different connotation. The information found during search alone can be considered for making addition u/s 153A of the Act. Therefore, we are inclined to accept the submissions of the Ld. AR and accordingly the ground No. 1 raised by the assessee is allowed. Penalty u/s 271 (1) (c) - Since we already held the assessment made under section 143 (3) read with section 153 A is bad in law in para no. 8.1 above and the assessing officer has not found any incriminating material during search, he cannot make any addition in the proceedings under section 153A of the Act, therefore, penalty cannot be levied in this case. Accordingly, we direct the AO to delete the penalty levied.

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• 2022 (1) TMI 74
  Assessment u/s 153A - Exemption u/s 11 - Carry forward of the deficit being excess of expenditure over income to the subsequent years by holding that the same is eligible for set off against the income of subsequent years - HELD THAT:- We find that the issue of carry forward losses and setting off against the subsequent years surplus is squarely covered by the decision as cited by the Ld. A.R. We have perused the order of Ld. CIT(A) carefully and found that the Ld. CIT(A) has passed a very reasoned order after following the decision of CIT vs. Institute of Banking Personnel Selection (IBPS) [ 2003 (7) TMI 52 - BOMBAY HIGH COURT] wherein it has been held by the Hon ble High Court that the carry forward of deficit of earlier years and setting it off against the surplus of the subsequent years is allowable. Similarly, in the case of CIT vs. Subros Educational Society [ 2018 (4) TMI 1622 - SC ORDER] the Hon ble Supreme Court has held that the excess expenditure incurred by the charitable institution in the earlier years could be allowed to be set off against the subsequent years by invoking section 11. Considering the ratio laid down in the above decision, we are inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue. Assessment u/s 153A - Addition of undisclosed income on the ground that assessee has diverted funds to another sister entity which is not in accordance with the objectives and general accounting principle - HELD THAT:- The undisputed facts are that on the date of search the assessment for the current assessment year was not pending and therefore it has attained finality and thus it was unabated on the date of search. Therefore the AO has no jurisdiction to make addition in an unabated assessment year without there being incriminating materials and accordingly the jurisdiction of the AO can not be justified. We note that the ld CIT(A) passed a very reasoned and speaking order after following the decision of Hon ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] , Murli Agro Products Ltd [ 2010 (10) TMI 1052 - BOMBAY HIGH COURT] and Pr. CIT vs. Meeta Gutgutia [[ 2018 (7) TMI 569 - SC ORDER] - Therefore we do not find any infirmity in the order and are inclined to uphold the same by dismissing ground no.3.

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• 2022 (1) TMI 52
  Characterization of income - Disallowing the claim of agriculture income by treating the same as income from other sources - HELD THAT:- As there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. It is not necessarily the agriculture income of current year only, as the past savings of the earlier years out of agriculture income were deposited in bank accounts or applied in the current year. We note that net holding of the agriculture land of this assessee and his family members is at 3,84,250.77 square meters, and nature of the crops cultivated by the family are sugar cane, jowar, tuwer, fruits, paddy, vegetables etc. To prove land holding, assessee submitted copies of Forms 7 x 12, which shows joint ownership of his and his family members as well as the types of crops grown in the land belonging to the assessee and his family members. The assessee also submitted before ld CIT(A), balance sheet, cash flow statement. The assessee submitted the agricultural income account. The assessee submitted ledger account of Chalthan Khand Ydhyog Mandali. CIT(A) has not made any adverse finding in any of these documents even, though all the details were furnished by the appellant before him. CIT(A) ought to have examined all these details and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion. On the contrary, the ld CIT(A) has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. The additions have been made purely on selective misinterpretation, without dealing with the explanations/ evidences of the assessee. Besides, no incriminating material were found by the search team, hence, no addition can be made for assessment years 2008-09 to assessment years 2010-11, without incriminating material, as the time limit for completion of assessment has already expired when the search was conducted for assessment years 2008-09 to assessment year 2010-11. Hence, we are not inclined to accept the contention of the Ld CIT(A) in sustaining the addition and enhancing the addition based on surmises and conjectures, and hence the addition so sustained and enhanced are deleted. Hence this ground of the assessee is allowed.

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• Customs

• 2022 (1) TMI 73
  Merchandise Export from India Scheme (MEIS) - Amendment in the shipping bill - entitlement to incentives on the realized Free On Board (FOB) value of exports - HELD THAT:- It is noticed that it is a genuine mistake on the part of the petitioner which has led the petitioner approaching this Court for prayer of permitting the bill manually. We notice that the respondent Nos.1 and 2 had permitted the manual amendment of shipping bill in question being the shipping bill bearing No.5561585 dated 14.06.2018 while filing shipping bill online in EDI system of the customs inadvertently systems had got been corrected value of goods exported as has been noted by the PRC Committee in its meeting. A representation made had weighed with the said Committee. The issue is more of procedural in nature than of substantive kind as the software has the limitation and it does not permit even after the manual correction of the shipping bill, the benefit to flow of MEIS Scheme as it does not recognize said manual correction, the petitioner is deprived of the benefits - No technicality can mar the right of the parties which otherwise accrued under the substantive law. Here when genuineness of the export and entitlement of petitioner otherwise is not in any manner disputed, this technical glitch shall in no manner hamper the request of the petitioner of getting benefit. The petition is allowed without imposing the late cut charges the benefits of MEIS shall be allowed.

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• 2022 (1) TMI 72
  Clandestine removal - Charge Chrome - reliable evidence or not - Whether the Tribunal was justified in holding that the ratio of 1:1.3 taken from charge chrome to charge chrome slag manufactured by the assessee was not established by the Department? - HELD THAT:- The Court is inclined to concur with the CEGAT that the Department proceeded on surmises and conjectures to allege there was clandestine removal of Charge Chrome by the Respondent and that this was based merely on the ratio of production of Charge Chrome to Charge Chrome Slag for FACOR. It was not based on the actual figures pertaining to the Respondent s production of Charge Chrome and Charge Chrome Slag over a period of time. As rightly pointed out by the CEGAT, the quality of the ore and the type of machinery used are relevant since no two units might use the same type of ore or machinery. To simply extrapolate the production figures of one company to determine whether there has been a suppression of production figures by another may neither be a safe or a reliable method of determining what should be the acceptable ratio of production of Charge Chrome and Charge Chrome Slag. The CEGAT was justified in holding that the ratio 1:1.3 for production of Charge Chrome to Charge Chrome Slag manufactured by the Assessee was not established by the Customs Department - the Court answers the question framed in the affirmative - reference disposed off.

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• 2022 (1) TMI 71
  Continuation of earlier proceedings made in the previous listings - HELD THAT:- The proceedings make it clear that this is the fifth consecutive successive listing in which the writ petitioner has not chosen to come before this court and pursue the matter. The adequate and ample opportunity has been given to the writ petitioner but the writ petitioner has not come forward to pursue the matter. Petition are dismissed for default/non-prosecution.

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• 2022 (1) TMI 70
  Summoning of witnesses - Refusal of summon of some of the witnesses as mentioned in the schedule of the petition through Court process - production of documents more-fully described therein - HELD THAT:- The procedure provided in the Code are for definite purpose to make the system of delivery of justice hassle free and smooth. Any deviation in the prescribed procedure may lead to miscarriage of justice. It cannot, of course, be denied that the procedure is a handmaid of justice. Procedure laid down in the Code should not be utilised to obstruct freeflow of justice, if the provisions made in Civil Procedure Code are strictly followed. Thus, in every case, a party seeking deviation from prescribed procedure must show that it will cause prejudice and obstruct free flow of justice if the procedure prescribed are strictly followed. In the case at hand no such case is made out by the Petitioners. Further, no material has been placed before this Court to show that the documents sought to be called for from Defendant No.6 are at all relevant for proper adjudication of the case. No ground whatsoever has been taken in the petition under Order XVI Rule 1 C.P.C. for summoning the aforesaid witnesses. It further appears that the Collector, Central Excise Custom, Bhubaneswar-1 is Defendant No.6 is to the suit and is contesting the suit by engaging its counsel. Hence, the Plaintiffs-Petitioners would be at liberty to cross-examine the witnesses to be produced on behalf of the Defendant No.6 during course of trial to establish their claim - there are no infirmity in the impugned order. Petition dismissed.

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• Law of Competition

• 2022 (1) TMI 69
  Sanction of the Scheme of Amalgamation - Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 and in terms of Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- The Scheme (Annexure 1) is approved and it is declared that the same to be binding on all the shareholders, and creditors of the Petitioner Company and on all concerned. While approving the Scheme, it is clarified that this order should not be construed as an order in any way granting exemption from payment of any stamp duty, taxes, or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance with any other requirement which may be specifically required under any law. Application allowed.

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• Corporate Laws

• 2022 (1) TMI 68
  Sanction of Scheme of Amalgamation - Sections 230 and 232 and other applicable provisions of the Companies Act, 2013, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- There appears to be no reservation to grant sanction to the Scheme, the sanction of the present Scheme is not against public policy, nor it would be prejudicial to the public interest at large. All the statutory compliance seems to have been complied with by Transferor Companies and Transferee Company, therefore, the present Company Petition deserves to be allowed - the scheme is approved - application allowed.

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• 2022 (1) TMI 67
  Seeking restoration of the name of the Company in the register maintained by the Registrar of Companies, NCT of Delhi and Haryana (RoC) - Section 252(3) of the Companies Act, 2013 - HELD THAT:- The Appellant Company has placed on record the Audited Balance sheets for the financial years 2015-16, 2016-17 2017-18 which depict NIL revenue from operations. This clearly demonstrates that the Company was not in operation or carrying out its business at the time of striking off. Further, the appellants have enclosed particulars of some agricultural land, which they intend to purchase for development work. However, the Appellant Company has neither produced or placed any Sale Deed(s) on record to depict ownership over any property nor any other document to indicate real estate development in furtherance of its objectives - the Appellant Company is not holding any Fixed Asset, which could justify its case. The appellant company has placed on record an Income Tax Acknowledgement Receipt for the financial year 2020-21 only, which relates to the period after the date of striking off the Company s name in the register of ROC. Therefore, no reliance can be placed on such a receipt to demonstrate that the Appellant Company was either in operation or carrying out its business at the time of its name was struck off from the register of RoC. This Bench is of the view that the Appellant Company has failed to bring anything concrete on record, which could demonstrate that the Appellant Company was either in active operation or carrying out its business during the immediately preceding two financial years from the date of striking off or it is otherwise just and fair to restore the name of the Appellant Company in the register of RoC - Appeal dismissed.

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• Insolvency & Bankruptcy

• 2022 (1) TMI 66
  Rejection of claim of the Applicant - Direction to 2nd and 3rd Respondent to pay the Applicant his dues as per the proportion for employees and workmen as stated in the Resolution Plan - HELD THAT:- The Applicant in support of his claim has referred to Annexure A6 , which is the copy of the Employee claims as appearing in the website of the 2nd Respondent. It is seen that the RP has published the list of claims received by the Employees, however there is no proof which has been placed on record by the Applicant in order to show that the said claim has been admitted. Further, in Annexure A6, it is stated that Verification with the books of accounts are pending. Once this verification is complete, the amount of claims that have been admitted/rejected/partially accepted shall be published. It has been made abundantly clear that the Resolution Applicant can be made liable for the dues which are forming part of the Information Memorandum and once the Resolution Plan is approved by this Adjudicating Authority, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. In the present case, the dues of the Applicant do not form part of the Information Memorandum as admitted claim and the RP has rejected the claim of the Applicant - Application dismissed.

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• 2022 (1) TMI 65
  Seeking extinguishment of all the disputed and undisputed claims against the Applicant relating to the period prior to the effective date i.e. 20.09.2018 in terms of the approved Resolution Plan in respect to the tea gardens mentioned therein - HELD THAT:- The Hon ble Supreme Court of India in the matter of Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta Ors. [ 2019 (11) TMI 731 - SUPREME COURT ] upheld the constitutional validity of the Insolvency and Bankruptcy Code (Amendment) Act, 2019 has held that (d) A successful Resolution Applicant cannot suddenly be faced with undecided claims after the Resolution Plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by the successful resolution applicant and (e) All claims must be submitted to and decided by the Resolution Professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the CD . The prayer made by the Applicant is allowed and the demand of the Respondent for the period prior to 20.09.2018 for Rs. 30,25,057.00 (Rupees Thirty lacs Twenty Five thousand Fifty Seven) only raised in respect of six tea gardens of the Applicant is hereby extinguished and claim, if any, is filed now or in future relating to the period prior to 20th September, 2018 need not be entertained by the Resolution Applicant / Corporate Debtor - Application disposed off.

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• 2022 (1) TMI 64
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is an admitted fact that the M.O.U dated 16.02.2018 was executed between the parties. The respondent in its reply has admitted that fact that Rs. 1.05 crores as per the MOU is pending to be paid by respondent to applicant towards supply of goods. The respondent has not denied the fact of executing the MOU - In respect of difference in amount claimed by applicant, it is pertinent to mention here that this is not a recovery forum and as far as there is debt and default the quantum of claim is immaterial. What is material that the amount of default, as admitted by respondent as well, is more than Rs. 1 lac in terms of Section 4 of the Code. Application admitted - moratorium declared.

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• 2022 (1) TMI 63
  Rejection of claim made by the Respondent/RP - seeking to allow the claim of the Applicant together with interest from 01.04.2019 till the date of payment - claim rejected on the ground that the Applicant does not qualify to be a financial creditor in respect of the Corporate Debtor - HELD THAT:- In order for the claim to satisfy as a financial debt it has to fall within the definitions stipulated under Section 5(8)(a) to (i) of IBC, 2016 as extracted supra. As to the present case, it is seen that the Applicant claims to be a Del Credere Agent for a third party/mill owners and for the supplies made by such third party/mill owners to the Corporate Debtor, the Applicant pays the money on behalf of the Corporate Debtor to such third party/mill owners - the Learned Counsel for the Applicant stated that since the Applicant has paid money on behalf the Corporate Debtor for the goods supplied by the mill owners, it is implied that he is a financial creditor. The said contention of the Learned Counsel for the Applicant is required to be brushed aside in view of the fact that the claim of the Applicant, in the absence of any legally binding agreement between the parties, is not falling under any of the category stipulated under Section 5(8)(a) to (i) of IBC, 2016 in order to qualify as a financial creditor . It is seen that the Applicant has preferred the present Application before this Tribunal only on 25.08.2021 and has also failed to explain such enormous delay of 12 months in filing the present application. Even though liberty was granted for the Applicant to file a fresh Application, the Applicant has been keeping silent and sleeping over a period of one year and only at the fag end of CIRP when the Resolution Plan in respect of the Corporate Debtor is in the offing and after the same was approved by the CoC, the Applicant has preferred the present Application, which in any case, is devoid of any merits. The order passed by the RP rejecting the claim of the Applicant is free from all legal infirmities and does not warrant interference of this Adjudicating Authority - application dismissed.

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• 2022 (1) TMI 62
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- On perusal of the MCA master data updated by the respondent-company, it is seen that as on March 31, 2019 it is active compliant and is into manufacturing activity. It has a paid-up capital of Rs. 15 crores, though reduced to Rs. 5.39 crores due to negative reserves and surplus. It has tangibles assets of Rs. 4.46 crores and trade receivables of Rs. 7.59 crores. Its total current assets have increased in the last three years and stand at Rs. 19.46 crores. It had net revenue from operations of Rs. 19.31 crores which has increased over the last three years and shows a growth rate of 46 per cent. over last year. It has a net profit of Rs. 77 lakhs and an improving and positive return to equity ratio. Thus prima facie, it has sufficient income and assets to repay its debt and cannot be termed as insolvent. The respondent is not an insolvent company, the respondent should be given some more time to repay the debt. Considering the amount involved, its financial status and the present economic scenario, despite the argument of the petitioner that it is a fit case for admission, it would be fair to allow the respondent some more time. The Code cannot be used to jeopardise the financial health of an otherwise solvent company by pushing it into insolvency, which would be against the objects of the Code. Petition is disposed of by directing the respondent/corporate debtor to repay the balance debt or the amount as settled with the petitioner within a period of 6 months failing which the petitioner would be at liberty to file a fresh petition for admission.

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• Central Excise

• 2022 (1) TMI 61
  Absolute confiscation - Gold - It was observed that once the Respondent made a statement on the very first date that the primary gold was a result of melting of gold ornaments belonging to the wife, notice ought to have been issued to her under Section 79 of the Act and in the absence of such notice, the gold could not be confiscated - HELD THAT:- A plain reading of the Section 79 of the Gold (Control) Act, 1968 reveals that a notice to the owner is a mandatory requirement prior to passing an order of confiscation of gold or levying any penalty etc. - In the present case, as far as the quantity of primary gold is concerned, it has been factually determined that on the very first day of raid on the premises and his shop, the Respondent disclosed that the primary gold was obtained by melting of the gold ornaments belonging to his wife. Therefore, the officers involved in the raid were made aware that the Respondent was not claiming ownership of the primary gold but attributing it to his wife. There should have been no difficulty, therefore, for a notice to be issued under Section 79 of the Act to the wife of the Respondent on the basis of the statement made by him to the officers. For some reason, however, that was not done. Section 79 itself is categorical that irrespective of the person from whom possession of the gold is recovered, a prior notice would have to be issued to the owner of such primary gold before proceeding further to confiscate the said primary gold. In other words, there is no explanation to the section expanding the scope of the expression owner to include an ostensible owner or even a person from whom possession the gold or gold ornaments is recovered - the Court is unable to find any ground to interfere with the impugned order of the CEGAT declining to make a reference of the question as urged by the Petitioner to this Court. Petition dismissed.

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• 2022 (1) TMI 60
  Seeking a complete waiver of the pre-deposit of Central Excise duty - HELD THAT:- As far as the prayer for waiver of the pre-deposit is concerned, the settled legal position as explained in several judgments including BENARA VALVES LTD. ORS. VERSUS CCE ANR. [ 2006 (11) TMI 6 - SUPREME COURT] and INDU NISSAN OXO CHEMICALS INDUSTRIES LTD. VERSUS UNION OF INDIA [ 2007 (12) TMI 220 - SUPREME COURT] is that financial hardship cannot be the only factor to be considered by the CESTAT while exercising the power under Section 35F of the CE Act. In the present case, the adjudication order has been passed by the Commissioner after complying with all the procedural requirements. For the purposes of the present petition, since the scope is limited, the Court refrains from expressing any opinion on the merits of the case. Suffice it to note that in the context of the demand amount, and the nature of activity carried on, the partial waiver of 50% of the demanded amount for the purposes of predeposit cannot be held to be harsh or unreasonable. The writ petition is dismissed.

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• 2022 (1) TMI 59
  CENVAT Credit - input service - construction services used by the appellant for setting up of Effluent Treatment Plant - HELD THAT:- The appellant has already existing factory and in the said factory, Effluent Treatment Plant was installed for which they have availed construction service from the contractor. Any activity of construction in the running existing factory shall be treated as modernization, renovation or repair and maintenance of existing factory - From a plain reading of Rule 2(l), it is clear that even though setting up of factory was removed from the exclusion clause however, the service of modernization, renovation or repair and maintenance is still provided in the inclusion clause. Therefore, any activity which related to modernization, renovation or repair and maintenance of factory, the same is eligible for Cenvat credit. There is no dispute on the fact that Effluent Treatment Plant was set up in the existing running factory. Therefore, it is nothing but modernization of the factory. As regards the argument made by learned Authorised Representative that from 01.04.2011, construction services and works contract services were excluded from the definition of input service, it is found that though construction service was excluded but since modernization, renovation and repair and maintenance is still continue to be existed in the inclusion clause of definition, credit shall be allowed. From the judgment of this Tribunal in M/S ION EXCHANGE I LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, SUARAT-II [ 2017 (12) TMI 151 - CESTAT AHMEDABAD] it can be seen that the amended definition of Input Service from 01.04.2011 was considered and it was viewed that though the construction service/ works contract service were excluded but it was interpreted that the said service related to only new construction or setting up of a new factory. But since modernization, renovation or repair and maintenance, even after exclusion category, continue to remain in inclusion clause of definition, credit cannot be denied - the adjudication order deciding the matter on the basis of exclusion category is beyond the scope of show cause notice. The appellant is entitled for Cenvat credit - Appeal allowed - decided in favor of appellant.

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• 2022 (1) TMI 58
  Rectification of mistake - mistake apparent on the face of record - interest on delayed refunds under section 35F/35FF of the Central Excise Act, 1944 - HELD THAT:- There is no mistake apparent on face of record but by filing this application for rectification of mistake, the applicant is seeking to challenge the merits of the order dated 07.01.2020 to recall the same which is not permissible in law as the same shall amounts to review of its own order - In the absence of any mistake apparent on face of record, the application of rectification of mistake is not entertainable. Accordingly, the application of rectification of mistake is dismissed. The provisions of Section 142 of CGST Act, 2017 clearly show that every claim of refund, every proceeding of appeal, review or reference filed/initiated whether on or before the appointed day i. e. 1.7.2017 under the existing law which means the jurisdiction for the purpose of every claim of refund, every proceeding of appeal, review or reference before this Tribunal shall be dealt under the provision Central Excise law and not by the provision of CGST law. As per the order dated 13.7.2012, the appellant falls under the jurisdiction of DC Range Panipat and the DC Range, Panipat is under the jurisdiction of the Commissioner of CGST, Panchkula. There are no merit in the ROM application as well as miscellaneous application for modification in the ROM application filed by the Revenue - applications filed by the revenue are dismissed.

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• CST, VAT & Sales Tax

• 2022 (1) TMI 57
  Recovery of dues - priority of charge over the subject properties in terms of Section 48 of the VAT Act as against the provisions of Section 26E of the SARFAESI Act - whether the petitioner who is a secured creditor will have first priority to recover its dues in view of Section 26E of the SARFAESI Act or the State will have first priority by virtue of Section 48 of the VAT Act? - HELD THAT:- The undisputed facts which have transpired from the record are that the petitioner is a secured creditor, who has derived his right, title and interest and all other ancillary benefits in terms of registered deed of assignment executed by Dena Bank vide registered deed dated 07.02.2017. Admittedly, the physical possession of the subject property was taken over by the Dena Bank on 04.02.2014 after following due procedure of law under Section 13(4) of the SARFAESI Act read with Rule 9 of the Security Interest (Enforcement) Rules, 2002. The record reveals that an attempt was made by the erstwhile borrower to challenged the order dated 19.02.2015 passed by the learned District Magistrate, Sabarkantha, under Section 14 of the SARFAESI Act by filing writ petition being Special Civil Application No.13879 of 2015 - As on date, no material is placed on record by the respondent state authorities to remotely suggest that any challenge has been made by the State to the proceedings of SARFAESI Act which has finally culminated into the execution of deed of assignment in favour of the petitioner holding him as a secured creditor. Issue of priority of charge over the subject properties in terms of Section 48 of the VAT Act as against the provisions of Section 26E of the SARFAESI Act - HELD THAT:- This Hon ble Court in Kalupur Commercial Cooperative Bank [ 2019 (9) TMI 1018 - GUJARAT HIGH COURT ] has extensively deal with the provisions of both enactment and following the ration laid down by the Hon ble Apex Court has held that section 48 of the VAT act would come into operate only when the liability is finally assessed and the amount becomes due and payable. This Court finds that the State cannot have prior charge over the secured assets, more particularly, as it transpires from the records that the mortgage deed was executed much prior in point of time before the outstanding dues of the Sales Tax had become due in favour of erstwhile borrower of the bank. Even otherwise assuming for a moment, that Section 26E of the SARFAESI Act had come on Statute Book in the 24.01.2020 or Section 31B of RDB Act - the mortgage deed was executed by the erstwhile borrower on 20.03.2010, proceedings under Section 14 of the SARFAESI Act had got concluded pursuant to the order darted 19.02.2015 passed by the learned District Magistrate, Sabarkantha at Himmatnagar and the registered deed of assignment came to be executed in favour of petitioner company on 07.02.2017. There are no hesitation in coming to the conclusion that first priority of charge over the secured assets shall be of the bank and not of the State Government as contended by referring to Section 48 of the VAT Act, 2003. It is hereby declared that the petitioner being secured creditor has first charge over the suit properties by virtue of Section 26E of the SARFAESI Act, 2002, which overrides the charge of the respondent Authorities as contended in terms of Section 48 of the Gujarat Sales Tax Act. Petition allowed.

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• 2022 (1) TMI 56
  Levy of Sales tax - Hajmola candy - taxable as an Ayurvedic medicine under list A of the Orissa Sales Tax Act, 1947 or not - HELD THAT:- A perusal of the impugned order of the Tribunal reveals that the tribunal primarily relied on the decision of the DABUR INDIA LIMITED AND ANOTHER VERSUS ACCT/CORPORATE DIVISION AND OTHERS [ 2006 (1) TMI 584 - WEST BENGAL TAXATION TRIBUNAL] . In the said decision, the WBTT took note of the decision of the Special Bench of the CEGAT, New Delhi in DABUR INDIA LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, MEERUT [ 1994 (3) TMI 202 - CEGAT, NEW DELHI] holding that Hajmola candy does not fall in the entries of drugs and medicines and it is taxable as a confectionery. In the present case as well the assessee had satisfactorily demonstrated that the product in question was an Ayurvedic Medicine, for which the assessee possessed a trade licence. The question of law framed by this Court is answered in the affirmative, i.e. in favour of the Petitioner Assessee and against the Department, by holding that Hajmola Candy is exigible to tax as Ayurvedic Medicine in terms of the List-A of the OST Act - revision disposed off.

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• 2022 (1) TMI 55
  Exemption from sales tax under Entry 30- FFF of the tax free schedule - repairing/assembling of transformer - HELD THAT:- This Court in M/S. BAJRANGBALLI WIRE PRODUCTS PVT. LTD. VERSUS STATE OF ORISSA, REPRESENTED BY THE COMMISSIONER OF SALES TAX, ODISHA, CUTTACK [ 2021 (4) TMI 1046 - ORISSA HIGH COURT ] has held that the sales tax authority could not have ignored the DIC certificate issued in favour of the Petitioner to deny sales tax benefit in terms of the IPR. In the instant case the Tribunal was in error in ignoring the DIC certificate. The permanent registration certificate clearly mentioned repairing of transformers as one of the activities. This certificate had to be read with the eligibility certificate to understand the activities for which the Petitioner was granted exemption. Revision disposed off.

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• Indian Laws

• 2022 (1) TMI 54
  Dishonor of Cheque - insufficiency of funds - vicarious liability of the accused - The complaint would not disclose as to what is the status of the Indus Hospital, whether it is a Company or a Corporation. The complaint also would not disclose as to how the accused were connected with the said hospital, whether they were Directors, Managing Directors etc. - invocation of Section 141 and 142 of the NI Act - HELD THAT:- The complaint was filed under Sections 138 and 142 of NI Act. The complaint would not disclose as to what is the status of the Indus Hospital, whether it is a Company or a Corporation. The complaint also would not disclose as to how the accused were connected with the said hospital, whether they were Directors, Managing Directors etc. The Indus Hospital was not shown as an accused. The complaint would not disclose how vicarious liability could be fastened to the petitioners herein. Considering the above judgment of the Hon ble Apex Court, if Indus Hospital is considered as a Company, it has to be arrayed as an accused. Without arraying it as an accused, the persons cited as A1 and A3 cannot be held liable without even stating as to how they are connected to the hospital. A perusal of the cheque would disclose that it was issued by Sri M. Madhusudhan Reddy, who was shown as A2, on behalf of Indus Hospitals. This petition is filed by only Accused Nos.1 and 3, who are not signatories to the said cheques which are returned / dishonoured. As per Section 138 of the NI Act, the emphasis has been laid on the fact that the cheque has to be drawn by a person on the account maintained by him. He must have issued the cheque in discharge of any debt or other liability. As the petitioners are not the persons, who had drawn the cheque and they were not shown as the persons who were maintaining the account in the bank and that they had issued the subject cheques in discharge of their liability, continuation of the proceedings against them is considered as an abuse of process of law and as such liable to be quashed. Petition allowed.

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• 2022 (1) TMI 53
  Dishonor of Cheque - insufficient funds - legally enforceable debt or not - preponderance of probabilities - validity of conviction and sentence of the accused for the offence under Section 255(2) Cr.P.C., and 357(3) Cr.P.C. basing on the materials available on record - HELD THAT:- In the case in hand, the petitioner/accused has consistently stated that the complainant did not have sufficient funds and it is not possible or probable to presume that he had lent the huge sum to the accused. Unless the cheques which were returned for insufficient funds were proved to have been issued for legally enforceable debt, the action taken under Section 138 of N.I.Act will fail. Since the complainant did not prove that he had procured funds from his alleged friends and relatives by way of examining them, that would shift the preponderance of probabilities in favour of the accused. So it is unbelievable that the complainant had lent a huge sum in a short span of 40 days and that too to a person like the accused who is his casual acquaintance. Since the Courts below have not properly appreciated the preponderance of probabilities available in favour of the petitioner/accused, from the short falling evidence of the complainant, this case is deemed fit to be interference - the Criminal Revision Case is allowed.

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