TMI Tax Updates - e-Newsletter
November 3, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax CST, VAT & Sales Tax Indian Laws

Articles

1. Option u.s.115BAC in case of individuals and HUF – an analysis and discussion of various aspects.

   By: DEVKUMAR KOTHARI

News

1. DRI seizes 155 kgs of Hashish

2. Income Tax Department conducts searches in Tamil Nadu

3. GoI constitutes 20-member Empowered Group of Secretaries to monitor development and implementation of the PM Gati Shakti NMP

4. INDIA’S MERCHANDISE TRADE: Preliminary Data October 2021

5. Finance Minister Smt. Nirmala Sitharaman holds review meeting on CAPEX for Power, Coal and Atomic Energy

Notifications

Customs

1. 89/2021 - dated 1-11-2021 - Cus (NT)

Appointed Common Adjudicating Authority

Income Tax

2. 129/2021 - dated 1-11-2021 - IT

e-Settlement Scheme, 2021

3. 124/2021 - dated 29-10-2021 - IT

U/s 92C(2) of IT Act 1961- Computation of arm's length price

Highlights / Catch Notes

GST

• Supreme Court Affirms CBIC Circular on GSTR-3B Rectification, Emphasizes Controlled Process to Avoid Electronic Record Disruptions.

  Case-Laws - SC : Validity of Circular issued by the CBIC - Jurisdiction - imposition on rectification of Form GSTR­-3B in respect of the period in which the error had occurred - A priori, despite such an express mechanism provided by Section 39(9) read with Rule 61, it was not open to the High Court to proceed on the assumption that the only remedy that can enable the assessee to enjoy the benefit of the seamless utilization of the input tax credit is by way of rectification of its return submitted in Form GSTR­-3B for the relevant period in which the error had occurred - the assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR­-3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records. - Validity of circular upheld - SC
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• Court Orders Review of Refund Applications u/s 74(5) CGST Act; Dismisses Voluntary Payment Defense as Untenable.

  Case-Laws - HC : Refund of amount illegally collected from the petitioner - Self-ascertainment under Section 74(5) of CGST Act - Amount paid under coercion - Right of Bona fide Tax Payer to be treated with dignity - The stand of the respondents is ambiguous as self-ascertainment is put forward only as defence to the assertion of the petitioner that the payment of amount has been made involuntarily - the contention of payment being made by way of self-ascertainment is liable to be rejected. - Lapse of time and lack of conclusion of investigation has only exacerbated the situation conferring upon the petitioners a right to seek for refund of the amount. - The refund applications at Annexure-'Q' are to be considered and suitable orders be passed - HC
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Income Tax

• Court Rules Property Sale Valid; Transfers Before Default Date Exempt u/s 281(1) of Income Tax Act.

  Case-Laws - HC : Recovery of tax - attachment of immovable property - validity of sale of immovable property - adequate consideration - As the 3rd respondent is treated as an assessee in default only upon the drawing up of certificate of recovery dt. 02.06.2000, the transfers of immovable property effected prior to the said date in favour of the petitioner cannot be said to be hit by the provisions of Section 281(1) of the Act; consequently, the purchase of flats by the petitioners is a bona fide purchase and are covered by the escape route provided under Section 281(1) - HC
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• Revocation Lifted: Petitioner Resumes Covid-19 Treatment Post Show Cause Notice u/s 17 (2) (viii) Nullification.

  Case-Laws - HC : Renewal of approval under proviso (ii) (b) to section 17 (2) (viii) - approval for providing treatment for Covid-19 patients - Since the show cause notice issued relies only on the revocation of permission for providing medical treatment for Covid-19 by the State Government, and the said revocation, having been lifted by the State authorities by proceedings dated 13.09.2020 and the petitioner was permitted to provide treatment for Covid-19 patients, the very basis of the show cause notice issued, stands removed. - HC
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• Commissioner Confirms Tata Steels' Promotion Expenses as Legitimate Business Deductions, Benefiting End Users through Gift Purchases.

  Case-Laws - AT : Business expenditure - sales promotion - the entire scheme (promotion scheme) was governed by the scheme put in place by M/s. Tata Steels, and that purchases of the gifts were also from Tata related outlets like M/s Titan and M/s Tanishq. And the distribution was also carried out by an authorized gift distributor company for M/s. Tata Steels. The scheme was controlled by M/s. Tata Steels and was to ensure that the end users would benefit if they are eligible. The Ld. CIT(A) has found that there was no doubt about the genuineness of the expenditure and the expenditure was for promotion of business of the assessee and therefore an allowable expense. - AT
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• Assam Industrial Promotion Policy VAT Subsidy Classified as Capital Receipt, Not Taxable per Section 115JB Calculation Guidelines.

  Case-Laws - AT : Nature of income - Subsidy received under the Industrial Promotion Policy of the Assam Government - the VAT subsidy received by it for undertaking substantial expansion at their unit was in the nature of capital receipt not liable to tax, since the object of granting of subsidies was to bring about industrial development, encourage fixed capital investment and generate employment in the State of Assam. - AO directed to deduct the VAT subsidy both while computing income under normal computational provisions and book profit u/s 115JB - AT
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• Tax Relief Granted for Bad Debts on Advances to Boat Owners; Unaccounted Sales Not Automatically Taxed.

  Case-Laws - AT : Undisclosed income - since the advances made to boat owners was subject to tax out of which fish was supplied and Same was sold and the sale proceeds was shown as receivables from debtors. Allowing relief to the assessee as bad debts / business loss out of advances given to the boat owners is a separate issue. It is because of certain advances given to the boat owners was allowed as business loss, that cannot lead to the conclusion that the entire amount of unaccounted sales is to be taxed. - AT
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• Compensation from Boeing Co. reduces aerospace project costs, not taxable interest income, due to temporary suspension.

  Case-Laws - AT : Additions as interest income - compensation received by the assessee - As the business of assessee was set up and had started and there was huge investment made by assessee and the project was only temporarily suspended by the Boeing Co - Here what is received by the assessee is part of overall cost of project in the form of compensation from Boeing Co. which cannot be treated as interest. Accordingly, we hold that the compensation received in the sum would go to reduce the cost of aerospace project of the assessee company. - AT
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• Court Rules Revenue Can't Reopen Assessment After Section 12A Registration Cancellation Basis is Removed.

  Case-Laws - AT : Withdrawal of exemption as provided u/s. 12A - Revenue could not controvert the fact that the sole ground of re-opening of assessment was that the Registration granted u/s. 12A of the Act had been cancelled since inception, therefore, the assessee was not eligible for the benefit of sections 11 & 12 of the Act. Under the undisputed fact that the basis of reopening of the assessment now no more exists - assessment framed on the basis of such ground cannot be sustained. - AT
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• Assessee's Direct Payments to Shipping Firms Without TDS Deduction Disallowed u/s 40(a)(ia.

  Case-Laws - AT : TDS u/s 194C - Non deduction of TDS on payments to shipping companies and CFS Agents - Addition u/s 40(a)(ia) - payments made by the assessee to shipping companies/CFS Agents is not a reimbursement of expenses, but first hand payment between principal to principal on the bill raised by the service providers. Since, the assessee has made payment on behalf of their customers; the assessee ought to have deducted TDS on such payments while making payments. Since, the assessee has failed to deduct TDS, on such payments the AO is right in disallowing such payments u/s. 40(a)(ia) of the Act. - AT
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• Assessment Reopening u/s 147 Invalid: No Inquiry with Seller, Unsigned Deed Insufficient Evidence.

  Case-Laws - AT : Reopening of assessment u/s 147 - Addition of payment made from an unaccounted sources - Assessing Officer has not carried out any inquiries from the seller of the land also. The assessee cannot be penalised merely on the basis of an unsigned deed found from the premises of a third-party. In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. - AT
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• Court Rejects Tax Authority's Disallowance of Alleged Bogus Short-Term Capital Loss Due to Lack of Concrete Evidence.

  Case-Laws - AT : Bogus STCL - Disallowance of Loss arising from the trading in shares - accommodation entry of STCL - the fact remains that the findings of the lower authorities are not based on evidence but on generalizations and probabilities. The AO could not place anything on record, maybe through a process of his own enquiry, to decisively prove that assessee has obtained bogus STCL through his connivance with entry operators / exit providers. - The claim of the assessee appears to have been rejected more on the basis of presumption rather than evidence. - Additions deleted - AT
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Customs

• High Court Error: Issued Common Judgment for Separate Trials Without Individual Evidence Assessment for Accused Parties' Guilt.

  Case-Laws - SC : Law for trial of the cross cases - Raid - In the present controversy, two different criminal appeals were being heard and decided against two different judgments based upon evidence recorded in separate trials, though for the commission of the same offence. As such, the High Court fell into an error while passing a common judgement, based on evidence recorded in only one trial, against two sets of accused persons having been subjected to separate trials. The High Court ought to have distinctly considered and dealt with the evidence of both the trials and then to decide the culpability of the accused persons. - SC
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Indian Laws

• Cheque Issued as Security Can Lead to Criminal Proceedings u/s 138 for Dishonor.

  Case-Laws - SC : Dishonor of Cheque - When a cheque is issued even though as ‘security’ the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation. - In the instant facts, the appellant cannot be non­suited for proceeding with the complaint filed under Section 138 of N.I. Act merely due to the fact that the cheques presented and dishonoured are shown to have been issued as security, as indicated in the loan agreement - SC
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Service Tax

• Refund of Pre-April 2012 CENVAT Credit Cannot Be Denied Due to Nexus Rule; Formula Applies Post-Rule 5 Change.

  Case-Laws - HC : Refund of unutilized CENVAT credit - In so far the claim for refund of CENVAT credit for the period prior to 01.04.2012 is concerned, as Rule at the relevant point of time did not contain any prescription as to the nexus between input services and output service, the denial of refund on the said ground cannot be held to be valid. For the period subsequent to the introduction of substituted Rule 5 of Rules, the only prescription for grant of refund in respect of export of output service is by applying the formula specified. - HC
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• Service Tax Refund Claims: No Rejection Order Needed Before Filing Under Amended Finance Act 2016.

  Case-Laws - AT : Refund of service tax - Period of limitation - It is not necessary that there should be an order of rejection of refund. If a litigation is at the stage of Show Cause Notice and there is a proposal for rejection, the Show Cause Notice has to be adjudicated after considering the amendment brought forth vide the Finance Act, 2016. It cannot be then said that the Adjudicating Authority has to first reject the claim and thereafter assessee has to file a fresh claim under the amended Notification of 2016 - The intention of the Government is very much clear from the Notification which is to grant refund retrospectively with effect from 01.07.2012. This cannot be frustrated by clinging on to technical formalities. - AT
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• Appellant's Services Qualify as Export under Finance Act; No Reversal of Cenvat Credit Required per Rule 6A.

  Case-Laws - AT : Export of services or not - Reversal of Credit - The fundamental charge that the service recipients are ‘other establishments’ of service providers in terms of in terms of rule 6A (f) and item (b) of Explanation 3 of clause (44) of section 65B of the Finance Act, 1994 is not established. Consequently, the services provided by appellant qualify as Export of Services, under rule 6A of Service Tax Rules, 1994. Thus, as the services provided by the appellant are export of services under rule 6A of Service Tax Rules, 1994, the same cannot be called ‘exempted services’ under clause 2(e) of the Cenvat Credit Rules, 2004. Since the services provided by the appellant are not exempted services, no demand of reversal of credit can be made under rule 6 of the Cenvat Credit Rule, 2004 and no liability can be fixed on the appellant. - AT
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VAT

• Bank Secured Creditor Status Affirmed Under SARFAESI Act; Priority Over Other Debts in Sales Tax Recovery Confirmed.

  Case-Laws - HC : Preferential charge - Recovery of sales tax - In the present case, the petitioner Bank had already registered all the mortgaged documents in the Central Registry as per Section 20 of the SARFAESI Act, 2002 and by virtue of provision of Section 26 E it is rightly held that the Bank being a secured creditor after registration of the security interest would enjoy priority over all other debts and all revenues, taxes, cesses and other rates. - HC
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Case Laws:

• GST

• 2021 (11) TMI 109
  Validity of Circular issued by the CBIC - Jurisdiction - Form GSTR -3B is return or not - imposition on rectification of Form GSTR -3B in respect of the period in which the error had occurred - Circular No. 26/26/2017 GST dated 29.12.2017 - jurisdiction of the Delhi High Court to entertain the writ petition - writ petition suffered from the vice of nonjoinder of the necessary parties including that the High Court could not have issued a writ of mandamus - HELD THAT:- The writ petitioner was not challenging the individual action of the States or the Union Territories, but a policy decision of the Central authority who had issued the impugned Circular, namely, the Commissioner (GST). If the writ petitioner succeeded in that challenge, the consequential relief would follow. Non impleadment of respective States/Union Territories would not come in the way of the writ petitioner to pursue the cause brought before the High Court by way of subject writ petition. Even the argument regarding High Court having exceeded jurisdiction in issuing writ of mandamus, does not commend to us. If the conclusion reached by the High Court regarding the efficacy of impugned Circular was to be upheld, no fault can be found with the directions issued by it in paragraph 24 of the impugned judgment, reproduced above. Accordingly, the preliminary objections regarding the maintainability of the writ petition and the jurisdiction of the Delhi High Court deserve to be rejected. Whether the impugned Circular dated 29.12.2017 issued by the Commissioner (GST) is without authority of law? - HELD THAT:- In strict sense, it is not the direction issued by the Commissioner (GST) as such, but it is notifying the decision(s) of the Board taken in exercise of its powers conferred under Section 168(1) of the 2017 Act. It is a different matter that a circular is issued under the signatures of Commissioner (GST), but in essence, it is notifying the decision(s) of the Board, which has had authority and power to issue directions. Accordingly, the argument that the impugned Circular dated 29.12.2017 has been issued without authority of law, needs to be rejected. The entire edifice of the grievance of the writ petitioner (respondent No. 1) was founded on non operability of Form GSTR2A during the relevant period, which plea having been rejected as untenable and flimsy, it must follow that the writ petitioner/respondent No. 1 with full knowledge and information derived from its books of accounts and records, had done self-assessment and assessed the OTL for the relevant period and chose to discharge the same by paying cash. Having so opted, it is not open to the respondent to now resile from the legal option already exercised. It is for that reason, the respondent has advisedly propounded a theory that in absence of (electronic auto populated record) mechanism made available as per Sections 37 and 38, return filed in Form GSTR -3B is not ascribable to Section 39(9) of the 2017 Act read with Rule 61(5) of the 2017 Rules - Appellant not only amended the statutory rule but also provided for filing of return manually in Form GSTR -3B electronically through the common portal with effect from July 2017. This is manifest from the circulars/notifications issued from time to time including the timeline for submitting the returns. A priori, despite such an express mechanism provided by Section 39(9) read with Rule 61, it was not open to the High Court to proceed on the assumption that the only remedy that can enable the assessee to enjoy the benefit of the seamless utilization of the input tax credit is by way of rectification of its return submitted in Form GSTR -3B for the relevant period in which the error had occurred - the assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR -3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records. Suffice it to conclude that the challenge to the impugned Circular No. 26/26/2017 GST dated 29.12.2017, is unsustainable for the reasons noted hitherto - the stipulations in the stated Circular including in paragraph 4 thereof, are consistent with the provisions of the 2017 Acts and the Rules framed thereunder - appeal allowed.

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• 2021 (11) TMI 108
  Refund of amount illegally collected from the petitioner - Self-ascertainment under Section 74(5) of CGST Act - Amount paid under coercion - Right of Bona fide Tax Payer to be treated with dignity - availability of alternative remedy - HELD THAT:- The mere fact that application has been made for refund does not in any way take away the right of the petitioner to seek for appropriate direction in the present proceedings, as the application for refund has merely been deferred and in effect, no decision is taken, even otherwise, the question of alternate remedy is of no significance, when the eventual direction in the present writ is only for consideration of the refund application - the learned counsel for the petitioner has fairly submitted that the eventual remedy that the petitioner is seeking insofar as refund application is, a direction to consider the application de hors the investigation being carried out and in light of such stand, it cannot be stated that the statutory remedy of refund would displace the petitioner from the present proceedings and the petition is to be dismissed on such ground. Self-ascertainment under Section 74(5) of CGST Act - HELD THAT:- The procedure of self-ascertainment under sub-section (5) of Section 74 contains a scheme that is concluded after following the procedure under sub-sections (6), (7) and (8) of Section 74 of the CGST Act. In the present case, it must be noted that though there is payment of tax and even if it is accepted that payment of tax is also followed by requisite Challan DRC-03, the mere payment of tax cannot be construed to be a payment towards self-ascertainment as contemplated under Section 74 (5) of CGST Act - the payment of tax by itself even if construed to be voluntary will not by itself in any way lead to a conclusion that the same is paid in furtherance of self-ascertainment under Section 74(5) of CGST Act. The scheme of self-ascertainment as contained in sub-sections (5), (6), (7), (8) of Section 74 of CGST Act would not admit of making of payment and continuance of investigation. Upon payment of tax after collection of the same with penalty, if the same is accepted even before the issuance of notice under Section 74(1) during investigation, there ends the matter and there is nothing further to be proceeded with. The respondents have not taken the stand that self-ascertained tax falls short and if that were to be so, it could have proceeded to issue notice as contemplated under Section 74(7) and could have even rejected the self-ascertainment in its entirety while asserting that it would issue notice under Section 74(1) of CGST Act, if facts so warrant. The stand of the respondents is ambiguous as self-ascertainment is put forward only as defence to the assertion of the petitioner that the payment of amount has been made involuntarily - the contention of payment being made by way of self-ascertainment is liable to be rejected. Amount paid under coercion - HELD THAT:- The manner in which investigation was carried out in late hours of the night and the early hours of the morning with physical closing of the gates during the investigation would reasonably create an apprehension in the mind of any person including the persons of the standing of Directors of the Assessee Company and its officers. The fear of police powers are such that would shake a man irrespective of their position in society. It must be noted that even under Section 132(1)(b) and (c)(i) to (iii) of the GST Act, 2017, the wrongful availment of I.T.C. is an offence and is punishable with imprisonment - the payment cannot be stated to have been made voluntarily. Such amount having been paid, retention of the said amount as referred to above by the Department right from November, 2019 till date where investigation is not concluded would call upon the department to honour legitimate claims being made for refund of the amount which cannot be grudged. Lapse of time and lack of conclusion of investigation has only exacerbated the situation conferring upon the petitioners a right to seek for refund of the amount. Right of Bona fide Tax Payer to be treated with dignity - HELD THAT:- No doubt, the power of investigation cannot be interfered with nor can the court direct investigation be made in a particular manner, however, during all such investigation, it cannot be held that the Fundamental Rights including the right of a bona fide tax payer to be treated with appropriate dignity as enshrined under Article 21 of the Constitution of India would be kept in abeyance. We would not like to elaborate further but to leave it to the wisdom of the respondents as to the manner in which bona fide tax payers are to be treated. Video Recording of Investigation - HELD THAT:- While the respondents would contend that the application is only for installing of CC TV only, the consequential direction that is made in the order dated 20.04.2021 is for video recording. Installation of CC TV as ordered by the Apex Court would taken within itself recording of all that would fall within the range of CC TV - recording of interrogation which direction is limited to maintaining of records relating to interrogation would make it possible as and when circumstances are so made out for summoning of the same as may be required at an appropriate stage. The refund applications at Annexure- Q are to be considered and suitable orders be passed within a period of four weeks from the date of release of the order while making it clear that consideration of refund applications must be made in light of the observations. Petition disposed off.

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• Income Tax

• 2021 (11) TMI 107
  Recovery of tax - attachment of immovable property - validity of sale of immovable property - right of bonafide purchaser - adequate consideration - 2nd respondent has stated that the immovable property was attached under warrant of attachment - whether transfer affected by the 3rd and 4th respondents in favour of the petitioners is not for adequate consideration? - HELD THAT:- As provisions of Section 281(1) of the Act would stand attracted, only when a demand is raised and the same is not paid by the assessee, thereby, becoming an assessee in default. It is only when an assessee is declared as assessee in default and certificate of recovery is drawn up, the protection provided under the said Section 281(1) of the Act would be available. In the facts of the case, it is not shown to this Court that the transfer affected by the 3rd and 4th respondents in favour of the petitioners is not for adequate consideration or that attachment of the subject property has been made before the petitioners had purchased the same. Going by the admission of the 2nd respondent in the impugned order itself, it is evident that warrant of attachment in ITCP-16 was issued for the first time on 04.10.2002. On the other hand, the sale deeds under which petitioners 1, 2 and 4 had purchased the property are all registered on 19.07.1999 and that of the 3rd petitioner on 24.07.1999. Further, it is also to be noted that the order of attachment issued mentions that certificate of recovery has been drawn up only on 02.06.2000, whereby it is held that the3rd respondent has failed to pay the sum as shown therein. As the 3rd respondent is treated as an assessee in default only upon the drawing up of certificate of recovery dt. 02.06.2000, the transfers of immovable property effected prior to the said date in favour of the petitioner cannot be said to be hit by the provisions of Section 281(1) of the Act; consequently, the purchase of flats by the petitioners is a bona fide purchase and are covered by the escape route provided under Section 281(1) of the Act, as held in ICICI Bank case [ 2019 (3) TMI 701 - TELANGANA AND ANDHRA PRADESH HIGH COURT ] Thus, the petitioners are entitled to claim the benefit of protection provided under Section 281(1) of the Act in respect of purchase of flats made by them from the 3rd respondent under registered documents bearing Nos.1666/99, 1667/99 and 1668/99 dt.19.07.1999 executed by the 3rd and 4th respondents in favour of petitioners 1, 2 and 4 and registered document No.1736 of 1999 executed on 24.07.1999 in favour of the 3rd petitioner by the 3rd and 4th respondents.

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• 2021 (11) TMI 106
  Renewal of approval under proviso (ii) (b) to section 17 (2) (viii) - approval for providing treatment for Covid-19 patients - rejecting the application of the petitioner for grant of renewal of approval under Section 17(1)(b) of the Income Tax Act, 1961 to treat Covid-19 patients on 03.08.2020 - order of the State Government of the mandate for Covid treatment - revocation of permission for providing medical treatment for Covid-19 by the State Government - HELD THAT:- State Government revoking the mandate given for Covid treatment be considered for deciding application of the petitioner for renewal of approval under Section 17(2)(ii)(b) of the Act, and nothing else. The impugned order, apart from dealing with the revocation of mandate for Covid treatment by the State Government, also dealt with other aspects as to the nature of coronavirus disease being a respiratory disease and the petitioner having resorted to excessive, exorbitant and unconscionable pricing being a misconduct or an offence, without putting the petitioner on notice of the said allegations, to offer its explanation. This action of the first respondent in passing the impugned order by traversing beyond the show cause notice in our view is a violation of principles of natural justice causing serious prejudice to the petitioner. On this sole ground itself the impugned order is liable to be set aside. We are also at a loss to understand the basis on which the 1st respondent has concluded that the treatment for coronavirus would be covered by respiratory disease, in as much as even after more than a year, no fool proof medical treatment/ vaccination is discovered and the research is continuing. Even the World Health Organization (WHO) or the Indian Council of Medical Research, which is the apex body in India for the formulation, coordination and promotion of biomedical research and one of oldest research bodies in the world established in the year 1911, have not notified the SARSCov-2 (corona virus) to be only a respiratory disease. On the other hand some of the other serious symptoms associated with Corona virus are chest pain or pressure, sore throat, loss of taste or smell, fever, dry cough and loss of speech or movement etc.- As the mutants of corona virus continue to strike, ICMR is continuing work on variant strains of SARS-Cov-2 and assisting in development of vaccines. In view of the above , the claim of the 1st respondent, that Covid-19 treatment is a respiratory disease, in our view, is not backed by any material or scientific data and appears to be a self evolved theory of the 1st respondent, and is liable to be rejected. Since the show cause notice issued relies only on the revocation of permission for providing medical treatment for Covid-19 by the State Government, and the said revocation, having been lifted by the State authorities by proceedings dated 13.09.2020 and the petitioner was permitted to provide treatment for Covid-19 patients, the very basis of the show cause notice issued, stands removed. In view of the above, considered from any angle, the impugned order passed by the 1st respondent, cannot be sustained.

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• 2021 (11) TMI 105
  Deduction u/s 80IA - manner of computation of amount of deduction allowable u/s 80IA - AO had arrived at the amount of eligible profits for the purpose of deduction u/s 80IA of the Act by setting off of unabsorbed losses of earlier years against current year profits of the eligible unit i.e. Windmill - HELD THAT:- As provisions of section 80IA of the Act are separate and distinct and has to be treated on standalone basis and also lays down a special method of computing the profits and gains entitled to deduction u/s 80IA of the Act. Further, it also suggests that the provisions of section 80IA of the Act are overriding in nature and the provisions of section 80IA of the Act shall be applied as if each unit is an independent unit and one and only source of income which means that the profits and losses of other units cannot be mixed up. As in the case of CIT Vs. Dewan Kraft Systems [ 2007 (2) TMI 149 - DELHI HIGH COURT] also held to the same effect and there is long line of authority in support of the this proposition. As a natural corollary of this, the losses of ineligible units cannot be set off against the profits of eligible units for the purpose of computing the amount of deduction and this line of approach has been consistently followed by several High Courts. Whether the unabsorbed losses of eligible units should be set off against the profits of current year for the purpose of computing the amount of deduction u/s 80IA? - The Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills [ 2010 (3) TMI 860 - MADRAS HIGH COURT] clearly held that the initial assessment year would mean the first year opted by the assessee for claiming deduction u/s 80IA of the Act out of block of years and not the first year of commencement of operations of eligible business. CBDT also issued a Circular No.1/2016, dated 15.02.2016 accepting the legal position enunciated by the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills Vs. ACIT (supra). Therefore, the finding of AO that the initial assessment year commences from the first year of commencement of commercial operations of eligible business has no legs to stand. Neither the ld. CIT(A) nor AO had dealt with the factual aspects as to whether the unabsorbed losses are pertaining to the prior period to the initial assessment year as opted by the assessee or after the initial assessment year. CIT(A) merely granted the relief by accepting the legal position without discussing it in detail on the factual aspects. Since the order of ld. CIT(A) is bereft of material facts necessary for adjudication of issue in appeal, we have no other option but to remit the matter back to the file of AO to examine the claim of assessee after due verification on the aspects whether the unabsorbed losses set off by the AO against current year eligible profits falls prior to the initial assessment year or after the initial assessment year. Appeal of Revenue for A.Y. 2013-14 is partly allowed for statistical purposes.

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• 2021 (11) TMI 104
  Addition made on account of recognition of revenue on the basis of POCM of the project - CIT-A deleted the addition - as per Revenue that the assessee ought to have recognized Revenue on the principles of POCM - HELD THAT:- No infirmity into the above findings of Ld.CIT(A) as the assessee has been applying consistently the same method since inception. Moreover, Ld.CIT(A) has recorded the fact that the assessee has been adopting the same method of accounting which was accepted by the Revenue. Further, it is also recorded by Ld.CIT(A) that the Assessing Officer committed error in computing the construction and development cost incurred by the assessee till 31.03.2014. As per Ld.CIT(A), the cost was only 18.40% of the total estimated construction and development cost. Therefore, no revenue could have been booked even as per the guidance note issued by ICAI. This finding of fact is not rebutted by the Revenue. Thus, Ground No.1 raised by the Revenue is devoid of any merit hence, dismissed. Addition on account of brokerage expenses - assessee company had not declared any income from the projects undertaken during the year under consideration - As per AO Expenditure should have been treated as work in progress - CIT- A deleted the addition - HELD THAT:- No infirmity in the order of Ld. CIT(A) as the CIT(A) has correctly appreciated the facts in the light of ratio laid down by the Hon ble Jurisdictional High Court rendered in the case of CIT vs Samsung India Electronics Ltd . [ 2013 (7) TMI 335 - DELHI HIGH COURT] and ESPN SOFTWARE INDIA P. LTD. [ 2008 (3) TMI 90 - DELHI HIGH COURT] - Revenue could not rebut the finding of Ld.CIT(A) that brokerage forms part of selling cost therefore, allowable expenditure. The Ground No.2 raised by the Revenue is dismissed. Interest free advance given to group companies - HELD THAT:- CIT(A) has categorically given a finding that from the financial statement, it was observed that interest was paid to Greater Noida Authority for late payment of installment of the land purchased on deferred credit. It was also recorded that the advances given to the associate concern was out of interest free advances received from booking of the flats. This finding on fact was not rebutted by the Revenue by furnishing any contrary material. Therefore, no interference is called for in the decision of Ld.CIT(A), the same is hereby affirmed.

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• 2021 (11) TMI 103
  Disallowance of deduction u/s 80P - CIT(A) held that the assessee was having substantial dealings with non-members (nominal members) thus not entitled to any deduction - HELD THAT:- Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] had held that the co-operative societies providing credit facilities to its members is entitled to deduction u/s 80P(2)(a)(i) - Section 80P(4) now specifically excludes only co-operative banks which are co-operative societies engaged in the business of banking i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. The Hon ble Apex Court had enunciated various principles in regard to deduction u/s 80P of the I.T.Act. On identical factual situation, Tribunal in the case of M/s.Ravindra Multipurpose Cooperative Society Ltd [ 2021 (9) TMI 342 - ITAT BANGALORE] had remanded the issue to the files of the A.O. for de novo consideration. The Tribunal directed the A.O. to follow the dictum laid down by the Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. Ors. v. CIT Anr. (supra). Thus we restore the issue of claim of deduction u/s 80P of the I.T.Act to the files of the A.O. for de novo consideration. As regards the claim of deduction u/s 80P(2)(d) of the I.T.Act, the CIT(A) has not adjudicated the same for the reason that the assessee has violated the principle of mutuality. If the assessee receives / earns interest / dividend income out of investments with co-operative society, the same is entitled to deduction u/s 80P(2)(d) of the I.T.Act. With these observations, we direct the A.O. to examine the claim of deduction u/s 80P(2)(d) of the I.T.Act, afresh. If interest income is to be assessed income from other sources, necessarily, the cost incurred for earning such interest income should be allowed as deduction u/s 57 - We find an identical issue was considered in the case of Totgars Co-operative Sales Society Ltd. [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] - assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the fundamental principle under Income-tax Act being that only net income has to be taxed and not the gross income, this plea of the assessee has to be necessarily entertained. Thus issue of deduction u/s 57 of the I.T.Act is restored to the files of the A.O. The A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57.Appeal filed by the assessee is allowed for statistical purposes.

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• 2021 (11) TMI 102
  Reopening of assessment u/s 147 - Addition u/s 68 - assessee has failed to prove the genuine creditworthiness- HELD THAT:- The person approving the reasons recorded is the same officer i.e. JCIT, Range 32, New Delhi, who passed the assessment order in the case of the assessee for assessment year 2011-12. Thus, from the above it is apparent that the approving authority who passed assessment order for assessment year 2011-12 on 31.03.2014 approved the reasons recorded by the Assessing Officer i.e. ACIT, Circle 32(1), New Delhi, on or before 27th of March, 2014 stating that assessment order for assessment year 2011-12 has been passed is clearly a back dated reason recorded by the Assessing Officer and approved by the lower authorities. Such reasons do not have any legs to stand and further the approving authority also did not apply his mind at the time of approving the reasons. Thus, reasons were recorded on 27th of March, 2014 based on assessment order for assessment year 2011-12 which was passed only on 31.03.2014 clearly shows that as on the date of recording of the reasons the assessment order for assessment year 2011-12 did not exist at all. In view of this, we do not have any hesitation in quashing the re-assessment proceedings. Thus, without going into the merits of the above, we quash the re-assessment proceedings and the order passed by the ld. Assessing Officer for assessment year 2007-08. Accordingly, the additional ground raised by the assessee is allowed.

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• 2021 (11) TMI 101
  Disallowing the expenses on account of rent - Disallowing of claim as most of the owners of the premises were partners of the assessee firm and one of them was the partner s wife - HELD THAT:- Even though the owners of the property are relatives, the assessee has been able to bring on record relevant material to support its claim of having taken the premises in question on rent. Whether the assessee was able to show that the rental premises was used wholly and exclusively for the purpose of the business? - As brought to our notice that all its commercial activities like back office work etc. was carried out at that premises, from which only the assessee has turnover of Rs. 458 crore. We note that the payment of rent was made by the assessee firm to the owners (partners) through cheque after deduction of TDS and the owners (partners) have duly shown the rental income in their respective Income tax returns and that tax has been paid on it. To substantiate the incurring of rental expenditure the assessee had filed the rental agreement, sale deed of the related parties, electricity bills, payment by cheque and details of TDS deducted on the rental payments. It is noted that these evidence could not be controverted/rebutted by the AO/Ld DR and the AO has disallowed the expenditure on the basis of surmises and conjectures. So we are of the opinion that disallowance made by the AO has been rightly reversed by the Ld. CIT(A). Therefore, we do not find any reason to interfere with the order of the Ld. CIT(A) and we confirm the same. Therefore, this ground of appeal of revenue stands dismissed. Addition of excess interest claimed on unsecured loan - assessee had borrowed sums from two (2) types of parties viz., related parties as defined u/s. 40A(2)(b) and non-related parties - HELD THAT:- CIT(A) has found that since there was an urgent business requirement, the assessee had taken the unsecured loan due to business exigency at higher rate @ 15% which was also repaid in the same year. The Ld. CIT(A) has noted that the assessee had disclosed the loans, nature of the loans, interest rates paid etc. which were reflected in the tax audit report which included the details of the unsecured loan from related parties. The Ld. CIT(A) was of the opinion that the assessee has made out a case that due to business exigency, loans were taken at a higher rate of 15% at short notice which warranted payment of higher rate of interest. The Ld. CIT(A) thereafter relied on the decision of the Hon ble Supreme Court in the case of S. A. Builders [ 2006 (12) TMI 82 - SUPREME COURT] to allow the assessee s interest expenditure. The aforesaid facts narrated above could not be rebutted/contradicted by the Ld. DR before us. Therefore, based on the factual finding of the Ld. CIT(A) on this issue as discussed supra, we do not find any reason to overturn the decision of the Ld. CIT(A) accepting the interest expenditure. Addition of commission paid to selling agents - as per AO there was no written agreement between the assessee and such brokers and payment made by cheque/TDS deducted cannot be the deciding factor regarding genuineness of claim of the commission paid by the assessee - CIT-A deleted the addition - HELD THAT:- CIT(A) noted that the remand report included brief note on the business activity of the commission agents, copies of return of income tax, copy of the TAR, copies of the P L Account and the details of commission received for work rendered by the commission agents for the assessee. The Ld. CIT(A) also noted that the assessee had a turnover of Rs. 458.91 cr. from Mumbai office itself which according the Ld. CIT(A) was around 72% of the total turnover and that the commission expenses worked out to be very less and constituted only a fraction of such disclosed turnover, which according to the Ld. CIT(A) was reasonable, especially in the situation when the salary payments incurred by the assessee are not excessive. So, he found justification for paying the commission to agents to achieve higher turnovers AO/Ld DR did not bring on record any material to show that the transaction of payment of commission to agents were not genuine or the commission paid was excessive or unreasonable, therefore, no disallowance could have been made by the AO at the first place itself. For that proposition, we rely on the decision of the jurisdictional High Court in the case of CIT Vs. Alfa Hydronics Pvt. Ltd. [ 2014 (11) TMI 1156 - CALCUTTA HIGH COURT] - Therefore, the Ld. CIT(A) rightly deleted the addition which does not require our interference so, we confirm the same. Therefore, this ground of appeal of revenue stands dismissed. Addition of expenses on account of sales promotion - CIT-A deleted the addition - HELD THAT:- CIT(A) took note of the fact that the gifts presented in the form of redeemable gift voucher of various denomination such as gold/silver gifts etc. was meant for promoting the business of the assessee thus attracting generation of more revenue and, therefore, is an allowable expenditure. We note that the entire scheme (promotion scheme) was governed by the scheme put in place by M/s. Tata Steels, and that purchases of the gifts were also from Tata related outlets like M/s Titan and M/s Tanishq. And the distribution was also carried out by an authorized gift distributor company for M/s. Tata Steels. The scheme was controlled by M/s. Tata Steels and was to ensure that the end users would benefit if they are eligible. The Ld. CIT(A) has found that there was no doubt about the genuineness of the expenditure and the expenditure was for promotion of business of the assessee and therefore an allowable expense. This finding of facts could not be controverted or rebutted by AO/Ld DR, so in such a case, we find no infirmity in the order of the Ld. CIT(A) Appeals of the revenue are dismissed.

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• 2021 (11) TMI 100
  Unexplained investment u/s 69 - Whether material found during the course of search to show that the assessee has made the balance of purchase consideration to the seller? - HELD THAT:- In the absence of any material or other facts to indicate that the alleged payment was made by the assessee and that too in the year under consideration the addition made by the AO merely on the basis of assumption and presumption has not justified. CIT(A) has confirmed the addition made by the AO by giving the reasons that the assessee has not explained the details of payment. It is pertinent to note that once the assessee has denied any payment except the payment made by the assessee at the time of agreement, the assessee is not supposed to produce any evidence of non existing transaction. As per terms of the agreement the assessee was to pay Rs. 25,00,000/- for discharge of loan amount against the property and once this payment is not made by the assessee to discharge the property in question from the mortgage charge of the bank which is matter of record then it cannot be presumed that the assessee has made the said payment. AO instead of discharging his duty to bring any material on record to show that the assessee has made unaccounted payment during the year under consideration the addition made purely on the basis of presumption it is not justified and the same is liable to be deleted. Accordingly the addition made by the AO is deleted.

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• 2021 (11) TMI 99
  Assessee as assessable as an agent of M/s Sino Hydro Corporation u/s 163 - HELD THAT:- Assessing authority appears to have set into motion section 163 mechanism in order to assess the taxpayer herein as an agent of M/s Sino Hydro Corporation (JV Partner) in tune by treating the tribunal s discussion in Revenue s and latter s cross appeals appeal [ 2014 (2) TMI 138 - ITAT HYDERABAD] for AY 2006-07 -The Revenue s endeavor all along; in light of the Assessing Officer s order in issue herein dated 30th March, 2013, is that the earlier coordinate bench directions has settled the issue of the assessee s having acted as other entity s JV/agent so as to be liable for section 163 assessment. We, thus, hold that the instant issue is no more res-integra between the parties since there were no such section 163 direction(s) against the assessee involved in the earlier order of the Tribunal and more so, when Revenue s appeal raising the very issue, is stated to be pending before the hon ble jurisdictional high court. Coupled with this, it has further brought on record that the Revenue has lost on the very issue in DRP s directions in AY 2006-07 as well. We accordingly conclude that in this factual back-drop that the CIT(A) has rightly held that the impugned section 163 mechanism set into motion by the Assessing Officer against the assessee is not sustainable in law.

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• 2021 (11) TMI 98
  Nature of income - MAT - Computation of book profit u/s 115JB - Subsidy received under the Industrial Promotion Policy of the Assam Government - application of object/purpose test to the subsidy received contention of the assessee that the impugned subsidy is capital in nature and therefore not exigible to income-tax, both under normal computational provisions as well as book profit u/s 115JB - HELD THAT:- Hon ble Supreme Court in the cases of Sahaney Steel Press Works [ 1997 (9) TMI 3 - SUPREME COURT] and Ponni Sugar Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT] had held that the object or purpose for which the subsidy was given is what matters, and the source of subsidy is immaterial, form of subsidy is equally immaterial and the time at which the subsidy is paid is also immaterial. Therefore, we need to examine as to what was the purpose of the scheme which enabled the grant of subsidy to the assessee. Gainful reference may also be made to the decision of this Tribunal in the case of DCIT vs. M/s. Century Plyboards (I) Ltd. [ 2020 (12) TMI 55 - ITAT KOLKATA] wherein the excise VAT subsidies received by the assessee post commencement of commercial production, from the Central Government and State Government for setting up new units in the States of Assam and West Bengal respectively, was held to be capital in nature We find merit in the claim of the assessee that the VAT subsidy received by it for undertaking substantial expansion at their unit was in the nature of capital receipt not liable to tax, since the object of granting of subsidies was to bring about industrial development, encourage fixed capital investment and generate employment in the State of Assam. Allow the grounds taken by the assessee and direct the AO to deduct the VAT subsidy both while computing income under normal computational provisions and book profit u/s 115JB of the Act for the relevant AY 2014-15.- Decided in favour of assessee.

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• 2021 (11) TMI 97
  Deduction u/s 80IA - income on the business of running of Inland Container Depot (ICD) - business of ICD covered under the definition of infrastructure facilities - HELD THAT:- CIT (A) deleted the impugned addition made by the AO by way of disallowance made u/s 80IA by thrashing the facts at hand in the light of the decision rendered in case of Container Corporation of India Ltd. [ 2012 (5) TMI 260 - DELHI HIGH COURT] , hence we find no scope to interfere into the same. So, ground no.1 of AYs 2013-14 2014-15 is determined against the Revenue. Disallowance u/s 14A r.w.r.8D - disallowance deleted on the sole ground that assessee company has not earned exempt dividend income from the investment during the year under consideration and as such, no disallowance can be made - HELD THAT:- Hon ble Delhi High Court in case of Holcim India Pvt. Ltd. [ 2014 (9) TMI 434 - DELHI HIGH COURT] and Hon ble Supreme Court in case of Godrej Boyce Manufacturing Company Ltd. [ 2017 (5) TMI 403 - SUPREME COURT] have categorically held that, when the assessee has not earned any dividend income forming part of the total income during the year under consideration, section 14A read with Rule 8D is not attracted. Consequently, we find no scope to interfere into the deletion of disallowance made by the ld. CIT (A) u/s 14A read with Rule 8D. - Decided against revenue. Addition u/s 37 - proportionate disallowance of interest qua the amount made by the assessee to its subsidiary and sister concern on the ground that the same was not for business purpose - CIT (A) has deleted the addition by thrashing facts in the light of the submissions made by the assessee on the ground that when the AO has failed to establish a reasonable nexus between the borrowing fund and interest free advances, addition is not sustainable - HELD THAT:- CIT (A) brought on record the fact that the assessee was having surplus fund in its kitty. When the assessee was having surplus fund of Rs. 133.06 crores during the year under consideration, advancing of interest free loan of Rs. 35.42 crores to its subsidiaries is not to attract any disallowance on account of proportionate interest on advances made to the subsidiaries. So, ld. CIT (A) has rightly deleted the addition, hence ground no.3 of AY 2014-15 is determined against the Revenue. Disallowance of interest earned by the assessee company on FDR - HELD THAT:- We have perused the aforesaid findings which are strictly on facts in the light of the law laid down in case of CIT vs. Jaypee DSC Ventures Ltd . [ 2011 (3) TMI 309 - DELHI HIGH COURT] the ratio of which is that, when a bank guarantee is furnished as a condition precedent to entering into a contract and further it has to be kept alive to fulfill certain obligations and the fixed deposits have not been made out of the surplus funds available with the assessee, the same is to be treated as business income. Since judgment of by Hon ble jurisdictional High Court in case of CIT vs. Jaypee DSC Ventures Ltd. (supra) is squarely applicable to the facts of the case at hand, ld. CIT (A) has rightly deleted the addition. - Decided in favour of assessee.

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• 2021 (11) TMI 96
  Addition u/s 69A - As submitted that considering the seized material there was sufficient material before AO who have made additional u/s 69/69A of the Act in these asst. years and the same to be confirmed - HELD THAT:- In this case, addition made towards unexplained investment and mentioning the wrong section is not fatal, though such addition to be made under section 69 of the Act but the AO mentioned the same as section 69A of the Act. Accordingly, this ground of appeal is dismissed. Addition based on seized loose sheet - HELD THAT:- The loose sheet found during the course of search are undated and did not bare the signature of the assessee or any other person. Hence, they are not in the nature of self speaking documents having no evidentiary value and cannot be taken as sole basis of determination of undisclosed income of the assessee. When document like loose sheets of paper are recovered and the revenue wants to make use of it, the onus is on the revenue to collect cogent evidence to corroborate the noting. The revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized paper reveled the unaccounted income of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewelry or investment outside the books of account was found in the course of search action in the case of assessee. Thus, the impugned addition was made by the AO on gross relief in advocate material or rather no sufficient material at all and as such neither to be deleted. We are of the view that an assessment carried out in pursuance of such action, no addition can be made on the basis of un-corroborative noting and scribbling on loose paper made by unidentified person having no evidentiary value, is unsubstantiated and is bad in law. Addition towards unexplained expenditure - addition on the basis of loose sheet - HELD THAT:- As we have deleted the various additions in all these assessment years, which are based on the seized material marked as A/BHB/11 and not supported by any material evidence. Being so, the amount voluntarily offered by the assessee in his return of income at Rs. 3,03,05,017/- is to be taxed and as such there is no question of giving any telescopic benefit and the AO not at all required to deduct Rs. 1.35 crores from the computation of income in assessment year 2011-12. He has to go by return filed by the assessee on 26/11/2011 in acknowledgment No.292359831260911 for the asst. year 2011-12 while passing the giving effect order to our findings in this order. This ground of appeal is dismissed accordingly

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• 2021 (11) TMI 95
  Addition on account of mismatch between the TDS and income shown in as much as it is duly reconciled - HELD THAT:- Admittedly, there was the difference between the income shown from 26AS viz a viz income shown in the books of accounts. However, such difference were duly explain by the assessee in the reconciliation statement available on record. But on perusal of the order of the authorities below, we note that such reconciliation statement was not considered by them. To our mind, the consideration of the impugned reconciliation statement is necessary to put an end on the ongoing dispute. Accordingly, we are inclined to restore the issue to the file of the AO for fresh adjudication as per the provisions of law and after considering the reconciliation statement filed by the assessee. Hence the ground of appeal of the assessee is allowed for the statistical purposes. Capital gain computation - Addition under the provisions of section 50C - contention of the assessee by observing that the stamp value as determined for the purpose of stamp duty shall be taken as the sale consideration in pursuance to the provisions of section 50C - HELD THAT:- Admittedly, the capital asset was transferred by the assessee in the year under consideration through the agreement to sale with possession. All the conditions of section 53A of the Act have been duly satisfied. Therefore, in our considered view the provisions of section 50C of the Act shall be applicable for computing the capital gain. In the present case the property has been transferred by way of an agreement as discussed above. Accordingly, the AO has taken the stamp value for the purpose of computing the capital gain under the provisions of section 50C of the Act which was worked out at Rs. 41,74,217/- only. In view of the above, we hold that the provisions of section 50C of the Act are applicable in the present case for computing the capital gain. Rejection valuation report filed by the assessee - AO cannot reject the valuation report filed by the assessee without referring the same to the DVO under the provisions of sub section (2) of section 50C.AO has not referred the matter to the DVO for determining the fair value of the property as contemplated above - we are inclined to restore this issue to the file of the AO with the direction to refer the same to the DVO for the purpose of valuation and decide the issue a fresh as per the provisions of law. Hence the ground of appeal of the assessee is allowed for statistical purposes.

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• 2021 (11) TMI 93
  Deduction u/s.36(1)(vii) r.w.s. 36(2) - irrecoverable amount has been identified by the assessee and in the course of statement u/s. 132(4) the assessee offered 40% of such advances as undisclosed income of such advances - quantum of amount to be allowed in the assessee s appeal - HELD THAT:- In the present case, the assessee advanced money to various fishermen without keeping any legal and proper documents and if the result of search was any loss to the assessee, then it has to be considered as business loss. Therefore, the assessee s claim has to be allowed in the absence of such enforceable books of account or legal documents. In the present scenario, even advances given with legal documents and securities were unable to be recovered and the assessee who has advanced money to various fishermen in the course of business activity which is undisclosed to the department, the claim of assessee has to be allowed as per statement recorded u/s. 132(4). The authorities cannot reject the statement recorded u/s. 132(4) without bringing any material on record to show that these debts are good so as to recovery from those persons. More so, there was no proper addresses available on record of these debtors so as to contact them for recovery. In this situation, we are of the opinion that these amounts are irrecoverable and the advances made during the course of business activity of the assessee has to be allowed as bad debts (business loss) and on recovery the same has to be taxed. The assessee has confirmed in his sworn statement recorded u/s. 132(4) on 13.10.2000 that 60% of advances made to Canoe and Porceine boat owners are bad debts. With these observations, we allow the grounds raised in appeal by the assessee and dismiss the relevant grounds in the revenue s appeal on this issue. Estimation of net income - HELD THAT:- There is a bank balance of Rs. 26,07,363 and physical cash of Rs. 26,970 totalling to Rs. 26,34,333. It is an admitted fact that it is generated from sale transaction of fish. In our opinion, it is fair to estimate only net income at 5% of the deposit by placing reliance on the order of the Tribunal in the case of M.A. Siddique v. DCIT [ 2020 (8) TMI 835 - ITAT BANGALORE] . Condoning the delay in filing block return for the purpose of interest u/s. 158BFA - HELD THAT:- As mandatory and consequential in nature and to be computed accordingly in the light of the judgment in CIT Anr. v. Smt. Sire Kanwar Bai [ 2009 (12) TMI 569 - KARNATAKA HIGH COURT] wherein it was held that the interest u/s.158BFA(1) is levied to compensate the Government for withholding the taxes by the assessee and therefore, interest is payable only on the sum found payable by the assessee as per the assessment order as reduced by the tax paid prior to the issue of notice or prior to the last date of filing of the return and it is also supported by the Supreme Court judgment in the case of R.C. Jewellers[ 2013 (12) TMI 317 - ALLAHABAD HIGH COURT] Thus interest u/s. 158BFA(1) being consequential and mandatory in nature to be computed accordingly by the AO while passing giving effect order to our findings in this order. Assessment of undisclosed income as a result of search - Due date for filing the return of income u/s. 139(4) had not expired and assessee filed the return on 9.5.2001 - HELD THAT:- The income for AY 2000-01 which is included in the return of income filed by the assessee and not unearthed by the department by way of any incriminating material cannot be considered as undisclosed income of the assessee. Therefore, the deletion of addition is justified. These grounds of the revenue are dismissed. Deletion of surcharge - HELD THAT:- In this case, the CIT(Appeals) deleted the surcharge levied by the AO on the reason that search took place in this case on 6.9.2000 and section 113 of the Act was inserted w.e.f. 1.6.2002 and for the assessment year under consideration there was no provision so as to levy surcharge. In our opinion, the finding of the CIT(Appeals) is justified as section 113 of the Act came into effect from 1.6.2002 and search took place in this case on 6.9.2000 and the findings of the CIT(Appeals) are in line with the provisions of the above section. Hence, these grounds are dismissed. Amount receivable on account of fish sales - HELD THAT:- Being so, the CIT(Appeals) allowed the claim of the assessee that only profit element of this transaction can be taxed as it would be an asset, since the total cost of fish sales was adjusted out of the advances given to the boat owners. This view of ours is supported by the judgment in the case of Smt. Daya Bai [ 1985 (1) TMI 39 - MADHYA PRADESH HIGH COURT] wherein it was held that under the Income-tax Act, levy of tax twice on the same income is not permissible. In the present case, since the advances made to boat owners was subject to tax out of which fish was supplied and Same was sold and the sale proceeds was shown as receivables from debtors. Allowing relief to the assessee as bad debts / business loss out of advances given to the boat owners is a separate issue. It is because of certain advances given to the boat owners was allowed as business loss, that cannot lead to the conclusion that the entire amount of unaccounted sales is to be taxed. Accordingly, these grounds of the revenue are dismissed. Amounts due to boat owners - HELD THAT:- As assessee explained that seized material CS/CS/1 regarding transaction of Rs. 35.47 lakhs is advances made to Purse-sein boat owners and also explained from the chartwise details of advances, there was liability of Rs. 11.57 lakhs which is sum due to the boat owners and credit has been given towards this amount. In our opinion, the outstanding liability due to boat owners and assessee s claim is supported by seized material. The same has to be allowed. We do not find any infirmity in the order of the CIT(Appeals). These grounds of the revenue are dismissed. Liabilities for purchases not paid - HELD THAT:- It is an admitted liability on the part of the assessee and related receipt has been taxed in the hands of the assessee. Following the matching principle credit should be given on this account. The department cannot have any grievance on admission of this ground by the CIT(Appeals) as his power is coterminous. Accordingly, these grounds of the revenue are dismissed.

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• 2021 (11) TMI 92
  Additions as interest income - Taxability of compensation received by the assessee company from Boeing Co.- aerospace project with Boeing Co.suspended - Capital gain or income from other sources - plea of the assessee that the compensation received would be capital receipt not chargeable to tax was rejected by the ld AO on the ground that the compensation received is akin to interest loss borne by the assessee for the delay in execution of the project by the Boeing Co. and accordingly the ld AO held that the said interest would be liable to be taxed separately under the head income from other sources - whether the assessee was justified in claiming the expenses pertaining to Boeing project as revenue expenditure when the aerospace project had been suspended at the behest of Boeing Co.? - HELD THAT:- We find that the compensation so received by the assessee company from Boeing Co. would only go to reduce the cost of project as it is effectively meant to cover up for the expenses and investments incurred by the assessee for the said project. Hence we hold that the receipt of compensation would be capital in nature and would go to reduce the cost of project. As the business of assessee was set up and had started and there was huge investment made by assessee and the project was only temporarily suspended by the Boeing Co - Here what is received by the assessee is part of overall cost of project in the form of compensation from Boeing Co. which cannot be treated as interest. Accordingly, we hold that the compensation received in the sum would go to reduce the cost of aerospace project of the assessee company. Hence the Ground raised by the assessee disposed of. Claim of revenue expenditure - We find that the ld AO had given a categorical finding which remain uncontroverted by the ld AR before us, that the business in Boeing Project started from 10/09/2012 falling in Asst Year 2013-14 onwards. Hence all the expenditure and receipts upto 09/09/2012 pertaining to the project would have to be treated as capital in nature. Accordingly, we hold that the receipt of compensation should go to reduce the cost of project i.e Capital Work in Progress of the assessee company. Similarly all expenditure incurred by the assessee which was claimed as revenue expenditure by assessee should also be capitalized to the Capital Work in Progress. This treatment, in our considered opinion, would meet the ends of justice to both assessee as well as for the revenue. Disallowance of expenses incurred on account of repairs to buildings - HELD THAT:- These expenses were incurred by Tata Motors Ltd on behalf of assessee and were later on billed to the assessee. We also find that similar disallowance made by the lower authorities in assessee s own case for the Asst Year 2009-10 had been deleted by this Tribunal [ 2017 (12) TMI 1817 - ITAT MUMBAI] by placing reliance on the decision of Hon ble Jurisdictional High Court in the case of CIT vs HEDE Consultancy Ltd. [ 2002 (6) TMI 19 - BOMBAY HIGH COURT ] In view of the aforesaid observations and also by placing reliance on the judicial precedent relied upon hereinabove, we direct the ld AO to delete the disallowance made towards repairs to buildings. Disallowance of commission paid - HELD THAT:- We find that the assessee had given an explanation that it had entered into agreement with those parties and commission is paid only if such agent solicits business for the assessee. The assessee also pointed out that due deduction of tax at source was made in accordance with provisions of Chapter XVIIB of the Act while making payment of such commission and payment made through regular banking channels. We find that the ld AO had merely followed his finding in Asst Year 2009-10 and made the disallowance for this year also in respect of the aforesaid two parties. No examination in any manner known to law was made by him for the year under consideration. - As decided in own case [ 2017 (12) TMI 1817 - ITAT MUMBAI] .after considering the details furnished by assessee like copies of agreements, invoice copies, relevant extract of bank statements, TDS certificates, etc, the same issue was decided in favour of the assessee and against the revenue by holding that merely non furnishing of information by the third party cannot be sole criteria for disallowance, when it is provided that expenses per se had been incurred in the normal course of business. Chargeability of interest u/s 234C - HELD THAT:- Interest u/s 234C of the Act could be levied only on the returned income and not on the assessed income - See Smt Premlata Jalani [ 2003 (7) TMI 62 - RAJASTHAN HIGH COURT ] Decided in favour of assessee.

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• 2021 (11) TMI 91
  Deductions u/s. 54 - assessee had purchased the house outside India - Scope of amended provisions - HELD THAT:- CIT(A) has allowed the deductions u/s. 54 of the Act basically holding that the amended provisions have no retrospective application as the claim of the assessee pertains to the assessment year 2013-14, whereas, the amendment was made applicable w.e.f. 01.04.2015. As pointed out by the ld. counsel, the ld. CIT(A) has decided the issue involved in the present case by following the judgement of the Hon ble Gujarat High Court in the case of Leena Jugal Kishore Shah [ 2016 (12) TMI 351 - GUJARAT HIGH COURT] and case of Shri Jaswinder Singh Lota [ 2018 (3) TMI 1942 - ITAT CHANDIGARH] . Peculiar facts of the present case the claim of the assessee has to be allowed. It is seen that the amendment by the Finance Act of 2014 in section 54F comes into effect only from 01/04/2015. Thus, from the said date the benefit of deduction under section 54F for investments made outside India undisputedly can be denied as it can be said to be limited to the investment in residential house property made only within India. However, prior to the said date when the amendment kicks in, there is no statutory bar for the taxpayer to make investments outside India in residential house property in order to get the benefit of deductions 54F provided other conditions were fulfilled. Thus, since the assessment year under consideration is prior to the amendment of section 54F by the Finance Act, 2014 the law as on date stands that the claim of the assessee has to be allowed. - Decided in favour of assessee.

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• 2021 (11) TMI 90
  Withdrawal of exemption as provided u/s. 12A - assessment was reopened on solitary ground that the registration u/s. 12AA of the Act as granted to the assessee was cancelled since inception - HELD THAT:- Tribunal in own case [ 2021 (6) TMI 621 - ITAT DELHI] was pleased to set-aside the impugned order whereby the registration of the assessee trust u/s.12AA of the Act was cancelled since inception, however, the Tribunal restored the Registration granted u/s. 12AA. Revenue could not controvert the fact that the sole ground of re-opening of assessment was that the Registration granted u/s. 12A of the Act had been cancelled since inception, therefore, the assessee was not eligible for the benefit of sections 11 12 of the Act. Under the undisputed fact that the basis of reopening of the assessment now no more exists - assessment framed on the basis of such ground cannot be sustained. We, therefore, set-aside the assessment order and direct the AO to delete the addition and grant benefit of exemption as provided under law. The grounds raised in the present appeal are allowed in terms indicated hereinabove. - Decided in favour of assessee.

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• 2021 (11) TMI 88
  Exemption u/s 11 - denying grant of registration u/s. 12AA - whether the objects of the applicant are charitable in nature or not and genuineness of the activities carried on by the trust - HELD THAT:- During the course of proceedings before the ld. CIT(Exemption), Pune, the appellant company was called upon to file certain information as to the details of expenditure incurred by it in the preceding financial year vide letter dated 13.08.2020 so as to enable the ld. CIT(Exemption) to form an opinion as to the genuineness or otherwise of the activities carried on by the appellant company. It is an admitted position that the appellant had not complied with the said notice for whatever reasons. However, keeping in view the difficulties being faced on account of Covid-19 pandemic, we are of the considered opinion that the interest of justice would be met if the matter is remanded back to the file of the ld. CIT(Exemption) to grant one more opportunity to the appellant company to comply with the notice issued on 13.08.2020 and with direction that the ld. CIT(Exemption) to decide the issue of grant of registration u/s. 12AA of the Act on the touchstone of the law laid down by the Hon ble Apex Court in M/s. Ananda Social and Educational Trust [ 2020 (2) TMI 1293 - SUPREME COURT ] Accordingly, the matter is remitted back to the file of the ld. CIT(Exemption). Appeal filed by the assessee is partly allowed for statistical purposes.

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• 2021 (11) TMI 87
  Limited scrutiny or limited scrutiny - HELD THAT:- After vehemently arguing for some time, learned counsel stated very fairly that the assessee no more wishes to press for the instant additional ground(s) as it emerged from a perusal of the case file that it was indeed a case of complete scrutiny assessment only. Estimating 10% of her sub-contract receipts as her business income - HELD THAT:- As assessee has been assessed at very high rate of 10% deposits the fact that she is only a sub-contractor wherein the margin does not cross maximum rate of 3 to 4% - no merit in the assessee s instant arguments since both the lower authorities have already granted her substantive relief in estimating the impugned profit element @10% despite the fact that she has not maintained any books, details of sub-contracts (project-wise) corresponding and all other overhead expenses. We sought to know from the learned counsel about the assessee s alleged regular business activity in civil construction business wherein he failed to throw any light. We therefore hold that the assessee does not deserve any further relief over and above the impugned profit estimation @10%. Disallowing bad debts, interest expenses followed by un-explained cash credits - HELD THAT:- When there is no indication in the case file regarding the learned lower authorities to have specifically issued any show cause notice regarding verification of the instant twin claims of bad debts interest disallowances, we deem it appropriate to restore the same back to the Assessing Officer for his afresh adjudication as per law within three effective opportunities of hearing. Un-explained cash credits - HELD THAT:- Assessee during the course of hearing that assessee had not only submitted the list of the creditor parties but also their confirmations before the Assessing Officer and the sums in issue had come from the banking channel only. There can hardly be any dispute that it is the assessee s onus only to prove identity, genuineness and creditworthiness of such cash credits wherein she cannot simply take recourse to filing list thereof followed by mechanical confirmations. We therefore deem it appropriate to restore the install issue as well back to the Assessing Officer with a clear-cut direction that it shall be the bounden duty/risk of the assessee only to produce the corresponding parties in issue; as and when required to do so, in consequential proceedings within three effective opportunities of hearing in order to prove their genuineness and creditworthiness. The instant last substantive ground is accepted for statistical purposes in above terms.

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• 2021 (11) TMI 86
  Penalty u/s. 271(1) (c) - HELD THAT:- Revenue has not controverted the fact that the facts are identical as were in the Assessment Year 2010-11 and the penalty proceeding pertaining of this year was dropped. The assessee has placed on record the order of the Assessing Officer pertaining to the Assessment Year 2010-11 wherein, the Assessing Officer had himself dropped the penalty proceedings. Assessing Officer has not given any reason as to why he dropped the penalty in Assessment Year 2010-11 and sustained the imposition of penalty for Assessment Year 2009-10 under the same set of facts - As in the impugned penalty order, the Assessing Officer has stated that non-filing of appeal goes to demonstrate the acceptance by the assessee of furnishing/concealing of income -. This observation goes to demonstrate that the AO had not specified the charge, whether it was far furnishing of inaccurate particulars of income or concealment of income. Therefore, looking into the facts where the Assessing Officer under the same set of facts has dropped the penalty in Assessment Year 2010-11, therefore, the penalty in this year also cannot be sustained, hence, deleted. Grounds raised in the appeal are allowed.

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• 2021 (11) TMI 85
  Addition on account of repurchase of Foreign Currency Convertible Bonds (FCCB) - allocation of machinery under the head of depreciation @ 15% and 80% are to be allocated on pro data basis depending upon the WDV of the said block - whether CIT(A)-3, erred in law on facts in not directing the assessing officer, not to allocate the amount of difference of discount on buying back of FCCB and reducing a sum from the cost of assets, while computing depreciation in the absence of any such findings in the appellate order? - HELD THAT:- As per RYAM SUGAR COMPANY LIMITED [ 1974 (3) TMI 10 - CALCUTTA HIGH COURT] AO has no power to go beyond the direction of the competent authority while passing order giving effect. So far as the merit of the case is concerned the Ld. counsel has pointed out that the issue involved is covered in favour of the assessee by the order of the Hon ble Supreme Court in the case of Tata Iron Steel Ltd. [ 1997 (12) TMI 5 - SUPREME COURT] - However, we notice that the Ld. CIT(A) has passed the impugned order without taking into consideration the cases relied upon by the Ld. counsel. As alleged by the Ld. counsel the issue involved is also covered in favour of the assessee which has not been looked into by the authorities below. Under these circumstances, we deem it appropriate to restore the issue to the AO for passing order giving effect afresh to the appellate order passed by the Ld. CIT(A) in the first round of appeal. The Ld. DR has no objection in case the appeal is send back to the AO for fresh consideration. Appeal of the assessee is allowed for statistical purposes.

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• 2021 (11) TMI 84
  Addition u/s 69 - investment made from undisclosed sources - CIT-A deleted the addition - HELD THAT:- AO has also not doubted the identity of the persons or entities from whom the assessee raised loans in question. CIT(A) further noticed that all the transactions had been made through banking channels. CIT(A) rightly delete the addition made by the AO. AO has not pointed out any evidence on the basis of which he reached at the conclusion that the assessee had obtained accommodation entries from the parties concerned. In our considered opinion, since the AO had made the addition in question on assumption and presumption basis the Ld. CIT(A) has rightly deleted the addition. We are therefore, of the considered view that the order passed by the Ld. CIT(A) is based on evidence on record and as per the settled principles of law, hence, does not require any interference. Therefore, we find no merit in the appeal of the revenue.

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• 2021 (11) TMI 83
  Disallowance towards sales tax penalty - assessee submitted that it is not a sales tax adjustment though it is mentioned as penalty - HELD THAT:- We observe that it is payment raised for the period from 4/2005 to 5/2007 for under-declared tax and imposed penalty vide order dated 30/07/2009 by the commercial tax department. Any penalty paid for violation of any law, is not allowable u/s 37 - Our view is supported by the decision of CIT Vs. Bharat Steel Tubes Ltd. [ 1995 (11) TMI 10 - DELHI HIGH COURT] - No infirmity in the action of CIT(A) in confirming the disallowance made by the AO on this account and accordingly, upholding the order of CIT(A), we dismiss the ground raised by the assessee on this issue. Disallowance towards cash payments to labour - HELD THAT:- We find that before the AO the assessee requested to confine the disallowance to the extent of 10%, but, the AO made the disallowance @ 15% of the cash portion of labour payments. On considering the totality of the facts and circumstances of the case, we restrict the disallowance 10% of the cash portion of labour payments and the AO is directed accordingly. Thus, this ground is partly allowed. Disallowance of interest on delay in remittance of TDS to the Govt. Treasury - AO noticed that the assessee claimed expenditure of interest on TDS - HELD THAT:- We observe that before the authorities the assessee submitted that the delay was caused in payment of TDS on account of paucity of funds whereas the revenue s grievance is that the assessee paid the interest for non-remittance of TDS to Govt. Account. Therefore, taking into consideration the request of the assessee that the issue may be remitted to AO for further verification, we remit the issue to the file of AO with a direction to verify whether the amount paid by the assessee towards delay or for non-remittance and decide the issue in accordance with law after providing reasonable opportunity of being heard to the assessee. The assessee is directed to substantiate its claim. Accordingly, this ground is treated as allowed for statistical purposes. Deduction u/s 80IA - additional ground raised by the assessee - HELD THAT:- Hon ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] has observed that the assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional clams before them. The appellate authorities have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The words could not have been raised must be construed liberally and not strictly. There may be several factors justifying the raising of a new plea in an appeal and each case must be considered on its own facts. In view of this, the additional ground taken by the assessee is admitted for adjudication - since the facts relating to this issue have not been examined by the lower authorities, hence, this issue is restored to the file of the AO for adjudication of the same as per law. The assessing officer is also directed that while deciding the additional ground of appeal regarding claim of deduction as per u/s 80IA if the Income Tax Act. 1961, the assessing officer will consider the CBDT Circular No. 37 of 2016 dated 2nd November, 2016 issued vide F.No. 279/Misc./140/2015/ITJ also. The assessee is directed to appear before the A.O. with necessary documents to substantiate its claim of deduction as per u/s 80IA and further directed to avoid unnecessarily delay to dispose-off the case. Thus, this additional ground is allowed for statistical purposes.

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• 2021 (11) TMI 82
  TDS u/s 194C - Non deduction of TDS on payments to shipping companies and CFS Agents - Addition u/s 40(a)(ia) - assessee claims that payments made to shipping companies and CFS Agents on behalf of its clients is in the nature of reimbursement of expenses without any element of profit and thus, is outside the scope of provisions of TDS - HELD THAT:- If you accept the arguments of the assessee, then the purpose of legislature is defeated and the intend to subject the contract payment to deduction of tax at the point of payment is defeated by D transaction in such a manner that the purpose is defeated. It is also important to note that it is the assessee who has booked the expenditure towards container storage charges on payment to shipping companies/CFS Agents and debited in their books of accounts. Similarly, the assessee has received charges from its clients including amount paid to shipping companies/CFS Agents and the same has been credited to its P L a/c when it had received payments from its clients - payments made by the assessee to shipping companies/CFS Agents is not a reimbursement of expenses, but first hand payment between principal to principal on the bill raised by the service providers. Since, the assessee has made payment on behalf of their customers; the assessee ought to have deducted TDS on such payments while making payments. Since, the assessee has failed to deduct TDS, on such payments the AO is right in disallowing such payments u/s. 40(a)(ia) of the Act. Hence, we confirm additions made by the AO. Alternative plea of the assessee that it has made payment to reputed shipping companies and all service providers has filed their return of income u/s. 139 of the Act and included payments made by the assessee in the return of income and thus, the assessee cannot be held as an assessee in default in terms of second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 w.e.f. assessment year 2013-2014 - In this case, the assessee has failed to obtain Form No. 26A and file before the AO and CIT(A) to give the benefit of proviso to section 40(a)(ia) of the Act, and said lapse is continued even before us. Before us, the assessee could not file any Form no 26A obtained from its clients nor filed their ITR copies to prove that the recipients have included sum paid by the assessee in their income tax returns. Therefore, we are of the considered view that there is no merit in alternate ground taken by the assessee and hence, the same is rejected. Disallowance u/s. 36(1)(ib) of the Act towards Key man Insurance Premium paid - HELD THAT:- As CIT(A), the assessee did not file any evidence to justify payment of insurance premium on Key man Insurance Policy taken in the name of the directors. Even before us neither any evidence was filed nor justified payment. There is no error in the reasons given by the CIT(A) to sustain additions made by the AO for disallowance of insurance premium paid on Key man Insurance Policy. Hence, we reject the arguments of the assessee and confirm additions made by the AO. Appeal filed by the assessee is dismissed.

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• 2021 (11) TMI 81
  TDS u/s 194H - Non deduction of TDS on the payment of incentive to various dealers - HELD THAT:- A.O. or JCIT didn t refer to any judgment in support of their observations that provisions of Section 194H read with Explanation 1 bring the case as one of services rendered in buying and selling. We don t find any merit: in the findings of A.O. read with the directions of JCIT and hold that no TDS deduction was required, keeping in mind the facts and circumstances in the appellant s case in respect, of incentives paid/payable to their franchise showrooms and distributors. TDS u/s 194J - Findings of the Ld. CIT(A) are in accordance with the provisions of law and in consonance with the ratio laid down by the Hon ble Supreme Court in the case of Hindustan Coco Cola Beverage (P) Ltd. vs. CIT [ 2007 (8) TMI 12 - SUPREME COURT] as held recipient of income has already paid taxes on amount received from deductor, the department cannot recover tax from deductor on the same income by treating deductor to be assessee-in-default for shortfall in its amount of tax deducted at source - Hence, we do not find any infirmity in the order of the Ld. CIT(A) to interfere with the same. Accordingly, uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.

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• 2021 (11) TMI 80
  Reopening of assessment u/s 147 - Addition of payment made from an unaccounted sources - Addition based on soft copy of a deed found from the computer of deed writer - HELD THAT:- No copy signed by the assessee and seller parties with a transaction has been found during the course of the search of Sh Naresh Gupta. The deed writer, himself has denied of having aware of any money transaction between the parties, which was recorded in the computer. He stated during the course of search that amount mentioned may be as a result of cut/paste of various documents in the computer. We find that the Assessing Officer has made addition only on the basis of said unsigned deed and no corroborative evidences have been brought on record to show that purchase transaction was executed by the assessee at the rate mentioned in the computer of Sh. Naresh Sharma. Assessing Officer has not carried out any inquiries from the seller of the land also. The assessee cannot be penalised merely on the basis of an unsigned deed found from the premises of a third-party. In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. - Decided in favour of assessee.

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• 2021 (11) TMI 79
  Deduction u/s 54F - Denial of deduction assessee was owner of multiple houses as on date of purchase of new asset - assessee owned 6 residential units and that effective ownership was held by assessee - scope of amendment - HELD THAT:- As perused the joint development agreement wherein, the sale consideration determined as against the transfer of right title and interest in the land by assessee for the purposes of development was 42% of the constructed premises being 24 residential units. In the Assessment Year under consideration, assessee is owner of 6 flats that are unsold under the JDA. No infirmity in the view taken by the Ld.CIT(A) that assessee owned multiple flats as on date of purchase of new asset. The relevant assessment year being 2013-14, the amendment would be applicable to the present facts and assessee won t be entitled to the benefit u/s. 54F. - Decided against assessee.

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• 2021 (11) TMI 78
  Disallowance of travel expenditure - addition estimated at 5% of the total expenditure claimed by assessee - HELD THAT:- As on the submissions advanced by Ld.AR now before us, it is justifiable to restrict the disallowance only to the extent of travel expenses. Whereas other expenses stands explained as most of the payments are statutory payments. Considering the fact that assessee sumo to disallowed a portion of it in the computation of income, further 5% of the travel expenses incurred would cover the leakage. We therefore direct the Ld.AO to restrict the disallowance only to the extent of 5% of the travel expenses. Addition u/s 68 - unexplained share application money and share premium money invested - HELD THAT:- As assessee filed its own audited accounts for assessment year under consideration, the share subscription and shareholders agreement, bank statement of current account held by assessee showing the receipt of the funds and a letter from the bank held by one of the promoter who is having the NRE account of having debited in amount of Rs. 140 lakhs in favour of assessee. As rightly observed by authorities below assessee has not discharge the primary onus of establishing the creditworthiness of all the directors. The right measure is to file the bank statements of the creditors/subscribers, copy of returns filed by them to establish that the promoters/share subscribers had sufficient funds to make such huge payments to assessee towards share capital/share premium. In the interest of justice we deem it proper to remand this issue to the Ld.AO. Assessee is directed to file all documents/statutory forms to establish the creditworthiness of the all the promoters/share subscribers. Merely by showing that the funds have received in the hands of assessee through banking channels, would not establish the creditworthiness of such creditors. Ld.AO is directed to verify all the details filed by the assessee and consider the claim in accordance with law

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• 2021 (11) TMI 77
  Bogus STCL - Disallowance of Loss arising from the trading in shares - accommodation entry of STCL -- AO has disallowed the claim of the assessee based on analysis of the information received from Directorate of Investigation as a result of enquires undertaken by the officers of the Directorate - HELD THAT:- Assessee has produced documents to substantiate the genuineness of the transactions carried out through banking channels, through the medium of portfolio management whereby there is no contact between the buyer and the seller. The fact remains that there is direct evidence placed on record by the assessee to support the genuineness of the impugned transactions such as contract notes, share certificates, corroborative evidence indicating purchase/ sale through registered broker as juxtaposed against the findings of the AO based on the general report from Investigation and the modus operandi adopted by unscrupulous entry providers. There is no denying that there is no assessee-specific material on record of the AO to pin-point that the assessee has entered into an unholy nexus with entry providers so as to stage manage accommodation entry of STCL. Material furnished by assessee to substantiate its claim remains unchallenged and uncontroverted. The purchases were neither off-market nor through preferential allotment. Besides, no copy of any report of information received was supplied to the assessee. The assessee was not confronted with any statement or material allegedly detrimental to the assessee arising or culled out of the Investigation report. Thus, the fact remains that the findings of the lower authorities are not based on evidence but on generalizations and probabilities. The AO could not place anything on record, maybe through a process of his own enquiry, to decisively prove that assessee has obtained bogus STCL through his connivance with entry operators / exit providers. The claim of the assessee appears to have been rejected more on the basis of presumption rather than evidence. An assessment purely based on suspicion, surmises and conjectures without any tangible evidence on record against the assessee of any connivance or collusion is unsustainable in law. - Decided in favour of assessee.

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• 2021 (11) TMI 76
  Allowable business expenses - Expenses incurred for retaining the status of the company - assessee did not carry out any business activity during the assessment yea - HELD THAT:- Assessee was incorporated on 10.09.2087, made investments in V. Hotels Ltd, which had acquired Centaur Hotel in Mumbai from the Government intending to revive the business of such hotels, but in view of legal dispute with regarding to Centaur Hotel and also on account of economic slowdown, the assessee could not start running of hotel, but, however, to keep the status of the company, the assessee had to incur expenses in the shape of salary of few key personnel, payments made towards statutory funds, communications, professional fees etc. CIT(A) while following the decision of Hon ble jurisdictional High Court in the case of Integrated Technology Ltd. [ 2011 (12) TMI 48 - DELHI HIGH COURT] and also order of Mokul Finance Pvt. Ltd [ 2007 (7) TMI 351 - ITAT DELHI-I] granted relief on the ground that the expenses incurred for retaining the status of the compare are allowable deduction, even though the assessee did not carry out any business activity during the assessment year. - Decided against revenue.

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• 2021 (11) TMI 75
  Nature of receipt - receipt in respect of Renewal Energy Certificates akin to carbon receipts - revenue or capital receipt - HELD THAT:- Hon ble Jurisdictional High Court in the case of CIT v. Ambika Cotton Mills Ltd. [ 2021 (3) TMI 442 - MADRAS HIGH COURT] has held that the proceeds received by the assessee company carrying on business of power generation on sale of certified emission reduction credit (carbon credit) is a capital receipt and not business income as carbon credit is not an offshoot of business, but an offshoot of environmental concerns. We hold that the proceeds received by the assessee is capital receipt. No reason to interfere with the order of the ld. CIT(A) and accordingly, the ground raised by the Revenue is dismissed. Belated payment towards PF ESI contribution - AO disallowed the same on the ground that the payment was delayed, which cannot be allowed under section 43B - HELD THAT:- As appellant has made the remittance of employees contribution towards PF/ESI account before the due date of filing of the Return of Income u/s 139(1) of the Act and, therefore, it is held that no disallowance can be made u/s 43B - As gone through the assessment order and appellate order and find no infirmity in the order passed by the ld. CIT(A). Accordingly, this ground of appeal of the Revenue is dismissed.

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• 2021 (11) TMI 74
  Violation of section 144C(1) - whether the impugned assessment order passed by the AO without proposing a draft assessment order makes it invalid? - HELD THAT:- Undisputedly, the conditions of section 144C(1) of the Act are satisfied in case of the present assessee, as, the assessee has entered into international transaction with the AE and there is a variation to the income which is prejudicial to the interest of assessee. In fact, initially, based on the adjustment proposed by the TPO, the AO had framed the draft assessment order and ultimately the Tribunal restored the issue back to him. However, though, the TPO again proposed adjustment and there is a variation to the income of the assessee which is prejudicial to its interest, the AO without following the mandatory provisions of section 144C(1) of the Act has proceeded to pass a final assessment order making the addition proposed by the TPO. There cannot be any doubt that the AO has not followed the statutory mandate contained under section 144C(1) of the Act. Keeping in view the aforesaid factual position, it has to be decided whether the assessment order so passed is valid in the eye of law. Undoubtedly, by not proposing a draft assessment order, the AO has effectively denied the assessee the remedy available under the statute of raising objections before the DRP. As we find, while deciding identical nature of dispute involving similar facts, the Hon ble jurisdictional High Court in case of Dimension Data Asia Pacific Pte. Ltd. [ 2018 (7) TMI 1256 - BOMBAY HIGH COURT] has held that assessment order passed in violation of section 144C(1) is invalid - Hon ble Delhi High Court in case of Turner International India (P) Ltd. vs. DCIT [ 2017 (5) TMI 991 - DELHI HIGH COURT] has expressed same view. We hold that the impugned assessment order passed under section 143 (3) r.w.s. 254 of the Act is invalid. Accordingly, we quash it. This ground is allowed.

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• 2021 (11) TMI 65
  Rejection of books of accounts - invoking the provision of section 145(3) - GP Estimation - gross turnover for the year as Income from other sources - HELD THAT:- As facts pertaining to discrepancies noticed in the financials of the assessee-firm and has also referred to various charts depecting the profitability of the assessee-firm in preceding years vis- -vis other related concerns of the same group and operating in the same field and even the same area. We find merit in the finding of Ld. CIT(A) rejecting the book results and invoking the provision of section 145(3) of the Act and this action of the Ld. CIT(A) has also not been challenged before us by the assessee by raising a specific ground. Assessee miserably failed to controvert the finding of Ld. CIT(A) by placing any material in its support. The only argument made by ld. counsel for the assessee is that the assessee-firm is consistently being allowed to the deduction u/s 80IC of the Act but had not said anything about the correctness of profit earned during the year. The case relied by the assessee in the case of M/s. Goodcare Pharma Pvt. Ltd. [ 2019 (4) TMI 566 - ITAT KOLKATA] is also not be of any benefit to assessee since the fact are not similar and more specifically the issue of rejection of book results was not before the coordinate bench of Kolkata in the case of M/s. Goodcare Pharma Pvt. Ltd. (supra) and, therefore, it shall not be applicable on the instant issue raised before us. Under the given facts and circumstances of the case and detailed enquiry conducted by the Ld. CIT(A), which remained uncontroverted by the ld. counsel for the assessee find no reason to interfere in the finding of Ld. CIT(A) applying the gross profit rate of 40% on the turnover disclosed by the assessee as against the gross profit rate of 57.01% disclosed by the assessee and accordingly has rightly charged the difference of the profit that is 17.01% (57.01% less 40%) on the gross turnover for the year as Income from other sources . Accordingly, ground no. 2, 3 4 raised by the assessee are dismissed. Appeal of the assessee for A.Y. 2013-14 is dismissed. Conditional allowing section 80IC taking 40% G.P. Rate - HELD THAT:- As decided in own case we confirm the finding of the Ld. CIT(A) applying the gross profit rate of 40%.

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• Customs

• 2021 (11) TMI 73
  Law for trial of the cross cases - Raid - whether the evidence recorded in a separate trial of coaccused can be read and considered by the appellate court in a criminal appeal arising out of another separate trial conducted against another accused, though for the commission of the same offence? - HELD THAT:- It is fairly well settled that each case has to be decided on its own merit and the evidence recorded in one case cannot be used in its cross case. Whatever evidence is available on the record of the case only that has to be considered. The only caution is that both the trials should be conducted simultaneously or in case of the appeal, they should be heard simultaneously - However, we are not concerned with cross-cases but are concerned with an eventuality of two separate trials for the commission of the same offence (two complaints for the same offence) for two sets of accused, on account of one of them absconding. A three-Judge Bench of this court in the case of KARAN SINGH VERSUS STATE OF MADHYA PRADESH [ 1964 (11) TMI 120 - SUPREME COURT ] was confronted with the question, as to, whether, in view of the acquittal of the absconding co-accused in a separate trial from which there had been no appeal, it was open to the High Court to hold that the accused appellant was guilty of murder under section 302 read with section 34 IPC. Merely because the seven witnesses produced by the prosecution were the same in both the cases would not mean that the evidence was identical and similar because in the oral testimony, not only the examination-in-chief but also the crossexamination is equally important and relevant, if not more. Even if the examination-in-chief of all the seven witnesses in both the cases, although examined in different sequence, was the same, there could have been an element of some benefit accruing to the accused in each case depending upon the cross-examination which could have been conducted maybe by the same counsel or a different counsel. The role of each accused cannot be said to be the same - The provisions of law and the essence of case-laws, give a clear impression that in the matter of a criminal trial against any accused, the distinctiveness of evidence is paramount in light of accused s right to fair trial, which encompasses two important facets along with others i.e., firstly, the recording of evidence in the presence of accused or his pleader and secondly, the right of accused to cross-examine the witnesses. In the present controversy, two different criminal appeals were being heard and decided against two different judgments based upon evidence recorded in separate trials, though for the commission of the same offence. As such, the High Court fell into an error while passing a common judgement, based on evidence recorded in only one trial, against two sets of accused persons having been subjected to separate trials. The High Court ought to have distinctly considered and dealt with the evidence of both the trials and then to decide the culpability of the accused persons. There is one more angle to be considered i.e. whether to remand one case to the High Court for fresh decision i.e. the case in which the evidence was not considered and we may proceed to decide the other case here - there cannot be a severance of the judgment particularly when it arises in a criminal case, where the rights of the accused are as important as the rights of a victim. Therefore, it would be in the fitness of things and in the interest of the parties that the matters are remanded to the High Court for a fresh decision in accordance with law. All the questions of law and fact would remain open before the High Court and the parties would be free to address the High Court on all issues both on law and facts - Appeal allowed.

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• Service Tax

• 2021 (11) TMI 72
  Refund of unutilized CENVAT credit - export of taxable output service - nexus between the input services and the output service exported or not - HELD THAT:- As the availment of CENVAT credit by the appellant under Rule 3 of the Rules is not called in question, the denial to grant refund under Rule 5 of the Rules without there being any proceedings initiated under Rule 14 of the Rules by seeking to deny the refund on the ground of the respondent/assessee availed CENVAT credit on input services, which according to the appellant/revenue have no nexus with the output service, cannot be held to be justified. Further, it is to be noted that these appeals relate to period prior to amendment made to Rule 5 of Rules w.e.f 01.04.2012 and also thereafter. In so far the claim for refund of CENVAT credit for the period prior to 01.04.2012 is concerned, as Rule at the relevant point of time did not contain any prescription as to the nexus between input services and output service, the denial of refund on the said ground cannot be held to be valid. For the period subsequent to the introduction of substituted Rule 5 of Rules, the only prescription for grant of refund in respect of export of output service is by applying the formula specified. This Court is of the view that in the given facts and circumstances, the reasons assigned by the Tribunal for holding that the respondent/assessee is entitled for grant of refund of unutilized CENVAT credit under Rule 5 of the Finance Act, does not call for any interference. This Court is of the opinion that no substantial question of law arises for consideration in these appeals - the appeals of the revenue are dismissed.

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• 2021 (11) TMI 71
  100% EOU - refund of service tax - Clearing and Forwarding Agency Service - Port Service - Customs House Agent Service - claim filed within a period of one year from the date of export or not - applicability of N/N. 41/2012-S.T. dated 29.06.2012 - Scope of beyond the place of removal - HELD THAT:- In Notification No. 41/2012 which was issued on 29.06.2012, the word used was beyond the place of removal . When the definition of place of removal as given in the Central Excise Act, 1944 is applied, the place where the goods are sold becomes the place of removal. The Department was of the view that only when the goods are loaded into the vessel for export, the transfer of property in goods takes place. So, the place where the sale takes place being the port, the place of removal is the port. That as per the pre-amended Notification No. 41/2012, the services used beyond the place of removal are only eligible for refund. This anomaly was corrected by issuing the Notification No. 01/2016 dated 03.02.2016 by amending Notification No. 41/2012.The amendment was made to have retrospective application with effect from 01.07.2012. It is clear that there was a mistake in Notification No. 41/2012, which stated that the taxable services that have been used beyond the place of removal for the export of goods would be eligible for refund. When the definition of input service includes services which have been used up to the place of removal , the same ought to have been incorporated in Notification No. 41/2012. After realizing the mistake and the ineligibility of credit / refund/ rebate on input services used for the export of goods, the amendment has been introduced by the Government by the Finance Act, 2016. It is not necessary that there should be an order of rejection of refund. If a litigation is at the stage of Show Cause Notice and there is a proposal for rejection, the Show Cause Notice has to be adjudicated after considering the amendment brought forth vide the Finance Act, 2016. It cannot be then said that the Adjudicating Authority has to first reject the claim and thereafter assessee has to file a fresh claim under the amended Notification of 2016 - The intention of the Government is very much clear from the Notification which is to grant refund retrospectively with effect from 01.07.2012. This cannot be frustrated by clinging on to technical formalities. In the present case, the appellant had requested to return the refund claims only to see if other alternate remedies were available to them. Meanwhile, the Notification corrected the situation. Therefore, the appellant has filed the refund claims pursuant to the amended Notification. The rejection of refund claim then, on the ground of limitation, denying the benefit intended by the amendment is not legal and proper - the rejection of refund cannot sustain and requires to be set aside - Appeal allowed - decided in favor of appellant.

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• 2021 (11) TMI 70
  Classification of services - Mining of Mineral, Oil or Gas Service or Survey and Exploration of Mineral Oil and Gas Service - Business Auxiliary Service or not - activity of gas compression carried out by the appellant for their clients - associated commission received by the appellant - manpower recruitment and supply service - period prior to 01.06.2007. Demand under the head of Survey and Exploration of Mineral Oil and Gas Service - HELD THAT:- The exact nature of the activity undertaken by the appellant in each contract needs to be examined to ascertain whether it would fall under the category of mining service. It is seen from the Show Cause Notice that it examines in detail the activities undertaken contract wise. However, the impugned order does not examine the activities undertaken contract-wise to ascertain the exact nature of service provided in each contract - It can be seen that the language in the contract for the nature of service being provided is quite different in each contract, and therefore, all the contracts cannot be dealt summarily in identical manner - the said demand is set aside and the issue remanded back to Commissioner to decided the matter after examining each contract. Demand under associated commission received from various clients - HELD THAT:- The appellant have claimed that the services are not covered under Business Auxiliary Service as there is no sale or marketing of goods involves in their activities. The said argument has been rejected by Commissioner on the ground that the Business Auxiliary Service not only covered service in relation to marketing or sale of goods but also includes their services including supervision of services on behalf of the client. It is seen that the impugned order does not elaborate as to how the activity done by the appellant amount to providing service on behalf of the client. From the description of services given by Shri Deepak Joshi, Director of the appellant, it is apparent that the services were not given on behalf of the ONGC but given to ONGC. In these circumstances, there is no merit in the argument of the Commissioner in the impugned order - there are no merit in the demand raised under this head and the same is set aside. Service tax under the head of Manpower Recruitment and Supply Service - HELD THAT:- The Show Cause Notice does not elaborate exactly how the personnel were deputed for the job. The appellant have asserted that the personnel were deployed for their own work and as per contract. Under these circumstances when the personnel were deployed by the appellant to undertake the jobs involved in the main contracts it cannot be termed as Man Power Recruitment and Supply Service , the demand on this count is set aside. Appeal allowed in part.

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• 2021 (11) TMI 69
  Export of services or not - consulting engineering services - export of services or not - the said two service recipients were other establishments of the assessee - applicability of item (b) of Explanation 3 of Clause (44) of section 65 B of the Finance Act, 1994 and in terms of rule 6A of the Service Tax Rules, 1994, as inserted w.e.f. 01.07.2012 vide Notification No.36/2012-S.T., dated 20.6.2012 - services provided by the appellant to Larson Toubro Electromech LLC (Oman) and Sargent Lundy, USA, is exempt service or not. Whether the service recipients were other establishments of the appellant, and, therefore hit by rule 6A of Service Tax Rules? - HELD THAT:- As per clause (44) of Section 65B of the Act. 1994 service means any activity carried out by a person for other for consideration, and includes a declared service. Item (b) of the explanation 3 stipulates that an establishment of a person in taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Therefore, a question arises in the fact of the present case, whether the services provided by the petitioner No.1 located in India which is a taxable territory and the recipient of the service i.e. holding Company of the petitioner No.1 located outside India which is a non- taxable territory, whether both of them would be two establishments of the same Company or not so as to treat them as distinct persons liable for service tax. The services rendered by the petitioner No.1-Company outside the territory of India to its parent Company would have to be considered export of service as per Rule 6A of the Rules, 1994 and Clause (f) of Rule 6A of the Rules, 1994 would not be applicable in the facts of the case as the petitioner No.1, who is the provider of service and its parent Company, who is the recipient of services cannot be said to be merely establishment so as to be distinct persons in accordance with Item (b) explanation 3 of Clause (44) of Section 65B of the Act, 1994 - Exempt services or not - services provided by the appellant to Larson Toubro Electromech LLC (Oman) and Sargent Lundy, USA - HELD THAT:- In the instant case, the appellant is a service provider and is a joint venture company of Larson Toubro Ltd, an Indian conglomerate and Sargent and Lundy LLC (USA). Both Larson Toubro Ltd and Sargent and Lundy LLC (USA) are independent registered companies in India and USA respectively. The service recipient Larson and Toubro Electromech LLC is a company registered in Oman. The said company is formed with L T Hydrocarbon Engineering Limited holding 70% of its share capital and Modern Channels Services LLC holding 30% of its share capital - it is apparent that the appellant and service recipient are similarly placed as the service provider and service recipient in the case of M/s Linde Engineering India Private Limited decided by High Court. Consequently, LLC and Sargent and Lundy LLC (USA) cannot be treated as other establishments of the appellant. The fundamental charge that the service recipients are other establishments of service providers in terms of in terms of rule 6A (f) and item (b) of Explanation 3 of clause (44) of section 65B of the Finance Act, 1994 is not established. Consequently, the services provided by appellant qualify as Export of Services, under rule 6A of Service Tax Rules, 1994. Thus, as the services provided by the appellant are export of services under rule 6A of Service Tax Rules, 1994, the same cannot be called exempted services under clause 2(e) of the Cenvat Credit Rules, 2004. Since the services provided by the appellant are not exempted services, no demand of reversal of credit can be made under rule 6 of the Cenvat Credit Rule, 2004 and no liability can be fixed on the appellant. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2021 (11) TMI 89
  Preferential charge - Recovery of sales tax - Default in repayment of credit facilities - account was classified as Non-Performing Assets (NPA) - Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - HELD THAT:- Overlapping between the provisions of the DRT Act and Securitisation Act on one hand and Section 38 C of the Bombay Sales Tax Act and Section 26 B of the Kerala General Sales Tax Act and the Non-obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation would not operate qua the proceedings initiated by Banks, Financial Institutions and other secured creditors for recovery of their dues or enforcement of security interest. The Central Government amended SARFAESI Act, 2002 by introducing Chapter IV A by Amending Act, 44 of 2016 dated 01.01.2016 and the Central Government introduced the concept of registration by secured creditors and other creditors. In case of KALUPUR COMMERCIAL CO-OPERATIVE BANK LTD. VERSUS STATE OF GUJARAT [ 2019 (9) TMI 1018 - GUJARAT HIGH COURT] the issue was with regard to the first priority of the Bank over the dues vis- -vis the sales tax dues which the State Government intended to recover from the assets of the defaulter. This Court examined this and to hold it in favour of the Bank that it would have the first charge over the properties mortgaged by virtue of Section 26 E. In the present case, the petitioner Bank had already registered all the mortgaged documents in the Central Registry as per Section 20 of the SARFAESI Act, 2002 and by virtue of provision of Section 26 E it is rightly held that the Bank being a secured creditor after registration of the security interest would enjoy priority over all other debts and all revenues, taxes, cesses and other rates. The petitioner appears to have registered all the mortgaged documents with the Central Registry as per the procedure prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011 - petitioner-Bank not only had registered the charge over the property in question, but it had also issued a public notice and deployed the security for protecting the property. The present petition succeeds and is hereby allowed.

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• 2021 (11) TMI 68
  Penalty proceedings initiated - Stock transfer - contravention of provision of Section 28-A of the Act, 1948 who intends to import goods in the State of U.P. from outside the State of U.P. without obtaining prescribed form of declaration and with the intention to evade payment of tax - Section 15- A(1)(o) of U.P. Trade Tax Act, 1948 - HELD THAT:- This Hon ble Court in the case of Sarvashri Ramesh Chand Santosh Kumar Vs. Commissioner of Trade Tax, U.P. Lucknow [ 2010 (7) TMI 906 - ALLAHABAD HIGH COURT] held that the penalty under Section 15-A(1)(o) of the Act, 1948 could not be imposed if the dealer not found to have contravened the provision of Section 28-A of the Act, 1948. The Court has further held that if the documents have produced along with the reply to the show cause notice, there is no attempt to evade tax and imposed the penalty is bad. The case in hand, revisionist along with reply to show cause notice has filed the documents but no weightage was given to it and the seizure order was passed. Once the documents were produced before passing of the seizure order, it cannot be said that the revisionist had any intention to evade payment of tax or made any contravention of the Act. The impugned order is hereby set aside and the questions of law are answered accordingly in favour of revisionist - revision allowed.

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• Indian Laws

• 2021 (11) TMI 67
  Dishonor of Cheque - work of Employer is regulated under Notification No.- S.O. 1284 (E) dated 20.05.2009 of the Government of India or not - Scheduled Employer under Minimum Wages Act, 1948 and Minimum Wages (Central) Rules, 1950 - Cognizance of offences - vicarious liability under sub-section (1) to section 22C of NI Act - HELD THAT:- Sub-section (1) to Section 22C states that where an offence is committed by a company, every person who at the time the offence was committed was in-charge of and was responsible to the company for the conduct of the business, as well as the company itself shall be deemed to be guilty of the offence. By necessary implication, it follows that a person who do not bear out the requirements is not vicariously liable under Section 22C(1) of the Act. The proviso, which is in the nature of an exception, states that a person who is liable under sub-section (1) shall not be punished if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. The onus to satisfy the requirements to take benefit of the proviso is on the accused, but it does not displace or extricate the initial onus and burden on the prosecution to first establish the requirements of sub-section (1) to Section 22C of the Act. The proviso is to give immunity to a person who is vicariously liable under sub-section (1) to section 22C of the Act. It is crystal clear that the complaint does not satisfy the mandate of sub-section (1) to Section 22C of the Act as there are no assertions or averments that the appellant before this Court was in-charge of and responsible to the company M/s. Writer Safeguard Pvt. Ltd. in the manner as interpreted by this Court in the cases mentioned above. The proviso to sub-section (1) in the present case would not apply. It is an exception that would be applicable and come into operation only when the conditions of sub-section (1) to Section 22C are satisfied. Notably, in the absence of any specific averment, the prosecution in the present case does not and cannot rely on Section 22C(2) of the Act. A company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences, and therefore, prosecution of the company is mandatory. The exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well. It is the court s duty not to issue summons in a mechanical and routine manner. If done so, the entire purpose of laying down a detailed procedure under Chapter XV of the 1973 Code gets frustrated. Under the proviso (a) to Section 200 of the 1973 Code, there may lie an exemption from recording pre-summoning evidence when a private complaint is filed by a public servant in discharge of his official duties; however, it is the duty of the Magistrate to apply his mind to see whether on the basis of the allegations made and the evidence, a prima facie case for taking cognizance and summoning the accused is made out or not - the issue of process resulting in summons is a judicial process that carries with it a sanctity and a promise of legal propriety. The summoning order and the proceedings against the present appellant is quashed - appeal allowed.

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• 2021 (11) TMI 66
  Dishonor of Cheque - cheating - respondent No.2 had taken the money on the assurance that the same would be returned but had deceived the appellant - legally recoverable debt or not - Section 420 of IPC with Section 138 of N.I. Act - HELD THAT:- It is the very case of the appellant that he has advanced substantial amount of Rs. 2 crores to the respondent No.2 by way of financial assistance for business purpose. While taking note of the nature of the transaction and also the proceedings initiated, it is necessary for us to remain conscious of the fact that the proceedings between the parties is at the preliminary stage and any conclusive findings rendered in relation to the dispute between the parties would affect their case if ultimately the appellants were to succeed herein and the criminal proceedings are to be restored for further progress. Therefore, what is necessary to be examined herein is, as to whether the appellant has prima facie established a transaction under which there is a legally recoverable debt payable to the appellant by the respondent No.2 and as to whether the cheques in question relating to which the complaint has been filed by the appellant is issued towards discharge of such legally recoverable debt. In that regard, what is necessary to be considered is also as to whether the cheques in question are still to be considered only as security for the said amount and whether it was not liable to be presented for recovery of the legally recoverable debt. It is evident that the learned Magistrate having referred to the complaint and sworn statement of the complainant and the witnesses has taken cognizance, issued summons and has consequently arrived at the conclusion that the discharge as sought by the respondent No.2 cannot be accepted. The conclusion reached by the High Court, insofar as the High Court arriving at the conclusion that no case punishable under Section 420 IPC can be made out in these facts, we are in agreement with such conclusion. This is due to the fact that even as per the case of the appellant the amount advanced by the appellant is towards the business transaction and a loan agreement had been entered into between the parties. Under the loan agreement, the period for repayment was agreed and the cheque had been issued to ensure repayment - In the present facts and circumstances, there is no sufficient evidence to indicate the offence under Section 420 IPC is made out and therefore on that aspect, we see no reason to interfere with the conclusion reached by the High Court. When a cheque is issued and is treated as security towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as security cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security - When a cheque is issued even though as security the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation. In the instant facts, the appellant cannot be non suited for proceeding with the complaint filed under Section 138 of N.I. Act merely due to the fact that the cheques presented and dishonoured are shown to have been issued as security, as indicated in the loan agreement - In the instant facts, the repayment as agreed by the respondent No.2 is during June/July 2015. The cheque has been presented by the appellant for realisation on 20.10.2015. As on the date of presentation of the cheque for realisation the repayment of the amount as agreed under the loan agreement had matured and the amount had become due and payable. Therefore, to contend that the cheque should be held as security even after the amount had become due and payable is not sustainable. In any event, it was not a case for the Court to either refuse to take cognizance or to discharge the respondent No.2 in the manner it has been done by the High Court. Therefore, though a criminal complaint under Section 420 IPC was not sustainable in the facts and circumstances of the instant case, the complaint under section 138 of the N.I Act was maintainable and all contentions and the defence were to be considered during the course of the trial - the order passed by the Judicial Magistrate are restored. Appeal allowed.

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