TMI Tax Updates - e-Newsletter
November 21, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Cancellation of the registration of the petitioner - principles of natural justice followed or not - While the show cause notice says that “in case” the petitioner has committed any fraud, wilful misstatement or suppression of facts, the order of cancellation of registration says that he has not submitted “clear records.” Both of them are not clear enough to understand the mind of the issuing authority. - order for cancellation of registration and SCN quashed - HC
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GST:
Levy of GST - agricultural produce - seeds received, processed, packed and returned by the Applicant, as job worker - Had the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications, we are not inclined to accept the plea of the applicant. - AAAR
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GST:
Valuation - inclusion of cost of the diesel incurred for running DG Set in the Course of Providing DG Rental Service - the consideration for reimbursement of expenses, as cost of the diesel for running of the DG Set, is nothing but the additional consideration for the renting of DG Set and attracts GST @ 18% - AAR
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Income Tax:
Exemption from tax - disability pension - Defence Forces Personnel / Indian Air Force - assessee had taken pre-mature retirement at his own request, before disability - Benefit of exemption granted - AT
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Income Tax:
Deduction u/s 80-IB - as per assessee different sizes of polyurethane foam are used as automobile seats and therefore the end product can be said to be the automobile seat which is different than the polyurethane foam - When the articles/goods which are manufactured by the assessee, namely, polyurethane foam is an article classifiable in the Eleventh Schedule (entry 25), considering Section 80IB(2)(iii), the assessee shall not be entitled to the benefit under Section 80-IB - SC
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Income Tax:
Validity of the order 278(2) - compounding of offence u/s 279(2) - Income Tax Authorities have the power to compound the offence either before or after the institution of the proceedings but certainly not after the conviction. Clause 4 of the policy also provides that compounding of offence is not a matter of right, however, the offence may be compounded by the competent authority on satisfaction prescribed in these guidelines. - HC
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Income Tax:
Audit Objections – relevance in making re-assessments - The function of the audit is essentially executive in nature, while the function of the assessing officer and his power to make an assessment are essentially quasi judicial in nature. One may also have to bear in mind that the executive cannot trench upon the powers of a quasi judicial authority for permitting to do so may result in subverting the scheme of quasi-judicial function of making assessment / reassessment, which is impermissible. - HC
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Income Tax:
Addition u/s 68 - bogus accommodation entry - There is no presumption that the people having smaller income cannot make small savings. Moreover, there is no linkage on record of these persons, the company allegedly providing bogus entries - the addition is totally on hypothesis which is not sustainable in law - AT
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Income Tax:
Penalty u/s 271(1)(c) - treating capital expenditure as revenue expenditure in the absence of any revenue recognition - t the assessee demonstrated that it had acted bonfidely on the basis of guidance notes of the ICAI and on the basis of accounting of such expenses in the earlier years, etc. - No penalty - AT
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Income Tax:
Speculative loss - trading transactions on NSEL platform - For the purpose of carrying out transaction with NSEL they use to keep 3.5% of the value of the transaction as margin money of this account which is released only after the transaction is over. But since the transaction was not materialized in end the settlement amount was received in consonance with these business transactions from NSEL and thus it cannot be treated as speculative loss and is a part of business loss - AT
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Income Tax:
Deduction u/s 80P - interest income received from parking its surplus funds with Co-operative Bank - interest would be eligible for claim of deduction under section 80P(2)(d) of the Act as the co-operative bank also falls in the category of society registered under the Co-operative Society Act, 1912 (20/1952) or under any other law for the time being in force in any state for the registration of co-operative society. - AT
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Income Tax:
Deduction u/s. 80IC - belated return filled - if deemed fit, the assessee can still approach the Board for consideration of its case and if the Board finds merit in the reason for genuine hardship of the assessee for filing the return belatedly the case of the assessee may be considered sympathetically. If such permission is granted by the Board, then the AO can allow claim of deduction of the assessee u/s.80IC of the Act in accordance with law - AT
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Income Tax:
Validity of the final assessment order due to non-service of the Dispute Resolution Panel’s (DRP) directions - AR candidly admitted before the Tribunal that, on the assessee writing to the DRP about non-communication of the direction, the DRP responded by mentioning that direction dated 11-03-2021 was promptly e-mailed to the assessee on that very date itself. No adverse contrary evidence has been brought to our notice on behalf of the assessee. Under such circumstances, we are satisfied that this ground is devoid of merit and hence deserves the fate of dismissal. - AT
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Income Tax:
TDS u/s 194A - interest paid to consumers on security deposit - Disallowance u/s. 40(a)(ia) ignoring the fact that average interest is merely Rs. 84/- per consumer and there will be large number of cases where interest amount paid on the security deposit may have been much below the prescribed limit for non-deduction of tax at source. - AT
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Income Tax:
Exemption from tax - disability pension - Defence Forces Personnel / Indian Air Force - assessee had taken pre-mature retirement at his own request, before disability - following the guidelines as per CBDT circular and SC order, benefit of exemption granted - AT
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Customs:
Maintainability of petition - availability of alternate remedy - Classification of imported goods - Glucometer - As the Tribunal has already expressed its views in an identical matter and has classified the Glucometer under 9027, an Appeal to CESTAT against impugned order would be a mere idle formality - Glucose meters are classifiable under heading 90.27 and are eligible for exemption - HC
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Customs:
Export promotion schemes - forge/fake DEPB licences/scrips - There is no provision to transfer the benefit of any exemption either under the policy or any notification or any provision of the law. The licences and scrips are transferable and if they are transferred, the transferee consequently gets the benefit of the exemption notification. Without transferring the licence/scrip, the benefit of exemption cannot be transferred - AT
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Customs:
Seeking release of declared goods - Misdeclaration of imported goods - The appellant’s prayer for interim relief by releasing only the quantity of goods actually declared cannot be accepted because there is no provision for giving customs “out of charge” to only a part of the goods under section 47. The appellant could have redeemed the goods as per the order - AT
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Indian Laws:
Auction of secured property by the Bank - Period of limitation under SARFAESI Act - It is required to be noted that the suit was for damages/compensation, with respect to the balance land, which could not have been decided by the DRT or Appellate Tribunal, Section 34 of the SARFAESI Act shall be applicable only in a case where the Debt Recovery Tribunal and/or Appellate Tribunal is empowered to decide the matter under the SARFAESI Act. The plaintiff was not challenging the sale/sale certificate. The plaintiff claimed the damages/compensation with respect to the less area. Therefore, the High Court has seriously erred in holding that the suit was barred by Section 34 of the SARFAESI Act.- SC
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Indian Laws:
Dishonor of Cheque - vicarious liability of director of a company u/s 141 of NI Act - prosecution u/s 138 of NI Act without the company being arraigned as an accused - if the complainant fails to make specific averments against the company in the complaint for the commission of an offence under Section 138 of NI Act, the same cannot be rectified by taking recourse to general principles of criminal jurisprudence - SC
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Indian Laws:
Dishonor of Cheque - compounding of offence - Since in the case at hand, it is not in dispute that after passing of judgment dated 15.03.2022, parties have entered into the compromise, whereby entire amount of compensation awarded by learned court below has been paid by the petitioner-accused to the respondent-complainant, this Court while exercising power under Section 147 of the Act can proceed to compound the offence. - HC
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Indian Laws:
Dishonor of Cheque - validity of signature on the cheques - rebuttal of presumption - The accused is a bank employee. If really he issued the cheques in order to repay the hand loan, he himself would have filled up all the particulars in the cheque. So looked in this background certainly a doubt arises in the case of the complainant and there is probability in the defence. - HC
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IBC:
Recovery of Fee payable to Resolution Professional from the Income Tax Department and the Excise and Taxation Department of state - Appellants (revenue authorities) chose to be absent in the re-assembled 7th CoC meeting, which was taking place after being adjourned once, and wherein decision regarding the CIRP cost, RP’s fees, etc. were taken - RP and the CoC have acted in the true spirit of the law for fixing of the shares of the operational creditors in the CIRP cost and RP’s fees (since there are no financial creditors) which are required to be deposited with the liquidator immediately. - AT
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IBC:
Validity of order of CoC rejecting the claim - Seeking to release the lawful dues of the Applicant and credit/make payment of TDS - Related party - Applicants had considerable control over the management of affairs of the Corporate Debtor - If in commercial wisdom the CoC has rejected the resolution for payment of salary to the Applicants, the question of reversing the decision cannot be considered - Tri
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Service Tax:
Reversal of proportionate CENVAT Credit - when the appellant have categorically agree for the reversal of Cenvat credit by way of opting for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should only be followed by the assessee. - AT
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Central Excise:
Seeking refund of amount paid under threat or duress in pursuance of an investigation - Though the original issuance of the show-cause notice may be in terms of the directions of the writ Court, any further contemplation of proceeding with the show-cause notice, would be without any authority, in view of the subsequent order passed. Thus, the consequential notice could be termed to be without any jurisdiction and would amount to an abuse of the process of law - Refund allowed - HC
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Central Excise:
Refund of amount of interest in addition to amount of duty estimated under SVLDR Scheme - it becomes abundantly clear that amount in question of Rs.17,38,023/- was to be deducted till the stage of SVLDRS Form No. 2 but was not deducted even at the stage of SVLDRS Form No. 3. Hence, the said amount cannot be covered under proviso to Section 124(2). Thus the said provision is held to have wrongly been applied while rejecting the impugned refund. - AT
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Central Excise:
Clandestine Removal - reliance on private records - It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue in the instant case i.e. “the charge of clandestine clearance” cannot be labeled against the assessee. - AT
Articles
Notifications
Customs-
60/2022 - dated
18-11-2022
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Cus
Effective rate of Agriculture Infrastructure and Development Cess for specified goods - withdrawal AIDC exemption on Anthracite,PCI Coal and Coking Coal - Seeks to amend Notification 11/2021-Customs, dated the 1st February, 2021.
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59/2022 - dated
18-11-2022
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Cus
Effective rates of customs duty and IGST for goods imported into India - withdrawal BCD exemption on Anthracite and PCI Coal, Coke & Semi coke and ferronickel - Seeks to amend Notification No. 50/2017-Customs, dated the 30th June, 2017.
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58/2022 - dated
18-11-2022
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Cus
Effective rate of export duty - Withdrawal export duty on iron ore & steel products - Seeks to amend Notification No. 27/2011- Customs, dated the 1st March, 2011.
GST - States-
06/2022-State Tax (Rate) - dated
17-11-2022
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Delhi SGST
Amendment in Notification No. 1/2017-State Tax (Rate), dated the 30th June, 2017
News
Case Laws:
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GST
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2022 (11) TMI 902
Seeking to re-open the GSTN portal to enable the petitioner to file revised Form GST TRAN-1 - transitional credit - HELD THAT:- The petitioner cannot be permitted to forgo a sum of Rs.39,13,025/- which according to petitioner is entitled to deemed excised credit particularly when under sub-section 3 of Section 29 his liability will continue even after cancellation of registration.
It will be wholly unfair if petitioner ends up having to forgo the deemed excise credit of a substantial amount of Rs.39,13,025/- - it is directed that the petitioner shall, by 4.30 p.m. on 18th November 2022, submit the physical application for restoration of the registration - petition disposed off.
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2022 (11) TMI 901
Cancellation of the registration of the petitioner - principles of natural justice followed or not - HELD THAT:- On going through the impugned show cause notice and order for cancellation of registration and found force in the submission of learned counsel for the petitioner, for, both show cause notice as well as the order of cancellation of registration are dubious enough and failing to divulge the misdeed or fraud allegedly committed by the petitioner. While the show cause notice says that “in case” the petitioner has committed any fraud, wilful misstatement or suppression of facts, the order of cancellation of registration says that he has not submitted “clear records.” Both of them are not clear enough to understand the mind of the issuing authority.
Both impugned show cause notice as well as the order for cancellation of registration are not sustainable in the eye of law - the impugned order for cancellation of registration dated 20.10.2022 and show cause notice dated 01.10.2022 are hereby set aside giving liberty to the 1st respondent to issue fresh show cause notice in accordance with the governing law - Petition allowed.
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2022 (11) TMI 900
Seeking review of order - Appeal dismissed without extending opportunity of hearing to the petitioner - violation of principles of natural justice - HELD THAT:- To deal with this contention of the petitioner, firstly it would be profitable to refer to order dated 04.01.2022 which is contained in Annexure P/2 with the writ petition. A perusal of the same reflects that the petitioner herein had submitted online appeal on 16.09.2019. The second paragraph of the order also reveals that in terms of the information which is available at web-portal, appeal was being dealt with and the Appellate Authority passed order dated 04.01.2022. The petitioner in the entire petition has nowhere stated that after filing of appeal on 16.09.2019, what were the next steps which were taken by the petitioner.
The petitioner nowhere asserted in the petition that he was not intimated about the hearing of matter on 04.01.2022 by the Appellate Authority. There are no averments in the entire petition to the effect that the date of fixing of the matter by the Appellate Authority on 04.01.2022, was given behind the back of the petitioner. It is also nowhere mentioned in the petition as to how the petitioner came to know about the order dated 04.01.2022.
Having found no substance, the present review petition stands dismissed.
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2022 (11) TMI 899
Maintainability of appeal - appeal rejected on the ground of time limitation - Section 107 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- Perusal of the pleadings would reveal that inspite of all the circulars and notifications that have been issued by the Central Government the petitioner as such has not moved any application for revocation during the period that was extended by way of the aforesaid circulars and notifications. Without moving an application for revocation the petitioner has straightaway thought of preferring an appeal before the appellate authority and which now stands decided vide Annexure P/2 dated 30.09.2021. Without availing the remedy of revocation which was permissible under the ROD dated 25.06.2020 and subsequent notification dated 29.08.2021 followed by the clarificatory circular issued on 06.09.2021, the petitioner as such cannot claim any advantage of showing justification for the delay in the filing of the appeal beyond the permissible period of limitation under the Act.
Further contention of the petitioner also is that the petitioner was an IBC Company and for which there was a circular No.134/04/2020-GST dated 23.03.2020 which provided that the companies under IBC the registration could not have been cancelled - This circular again would not come to the rescue of the petitioner for the reason that the registration of the petitioner already stood cancelled on 04.09.2019 i.e. much before the said circular dated 23.03.2020 came into force. Under the then prevailing provision of law, the only recourse available to the petitioner was to promptly challenge the same in accordance with law before the appellate authority within the time limit stipulated therein.
The petitioner for reasons best known did not choose to prefer an appeal during the period of limitation and also within a reasonable period of time. The appeal has been filed after more than 1 and ½ years of time before the appellate authority who thereafter was not having any further powers to condone the inordinate delay that had occurred in the filing of the appeal. The impugned order in the given circumstances seems to be fair, reasonable, proper and justified and does not warrant any interference - Petition dismissed.
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2022 (11) TMI 897
Valuation - inclusion of cost of the diesel incurred for running DG Set in the Course of Providing DG Rental Service - diesel is a non-GST or not - HELD THAT:- The price of the Diesel i.e. the fuel, to run the DG Set, shall form part of value of supply in view of Section 15 of the CGST Act, 2017, as for the purpose of levy of GST, cost of all the inputs, has to be included in the value of supply - This authority has taken the similar view in IN RE: M/S GURJINDER SINGH SANDHU, (PROPRIETOR M/S. NEW JAI HIND TRANSPORT SERVICE) [2022 (10) TMI 911 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND].
Thus, the consideration for reimbursement of expenses, as cost of the diesel for running of the DG Set, is nothing but the additional consideration for the renting of DG Set and attracts GST @ 18% under the provisions of Central Goods and Services Tax Act, 2017 & Uttarakhand Goods and Service Tax Act, 2017.
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2022 (11) TMI 898
Levy of GST - agricultural produce - seeds received, processed, packed and returned by the Applicant, as job worker - storage of the seeds in the storage facility/godowns, loading, unloading and packing of the seeds (heading No.9986) by the applicant - job worker on job work basis - cleaning, drying, grading and treatment with chemicals (heading No.9986) carried out by the applicant - date of the impugned order is 18.2.2022 and the appeal is filed on 4.3.2022 - whether the appeal is found to be in time?
HELD THAT:- In the present case, as per the written submission, the applicant takes organizing the production of agricultural seeds, storing the agricultural seeds, drying of maize cobs, it segregates part of the agriculture produce based on its quality and germination strength and undertakes preservation process such as clearing, drying, grading and chemical processing to make the seed fit for sowing purpose and to have better shelf life. The applicant has pleaded that till the chemical processing is taken up the seed retains the character of the agriculture produce on par with any agriculture produce and they are entitled for exemption in respect of services availed by them. Had the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications, we are not inclined to accept the plea of the applicant.
The order passed by the lower authority is upheld - Appeal disposed off.
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2022 (11) TMI 903
Refund claim - exclusion of certain period due to COVID pendamic between the said period 15th March 2020 and 2nd October 2021 - Constitutional validity of Rule 90(3) of the Central Goods and Services Tax Rules, 2017 - HELD THAT:- Let the third refund application submitted by the respondent be considered in accordance with law and on its own merits.
SLP dismissed.
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Income Tax
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2022 (11) TMI 896
Deduction u/s 80-IB - Proof of assessee manufactures or produces any article or thing specified in the list in the Eleventh Schedule of the IT Act - process for end product - as submitted assessee is manufacturing ‘polyurethane foam,’ which is ultimately used as automobile seat - as per AO nature of the business of the assessee is “manufacturer of polyurethane foam seats” which falls under entry 25 to the Eleventh Schedule of the IT Act and therefore the assessee shall not be entitled to deduction under Section 80-IB - as per assessee different sizes of polyurethane foam are used as automobile seats and therefore the end product can be said to be the automobile seat which is different than the polyurethane foam
HELD THAT:- The assessee is manufacturing polyurethane foam and supplying the same in different sizes/designs to the assembly operator, which ultimately is being used for car seats. The assessee is not undertaking any further process for end product, namely, car seats. The polyurethane foam which is supplied in different designs/sizes is being used as ingredient by others, namely, assembly operators for the car seats. Merely because the assessee is using the chemicals and ultimately what is manufactured is polyurethane foam and the same is used by assembly operators after the process of moulding as car seats, it cannot be said that the end product manufactured by the assessee is car seats/automobile seats. There must be a further process to be undertaken by the very assessee in manufacturing of the car seats. No further process seems to have been undertaken by the assessee except supplying/selling the polyurethane foam in different sizes/designs/shapes which may be ultimately used for end product by others as car seats/automobile seats.
When the articles/goods which are manufactured by the assessee, namely, polyurethane foam is an article classifiable in the Eleventh Schedule (entry 25), considering Section 80IB(2)(iii), the assessee shall not be entitled to the benefit under Section 80-IB - The High Court has rightly held so and has rightly set aside the order passed by the ITAT and has rightly restored the order passed by the assessing officer denying the deduction/benefit claimed under Section 80-IB - We are in complete agreement with the view taken by the High Court and that of the assessing officer, confirmed by the CIT(Appeals). - Decided against assessee.
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2022 (11) TMI 892
Addition u/s 68 - bogus accommodation entry - HELD THAT:- The name of the party and PAN number in the information received is totally different that of the assessee. Hence, by no stretch of imagination, it can be said that it is a curable defect. In our considered opinion, the defect is fatal. Assessee’s objections have not been disposed off. This is another flaw which is fatal and the assessment is liable to be quashed on that count. As regards the merits of addition the only case of the Revenue is that these persons have earned small amount so they are not capable of giving loans - these persons have given confirmation and no adverse material is available with the Revenue.
There is no presumption that the people having smaller income cannot make small savings. Moreover, there is no linkage on record of these persons with White Collar Management Pvt. Ltd., the company allegedly providing bogus entries. Hence, on merits also, the addition is totally on hypothesis which is not sustainable in law. Appeal filed by the assessee stands allowed.
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2022 (11) TMI 891
Revision u/s 263 - Disallowance of interest expenditure - HELD THAT:- It is not a case wherein the learned CIT set aside the assessment order and directed the AO to conduct de novo assessment on this issue. Rather in this case assessment order was set aside on the specific issue discussed by the learned CIT. Thus, the AO was under obligation to comply with the limited directions issued by CIT vide order passed under section 263 of the Act instead of going into aspects that are beyond the directions under the aforesaid order.
The fact as noted by the CIT(A) in the impugned order that during the year under consideration, the assessee has shown Revenue/income from the sale of wind power to the tune of Rs.3,13,39,657, and Revenue of Rs. 1,88,11,508, in immediately preceding year also justifies the fact that windmills in respect of which loan was obtained by the assessee were already in operation since preceding years and the interest claimed during the year is post the commencement of the project. In view of the aforesaid findings, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 1 raised by the Revenue is dismissed.
Addition u/s 68 - AR submitted that though in the submission before the AO it is mentioned that details of unsecured loans are enclosed, however, no such details form part of the submission - HELD THAT:- We deem it appropriate to remand this issue to the AO for de novo adjudication. The assessee is directed to furnish all the details in support of its claim in respect of this issue. Needless to mention that no order shall be passed without affording reasonable opportunity of being heard to the assessee. As a result, ground No. 2 raised in Revenue’s appeal is allowed for statistical purposes.
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2022 (11) TMI 890
Disallowance u/s 14A r.w.r.8D(2)(iii) - Expenditure incurred exempt income earned by the assessee - HELD THAT:- As settled on the basis of various decision of different courts that disallowance under section 8D(2)(iii) cannot exceed exempt income. Accordingly, we direct the AO to restrict the disallowance to the extent of exempt income earned by the assessee after examination of the relevant detail to be filed by the assessee. Therefore, grounds of appeal of the assessee is partly allowed.
Disallowance of depreciation claimed on 3 vehicles registered in the name of three individual employees of associate company - HELD THAT:- As submitted that payments for purchase of all the three vehicles were made by the assessee company and these cars were used for the business purpose of the assessee company. However, on perusal of material on record, it is found that assessee has not placed on record relevant supporting evidences to demonstrate that vehicles were used for the purpose of business and copy of Board Resolution, etc. to substantiate that assessee company was authorized to purchase these vehicles in the name of the employees of the group concern, etc. Therefore, we restore this issue to the file of the Assessing Officer to decide afresh after verification and examination of the relevant supporting details to be furnished by the assessee. Accordingly, ground 3 & 4 of the assessee are allowed for statistical purpose.
Disallowance of Yacht Expenses - AO stated, during the course of assessment, assessee failed to furnish cogent evidence and credible explanation in order to prove that the aforesaid yacht expenses were incurred in connection with the business of the assessee company - HELD THAT:- Assessee filed appeal before the Ld.CIT(A). CIT(A) stated that actually yacht expenses were incurred in connection with the business of the group concern of the assessee company, viz. Vijaydurg Ports Private Limited’s Greenfield Port Project at Sindhudurg District in Southern Maharashtra (VDPPL) which had used the high speed vessel for carrying out on-site investigation, surveys and status for the purpose of submitting the detailed project report to the Maharashtra Maritime Board. The assessee has submitted that the said expenses were incurred on yacht which was used in connection with the group concern VDPPL. Assessee has not substantiated with any relevant supporting evidence that these expenses were used for the business purpose of the assessee company, therefore, we do not find any reason to interfere in the decision of the CIT(A). Accordingly, this ground of the assessee stands dismissed.
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2022 (11) TMI 889
Penalty u/s 271(1)(c) - treating capital expenditure as revenue expenditure in the absence of any revenue recognition - allegation of filing of inaccurate particulars of income - HELD THAT:- We observe that assessee has substantiated in its explanation that there was bonafide reason to claim the aforesaid expenditure as revenue expenditure. The assessee also explained that similar expenses were also booked for assessment years 2009-10 to 2014-15 which were accepted under section 143(1) of the Act.
We consider that the assessee demonstrated that it had acted bonfidely on the basis of guidance notes of the ICAI and on the basis of accounting of such expenses in the earlier years, etc. Therefore, we find the decision of the Ld.CIT(A) in sustaining the penalty is not justified. Accordingly, we direct the Assessing Officer to delete the penalty levied.
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2022 (11) TMI 888
LTCG computation - FMV determination - HELD THAT:- SRO has provided Rs. 35 lakhs per acre which can be utilized for the purpose of calculating the stamp duty valuation of the said agricultural lands. However, it cannot be considered as a FMV as on 12/5/2013. Similarly the FMV adopted by the assessee at Rs. 90 lakhs per acre also is on the higher side and there cannot be such huge difference between the FMV adopted by the assessee and the SRO value. AR also failed to provide any basis for adopting Rs. 90 lakhs per acre as market value. Considering the peculiar circumstances, we are of the considered view that the market value can be estimated at Rs. 60 lakhs per acre and accordingly, AO is directed to compute the capital gains for the impugned assessment year. Thus, the grounds no. 2 and 5 raised by the assessee are partly allowed.
Deduction u/s. 54B - assessee has claimed deduction U/s. 54B but has failed to produce the evidence carrying of agricultural activities on the said agricultural lands - HELD THAT:- We therefore are in concurrence with the findings of the Ld. CIT(A) as no evidences have been produced even before us. Accordingly, we are of the considered view that there is no infirmity in the order of the Ld.CIT(A) and no interference is required on this issue. Thus, the Ground No.3 raised by the assessee is dismissed.
Deduction u/s. 54F - AR argued that the assessee has purchased a residential property and has incurred certain expenditure for renovation - AR also submitted that the proof of expenditure was also provided before the Ld. AO - HELD THAT:- We find from the written submissions and the paper book submitted by the Ld. AR that the assessee has claimed renovation expenses which were mostly though self-made vouchers. No cogent evidences are provided before us or before the Ld. Revenue Authorities. In the absence of any material evidence, we find no infirmity in the order of the Ld. CIT (A) and hence no interference is required on this ground. Thus, this Ground No.4 raised by the assessee is dismissed.
Restriction of land development expenses - HELD THAT:- We find that the Ld. CIT(A) has reasonably considered the disallowance of expenses to the extent of 20% of the total expenses in the absence of any cogent evidences such as bills, vouchers etc., not produced by the assessee either before the Ld. Revenue Authorities or before us. We are therefore inclined to uphold the order of the Ld. CIT(A) on this issue. Thus, this ground No.6 raised by the assessee is dismissed.
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2022 (11) TMI 887
Disallowance of depreciation and Insurance expenses - certain assets (vehicles) were purchased on which assessee had to claim depreciation which were not held in the name of the assessee company - AO disallowed the depreciation claimed on such assets on the basis that the assessee company could not submit any proof in respect of the claim that the dominion over the said assets vested with assessee company and the assets under consideration were indeed used for the purpose of the assessee’s business - HELD THAT:- CIT(Appeals) has made a specific observation that firstly, the assets (vehicles) have not been acquired out of funds of the assessee company, secondly, the assets have been purchased in the names of Shri Rajeev Agarwal, Jugal Kishore Agrawal, Anil Kumar Agarwal & Sanjay Agrawal, however, the assessee has not been able to show the relation of these person with assessee company - we are hereby restoring the file to the Ld. CIT(Appeals) to verify whether the firstly, assets (vehicles) have been acquired out of funds of the assessee company, secondly, whether Shri Rajeev Agarwal, Jugal Kishore Agrawal, Anil Kumar Agarwal & Sanjay Agrawal are the Directors of the assessee company. In case, the assessee is able substantiate the above two aspects, Ld. CIT(Appeals) may allow the appeal of the assessee in light of several Rulings highlighted above.Grounds No.1 of the assessee’s Appeal is allowed for statistical purposes.
Unreconciled creditor - Difference in total credit amount as per the assessee’s books of accounts and the amount confirmed by the creditor in response to notice under section 133(6) - HELD THAT:- The entire amount has been paid back to the creditor by way of account payee cheque i.e. through appropriate banking channels. The counsel for the assessee submitted that the assessee cannot be held responsible for any discrepancy/mistake committed by the creditor in its accounts. We are in agreement with the contention of the counsel of the assessee that the AO/CIT have not disputed that the entire amount of has been returned back to the creditor after deduction of taxes, through banking channels - the assessee is not liable to explain any accounting discrepancy made by the creditor in its books of accounts. Accordingly, looking into the instant set of facts, we are of the considered view that the aforesaid addition is liable to be deleted. Assessee appeal allowed.
Non-deduction of TDS made to transporters - Addition u/s 40(a)(ia) - HELD THAT:- Assessee submitted that admittedly that no TDS has been deducted on the aforesaid payment. Further, no additional supporting documents have also been furnished to the effect that the payee has reflected the above income in the return of income and paid taxes thereon, and accordingly, the assessee is not an assessee default. In view of the facts, we are of the considered view, that the CIT(Appeals) has not erred in facts and in law in confirming the disallowance made by the Ld. Assessing Officer. - Decided against assessee.
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2022 (11) TMI 886
Addition u/s.69A - unexplained cash being found during the course search - AO treated the amount of cash found during the search and seizure operation - HELD THAT:- Admittedly, the cash was found during the search proceedings conducted u/s 132 at the premises of the assessee. The onus lies upon the assessee to explain the source of cash. We note that the assessee before the investigation wing post search in response to the notice issued u/s 131.
None of the authorities below has pointed out any iota of defects in the details furnished by the assessee before them. As such, it seems to us that the assessee has duly discharged the onus about the cash found during the course of search and seizure operation and the onus now shifted upon the revenue to disprove the contention of the assessee based on the tangible materials. The revenue has not disproved the contention of the assessee except making a statement by the CIT-A that all the documents were prepared to mislead the AO and likewise these documents were prepared afterthought. In our considered view the revenue has not brought any cogent basis for rejecting the contention of the assessee. Accordingly we hold that there cannot be any addition to the total income of the assessee with respect to the cash found during the search proceedings. Hence, the ground of appeal of the assessee is hereby allowed.
Addition mad on the basis of admission made by the assessee in the statement furnished u/s 132(4) - HELD THAT:- There were various land transactions carried out as evident from the seized documents but we note that such land transaction had been considered by the revenue in the hands of Smt. Parvatiben in the assessment which can be verified from the assessment order of and the order of the learned CIT-A placed - In view of the above and after considering the facts in totality, we are of the view that no addition based on admission is warranted in the given facts and circumstances. Hence, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence, ground of appeal of the assessee is hereby allowed.
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2022 (11) TMI 885
Speculative loss - trading transactions on NSEL platform and loss incurred - finance charges/interest - claim of the assessee that the same being interest expenditure deductible as business expenditure and allowable as deduction - HELD THAT:- For the purpose of carrying out transaction with NSEL they use to keep 3.5% of the value of the transaction as margin money of this account which is released only after the transaction is over. But since the transaction was not materialized in end the settlement amount was received in consonance with these business transactions from NSEL and thus it cannot be treated as speculative loss and is a part of business loss
The relevant purchase and sales transactions were entered into by the assessee-company in order to avail the funds and, therefore, the loss incurred in the said transactions actually represented cost of such funds which was a business loss. The adverse inference drawn by the learned CIT(A) against the assessee on the basis of withdrawal of such loss partly was also not correct as the reasons for such withdrawal proposed by the assessee were duly explained and the fact that the assessee-company by entering into these transactions had availed finance for the purpose of business was duly established.
Applicability of TDS provision - assessee has pointed out from the relevant details of transactions that the sale proceeds were received by the assessee-company from different entities while payment towards the purchase was made towards different entities. The cost of finance thus was not paid to the party from whom the finance was actually availed and the applicability of TDS, therefore, was not warranted. Moreover, the cost incurred by the assessee for availing finance was not strictly in the nature of interest and the party selling the goods having offered the same for taxation, there is no obligation of deduction of tax at source by the assessee. Having regard to all these facts of the case, we are of the view that the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of alleged speculation loss is not sustainable and deleting the same, we allow Ground No.4 of the assessee’s appeal.
Addition of transaction charges under Section 40(a)(ia) - HELD THAT:- As the assessee failed to furnish any details or make any submission to show that tax at source was deducted from the payment made on account of transaction charges paid to IBMA. He, therefore, confirmed the disallowance made by the Assessing Officer under Section 40(a)(ia) of the Act. Even at the time of hearing before us, nothing has been brought on record on behalf of the assessee to prove that the tax at source was deducted from the amount in question paid towards transaction charges. We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) confirming the disallowance made by the Assessing Officer on this issue. Ground No.5 of the assessee’s appeal is accordingly dismissed.
Disallowance of transaction charges - transaction charges were recoverable by the assessee-company from clients and since it could not produce any documentary evidence to substantiate its claim that it was not obligatory to recover the transaction charges, he disallowed the entire transaction charges - HELD THAT:- The transaction charges actually represented additional cost of funds raised by the assessee-company for the purpose of its business and the expenditure incurred on account of the same was wholly and exclusively for the purpose of business of the assessee as rightly contended by the assessee. In the case of Khambhatta Family Trust [2013 (7) TMI 657 - GUJARAT HIGH COURT] cited by assessee, the Hon’ble Gujarat High Court has held that the requirement for allowability of any expenditure as business expenditure is that the same should be wholly and exclusively incurred for the purpose of business and not necessarily - we are of the view that the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of transaction charges is not justifiable and deleting the same, we allow Ground No.6 of the assessee’s appeal.
Partial depreciation claim - asset put to use - depreciation on concerned plant was restricted by AO as well as CIT(A) to the extent of 50% on the ground that even though the said plant was ready to commence the operation, the actual production had started only after 30.09.2010 - HELD THAT:- As rightly submitted by the learned Counsel for the assessee by relying on the relevant judicial pronouncements including the decision of Ashima Syntex Ltd, [2000 (8) TMI 22 - GUJARAT HIGH COURT] the assessee is entitled for depreciation at full rate as the concerned plant was ready to use on 27.09.2010 itself as agreed by the authorities below also and the business of the assessee was already in existence. We accordingly direct the Assessing Officer to allow depreciation on the said plant at full rate as claimed by the assessee and allow Ground No.7 of the assessee’s appeal.
Unexplained expenditure - AO disallowed the assessee’s claim on account of debit notes raised by NKPL and the amount of such debit notes was added by him to the total income of the assessee by treating the same as unexplained expenditure - HELD THAT:- Amount of debit note in question was duly recognized by NKPL as its profit which was offered to tax and keeping in view that the assessee-company was a BIFR company since 2002 incurring consistent losses, it cannot be said by any stretch of imagination that the debit notes were raised to reduce the taxable income of the assessee-company as alleged by the authorities below. There was a Memorandum of Understanding entered into between the assessee-company & NKPL and the same was acted upon by both the sides by raising debit/credit notes for the difference in price charged by the assessee to NKPL and the price actually realized by NKPL from corresponding exports as the same was to be transferred to the assessee-company.
We are inclined to accept the claim of the assessee that the amount of debit notes in question was its business expenditure being the difference in sale price charged and actually realized which is allowable as deduction. In that view of the matter, we delete the disallowance made by the AO and confirmed by the learned CIT(A) on this issue and allow Ground No.5 of the assessee’s appeal.
Disallowance of interest under Section 36(1)(iii) - HELD THAT:- The assessee has not produced any cogent evidence to substantiate its claim that the advances in question were given for the purposes of business. He has also not furnished any details or given any reasons as to why the recovery of these advances had become doubtful as claimed. Since the business purpose of giving these advances was not established by the assessee on evidence, we are of the view that it was a clear case of diversion of interest bearing loans for non-business purpose and disallowance on account of interest attributable to the said advances was rightly made by the Assessing Officer and confirmed by the learned CIT(A). Ground No.6 of the assessee’s appeal is accordingly dismissed.
Disallowance on account of employees’ contribution to PF and ESI - HELD THAT:- This issue is squarely covered against the assessee by the decision of CIT Vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] which has been subsequently upheld by the Hon’ble Supreme Court. Respectfully following the said judgment of the Hon’ble jurisdictional High Court which has been upheld by the Hon’ble Apex Court, we uphold the impugned order of the learned CIT(A) confirming the disallowance made by the Assessing Officer on this issue. Ground No.7 is accordingly dismissed.
Addition u/s 68 - payment against purchase - HELD THAT:- The entire amount was utilized by the assessee-company for making payment against purchase as a part of the trade cycle and consequently even the balance amounT cannot be treated as unexplained cash credit under Section 68 of the Act merely on the ground that the same had remained unpaid. Moreover, the entire corresponding sales made by the assessee-company to the parties through NSEL was duly recognized as its income in the books of account and the proceeds against the same cannot be treated as income of the assessee again as the same would amount to double addition. We, therefore, delete the addition made by the Assessing Officer and confirmed by the learned CIT(A) on this issue and allow Ground No.8 of the assessee’s appeal.
Claim for business loss - action of AO in treating the loss in question as speculative loss instead of trading loss - HELD THAT:- Keeping in view the submission made by both the sides, we consider it fair and proper and in the interest of justice to restore this issue to the file of the Assessing Officer with the direction to decide the same afresh after giving the assessee an opportunity to establish that all the transactions resulting in the business loss in question were made at the prevailing market price and it was not a case where the goods purchased at higher rate were sold by the assessee-company at lower rate in order to claim trading loss.
Non-genuine purchases - HELD THAT:- A confirmation of Shree Rajkot Lodhika Sahakari Kharid Vechan Sangh Ltd. was also filed by the assessee confirming delivery of CWO made to the concerned parties on various dates. Moreover, the quantitative details furnished by the assessee also revealed that the quantity of both purchases and sales was tallying with each other. It is thus clear that the purchase of 10180 MT of CWO for Rs.59.70 crores on delivery basis was actually established by the assessee on the basis of supporting evidence and since the corresponding sale of the same was not only proved but the same was also recorded and recognized as income in the books of account of the assessee-company, we are of the view that the purchase of 10,180 MT of CWO for Rs.59.70 crores cannot be said to be excessive as alleged by the authorities below. We, therefore, delete the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of alleged excessive purchases and allow Ground No.4 of the assessee’s appeal.
Unexplained sales - DR has submitted that this claim of the assessee specifically made for the first time before the Tribunal requires verification by the AO - HELD THAT:- We find merit in this contention of the learned DR and since the learned Counsel for the assessee has also no objection for such verification being done by the Assessing Officer, we restore this issue to the file of the Assessing Officer with the direction to decide the same afresh after verifying the claim of the assessee that the sales in question treated as unexplained was already accounted for by the assessee-company in its books of account. Ground No.5 is accordingly treated as allowed for statistical purposes.
Disallowance of interest expenses - HELD THAT:- At the time of hearing before us, assessee has invited our attention to the balance-sheet of the assessee-company placed to point out that own funds in the form of capital and reserves to the extent of Rs.420 crores were available with the assessee-company at the relevant time and the same were sufficient to give interest free advances in question. We, therefore, find merit in this contention of the learned Counsel for the assessee that the disallowance made by the Assessing Officer on account of interest and confirmed by CIT(A) is not sustainable. The same is accordingly deleted and Ground No.7 of the assessee’s appeal is allowed.
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2022 (11) TMI 883
Grant of registration u/s 80G - CIT-E power to prescribe/impose any conditions - certain conditions as mentioned in column No. 10 of the impugned order passed in Form No. 10 AC not met - HELD THAT:- Issue decided in favour of assessee as relying on Chamber of Indian Charitable Trusts [2022 (11) TMI 840 - ITAT MUMBAI] as held CIT(E) lacked jurisdiction to impose any conditions on his (other than what is stipulated in law) while granting the approval u/s 80G of the Act as well. Accordingly, this appeal also stands allowed. Needless to say, any violations of the conditions prescribed by the statute, will have consequence as sanctioned by law and our observation set out in Para 37 above shall apply with equal force in the context of this registration accorded by the Ld. CIT(E) u/s 80G of the Act as well.
Accordingly, respectfully following the aforesaid decision, grounds raised by the assessee trust in the present batch of appeals are allowed.
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2022 (11) TMI 895
Validity of assessment proceedings - Omission on the part of AO to issue notice under Section 143(2) - curable defect u/s 292BB - HELD THAT:- Tribunal was fully justified in allowing the assessee’s appeal by taking note of the decision of this Court in the case of Principal Commissioner of Income Tax vs. Oberoi Hotels Pvt. Ltd. [2018 (6) TMI 1472 - CALCUTTA HIGH COURT] . In the said decision it was held that the notice under Section 143(2) of the Act was required to be mandatorily issued and Section 292BB had no manner of operation. The earliest of the decision is that of the Hon’ble Supreme Court in the case of Assistant Commissioner of Income Tax & Anr. vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT]wherein it was held that if an assessment is to be completed under Section 143(3) read with Section 158BC, notice under Section 143(2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedure irregularity and is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with.
Very recently, the Hon’ble Supreme Court in the case of Assistant Commissioner of Income Tax vs. S.K. Industries [2022 (7) TMI 1345 - SC ORDER] dismissed the Special Leave Petition filed by the revenue against the order of the High Court holding that where the assessing officer of a particular Circle passed an assessment order under Section 143(3) without issuing notice under Section 143(2) and only in pursuance with the notice issued under Section 143(2), he had no jurisdiction over the assessee at the relevant time and such assessment order was liable to be set aside. Thus Tribunal was fully justified in allowing the assessee’s appeal.
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2022 (11) TMI 882
Disallowance u/s 14A read with rule 8D - HELD THAT:- We find that during the year the assessee has not earned any exempt income. As it is held in Era Infrastructure India Limited [2022 (7) TMI 1093 - DELHI HIGH COURT] that there cannot be disallowance in the hands of the assessee as the amendment made by the Finance Act, 2022 to section 14A by inserting a non obstante clause and explanation will take effect from 01.04.2022 and cannot be presumed to have retrospective effect. Therefore, in A.Y. 2014-15 no disallowance could be made under section 14A if no exempt income was earned by the assessee. Appeal of assessee allowed.
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2022 (11) TMI 881
Addition u/s 68 - Bogus share transactions - penny stock purchases - HELD THAT:- Share prices of alleged company witnessed a drastic and sharp increase in a very short span of time without having sufficient reason for such increase of price of such share and findings of authorities below on this issue.
In the case of Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] under similar set of facts considering report of Directorate of Income Tax (Investigation), Kolkata and also poor financials of the penny stock companies but having sharp, drastic and abnormal increase in share price, held such long term capital gain from sale of such shares as bogus and confirmed the addition made by the ld. AO u/s. 68 and also confirmed the order passed by the AO thereby treating the assessment order is a valid one. Thus assessee having failed to controvert this finding by placing any other binding precedence of Hon’ble Supreme Court in its favour therefore we fail to find any infirmity in the finding of the authorities below and the assessment order passed u/s 143(3) and order passed by the ld. CIT(A). Therefore, we dismiss the appeal filed by the assessee.
Addition u/s 69C alleging commission paid by the assessee towards payment of brokerage - Same has been added under the head of income from other sources in the hands of assessee which was also affirmed by the ld. CIT(A). while passing the impugned order regarding this issue, assessee having failed to controvert the findings of the authorities below. Therefore, we failed to find any infirmity in respect of this issue and dismiss the appeal filed by the assessee.
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2022 (11) TMI 880
Addition u/s 68 - Unexpalined cash credits - initial burden to prove the cash credits - whether assessee has discharged the initial onus to prove the cash credits by furnishing all the information to prove the three main ingredients, viz., the identity of the creditor, the credit worthiness of the creditor and the genuineness of transactions? - HELD THAT:- It is settled proposition of law that the initial burden to prove the cash credits is placed upon the shoulders of the assessee u/s 68 - In order to discharge the said burden, the assessee has to prove three main ingredients, viz., the identity of the creditor, the genuineness of the transactions and the credit worthiness of the creditor. If the assessee discharges the initial burden, then the burden would shift to the shoulders of the assessing officer, i.e., it is the responsibility of the AO to disprove the claim of the assessee by bringing evidences on record.
The settled proposition of law is that the requirement of invoking the provisions of sec.68 of the Act in respect of cash credits has to be decided on the basis of facts prevailing in each of the case and the answer to the question as to whether the assessee has discharged the initial onus placed upon it by proving three main ingredients. As noticed that the assessee, in the instant case, has discharged the initial onus placed upon it. AO has not rebutted the same. Accordingly, we hold that the addition made u/s 68 of the Act is not justified.
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2022 (11) TMI 879
Addition u/s 68 - bogus LTCG - Addition relying on the report of the investigation wing and the steep increase in the price of the shares - HELD THAT:- Assessment order in the present case does not have any mention about the independent inquiry that was conducted by the AO relevant to the impugned transaction. It is also observed that the AO has failed to examine the alleged Directors of M/s. Diamant Infrastructure Limited as to the nature of business carried out by the said company nor has the AO examined the alleged brokers involved in the impugned transactions.
As decided in Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] on similar issue which held that the AO should conduct enquiry on the impugned transaction to substantiate that the claim of the assessee for LTCG/STCL is non genuine and further held that the AO can rely on circumstantial evidence based on the doctrine of preponderance of probabilities in such cases where it is beyond the reach to carve out direct evidences.
But, in the present case we find that the AO has made no enquiry other than relying on the report of the investigation wing and the steep increase in the price of the shares. We are of the considered opinion that the AO should have done a further analysis and enquired into the genuineness of the alleged transaction. In the present case in hand the assessment order is flawed by lack of enquiry by the AO. Appeal filed by the assessee is allowed.
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2022 (11) TMI 878
Excess claim u/s 35D related to the IPO expenses - AO has restricted the same to 1/5th of the said expenditure as per provisions of section 35D - assessee is said to have raised funds for Primary Securities Market and has submitted that the main object of raising the funds was to meet the working capital requirements and to procure new machinery to reduce the overheads and other costs - HELD THAT:- Addition as excess deduction u/s 35D is justified by the lower authorities and the assessee has failed to substantiate its claim before us. In the result, this ground of appeal filed by the assessee is dismissed.
Disallowance u/s 43B - AO has disallowed the statutory liabilities of Service Tax and Gratuity - AO made disallowance as the assessee has failed to pay the said amount before the due date and the same is reflected in the tax audit report of the assessee in Form 3CD - HELD THAT:- As statutory liabilities were found to be outstanding before filing the return of income and the same was disallowed on the ground that the assessee has failed to furnish the details pertaining to the payment of the impugned amount before the lower authorities. The assessee has stated that it has turn NPA in August 2013 and the same was the reason for not paying the statutory dues. We find no infirmity in the order of the CIT(A) as the assessee has failed to furnish particulars of its claim before us. In the result, this ground of appeal filed by the assessee is dismissed.
Disallowance of interest on late payments of TDS, disallowance u/s 40a(ia) and addition on staff welfare expenses - HELD THAT:- It is pertinent to point out that the assessee has not raised these grounds as additional grounds which were not adjudicated by the learned CIT(A). The assessee has also failed to furnish documents/evidences pertaining to these claims and therefore, we deem it fit to dismiss these grounds of appeal filed by the assessee.
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2022 (11) TMI 877
Deduction u/s 80P - interest income received from parking its surplus funds with Co-operative Bank - As per AO and CIT since SVC Co-operative Bank Ltd is no more a co-operative society as it has more than 105 branches in 7 states operating on the basis of licence issued by Reserve Bank of India and the interest income earned by assessee is clearly in the nature of “Income from other sources” it does not qualify for deduction under section 80P(2)(d) - HELD THAT:- We have perused the findings returned by co-ordinate bench of Tribunal in case of Petit Towers Co-operative Housing Society Ltd [2021 (9) TMI 232 - ITAT MUMBAI], which is on identical issue, co-ordinate bench of Tribunal by distinguishing the case laws rendered by Hon’ble Supreme Court in the case of Totagar’s Co-operative Sale Society Ltd vs ITO [2010 (2) TMI 3 - SUPREME COURT] and by following the decision of Pr. Commissioner of Income Tax and Anr. vs. Totagars Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank Of India Vs. CIT [2016 (7) TMI 516 - GUJARAT HIGH COURT] reached the conclusion that interest income earned by co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act.
Thus interest income earned by assessee society from parking its surplus funds with SVC Co-operative Bank Ltd would be eligible for claim of deduction under section 80P(2)(d) of the Act as the co-operative bank also falls in the category of society registered under the Co-operative Society Act, 1912 (20/1952) or under any other law for the time being in force in any state for the registration of co-operative society. Appeal of assessee allowed.
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2022 (11) TMI 876
Bogus purchases - Certain parties did not respond to the enquiries made by the A.O. u/s 133(6) - HELD THAT:- We find that in respect of the purchases made and to prove the genuineness of the purchases, assessee had placed on record copy of the bill which shows the bill number, vehicle number through which it was transported and it also bears the stamp of the check post. The assessee has also placed on record copy of the Certificate issued by the Commercial Taxes Department, Bhiwadi, Government of Rajasthan which evidences the purchases made by the assessee company. The conclusion of the A.O. that the Certificate issued by Commercial Tax Department evidencing the purchase of goods by the assessee is not based on any cogent evidence.
No enquiry has been made by the A.O. to justify his conclusion that the bills are not genuine. When the bills were available with the A.O, he could have made necessary enquiries. We, therefore, find that the disallowance of purchases being not genuine as it is an accommodation entry, is not supported by any cogent reasons and is more in the nature of surmises and conjectures.
We find the Coordinate Bench of Delhi Tribunal in the case of M/s. Varun Beverages Ltd., New Delhi [2019 (9) TMI 1673 - ITAT DELHI] after relying on the decision of GP International Ltd. [2009 (12) TMI 33 - PUNJAB AND HARYANA HIGH COURT] held that mere fact that certain parties did not respond to the enquiries made by the A.O. under section 133(6) would not by itself be sufficient to warrant addition of expenses in connection with which the enquiries were made under section 133(6). - Considering all we are of the view that A.O. was not justified in making the impugned addition. We, therefore, direct the A.O. to delete the addition made by him. Appeal of assessee allowed.
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2022 (11) TMI 875
Deduction u/s. 80IC - belated return filled - Deduction not to be allowed unless return furnished - audit report in form 10CCB for claim of deduction u/s. 80IC has been filed on 21-09-2015 i.e. within the prescribed time limit for filing return u/s. 139(1) - HELD THAT:- As in the instant case the assessee has failed bring forth any such communication or any order condoning such delay in filing return of income before the due date specified u/s. 139(1) of the Act.
We, therefore, under the given facts and circumstances of the case are of the considered view are that since the assessee has filed belated return, the claim of deduction under section 80IC of the Act cannot be entertained/allowed as the assessee is directly hit by provisions of section 80AC - We, thus, fail to find any infirmity in the finding of the CIT ( A ) denying assessee’s claim of deduction u/s. 80IC - However, if deemed fit, the assessee can still approach the Board for consideration of its case and if the Board finds merit in the reason for genuine hardship of the assessee for filing the return belatedly the case of the assessee may be considered sympathetically. If such permission is granted by the Board, then the AO can allow claim of deduction of the assessee u/s.80IC of the Act in accordance with law - Appeal of assessee is dismissed .
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2022 (11) TMI 904
Exemption from tax - disability pension - Defence Forces Personnel / Indian Air Force - assessee had taken pre-mature retirement at his own request, before disability - HELD THAT:- As in the instant case that at the time of disbursement of amount, no TDS has been deducted in the case of assessee and from careful perusal of the order of the Hon’ble Supreme Court it is noticed that the Hon’ble Supreme Court directed the respondents to maintain status quo in the matter.
The Circular issued by the CBDT as well as in the Circular of Principal Controller of Defence Accounts (Pensions) in which it is clearly stated that tax exemption shall be available to the Defence Forces Personnel who have been invalidated from service on account of bodily disability while in service.
Since the Ld. D.R. has failed to furnish any contrary material or decision of any higher Judicial Forum to the notice of Bench, we allow the claim of assessee and direct the A.O. to delete the addition. Accordingly, appeal of the assessee is allowed.
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2022 (11) TMI 874
Validity of the final assessment order due to non-service of the Dispute Resolution Panel’s (DRP) directions - AR contended that the directions given by the DRP u/s.144C(5) was not served on the assessee - HELD THAT:- Insofar as the assessee is concerned, the requirement is to give opportunity of hearing before issuing the direction and there is no further statutory requirement of communicating such direction to him. The AO is required to pass the final order in conformity with the direction. There is no specific legal recourse available to the assessee against the adverse direction of the DRP except for filing an appeal against the final assessment order giving effect to such direction. The service of the direction by the DRP on the assessee, in terms of Rule 11 of Income-tax (DRP) Rules, 2009, is only a procedural requirement put in place by delegated legislation, without any corresponding provision in the enactment. In that view of the matter, it cannot be said that non-service of the direction of the DRP to the assessee would vitiate the final assessment order itself.
Notwithstanding the above position, AR candidly admitted before the Tribunal that, on the assessee writing to the DRP about non-communication of the direction, the DRP responded by mentioning that direction dated 11-03-2021 was promptly e-mailed to the assessee on that very date itself. No adverse contrary evidence has been brought to our notice on behalf of the assessee. Under such circumstances, we are satisfied that this ground is devoid of merit and hence deserves the fate of dismissal. We order accordingly.
TP addition in the international transaction of `Payment of Royalty for use of technology’ - HELD THAT:- Following the view taken by the Tribunal for the A.Y. 2015- 16, we approve the segregation of payment of Royalty from other international transactions under the ‘Manufacturing segment’ and send the matter to the DRP for disposing of the assessee’s objections on the further segregation of Royalty payment on exports and domestic sales and the consequential transfer pricing adjustment in respect of export sales to the AEs.
Non-granting of deduction u/s.80G - HELD THAT:- AO did not dispute the deduction and adopted the total income offered by the assessee (after deduction u/s.80G) for making certain disallowances and computed the total income accordingly. This was done in the draft as well as the final assessment orders. However, in the Computation sheet, AO omitted to grant the deduction of Rs.6.00 crore, as is apparent from column no.12 showing the figure of ‘zero’ against the total deduction against Chapter VI-A. Under such circumstances, we direct the AO to verify the assessee’s contention and allow deduction of Rs.6.00 crore, if not earlier allowed, after due opportunity of hearing to the assessee.
Income during the scrutiny assessment u/s.143(3) - HELD THAT:- We direct the disposal of the application made by the assessee u/s.154 of the Act and then make suitable changes to the figure of income u/s.143(1) as the base figure for determining income u/s.143(3), if warranted.
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2022 (11) TMI 873
Validity of assessment - non-issuance of notice u/s 143(2) - HELD THAT:- AO having jurisdiction over the assessee proceeded to commence and complete the assessment proceedings without issuing a fresh notice u/s 143(2) of the Act.
Hon’ble Supreme Court in the case of ACIT vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] has held that the service of the statutory notice u/s 143(2) of the Act is sine-qua-non to initiate/commence the assessment proceedings u/s 143(3) of the Act.
Also in the case of Smt. Kene Welly [2021 (4) TMI 715 - ITAT GUWAHATI] while dealing with similar issue pertaining to AY 2015-16 and held the assessment invalid and quashed the same.
Thus assessment proceedings carried out u/s 143(3) are held to be invalid and bad in law and are hereby quashed. Thus, the legal issue raised in the additional ground by the assessee is allowed.
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2022 (11) TMI 894
Validity of the order 278(2) - compounding of offence u/s 279(2) - prosecution u/s 276C (1) (i) - HELD THAT:- Section 279 (2) provides that any offence under this Chapter either before or after the institution of the proceedings can be compounded by the Principal Chief Commissioner, Chief Commissioner, Director General or Principal Director General.
In order to give the effect of Section 279(2) of the IT Category, the Government of India, Ministry of Finance issued guidelines. Clause 7 of the guidelines provides eligibility conditions for compounding and clause 8 provides a list of certain offences which are normally not be compounded. In order to become eligible for compounding clause 7(v) says that there has be to an undertaking by the assesses for withdrawal appeal filed by him, if it is related to the offence sought to be compounded.
Likewise, clause 8(iii) provides that offence committed by a person for which he was convicted by a Court of law under direct taxes laws compounding cannot be done. As on today, the petitioners are convicted persons and in appeal, only the sentence has been suspended not the conviction, therefore, respondent No. 1 has rightly declined to compound the offence.
By conjoint reading of section 279(2) and clauses 7(v) and 8. (iii), it is explicit that the Income Tax Authorities have the power to compound the offence either before or after the institution of the proceedings but certainly not after the conviction. Clause 4 of the policy also provides that compounding of offence is not a matter of right, however, the offence may be compounded by the competent authority on satisfaction prescribed in these guidelines. It is also important to see Clause 7.(ii) which provides that no application of compounding can be filed after the end of 12 months in which a prosecution complaint, if any, has been filed in the court of law. In view of the above, no writ/order/direction can be issued to the respondents for compounding the offence, hence the Writ Petition is dismissed.
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2022 (11) TMI 893
Reopening of assessment u/s 147 - reason to believe - change of opinion - information was obtained under the RTI Act comprising of the Audit point/objection relating to the claim of depreciation on DVN, the exchange of communications between the Respondent and the Audit - correctness of the claim of depreciation was examined by the assessing officer while making the assessment under Section 143(3) - HELD THAT:- AO after having resisted the audit wing report/point, stating that there is no material much less tangible material for reassessment and secondly that the claim of depreciation was examined closely and allowed after appreciation of law and also making it clear that reassessment/revisit on the above issue would fall within the realm of change of opinion, the action of the assessing officer in proceeding to make the reassessment is thus unsustainable.
Opinion need not be expressed – For applying the limitation of change of opinion with regard to power of reassessment - Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the assessing officer while completing the assessment. It is not necessary that an assessment order should contain reference and / or discussion to disclose its satisfaction in respect of the query raised. Therefore, the entire proceeding for reopening the assessment had emanated only on account of change of opinion on the part of the assessing officer.
Audit Objections – relevance in making re-assessments - We have seen that the audit both Internal as well as by the Comptroller and Auditor General is not the Authority conferred with the jurisdiction to make an assessment which falls within the exclusive jurisdiction / domain of the assessing officer. Any attempt by an external agency other than the assessing officers would amount to entrenchment on the powers of assessment/reassessment vested exclusively under the statute on the assessing officer. In other words, it clearly amounts to transgression and usurping of powers vested with the assessing authority by a body/ unit not vested with the power of assessment/reassessment as in the present case, by the audit which is impermissible.
The function of the audit is essentially executive in nature, while the function of the assessing officer and his power to make an assessment are essentially quasi judicial in nature. One may also have to bear in mind that the executive cannot trench upon the powers of a quasi judicial authority for permitting to do so may result in subverting the scheme of quasi-judicial function of making assessment / reassessment, which is impermissible.
Evaluation of law and its bearing on the assessment must be directly and solely done by the assessing officer. The audit party can furnish information which leads the assessing officer to realise the need for reassessment - information / material provided by the audit or any external agency must give birth to the realisation on the part of the assessing officer of the need to exercise its power of reassessment - information cannot be the realisation. If the distinction between the two is lost sight, there is a grave danger of powers of reassessment being usurped by external agency and abdication of its quasi judicial function/power by the assessing officer, both of which are impermissible and would prove fatal to the validity of any proceedings which suffers from the above vice.
Impugned order – not an exercise of power of reassessment in “good faith”- The sequence of events and the exchange of communication between the Respondent and the Audit would reveal that the Respondents have not exercised their power in “Good Faith”. The power of reassessment has been exercised for purposes which are extraneous. The order of reassessment appears to be a manifestation of colourable exercise of power by the Assessing authority which vitiates the entire proceedings. The assessing officer, who after indicating that the Audit Report, does not enable the exercise of powers of reassessment as no new material is furnished and more importantly having expressed the view that in the circumstances it would tantamount to exercise of power of reassessment on change of opinion, has without any change in circumstance, proceeded to make the reassessment which is not in “good faith” rather indicative of exercise of power for purposes alien/foreign to the purpose for which such power was conferred/granted.
Absence of finding – failure on the part of the assessee to fully and truly disclose material facts and invoke extended period - impermissible - We find that for the assessment year 2008-09, the reassessment is beyond four years, whereas, the same with regard to assessment year 2009-10 is within four years.
The common jurisdictional requirement for reopening of assessment both within and beyond four years, has to be on the basis of ''reason to believe'' which cannot be on the basis of mere change of opinion. In addition to the above which is a restriction common to exercise powers of reassessment both within and beyond four years, with regard to cases of reassessment falling under clause(b) i.,e beyond four years from the end of the relevant assessment year, there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment during the original assessment proceedings. We find that the jurisdictional fact to invoke the extended period is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. A finding on the above aspect is a sine qua non/condition precedent/pre-requisite for invoking the extended period. Absence of such finding, while invoking the extended period, may prove fatal. The order of assessment for the year 2008-09 suffers from this additional infirmity.
The reassesment order for the Assessment Year 2008-09 also suffers from the infirmity of not rendering any finding of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment which would also vitiate the proceedings.
We do not propose to examine the matter on merit as the exercise of power of reassessment under Section 147 of the Act is bad for want of jurisdiction and thus unsustainable. It is well-settled that Court would be loathe in infering with matters of reassessment where there is alternate remedy by way of statutory appeal.
There are atleast in two circumstances which has been carved out as an exception to the above, self-imposed limitation namely If the order is shown to be made in violation of principles of natural justice and If the order is bad for want of jurisdiction.
The impugned proceedings falls within the above exception as it is bad for want of jurisdiction thereby warranting interference.
We set aside the order of the learned Single Judge and the orders of reassessment for the assessment years 2008-09 and 2009-10 passed by the Assessing Officer. Decided in favour of assessee.
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2022 (11) TMI 872
Disallowance u/s 43B - electricity duty payable to State Govt - non-payment of electricity duty before the due date of filing return of income - HELD THAT:- As finding of ld. CIT(A) placing reliance on the decision of CESC Ltd[2015 (5) TMI 795 - CALCUTTA HIGH COURT] stands uncontroverted by the ld. D/R and we, therefore, respectfully following the ratio laid down since the alleged amount is not a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee but the said amount i.e. the electricity duty is collected by the assessee company from the consumers to be passed on to the State Govt. and the said amount is not claimed as an expenditure in the profit and loss account. We, therefore, fail to find any infirmity in the finding of the ld. CIT(A) and, therefore, dismiss ground nos. 1, 2 & 3 raised by the Revenue.
TDS u/s 194A - non-deduction of tax at source on the interest paid to consumers on security deposit - HELD THAT:- As we note that there are large number of consumers and it is difficult to collect data of each and every consumer (20 lakh) which are maintained manually in the registers at each of the locations of the company and also the average interest amount is not exceeding Rs. 84/-, necessary efforts have already been made by the assessee company filing complete details of the consumers to which interest was paid above the prescribed limit and due tax deducted at source, restoring the issue to the ld. AO for again calling for the records of each and every consumer and then find out the correct amount eligible for deduction of tax at source will unnecessarily stretch the long drawn proceedings which pertains to AY 2012-13 and even after carrying out such exercises it is not certain that the necessary results would be obtained.
Disallowance u/s. 40(a)(ia) of the Act is not called for on the alleged amount as the assessee has filed the details which it could possibly gather and the Revenue authorities have no material with them to make the disallowance except for non-filing of details by the assessee and ignoring the fact that average interest is merely Rs. 84/- per consumer and there will be large number of cases where interest amount paid on the security deposit may have been much below the prescribed limit for non-deduction of tax at source. However, since the interest amount of Rs. 48,60,850/- has already been subjected to TDS, the remaining amount of alleged disallowance will only be Rs. 16,13,39,150/- and we allow the said amount as an interest expenditure not calling for disallowance u/s. 40(a)(ia) - Decided in favour of assessee.
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Customs
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2022 (11) TMI 870
Condonation of delay in filing appeal - substantial delay between the issuance of charge-sheet under the extant Regulations and the culmination in revocation - Suspension of Customs Broker License - forfeiture of security deposit - Misdeclaration of imported goods - MPEG cards or mounted PCB for set top box - HELD THAT:- The licence of the appellant had been suspended and then revoked with an interlude of operability. It is also on record that the adjudication proceedings did not find it appropriate to penalize the appellant herein. It is noted that there is no evidence on record that the alleged non-compliance, as enumerated, was either at the initiative of the appellant or could have been forestalled by awareness of the alleged misdeclaration. Even the Directorate of Revenue Intelligence (DRI) was able to deduce a conspiracy only in 2008; it is moot if blood, or marital relationship, suffices to infer the cognizance of the appellant about intent to misdeclare the contents of the consignment.
There has been substantial delay between the issuance of charge-sheet under the extant Regulations and the culmination in revocation. There is no justification offered for the delay; nor do we find from the records that the appellant, by acts of omission and commission, had contributed to the delay. On the other hand, it appears that the first inquiry authority had failed to take up the task assigned to him till his retirement and licencing authority did permit that state of affairs to continue without monitorial oversight - Casual disregard of timelines is not to be encouraged as it would only lead to stealthy dilution of timelines that the Central Board of Indirect Taxes and Customs (CBIC) has considered appropriate to bind authorities subordinate to it with.
It is also incorrect on the part of Learned Authorized Representative to contend that pending proceedings was no detriment as far as appellant is concerned. Not only is it demonstrative of breach of public duty but also prolongs sysiphean agony that bordering on sadism - Appeal allowed.
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2022 (11) TMI 869
Export promotion schemes - forge/fake DEPB licences/scrips - denial of benefit on the ground of principle fraud vitiates everything - evidence of involvement of the appellant in the fraud or not - HELD THAT:- The undisputed facts of the case are that Nidhi imported goods by 29 Bills of Entry as listed in the annexure to the show cause notice using various duty free scrips/licenses which were issued in the name of other persons/entities. Such licences/scrips were transferable. Nidhi had not obtained physical copy of any of the licences or scrips which it was supposed to have purchased. It was also not aware as to which licence or scrip, if any, it had purchased. The invoices which it received from firms of Shri Sharafat Hussain also did not indicate which scrip or licence was being sold.
The SCN was issued by the jurisdictional Commissioner of Customs. This power of assigning any SCN for adjudication has been delegated to the Zonal Chief Commissioner by the Government. The Zonal Chief Commissioner had assigned this SCN to the Commissioner of Customs (Export), Air Cargo, New Delhi who passed the impugned order.
Whether in a case where forged or manipulated scrips or licences have been used for clearance of goods and there is no evidence that the fraud was committed by the importer, demand can been raised for the duty on the importer and if so whether extended period of limitation can also be invoked? - HELD THAT:- This issue is no longer res integra and it has been settled by the Supreme Court in M/S. MUNJAL SHOWA LTD. VERSUS COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE (DELHI – IV) AND M/S. FRIENDS TRADING CO. VERSUS UNION OF INDIA AND ORS. [2022 (9) TMI 1076 - SUPREME COURT]. The Supreme Court was seized of a matter where forge/fake DEPB licences/scrips were used to pay duty on imported goods. After completing investigation, show cause notices were issued invoking the extended period of limitation which were challenged both on the ground of limitation as well as on the ground that though the scrips were forged, the importers had no intention to evade the customs duty.
Similarly in the case of M/S MERCEDES BENZ INDIA PRIVATE LIMITED, M/S O.A. ASSOCIATES, PASHUPATI ACRYLON LIMITED VERSUS COMMISSIONER OF CUSTOMS, DELHI, ADDITIONAL DIRECTOR GENERAL (ADJUDICATION) , NEW DELHI, DIRECTORATE OF REVENUE (INTELLIGENCE) & OTHERS [2020 (2) TMI 437 - CESTAT NEW DELHI] upheld the demand of duty on the importers where fraudulent/forged DEPB scrips or licences were used.
There is no provision to transfer the benefit of any exemption either under the policy or any notification or any provision of the law. The licences and scrips are transferable and if they are transferred, the transferee consequently gets the benefit of the exemption notification. Without transferring the licence/scrip, the benefit of exemption cannot be transferred - Nidhi never had any licence/scrip with it nor was even aware as to the benefit available under which licence/scrip issued to whom and/or transferred who was used in the Bill of Entry was known to the appellant. The question of producing the scrip or licence at the time of clearing the goods does not arise as a consequence. As the appellant had not fulfilled the requirements of either getting the licence/scrip transferred to it or producing it at the time of clearance as required under exemption notifications, we do not find any reason to hold that the appellant is entitled to the benefit of exemption notifications even to the extent that the manipulated licence has covered part of the duty debited.
Interest under Section 28AA of Customs Act - HELD THAT:- Interest under Section 28AA follows from the demand under Section 28 of the Customs Act. As the duty is payable the interest liability follows.
Imposition of penalty - HELD THAT:- As far as the role of the officers in the matter is concerned, learned authorized representative submits that the matter has been sent to the CBI who are investigating the matter - in respect of the appellant only duty, interest, fine and penalty are relevant in this case but if any officers are involved, it will be a much more serious matter which will have to be investigated with respect to the violations of other laws such as Prevention of Corruption Act also. Investigation in this regard has been handed over to CBI. Even if the officers were involved, it does not, in any way, dilute the liability of the appellants in terms of duty, interest or penalties.
Penalty of an amount equal to the duty not paid was imposed on Nidhi under section 114A. This is a mandatory penalty imposable when a demand invoking extended period of limitation and since we have upheld the confirmation of the demand invoking extended period of limitation, the imposition of penalty under section 114A is upheld - Penalty under section 112(a) (ii) on Jain (the partner) and penalty under section 114A on Nidhi (the partnership firm) in this case arise out of the same cause of action and therefore, penalty under section 112 cannot be sustained as penalty has been imposed under section 114A which is upheld - there is no evidence that Nidhi or its partner Jain had knowledge of the fraud/forged licences/ scrips being used to clear the goods and therefore, the penalty under section 114AA cannot be sustained.
Appeal disposed off.
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2022 (11) TMI 871
Maintainability of petition - availability of alternate remedy - Violation of principles of judicial discipline and doctrine of stare decisis - Classification of imported goods - Glucometer - whether the Glucometer should get classified under item 9018 or item 9027, which has already been considered by CESTAT? - HELD THAT:- As the Tribunal has already expressed its views in an identical matter and has classified the Glucometer under 9027, an Appeal to CESTAT against impugned order would be a mere idle formality.
Moreover, with this background, Petitioner will also have to make compliance with an onerous precondition of mandatory pre-deposit. When the order is ex facie erroneous and patently in violation of principles of judicial discipline and doctrine of stare decisis, this is a fit case to exercise our jurisdiction under Article 226 of the Constitution of India. Moreover, there are no disputed facts and the only issue to be considered is whether the Glucometer should get classified under item 9018 or item 9027, which has already been considered by CESTAT. Since this is already concluded by CESTAT, on this ground alone, the impugned order requires to be quashed and set aside.
First of all this conclusion is erroneous particularly in view of findings of the CESTAT in M/S BAYER PHARMACEUTICALS PVT LTD VERSUS COMMISSIONER OF CUSTOMS, MUMBAI [2015 (11) TMI 943 - CESTAT MUMBAI]. Moreover, the said notification will apply only where goods are classified under item 9018. The notification would not apply when goods are classified under 9027. Therefore, the attempt of giving reasons or explaining how the notification is applicable only to those goods classified under item 9018 could be applicable to goods under item 9027 is not acceptable. Non considering and following Bayer (supra) itself is a reason for us to interfere under Article 226 of the Constitution of India.
We entirely agree with the conclusions/findings of CESTAT in Bayer [2015 (11) TMI 943 - CESTAT MUMBAI] since the goods are identical. - Demand set aside.
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2022 (11) TMI 868
Confiscation of goods - Seeking release of declared goods - Misdeclaration of imported goods - Polished Marble Slabs (thickness below 2.0 cm) - quantity actually imported was much more than what was declared in the Bill of Entry and other documents - method of measurement adopted during examination - abatement of duty - Confiscation - redemption fine - penalty - HELD THAT:- To claim abatement under section 22, the importer has to prove to the satisfaction of the Assistant Commissioner/Deputy Commissioner that the damage occurred before unloading or during unloading or after unloading due to an accident - the abatement is of the duty and not of the quantity of the goods imported which is a matter of fact. After reckoning the entire quantity of goods which are imported, if some proportion of the goods are damaged, as per section 22, then the duty to that extent can be abated. The quantity of goods does not abate. If there were hairline cracks or if there was chemical damage or even if the corners were cut or chipped, the quantity of the goods imported does not vary.
It must also be noted that abatement under section 22 only covers damages before or during unloading or after unloading but before examination due to accidents. Natural deficiencies in the imported material such as irregular edges which occur naturally are not covered under this section - It must also be noted that abatement of duty under section 22 and remission of duty under section 23 are exceptions to the levy of customs duty under section 12 on all goods imported. Hence, these provisions must be applied with due diligence and after recording the facts and also the satisfaction of the officer as required.
In this case, the quantity of goods declared was 1,192.30 square metres while on examination 2,530 square metres was found. The adjudicating authority reduced it by 20% (towards corner cuts) and considered only 2,024 square metres as imported. Although the excess quantity imported was 1,307.70 square metres (2,530 – 1192.30) he confiscated only 831.70 square metres (2,024 – 1,192.30). The excess quantity of goods found are liable for confiscation under section 111(l) - The confiscated goods were valued at Rs.21,89,084 and hence the fine of Rs.5,00,000/- is fair and we find no reason to interfere with it. Likewise, the penalty of Rs, 1,20,000/- imposed on the appellant is also fair and we find no reason to interfere with it. If the goods are redeemed under section 125(1), the importer also has to pay customs duty under 125(2). Therefore, the demand of duty also deserves to be upheld. We, therefore, answer questions (f), (g) and (h) in favour of the Revenue and against the appellant.
The appellant’s prayer for interim relief by releasing only the quantity of goods actually declared cannot be accepted because there is no provision for giving customs “out of charge” to only a part of the goods under section 47. The appellant could have redeemed the goods as per the order of the Additional Commissioner and still pursued the appeals - Appeal dismissed.
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2022 (11) TMI 867
Classification of imported goods - Polyester Woven Fabrics - to be classified under Chapter 54075490 of the Customs Tariff Act 1975 or under CTH 63041990 - HELD THAT:- The issue is no longer res integra as the same was already decided by this bench in DEV TEXTILES AND RAM PRAKASH VERSUS C.C. -MUNDRA [2022 (1) TMI 1080 - CESTAT AHMEDABAD] where it was held that Since the revenue has not been able to discharge their burden of proof. Hence the classification of goods declared by the appellants cannot be disturbed.
This case is squarely covered by the aforesaid decision - the impugned order is not sustainable - Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2022 (11) TMI 866
CIRP - Recovery of Fee payable to Resolution Professional from the Income Tax Department and the Excise and Taxation Department of state in proportion to its voting share in the Committee of Creditors - Recovery from the operation credit - there is no financial creditors - HELD THAT:- Section 21(8) of the IBC stipulates that all decisions of the CoC shall be taken by not less than 51% of voting share in the CoC. It is noted that the notice for 7th CoC meeting was sent and delivered to both the Appellants viz. Income Tax Department and Excise and Taxation Department and they chose not to be present in the said meeting, whereupon the RP adjourned the meeting to hold it with their participation. It is noted that both the Appellants again chose to be absent in the re-assembled 7th CoC meeting, which was taking place after being adjourned once, and wherein decision regarding the CIRP cost, RP’s fees, etc. were taken.
Regulation 22(2) and 22(3) of CIRP Regulations provide that when a meeting could not be held for want of quorum, the meeting automatically stand adjourned at the same time and place on the next day and regulation 22(3) provide that when the adjourned meeting takes place with the members attending the meeting, it shall be quorate - there are no illegality in either holding of the 7th meeting of CoC dated 6.12.2019 and in the decisions taken in the meeting regarding the payment of CIRP cost and RP fees.
RP and the CoC have acted in the true spirit of the law for fixing of the shares of the operational creditors in the CIRP cost and RP’s fees (since there are no financial creditors) which are required to be deposited with the liquidator immediately. The Impugned Order does not suffer from any error and, therefore, needs no interference - appeal dismissed.
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2022 (11) TMI 865
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- A perusal of the record placed by the Financial Creditor discloses that it has provided various Term Loans including Short Term Loans, Equipment Loans, Demand Loan, ECB Loan and working capital facilities, both fund based and non-fund based to the Corporate Debtor from time to time and that an amount of Rs. 242,33,00,269/- became due and payable as on 30.09.2022 and the account of the Corporate Debtor was classified as NPA on 30.04.2022. Despite opportunity the corporate debtor failed to place any record disclosing that there is no debt or default as claimed by the applicant. Thus, the record placed and the averments made in the company petition by the Applicant remain un rebutted.
There are due compliance of the requirements in terms of Section 7(3) of IB Code by the financial creditor, and this Adjudicating Authority in terms of its power under section 7 (4) ascertained the existence of debt and default if any as alleged on the part of the corporate debtor from the record placed by the financial creditor under sub section (3) of Section 7 of IB Code, and is fully satisfied that present application under subsection 2 of Section 7 of IB Code is complete in all aspects and that the re are no disciplinary proceedings pending against the proposed resolution professional, hence the instant Application is admitted.
Application admitted - moratorium declared.
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2022 (11) TMI 864
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The first objection raised by the corporate debtor is that Mr. Vismay Chokshi has no authority to file the application. On perusal of the record it is found that the applicant has filed copy of resolution passed by the designated partners of the applicant LLP on 01.11.2019 authorising Mr. Vismay Chokshi , designated partner of the LLP, to act on behalf of the applicant before Court/Tribunal/Forums in legal matters including NCLT to commence CIRP against the corporate debtor.
It is evident that the debt is due and payable and default has occurred. The present application is admitted, in terms of section 9 (5) (i) of IBC, 2016.
Application admitted - moratorium declared.
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2022 (11) TMI 863
Validity of order of CoC rejecting the claim -Seeking to release the lawful dues of the Applicant and credit/make payment of TDS for the months of September 2020 and October 2020 towards salary during the CIRP period alongwith interest - scope of Related Party - HELD THAT:- It is an admitted fact that the Applicants were part of suspended board of directors of the Corporate Debtor on the date of initiation of CIRP of the Corporate Debtor and even after initiation of CIRP as they had resigned from the post of directors on 28.10.2021. Thus, in view of Section 5(24) (a) the Applicants fall under the category of related party of the Corporate Debtor.
The term related party transaction is not defined under the Code, therefore Section 188 of the Companies Act, 2013 is referred. On reading of Section 188 of the Companies Act, 2013 it is understood that related party transaction includes any contract or arrangement with a related party with respect to availing of any services. Therefore, availing of services from the Applicants would amount to related party transactions.
The Code has given ample power to the CoC and one of the powers as provided under Section 28(1) (f) includes to take commercial decision to undertake or not to undertake related party transactions during the CIRP of the Corporate Debtor. Accordingly, the Resolution Professional in various CoC meetings had placed a resolution for payment of salary to the Applicants but the CoC in its commercial decision has rejected the resolution - the decision of COC should not be interfered with, since the Resolution Professional had time and again placed proposal before CoC for payment of salaries to the Applicants and CoC after detailed deliberations rejected the proposal. If in commercial wisdom the CoC has rejected the resolution for payment of salary to the Applicants, the question of reversing the decision cannot be considered.
It is noted from the master data available on MCA portal that Applicant No. 1 was holding position of director since 30.11.2018 and Applicant No. 2 & Applicant No. 3 had held position of directors since 07.07.2019. In addition to the post of directors, the Applicant No. 2 & 3 were also holding the post of General Manager-Finance & Accounts and Vice President- Operations since 30.11.2013 & 03.12.2014 respectively and drawing the salaries of Rs. 5,06,452/- p.m. and Rs. 5,45,728/- p.m. This reflects that Applicants had considerable control over the management of affairs of the Corporate Debtor and in view of Section 19 of the Code are bound to extend all assistance and cooperation to the Interim Resolution Professional/Resolution Professional as may be required by him in managing the affairs of the corporate debtor.
Application dismissed.
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Service Tax
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2022 (11) TMI 884
Refund of amount paid during the investigation - refund claims sanctioned but ordered to the same to be transferred to consumer welfare fund on the ground that paid service tax amount was already received by the Appellant from its clients - whether unjust enrichment is applicable in respect of Service Tax refund claim filed by the Appellant?
HELD THAT:- Even though the Service Tax was paid during the investigation of case, there is no escape from the provision of Section 11B wherein the test of unjust-enrichment is necessary before sanction of refund. As regards the fact whether incidence of refund amount has been passed on or otherwise, we find that the Ld. Commissioner (Appeals) only based on the contract clause and statement of Shri Milind Belsare concluded that appellant have passed on the burden of service tax to the customers. However here Ld. Counsel submitted the copy of balance sheet, details of amount shown as receivable in Balance Sheet, break-up of receivable amount, details of contract, copy of invoices and copy of CA certificate in support of their claim that no service tax was charged from the customers.
Matter remanded to the adjudicating authority only for limited purpose to verify the factual aspect as per the books of account of the appellant that whether the incidence of service tax has not been passed on to any other person or otherwise - appeal allowed by way of remand.
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2022 (11) TMI 862
Levy of service tax - work contract service - entire case of the department is based only on the contract between appellant and buyer of RMC - HELD THAT:- As per the contract, the entire transaction is of Works Contract. However, the appellant is mainly engaged in the manufacture of Ready-Mix-Concrete and selling the same to various buyers. As per the nature of product, it is necessary to supply RMC in a specialized container and after reaching at the customer’s site RMC is delivered by carrying out the process of pouring, pumping and laying of concrete at the customer’s place. The RMC cannot be unloaded at a particular place and thereafter shifted the same to a different particular place at site. Due to peculiar nature of RMC, it is unavoidable to deliver at particular place where the RMC is required to be laid-down. It is also the fact that appellant being manufacturer of RMC, paying excise duty not only on the value of the goods but also on the value of service of pumping, laying of concrete and the same is included in the sale value. Therefore, no value is escaped from payment of excise duty.
Accordingly, the entire activity right from the manufacturing of RMC and delivery at the site of the customer is excisable activity. Merely because the contract says that it is works contract, the actual nature of transaction cannot be overlooked.
The manufacturing activity of RMC cannot be covered under Works Contract by any stretch of imagination. Therefore, even though there is contract of Works Contract basically for the purpose of VAT Act, cannot be applied in the present transaction of manufacture and sale of goods in terms of Section 2(f) of Central Excise Act, 1944 - the department cannot take two stands, in one hand manufacturer for demanding excise duty and on the same activity, on the other hand demanding service tax under Works Contract - the activity of the appellant is predominantly of manufacture and sale of goods. Accordingly, the same cannot be charged with service tax under Works Contract service.
Service tax demand on supply of tangible goods service - HELD THAT:- The appellant has put forward the contention that it would be within the threshold limit. The details of rent collected covered by the show cause notice for the year 2016-17 is of Rs. 1,50,000/- and 2015-16 is NIL. It would go to show that the amount related to supply of tangible goods service is within the threshold limit of exemption of service tax provided under the Notification 33/2012-ST. dated 20.06.2012 - the demand of service tax on the supply oftangible goods services also cannot sustain and requires to be set aside.
Levy of service tax - legal services under reverse charge mechanism - HELD THAT:- Appellant is contesting the said demand only on limitation and submitted the copy of departmental audit report in support of their arguments - the demand is set aside on the ground of time bar.
The appeal is allowed.
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2022 (11) TMI 861
Reversal of proportionate CENVAT Credit - common input services have been used in the manufacture of excisable goods as well as in the trading activity - failure to maintain separate accounts to utilize the CENVAT credit - Recovery of 5%/ 6%/ 7% of the value of exempted service in accordance with Rule 6(3)(i) of the Cenvat Credit Rules, 2004 as amended - HELD THAT:- In the present matter appellant admittedly reversed the proportionate Cenvat Credit attributable to the trading activity/ exempted service, this is not under dispute. Therefore the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, 2004 therefore demand of huge amount on the total value of the trading activity @ 5% / 6%/ 7% cannot be demanded. Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services - when the appellant have categorically agree for the reversal of Cenvat credit by way of opting for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should only be followed by the assessee.
The demand confirmed by the adjudicating authority has no legs and therefore the same cannot be sustained. The impugned orders demanding amount equal to 5%/ 6%/ 7% are set aside and the matters are remanded to the adjudicating authority to verify and pass a fresh order regarding the correctness of proportionate credit to be reversed in this matter after giving a reasonable opportunity of hearing to the appellants - appeal allowed by way of remand.
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Central Excise
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2022 (11) TMI 860
Seeking refund of amount paid under threat or duress in pursuance of an investigation - authority to receive the payment when no ascertainment of the duties has been made by the Central Excise Officer - HELD THAT:- It is no doubt true that the scope of interference to a show-cause notice by a writ Court exercising its power under Article 226 of the Constitution of India, is very limited, barring few exceptions, like lack of jurisdiction or abuse of process of law, etc.
In the instant case, there is a major flaw, which dispossess the jurisdiction of the respondent in proceeding further with the show-cause notice - The Bench had further held that in order to invoke sub-section 3 of Section 11(A), the Excise Officer should form an opinion and that the respondents have issued a show-cause notice after the order of the learned Single Judge, which is not in terms of Section 11(A)(3) and therefore, the payment of Rs.7.53 Crores made by the appellant cannot be said to be in terms of 11(A)(1)(b) of the Central Excise Act. With these observations, the Bench had allowed the writ appeal and 'set aside' the order of the learned Single Judge.
Though the original issuance of the show-cause notice may be in terms of the directions of the writ Court, any further contemplation of proceeding with the show-cause notice, would be without any authority, in view of the subsequent order passed. Thus, the consequential notice could be termed to be without any jurisdiction and would amount to an abuse of the process of law, as held by the Hon'ble Supreme Court in Vicco Laboratories's case(2007 (11) TMI 21 - SUPREME COURT). Hence, the appellant would be entitled to succeed.
The impugned show-cause notice is quashed - appeal allowed.
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2022 (11) TMI 859
Refund of amount of interest in addition to amount of duty estimated under SVLDR Scheme - duty liability or not - refund rejected in terms of Section 124 (2) of the Finance Act, 2019 - HELD THAT:- A bare perusal makes it clear that provision is not talking about tax dues only as defined under section 123 of the Finance Act, 2019 to be deducted while estimating duty amount to be deposited. But it is talking about any such amount which has already been deposited by the assessee which includes definitely the amount paid as interest - the impugned amount was mandatorily to be deducted from the amount of duty calculated to arrive at estimated amount payable. As apparent from the SVLDR Scheme Form No.3, admittedly the amount of impugned refund has not been deducted while calculating the estimated amount payable by the appellant. It is well settled principle well enshrined under Constitution of India itself Article 362 that no tax can be collected without validity of law. Since the appellant has paid the entire estimated amount payable amount of Rs.17,38,023/- becomes such a deposit with the department for which the Department of Revenue had not authority to retain.
The amount payable by the declarant has to be calculated in terms of Section 124(2) i.e. by making a deduction of any amount deposited at any stage prior. From the entire discussion, it becomes abundantly clear that amount in question of Rs.17,38,023/- was to be deducted till the stage of SVLDRS Form No. 2 but was not deducted even at the stage of SVLDRS Form No. 3. Hence, the said amount cannot be covered under proviso to Section 124(2). Thus the said provision is held to have wrongly been applied while rejecting the impugned refund. Similarly, any amount paid under section 130 of Finance Act, 2019 is the amount towards the tax dues as defined under section 123 of the Finance Act, 2019. Hence, it is held that same section 130 has also been wrongly invoked while rejecting the impugned refund.
The amount in question is eligible for refund on merits as well as on account of limitation - Appeal allowed - decided in favor of appellant.
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2022 (11) TMI 858
Clandestine Removal - reliance on private records - 1964.970 MT of C.I. Mould - existence of corroborative evidences or not - burden to prove - non-compliance with Section 9D of the Central Excise Act, 1944 - HELD THAT:- In the course of the search operation, no parallel invoices or challans were found. All the invoice books found in the search operation were found to be unused. It is held in the impugned Order that the said invoices were intended to be used - the six statements of three persons Sri Pitabas Chhotray [dated 23-03-2011 & 20-01-2012], Sri Anirudha Sutar [dated 23-03-2011 &21-09-2011] and Sri Ajay Kumar Das [dated 23-03-2011 & 19-09- 2011] are not examined and cross examined by the adjudicating authority, hence, by operation of Section 9D of the Central Excise Act, 1944, said six statements have become irrelevant piece of material, and therefore, have to be eschewed from evidence.
In the instant case the entire case is based on the private records seized from the residence of the employee Shri Anirudha Sutar and office of the Appellant. There is considerable force in the contention of the Appellant that the private records relied upon by the Revenue cannot be a basis to uphold the serious charge of clandestine clearance. It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue in the instant case i.e. “the charge of clandestine clearance” cannot be labeled against the assessee.
The allegation of clandestine manufacture and removal of finished goods by the Appellant made in the Show Cause Notice, is merely on assumption and presumption, without sufficient material evidence corroborating the said allegations - impugned order is set aside - penalty imposed under Rule 26 of the Central Excise Rules, 2002 on Shri Pitabhas Chhotray, Director of the Appellant Company is also set aside - appeal allowed.
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2022 (11) TMI 857
Utilization of carried forward CENVAT Credit - case of the department is that the credit which was carried forward should be lapsed and the same could not have been utilized for the payment of duty - transfer of unutilized credit from one unit to another - HELD THAT:- Reliance placed in the case of M/S MOHIT INDUSTRIES LTD VERSUS COMMISSIONERS OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX-SURAT-II (APPEAL) [2015 (10) TMI 1652 - CESTAT AHMEDABAD] where it was held that The appellant in the grounds of appeal stated before the Commissioner (Appeals) they have maintained records separately against the exempted as well as dutiable finished goods. This fact was not seriously disputed by the Commissioner (Appeals).
Thus, it has been settled that the appellant is entitled to utilize the credit which was carried forward as on 09.07.2004 and it was also settled that the transfer of credit from the silvassa unit to surat unit is correct and legal - since both the issue have been settled in favour of the appellant, the demand in the present impugned orders shall not sustain.
Appeal allowed.
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Indian Laws
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2022 (11) TMI 856
Maintainability of suit - auction of property - fraud established or not - suit was barred in view of Section 34 of the SARFAESI Act - disclosure of all facts - actual area of the secured property put to auction is less than 54 cents - property was put to auction “as is where is” and “as is what is” basis - HELD THAT:- It is required to be noted that after the Bank received the possession of the secured property in exercise of powers under the SARFAESI Act, the property in question admeasuring 54 cents was put to auction, by Auction Notice dated 23.01.2007. The plaintiff on the basis of the representation made and the auction notice in which the land was put to auction was stated to be 54 cents submitted her offer of Rs.32,05,000/for sale of 54 cents. At this stage, it is required to be noted that in the quotation itself the plaintiff specifically stated that the offer of Rs.32,05,000/is subject to the condition that the absolute ownership and vacant possession of full extent of property without encumbrances is handed over - The sale consideration received by the Bank was for 54 cents. That thereafter the sale certificate was registered in the month of October, 2010. Thereafter the plaintiff filed the suit for recovery of damages with respect to 14.40 cents. The final certificate was registered on 01.10.2010 and thereafter when the suit was filed in the year 2012 it cannot be said that the suit was barred by limitation. At this stage, it is required to be noted that as such no issue was framed by the learned Trial Court on whether the suit is barred by limitation or not.
Suit was barred by Section 34 of the SARFAESI Act or not - HELD THAT:- It is required to be noted that the suit was for damages/compensation, with respect to the balance land, which could not have been decided by the DRT or Appellate Tribunal, Section 34 of the SARFAESI Act shall be applicable only in a case where the Debt Recovery Tribunal and/or Appellate Tribunal is empowered to decide the matter under the SARFAESI Act. The plaintiff was not challenging the sale/sale certificate. The plaintiff claimed the damages/compensation with respect to the less area. Therefore, the High Court has seriously erred in holding that the suit was barred by Section 34 of the SARFAESI Act.
Property was put to auction on “as is where is” and “as is what is” basis - HELD THAT:- Considering the fact that the auction notice was for 54 cents; the plaintiff submitted the offer of Rs.32,05,000/for 54 cents; the plaintiff paid the actual amount of sale consideration i.e. Rs.32,05,000/for 54 cents; the sale certificate was issued for 54 cents and even the sale certificate which was registered in the year 2012 was for 54 cents, thereafter it was not open for the Bank to contend that though the Bank had handed over the possession of 34.60 cents still the sale consideration recovered would be for 54 cents. It was not open for the financial institution like the Bank to take such a plea. Even otherwise it is required to be noted that at least in the month of November, 2007 when the Tehsildar submitted the report, the Bank was aware that the actual area is 34.60 cents and not 54 cents. Thereafter the Bank ought not to have issued the sale certificate for 54 cents. The Bank ought to have been fair and ought to have issued the sale certificate only for 34.60 cents. This shows the conduct on the part of the bank.
The High Court has committed an error in allowing the appeal and quashing and setting aside the judgment and decree passed by the learned Trial Court. Consequently, the impugned judgment and order passed by the High Court is hereby quashed and set aside. The judgment and decree passed by the learned Trial Court decreeing the suit is hereby restored - appeal allowed.
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2022 (11) TMI 855
Dishonor of Cheque - vicarious liability of director of a company u/s 141 of NI Act - prosecution under Section 138 of NI Act without the company being arraigned as an accused - Whether a complaint under Section 138 of NI Act would be liable to be proceeded against the director of the company without their being any averments in the complaint that the director arrayed as an accused was in charge of and responsible for the conduct and business of the company?
HELD THAT:- A bare perusal of Section 138 and Section 141 of NI Act indicates that Section 138 of the NI Act casts criminal liability punishable with imprisonment for a term that may be extended to two years or with a fine that may extend to twice the amount of the cheque, or with both on a person who issues a cheque towards discharge of a debt or liability in whole or in part and the cheque is dishonoured by the bank on presentation. While Section 141 extends such criminal liability in case of a company to every person who at the time the offence was committed, was in charge of, and was responsible for the conduct of the business of the company.
This Court has been firm with the stand that if the complainant fails to make specific averments against the company in the complaint for the commission of an offence under Section 138 of NI Act, the same cannot be rectified by taking recourse to general principles of criminal jurisprudence. Needless to say, the provisions of Section 141 impose vicarious liability by deeming fiction which pre-supposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-Section (1) and (2) would not be liable to be convicted on the basis of the principles of vicarious liablity - in view of the fact that neither any effort was made by the petitioner at any stage of the proceedings to arraign the company as an accused nor any such circumstances or reason has been pointed out to enable the Court to exercise the power conferred by proviso to Section 142, to condone the delay for not making the complaint within the prescribed period of limitation.
There are no hesitation in holding that no error has been committed by the High Court in allowing the Writ Petition filed by the respondent no. 2 and quashing the impugned order and the proceedings - appeal dismissed.
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2022 (11) TMI 854
Dishonor of Cheque - acceptance of evidence - acquittal of accused - rebuttal of statutory presumption under Section 139 of the Negotiable Instruments Act - HELD THAT:- The purpose of Section 138 of Negotiable Instruments Act is twofold. Firstly, it shows that even if on any count the negotiable instrument is not honoured by the bank, notice is mandatory to be given to the drawer of the cheque by the payee or the holder about reasons of dishonouring of the cheque and alongwith it, calling upon such drawer by way of demand for payment of the amount of money mentioned in the cheque.
Failure on the part of drawer to comply with the said notice on either way must be considered strictly as such failure is going to affect the drawer in the matter filed under Section 138 of Negotiable Instruments Act. It is so because, Section 138 of Negotiable Instruments Act draws a presumption in favour of the payee or the holder in due course that such cheque was issued for the discharge in whole or in part of any debt or other liability, unless contrary is proved. Such presumption is necessarily to be drawn once it is found that the cheque is issued by the drawer. The words “unless contrary is proved” comes into play only during trial and not at the stage of pre-trial proceedings - when a complaint is lodged under Section 138 of Negotiable Instruments Act and complainant/holder of the cheque produces the material before the Court that such cheque was drawn/signed by the accused, presented within its validity and dishonoured for the reasons stated in the memo issued by the bank and that in spite of issuing notice to the accused, he failed to pay the amount mentioned in the cheque, the Court is bound to draw presumption under Section 139 of Negotiable Instruments Act in favour of the complainant. Only then the accused is required to prove contrary in order to rebut such presumption.
The reasoning of the learned trial Court are totally tangent to the presumptive value of section 139 of Negotiable Instruments Act - The so-called defence raised by the accused during cross-examination of the complainant and her witness, specifically in absence of any reply to the legal notice, cannot be considered as probable defence and certainly not a defence showing preponderance of probability in favour of the accused so as to rebut statutory presumption.
Appeal allowed.
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2022 (11) TMI 853
Dishonor of Cheque - compounding of offence punishable u/s 138 of NI Act - whether after upholding the judgment of conviction and order of sentence passed by learned court below, can this Court proceed to compound the offence or not? - doctrine of merger - HELD THAT:- This Court in GULAB SINGH SHANDIL VERSUS VIDYA SAGAR SHARMA [2017 (3) TMI 1891 - HIMACHAL PRADESH HIGH COURT], while relying upon judgment of Hon'ble Apex Court as well as other Constitutional Courts has already held that court, while exercising power under Section 147 of Act can proceed to compound offence even in those cases, where accused stands convicted.
Since in the case at hand, it is not in dispute that after passing of judgment dated 15.03.2022, parties have entered into the compromise, whereby entire amount of compensation awarded by learned court below has been paid by the petitioner-accused to the respondent-complainant, this Court while exercising power under Section 147 of the Act can proceed to compound the offence.
This court finds no impediment in accepting the prayer made on behalf of the petitioneraccused through instant petition for compounding of the offence and same is allowed - Petition allowed.
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2022 (11) TMI 852
Dishonor of Cheque - insufficient funds - rebuttal of presumption - accused failed to make the payment good within the time stipulated in the legal notice - Section 138 of the Negotiable Instruments Act - HELD THAT:- This Court finds that complainant successfully proved all the ingredients of Section 138 of the Act and since accused despite having received legal notice failed to send any reply to the complainant raising therein dispute with regard to issuance of cheque, if any, in favour of the complainant, there is presumption in favour of the complainant that cheque in question was issued by the accused towards discharge of his lawful liability. Hence, it cannot be concluded that courts below have committed any illegality and infirmity while holding accused guilty of having committed offence punishable under Section 138 of the Act. Moreover, this Court has a very limited jurisdiction under Section 397 of the Cr.PC, to re-appreciate the evidence, especially, in view of the concurrent findings of fact and law recorded by the courts below.
Since after having carefully examined the evidence in the present case, this Court is unable to find any error of law as well as of fact, if any, committed by the courts below while passing impugned judgments, and as such, there is no occasion, whatsoever, to exercise the revisional power.
The present revision petition is dismissed being devoid of any merit and judgments passed by learned courts below are upheld.
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2022 (11) TMI 851
Dishonor of Cheque - insufficient funds - part payment of cheque was claimed to be done - endorsement in the cheque for the part payment - HELD THAT:- It is made clear that the provisions under Section 56 r/w Section 15 of the Negotiable Instruments Act, an endorsement may be made by recording the part-payment of the debt in the cheque or in a note appended to the cheque. When such an endorsement is made, the instrument could still be used to negotiate the balance amount. If the endorsed cheque when presented for encashment of the balance amount is dishonoured, then the drawee can take recourse to the provisions of Section 138. Thus, when a part- payment of the debt is made after the cheque was drawn but before the cheque is encashed, such payment must be endorsed on the cheque under Section 56 of the Act. The cheque cannot be presented for encashment without recording the part payment - When the respondent was recalled, he deposed that now, the petitioner was in due of Rs.65,000/- out of Rs.1,00,000/-. Therefore, the petitioner did not make any payment after issuance of the cheque and before the said cheque was presented for encashment.
The Statute mandates that once the signature(s) of an accused on the cheque are established, then these 'reverse onus' clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. Admittedly, the petitioner did not even send any reply and failed to examine any witness to rebut the presumption.
Toth the Courts below rightly found the petitioner guilty for the offence punishable under Section 138 of Negotiable Instruments Act and sentenced him to pay the fine amount. Hence, this Court finds no infirmity or illegality in the orders passed by the Courts below and this revision is liable to be dismissed - this Criminal Revision case stands dismissed.
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2022 (11) TMI 850
Dishonor of Cheque - insufficient funds - existence of legally enforceable debt or not - reply to demand notices not done - validity of signature on the cheques - rebuttal of presumption - section 138 of NI Act - HELD THAT:- If the entire case is analysed, it can be very well said that the Sessions Judge has come to a right conclusion to reverse the judgment of the learned Magistrate. It is no doubt true that the accused does not dispute the signature on the cheques. It is also a fact that accused did not reply to the demand notice issued by the complainant before filing the complaint. For these reasons, no inference can be drawn that the complainant was able to prove that the accused issued the cheques for discharging the hand loan. The burden is on the complainant to prove that he had lent money to the accused. Mere statement in the complaint that the accused had taken hand loan is not sufficient. The complaint has not disclosed the date of transaction. At least he could have mentioned the year in which he lent money to the accused. In the demand notice also, there is no reference to the date of transaction.
It has come in evidence that the accused just signed the cheque and wrote the amount in figures. PW.1 has admitted that accused himself asked him to write the name and amount in figures. If this part of the evidence is examined in the light of the actual defence taken by the accused, it can be said that the cheques might have been issued at the time when the accused purchased the landed property from the father of the complainant - Accused has stated that the sale talks were held in the year 2003 and at that time he issued the cheques without writing the date, name of the drawee and the amount in words. PW.1 has clearly admitted in the cross-examination that the accused issued two blank cheques and asked him to write all the particulars. So if this answer of PW.1 is considered and examined in the background of Ex.D.1 and D.2, it is possible to draw an inference that probably in the year 2003 itself, i.e., in connection with sale transaction accused might have issued the cheques without writing the name of the drawee and the amount in figures. The accused is a bank employee. If really he issued the cheques in order to repay the hand loan, he himself would have filled up all the particulars in the cheque. So looked in this background certainly a doubt arises in the case of the complainant and there is probability in the defence.
In order to attach presumption to the case of the complainant under section 139 of Negotiable Instruments Act, the complainant's case must prima face appear to be believable. There must be clear reference to the transaction giving rise to legally enforceable debt or other liability. If there are innate defects in the facts pleaded by the complainant, presumption cannot be automatically raised.
The above being the inferences that can be drawn, the Sessions Judge is right in accepting the probability in the defence put forth by the accused and rejecting the complainant's case - Appeal dismissed.
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2022 (11) TMI 849
Dishonor of Cheque - amicable settlement of the matter - compounding of offences - applicability of section 138 and 147 of NI Act - HELD THAT:- Section 147 of the N.I. Act has made every offence punishable under the N.I. Act as compoundable. As such, there is no bar for the parties in the proceeding to compound the offence - Admittedly, in the instant case, the cheque amount is for a sum of Rs. 2,50,000/-, as such, the graded cost would be Rs. 37,500/-.
The parties are permitted to compound the offence under Section 147 of the N.I. Act. The matter is settled as per the terms mentioned in the joint application filed by both side and the petitioner herein who was accused in the Trial Court is acquitted of the offence punishable under Section 138 of the N.I. Act - the present revision petition stands disposed of.
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