TMI Tax Updates - e-Newsletter
November 28, 2020
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Grant of Anticipatory Bail - allegation of illegal input tax credit taken by the M/s Milk Food Ltd. - fake form created for passing fake credit by issuing Bogus invoices - The applicants shall deposit a total sum of ₹ 10 crores, out of the total liability of 85.4 crores, within 10 days from today to the commissioner CGST/ competent Authority - DSC
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Income Tax:
Criminal complaint u/s 276-D - separate criminal complaints u/s 276-C (1) and Section 277 - Seeking clubbing of the three complaints and joint trial - the three complaints in fact are a part of the same transaction. The first complaint has been filed on the assumption that petitioner is holding an undisclosed foreign account and two subsequent complaints are nothing but to arrive at a figure to meet the ingredients of the first offence. The chart given above reveals that the allegations, documents and nature of evidence are same in all the three complaints. In these circumstances, it will be in the interest of justice to have a common trial for all the three complaints. - HC
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Income Tax:
Expenditure incurred toward payment of voluntary retirement compensation of the employees taken over - the expenses incurred by the assessee under the scheme have been incurred solely and exclusively for the purposes of business and are entitled for deduction under Section 37(1) of the Act. - HC
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Income Tax:
Treatment of sales as income from unexplained source - Allegation that Assessee had created a false business with the objective of laundering its unaccounted income is based on the enquiries conducted by the AO under Section 133B - Rule of consistency is a well-established and recognised principle applicable to the Income-Tax proceedings. Pertinently, the Respondent-Assessee had closed his business in July, 2015 after selling all the stocks and the survey carried out at a later stage would not have strong evidentiary value. Besides, all these aspects are completely factual in nature and we are unable to find any perversity in the impugned order. - HC
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Income Tax:
Addition u/s 68 - Unexplained cash credit - It is well settled principle that the repayment of cash credit would not prove the genuineness of cash credit. It is the responsibility of the assessee to prove three main ingredients, viz., identity of the creditor, credit worthiness of creditor and genuineness of the transaction. In the instant case, the assessee has failed to prove the credit worthiness fully and also the genuineness of the transactions. - AT
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Income Tax:
In the absence of any evidence to show either that the sales were sham transactions or that the market prices were in fact paid by the purchasers, the mere fact that the goods were sold at a concessional rate to benefit the purchasers at the expense of the company would not entitle the income-tax department to assess the difference between the market price and the price paid by the purchasers, as profit of the company - AT
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Income Tax:
No notice u/s 143(2) issued - Assessment in the remand proceedings - During the assessment proceedings (second round) under section 143(3) r.w.s. 254 of the Act, the Assessing Officer has issued letter on 13.02.2012 to the assessee to furnish books of accounts, bank statements etc. In response to the said letter the assessee has filed documents and submissions, therefore, the principle of natural justice has been observed during the assessment stage. Therefore, the requirement to issue notice under section 143(2) does not arise - AT
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Income Tax:
Entitlement to cost of improvement and consequent indexed cost of improvement - The assessee’s wife who was holding 50% title on the said land, has not been allowed cost of improvement or indexed cost of improvement by the AO and no further appeal or any other proceedings have been initiated by her accepting the rejection of claim by the AO. No hesitation to hold that the assessee is not entitled for any cost of improvement and consequent indexed cost of improvement. - AT
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Income Tax:
TDS u/s 194C - determination of milling cost paid by the assessee - payments which were made in kind - the property in the by-product was not passed on by the assessee / Procurement Agencies as milling charges, hence, it is held that TDS provisions of section 194C are not attracted in this case. - AT
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Income Tax:
Revision u/s 263 - The vague and illogical show cause notice, the incorrect interpretation of documents by the Ld. Pr. CIT all show the arbitrary manner in which this extraordinary power to revise the order of the AO has been exercised by the Ld. Pr. CIT. - AT
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Income Tax:
Addition on the basis of statement of son as recorded u/s 132(4) - documents as found and seized in search - There is force in the contention of the assessee that without referring to any of the documents was not binding on the assessee and the same cannot be used against the assessee as an evidence and that too in search assessment proceedings. - Additions deleeted - AT
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Income Tax:
Taxability of long term capital gain arising on sale of depreciable asset at 20% instead of 30% - assessee has not made such claim either in the original return of income or through a revised return of income - CIT(A) was not justified in rejecting the claim of the assessee without deciding it on merit. - AT
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Indian Laws:
Dishonor of Cheque - Vicarious liability of Director - The primary liability in a cheque bounce case where cheque has been issued on behalf of the company is upon the drawer-Company. Though the accounts of the drawer company herein are under the control of a Resolution Professional but sword of liability qua cheque issued on behalf of company has been vicariously imposed on the suspended director/petitioner. - The impugned complaint and summoning order are set aside only qua the petitioner/director - HC
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IBC:
Jurisdiction of the NCLT to hear applications under Section 43 after the approval of the Resolution Plan - The fact that the new management can take a decision in respect of any agreement which is deemed to be not beneficial to it also supports the interpretation that after the Plan is approved, the company is completely in the hands of the new management and neither the NCLT nor the RP has any right or power in respect of the said company. As can be seen in the present case, the Corporate Debtor in its new avatar has terminated the agreement with the Petitioner. - The above discussion is only in the context of Resolution processes and would however not apply in case of liquidation proceedings. - HC
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IBC:
Approval of Resolution plan - It is settled position in Law that provisions in a Statute would operate prospectively unless the retrospective operation is expressly provided for. There being no clarification provided to that effect, the amended Regulation 38 cannot be said to have retrospective application. - The approved Resolution does not give differential treatment among the same Class of Financial Creditors merely based on assenting or dissenting Financial Creditors. Thus, the approved Resolution Plan is not discriminatory.- AT
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IBC:
Inclusion of name of applicant in the CoC - related party or not - the Applicant is stepping into the shoes of the Assignor and thereby takes over the right of the Assignor with the onerous crown, which also includes the disadvantage as found in the Assignment Agreement. Thus, if the Assignor of a debt is a Related Party of the Corporate Debtor, as per the ratio laid down by the Hon'ble NCLAT, the Assignee, who is a third party, is also liable to be held as a Related Party of the Corporate Debtor. - Tri
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Service Tax:
Rejection of Declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - In a situation where Designated Committee grants hearing to a declarant when the amount estimated by it exceeds the amount declared by the declarant, then it would be wholly inconceivable that before an application (declaration) is rejected on the ground of ineligibility, no hearing is granted to the declarant.- HC
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Central Excise:
Validity of delayed adjudication of SCN - Inordinate delay of 13 years in adjudication of SCN - We fail to understand when the respondents could wait for 13 long years after issuance of the show-cause notices, there could not have been any earthly reason to proceed at such great speed and pass the order-in-original before the Court could adjudicate on the correctness of the action of the respondents. - Such adjudication proceeding is therefore, held to be invalid - Order quashed - HC
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Central Excise:
Interest on refund - the amount paid as supervision charges - the earlier payment of the supervision charges has been made by a mistaken notion of law - the department cannot be held completely responsible for collection of these amounts. Therefore, in order to balance equities, a notional interest is liable to be imposed - interest @ 3% per annum will be paid from the date of deposit made by the appellant till the date of payment to be made to the appellant by the respondents. - HC
Articles
Notifications
Customs-
41/2020 - dated
27-11-2020
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ADD
Seeks to further amend notification No. 49/2015-Customs (ADD), dated 21st October, 2015 to extend the levy of ADD on imports of “Front Axle Beam and Steering Knuckles meant for heavy and medium commercial vehicles” originating in or exported from China PR, for a period upto and inclusive of the January 31, 2021
GST - States-
CCT/26-2/2018-19/66/1822 - dated
25-11-2020
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Goa SGST
Extends the time limit for furnishing the declaration in FORM GST ITC-04
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CCT/26-2/2018-19/65/1823 - dated
25-11-2020
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Goa SGST
Rescinds the Notification No. CCT/26-2/2018-19/61/1546 dated 21st October, 2020
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11/2020-STATE TAX - dated
27-10-2020
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Kerala SGST
Seeks to amend Notification No. 1/2017- State Tax dated the 6th July, 2017
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10/2020-STATE TAX - dated
27-10-2020
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Kerala SGST
Seeks to prescribe return in FORM GSTR-3B of KGST Rules, 2017 along with due dates of furnishing the said form for October, 2020 to March, 2021
Indian Laws-
CCI/CD/Amend/Comb. Regl./2020 - dated
26-11-2020
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Indian Law
Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2020.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (11) TMI 880
Profiteering - Proceedings before the National Anti-profiteering Authority - section 171 of the Goods and Services Tax Act - main contention of the Petitioner is of violation of the principles of natural justice - It was held by High Court that The term profiteering, under the Act and Rules, is used in a pejorative sense. Such a finding can severely dent the business reputation. The Authority is newly established. Therefore, as a guidance to this Authority, highlighting the importance of fair decision-making is necessary. HELD THAT:- Considering the fact that after the impugned order, the matter has already proceeded before the authority - There is no need to interfere with the present SLP. SLP disposed off.
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2020 (11) TMI 879
Detention of goods alongwith vehicle - expired E-Way bill - HELD THAT:- The learned counsel for the petitioner submits, however, that there is an issue regarding the legality of inclusion of the cess component in the quantification of the amount liable to be paid under Section 129 of the GST Act, the respondents are directed to release the goods and vehicle on the petitioner furnishing a Bank guarantee for the amount demanded in Ext.P10 order. Petition disposed off.
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2020 (11) TMI 878
Decision to be made on petitioner's representation - HELD THAT:- This Court directs the Central Board of Indirect Taxes (CBIC) to decide the petitioner s representation dated 30th June, 2020 along with the additional representation to be made within two weeks, within eight weeks from the date of filing of the additional representation. All the rights and contentions of the parties are left open. Petition disposed off.
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2020 (11) TMI 877
Grant of Anticipatory Bail - allegation of illegal input tax credit taken by the M/s Milk Food Ltd. - fake form created for passing fake credit by issuing Bogus invoices - It is contended by Ld. Defence counsel that despite the fact that adjudication in this case is yet to be carried out despite that accused persons are ready to deposit 10% of the total tentative liability which has been allegedby the department by way of its reply. In support of his averment Ld. Counsel has also relied on the judgment of Hon'ble Supreme Court in C. Pradeeep Petitioners(s) v. The Commissioner of GST and central Excise, Selam and Anr. [ 2019 (11) TMI 659 - SUPREME COURT] HELD THAT:- Admittedly the total amount as liability of the of the applicants is yet to be adjudicated and assessed. Liability which has been raised by the department is the tentative where show cause notice is yet to be issued and adjudication is still due. Such proceeding will take considerable period of time. The firm involved in this case is stated to be a 50 years old firm and applicants are responsible for the running the firm being it s employees at senior positions. Lability is yet to be ascertained, only a tentative availment of ITC of GST has been averred, even as on today it is not sure that the entire amount of ICT has been availed by the accused firm alone as involvement of other firms also been averred. Apart from this, there is nothing on record to show that applicant has been a habitual offender. It has also not been contended that there is any likelihood of their absconding from the country, investigation in this case still at the initial stage and the evidence which is required to be collected during the course of investigation is primarily documentary in nature. The presence of accused can be secured by imposing stringent condition upon the applicant, so that, they may not flee from the investigation and cooperate in the same as and when directed by the department. A sum of Rs ₹ 4.5 crores already deposited out of total sum of Rs ₹ 85.4 crores. Moreover, the purpose of investigation and fixing the liability of the petitioner is to secure the payment of GST, and also to deprecate the false claim of ITC and the object of statute can be secured by directing the applicant to deposit the amount in terms of the liability - The applicants shall deposit a total sum of ₹ 10 crores, out of the total liability, within 10 days from today to the commissioner CGST/ competent Authority In these circumstances, it is directed that in the event of arrest of the applicants namely Naval Kumar, Sanjeev Kothiala, Harmesh Mohan Sood and Sudhir Awasthi, they be released on bail on furnishing personal bond in the sum of ₹ 2 lacs each with surety of like amount to the satisfaction of IO/Commissioner, GST subject to the conditions imposed.
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Income Tax
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2020 (11) TMI 876
Validity of Section 40(a)(iib) - vires of Section 40(a)(iib) - HELD THAT:- The stage at which the appellant approached the High Court and challenged the vires of Section 40(a)(iib) of the Income Tax Act can be said to be an appropriate moment. Therefore, the High Court ought to have decided the issue with respect to the challenge to the vires of Section 40(a)(iib) of the Income Tax Act on merits. The High Court has failed to exercise the powers vested in it under Article 226 of the Constitution of India by not deciding the writ petition on merits and not deciding the challenge to the vires of Section 40(a)(iib) of the Income Tax Act on merits. As the High Court has not decided the issue with respect to vires of Section 40(a)(iib) of the Income Tax Act on merits, the matter is required to be remanded to the High Court to decide the writ petition on merits and decide the question with respect to challenge to the vires of Section 40(a)(iib) of the Income Tax Act on merits. The present appeal succeeds. The impugned judgment and order passed by the High Court is hereby quashed and set aside and the matter is remitted to the High Court to decide the writ petition on merits with respect to challenge to the vires of Section 40(a)(iib) - However, it is made clear that we have not expressed any opinion on merits with respect to legality and validity of Section 40(a)(iib) of the Income Tax Act and we have remanded the matter on the aforesaid ground alone.
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2020 (11) TMI 875
Criminal complaint u/s 276-D - separate criminal complaints u/s 276-C (1) and Section 277 - Seeking clubbing of the three complaints and joint trial - information was received from the Government of France that petitioner is having an account in HSBC Bank, Zurich, Switzerland with the mala fide intention to evade tax and to hide money transactions - HELD THAT:- The petitioner is facing three separate trials in all the three complaints before the same Magistrate for allegedly not declaring the fact of having a foreign account to the Income Tax authorities, though the material and evidence relied upon by the respondent/department is similar in all the three complaints. Whether the petitioner is holding a foreign account or not is a matter of trial in the first complaint and the assumption that he holds an undisclosed foreign account, which forms basis of other two complaints, is also subject matter of trial. The respondent has preferred these complaints on the very same material, evidence and documents and allegations in all the three complaints are to a large extent quite same. The petitioner is, thus, facing three separate trials in all the three complaints before the same Magistrate for not declaring the fact of having a foreign account to the Income Tax Authorities. The ingredients of Section 220 of Cr.P.C. have been defined in Chandni Srivastava Vs. CBI Ors. [ 2016 (2) TMI 1289 - DELHI HIGH COURT] in which it was held that Sec. 220 of the Cr.P.C. permits of one trial even if many offences are committed, if such offences form part of the same transaction, the rationale for such an exception being that in such circumstances, separate trials may lead to conflicting judgments. The three complaints in fact are a part of the same transaction. The first complaint has been filed on the assumption that petitioner is holding an undisclosed foreign account and two subsequent complaints are nothing but to arrive at a figure to meet the ingredients of the first offence. The chart given above reveals that the allegations, documents and nature of evidence are same in all the three complaints. In these circumstances, it will be in the interest of justice to have a common trial for all the three complaints. This petition is allowed. The order dated 30th June, 2018 passed by the Ld. Trial Court rejecting the application of the petitioner for clubbing of the three complaints and joint trial is set aside
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2020 (11) TMI 874
Expenditure incurred toward payment of voluntary retirement compensation of the employees taken over - As per revenue Expenditure not incurred solely and exclusively for the purpose of business - assessee formulated the scheme wherrein sum was paid as retirement benefit to the employees who availed benefit of the scheme not only for past services but also for remaining years of service with the company - HELD THAT:-Scheme was admittedly sanctioned by the Chief Commissioner for the exemption under Section 10(10C) of the Act and it was a contractual obligation and was an ascertained liability. It is also pertinent to mention here that the genuineness of the scheme was not doubted by any of the authorities, rather the same was approved by Chief CIT. CIT(Appeals) as well as the tribunal held that payment of compensation under the scheme was to induce workmen to retire prematurely and the decision of the assessee was purely on the ground of commercial expediency to curtail the expenditure in future and to facilitate for carrying on the business. Thus, the expenditure incurred under the scheme has been treated as revenue expenditure. It is pertinent to mention that Supreme Court in 'EMPLOYERS IN RELATION TO THE MANAGEMENT OF INDIAN CABLE CO[ 1972 (4) TMI 100 - SUPREME COURT] has also held that expenditure incurred by the company under the scheme has to be treated as an item of expenditure incurred by the company on the ground of commercial expediency and the same is allowable under Section 37(1) of the Act. In view of aforesaid enunciation of law by the Supreme Court, the expenses incurred by the assessee under the scheme have been incurred solely and exclusively for the purposes of business and are entitled for deduction under Section 37(1) of the Act. - Decided in favour of assessee.
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2020 (11) TMI 873
Treatment of sales as income from unexplained source - Allegation that, Assessee had created a false business with the objective of laundering its unaccounted income is based on the enquiries conducted by the AO under Section 133B - Assessee had failed to appear in person even after being summoned under Section 131(1) of the Act to clarify the position - HELD THAT:- Quantum figure and the opening stock which stood accepted in the earlier years had to be taken as actual stock available with the Respondent-Assessee - the sales made by the Respondent-Assessee out of its opening stock were not treated as unexplained income, to be taxed as income from other sources. It thus manifests that the learned ITAT has taken into consideration the entire material placed on record including the report of the AO. ITAT has applied the rule of consistency and rejected the enquiry made by the AO in the relevant assessment year. Rule of consistency is a well-established and recognised principle applicable to the Income-Tax proceedings. Pertinently, the Respondent-Assessee had closed his business in July, 2015 after selling all the stocks and the survey carried out at a later stage would not have strong evidentiary value. Besides, all these aspects are completely factual in nature and we are unable to find any perversity in the impugned order. The factual findings recorded by the Income-Tax authorities, have been examined by the last fact-finding authority i.e. the learned ITAT. In absence of any perversity in the impugned order, we are not inclined to entertain the present appeal, which urges questions of law that are entirely resting on findings of fact.
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2020 (11) TMI 872
Capital gain computation - amenities charges claimed by the assessee as part of cost of acquisition of the flat - Stamp duty paid towards cost of acquisition and also the transfer charges paid to the society inclusion - HELD THAT:- This issue had already travelled to the ITAT before. The ITAT had principally agreed with the assessee s claim but had directed the authorities below to examine whether the similar agreement had been entered for amenities by other flat owners. The objection of the authorities below towards the veracity of agreement for the amenities had already been rejected by the ITAT. Upon subsequent enquiry the AO got information that 33 of the flat owners have also entered into such amenities agreements. Despite this information the authorities below disallowed the assessee s claim by holding that the veracity of the same was not established. We note that the veracity of the claim was already established by the agreement already submitted by the assessee earlier which the ITAT has accepted. The matter was only remanded to find out the position of other flat owners. From the enquiry of the authorities below it came to light that 33 other flatters had entered into similar amenity agreement. In such circumstances in our considered opinion the authorities below should have followed the ITAT order and allowed the assessee s claim of amenities charges as part of cost of the position. This position is further fortified that the amenity charges had already been paid and the same was appearing in the balance sheet of the assessee. Accordingly, in our considered opinion the denial of the assessee s claim towards amenities charges paid as part of cost of acquisition is not sustainable. Accordingly set aside the orders of authorities below on this issue and decide the issue in favour of assessee.
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2020 (11) TMI 871
Deduction u/s 80IA - second round of proceedings - AO once again denied the claim of deduction in respect of profits from production of lean gas/processed natural gas at various customer terminals - Whether lean gas was manufactured/produced at the two LPG plants at Vijaipur and Vaghodia and not at customer terminals as claimed by the assessee? - activities undertaken by the appellant at its customer terminals did not constitute manufacture or production of any article or thing , so as to be eligible for deduction under sections 801, 80IA and 80HH or not? - HELD THAT:- As decided in own case [ 2020 (10) TMI 1125 - ITAT DELHI] we are of the considered view the appellant is eligible to the deductions/tax holding u/s 80HH/80I and 80IA of the Act on lean gas at the stage of customer terminals. Claim of deduction in respect of interest on fixed deposits, bonds etc. Interest on employees, loans and advances, interest on customer outstanding and miscellaneous income - HELD THAT:- As decided in own case [ 2020 (10) TMI 1125 - ITAT DELHI] Assessee has produced all the relevant evidence as regards to how the scrap sale is derived from the industrial undertaking. As regards to interest on fixed deposits, various decisions of the Hon ble High Court categorically held that the deduction in respect of interest on fixed deposits under Section 80IA is allowable. The revenue has not pointed out as to why the same should be denied to the assessee. The case laws given by the Revenue in fact reiterate the stand of the assessee. Hence, it is pertinent to remand back the matter to the file of the AO and we direct the Assessing Officer to allow deduction in respect of interest on fixed deposits under Section 80IA - interest on employees loans and advances is concerned, the interest on loan provided to employees in our opinion is inextricably linked to the business of the assessee and constitutes business income eligible for deduction - interest on customer outstanding is profit derived from eligible undertakings and entitled for deduction under Section 80IA/80I, in department s appeal, the issue is covered in favour of the assessee by various decisions of High Court. As regards to miscellaneous income, the said income is inextricably linked to and have first degree nexus with the profits and gains of the eligible undertaking and the same were eligible for deduction. Asset Transfer Agreement - Payment received towards the reimbursement of expenses - first appellate authority set aside the matter to the file of the AO for deciding afresh - HELD THAT:- The Asset Transfer Agreement the total value of assets to be transferred is mentioned which is ₹ 18,13,13,311/-. We further find that on this total value appellant was issued shares of ₹ 10/- each at 18131331. We have carefully considered the computation of additional reimbursement computed by the AO at ₹ 3,01,17,428/-. We find that the AO has simply proceeded by erroneous figures without applying his mind. The actual reimbursement of cost of ₹ 2,68,16,119/- has already been offered therefore in our considered opinion nothing further remained to be added more particularly on erroneous figures and computation. We accordingly direct the AO to delete the impugned addition. Ground No. 5 is accordingly allowed. Provision for guarantee fee payable - Central Government has given guarantee on behalf of the assessee in lieu thereof instructed for levy of guarantee fee @ 1.2% per annum on the outstanding amount of loan - HELD THAT:- C AG made adverse remark and pursuance to which the assessee created the liability. In our considered opinion the assessee has rightly created the liability as such liability was properly ascertainable. We are of the considered view that merely because the assessee was pursuing the matter with the Ministry of Petroleum and Natural Gas the same can not make the liability a contingent liability. Moreover this is not an estimated liability but the same is in line with the office Memorandum F-12 (1)-B/SB/92 dated 4.6.1993 by which the Central Government has instructed for levy of guarantee fee @ 1.2% per annum on the outstanding amount of loan. As per the said OM the guarantee fee was to be levied on the date of guarantee and thereafter on first day of April every year. Considering the facts of the case in totality we are of the considered view that such liability has to be allowed in the year under consideration - direct the AO to delete the impugned addition on account of guarantee fee. Investment allowance u/s 32A - assessee had awarded a contract for laying of HBJ pipeline to consortium led by M/s. Spice Capag. The plant and machinery was put to use before 31.3.1990 and was capitalized during the assessment year 1989-90 - HELD THAT:- The fact is that in the first order of litigation the Tribunal has categorically allowed the claim of deduction u/s 32A of the Act. Though certain verifications were to be done by the AO. However without following the directions of the Tribunal the AO simply repeated the addition. However the first appellate authority after considering the findings of the Tribunal in the first order of litigation allowed the claim of deduction. AO is directed to verify only the aggregate amounts of investment allowance and investment allowance reserve, respectively, claimed by the reliant during this period. If the aggregate amount of reserves created are more than 75% of the aggregate amount of investment allowance claimed by the appellant, the claim of deduction u/s 32A is to be allowed. Accordingly, this ground is allowed in favour of the appellant -No error or infirmity in the directions of the CIT(A) and hence we do not find any reason to interfere with the same
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2020 (11) TMI 870
Addition u/s 68 - Unexplained cash credit - assessee argued that he has repaid the loan taken - HELD THAT:- CIT(A) has analysed entire facts relating to the case, considered the arguments of the assessee and has estimated the agricultural income in a meticulous way. We notice that no material was placed before us to show that the estimate made by Ld CIT(A) is not correct. Instead, the assessee is placing reliance on the returns of income filed by Shri Prabhulingappa subsequent to passing of assessment order, which has been held to be an afterthought by Ld CIT(A). We are of the view that the Ld CIT(A) was justified in taking the above said view in the facts and circumstances of the case. A.R submitted that the assessee has repaid the loan taken from Shri Prabhulingappa subsequently. It is well settled principle that the repayment of cash credit would not prove the genuineness of cash credit. It is the responsibility of the assessee to prove three main ingredients, viz., identity of the creditor, credit worthiness of creditor and genuineness of the transaction. In the instant case, the assessee has failed to prove the credit worthiness fully and also the genuineness of the transactions. Accordingly, in the facts and circumstances of the case, we are of the view that the Ld CIT(A) has taken a reasonable view of the matter - Decided against assessee.
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2020 (11) TMI 869
TP Adjustment - comparable selection - software development services segment of assessee - HELD THAT:- Infosys technologies Ltd directed to exclude from comparability analysis based on the reason of comparable company is having huge brand value.The honourable Bombay High Court in case of CIT versus Pentair water India private limited [ 2016 (5) TMI 137 - BOMBAY HIGH COURT] has held that where comparable has multiple times of turnover over the size of the assessee, same is not comparable. Wipro Ltd s turnover is ₹ 9668 crores against the assessee s total sales and turnover is of ₹ 17 crores. The turnover of the comparable is more than 500 times the size of the assessee - Following case of M/S. PENTAIR WATER INDIA PVT. LTD. [ 2016 (5) TMI 137 - BOMBAY HIGH COURT] we direct the learned transfer pricing officer/assessing officer to exclude Wipro Ltd as a comparable company from the comparability analysis. Persistent Systems Ltd need to be rejected as relying on EQUANT SOLUTIONS INDIA PVT. LTD. VERSUS DCIT, CIRCLE 3, GURGAON [ 2016 (1) TMI 1260 - ITAT DELHI]
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2020 (11) TMI 868
Addition at the rate 20% of expenses incurred by the assessee for services rendered to M/s Cigna TTK during the year - Whether CIT(A) was justified in accepting the claim of the assessee that there was no profit element involved in a transaction wherein the assessee had provided a highly technical and professional services to the other party, that too by utilizing its own funds? - HELD THAT:- Giving that the assessee received development cost for developing and transferring the initial infrastructure to Cigna TTK, the transaction is not expenditure in the hands of the assessee. For the assessee (the recipient of the amount) the provisions of specified domestic transaction would not be applicable. We find that (i) the vendor agreement between the assessee and Cigna TTK has been entered at cost and no income has been earned by the assessee, (ii) there is neither any evidence nor allegation that assessee has received any consideration over and above to what is mentioned in the aforesaid agreement. In the absence of any evidence to show either that the sales were sham transactions or that the market prices were in fact paid by the purchasers, the mere fact that the goods were sold at a concessional rate to benefit the purchasers at the expense of the company would not entitle the income-tax department to assess the difference between the market price and the price paid by the purchasers, as profit of the company. We affirm the order of the Ld. CIT(A) deleting the addition - Decided against revenue.
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2020 (11) TMI 867
Income accrued in India - Taxability of certain receipts by the assessee as Fees for technical services within the meaning of Article 12 of India-Sweden DDTAA read with India-Portugal DTAA (via Protocol) - HELD THAT:- Assessee rendered IT support services but could not furnish proof of correct nature of services with the help of any Agreement etc. The assessee only furnished copies of cf services. This iertain invoices before the authorities below which did not facilitate the correct determination of the nature ossue anent to Walter Tools India Pvt. Ltd. and Dormer Tools India Pvt. Ltd. came up for consideration before the Tribunal for the A.Y. 2013-14 wherein the matter stood remitted to the file of the AO for fresh determination of nature of services. Similar view has been reiterated by the Tribunal in its order for A.Ys. 2014-15 and 2015-16. A copy of this order is available at page 19 onwards of paper book. Since the facts and circumstances of the nature of receipt from three Indian entities in this year are admittedly similar to those of two entities in preceding years, respectfully following the precedent, we set aside the impugned order and remit the matter to the file of the AO for a fresh determination of the issue in accordance with the directions given by the Tribunal for the preceding years.
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2020 (11) TMI 866
No notice u/s 143(2) issued - Assessment in the remand proceedings - Tribunal has remanded the matter back (the same issues which were there during the original assessment proceedings before the assessing officer) to the file of Assessing Officer, with direction to the Assessing Officer and Assessee - whether notice under section 143(2) of the Act is required be issued to the assessee? - HELD THAT:- Tribunal had given specific direction while setting aside and restoring the matter back to the file of the Assessing Officer and the assessee was also asked to furnish documents and explanation on those issues in view of the directions of the Tribunal. The assessment order is to be passed after discussing the details/documents furnished by the assessee therefore, the assessing officer and assessee both were aware about the details/documents and directions of the Tribunal. Hence, there is no need to issue notice under section 143(2) of the Act, as the necessary instructions were given by the Tribunal in its order. Therefore, the requirement to issue the notice under section 143(2) of the Act does not arise. We note that notice under section 143(2) is required when assessee has furnished his return of income under section 139 or in response to a notice under section 142(1) of the Act. Therefore, notice under section 143(2) is not required when the Tribunal has remanded the matter back to the file of Assessing Officer, with certain direction to assessee and Assessing Officer. It is abundantly clear that assessee had himself taken the responsibility to produce creditors to establish identity and creditworthiness, hence the question to issue notice under section 143(2) does not arise. During the assessment proceedings (second round) under section 143(3) r.w.s. 254 of the Act, the Assessing Officer has issued letter on 13.02.2012 to the assessee to furnish books of accounts, bank statements etc. In response to the said letter the assessee has filed documents and submissions, therefore, the principle of natural justice has been observed during the assessment stage. Therefore, the requirement to issue notice under section 143(2) does not arise. Hence, we dismiss the ground no.1 raised by the assessee. Rejection of books of accounts - CIT(A) deleted gross profit addition and upheld the rejection of books of accounts - HELD THAT:- When the books of accounts are rejected then only option available before the Income Tax Officer is to make addition based on estimation, that is, gross profit addition/net profit addition etc, and item-wise addition are not made. We note that ld CIT(A) deleted the addition based on gross profit (GP). Thus, we note that ld CIT(A) has not rejected the books of accounts. We note that it is only a passing reference and contradictory statement made by ld. CIT(A) in his order, as the item-wise additions were upheld by the ld. CIT(A), therefore, books of accounts were not rejected. Based on this factual position, ground no.2 raised by the assessee is dismissed. Addition u/s 68 - HELD THAT:- Assessee has discharged his burden by establishing identity, genuineness as well a creditworthiness. In fact, it was up to the department to make further inquiries in the matter based on the documents and evidences submitted by the assessee, as noted above, but no such exercise has been done by the department. Hence, we delete the addition. Undervaluation of the stock of Cement sheets and Angles - HELD THAT:- The assessee has maintained quantity wise and quality wise day-to-day register which is not disputed by the assessing officer. The assessee has adopted LIFO mode of valuation because these sheets when typically are piled over each other say 50-60 sheets, it results in only the last sheet inwarded as first to be taken out. These sheets were valued at ₹ 180 per sheet considering the fact that they result in unavoidable damage due to fragile nature of the sheets, sheets damaged in transit and it loses some merchandise value. Undervaluation of M.S. angle channels - The valuation adopted by the assessing officer has been based on the last bill of purchases without specifying to which quality it applied. Hence there is no any undervaluation of the stock therefore we delete both the addition in respect of Cement sheets and Angles The instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
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2020 (11) TMI 865
Rejection of books of accounts - Profit estimation - enhancement of profit ratio to 25% as against profit ratio declared by the assessee to the tune of 20% - HELD THAT:- The assessee on its part has not filed complete details , nor stock records were filed as well balance sheet were not filed. The authorities below have detailed in their orders about non submission of records by the assessee. The details called for by the Bench has also not been filed for the profits declared in the preceding years and its acceptability by Revenue for those years. It is important to compare profit ratio declared by the assessee in the earlier years and the acceptability of the same by the Department in those years Assessee was directed by the Bench to file complete details of the profit ratios of the preceding years declared by the assessee and its acceptability by Revenue for those years , but the same is not filed before us rather details of succeeding years are filed - we are remitting the matter back to AO for fresh enquiry as to profit declared by the assessee in the earlier three years and its acceptability by Revenue and if the same were accepted by Revenue in those three years and similar business is carried on by the assessee in the impugned ay, then in that situation, the AO is directed to adopt average of the profits for the last three years or the profits declared by the assessee for the impugned ay which ever is higher - in case suppression is detected by AO keeping in view peculiar/specific facts(evidences) and circumstances in the year under consideration, then the onus is on the AO to bring on record profit earned by other persons in the similar businesses, and then based upon the same, the profit of the assessee be computed by Revenue for impugned ay. Thus, the matter is remitted back to the AO for denovo determination of the issue on merits. Additions being made with respect of income from business of PAAN alleged to have been carried out by the assessee - assessee has demonstrated before the authorities below that the business of PAAN were carried out by his father and not by the assessee - HELD THAT:- The Revenue is not able to demonstrate with evidence that the assessee was engaged in the business of PAAN also and income from the business of PAAN has not been declared by assessee in the return of income filed by assessee with Revenue. The powers of the ld. CIT(A) are co-terminus with the power of the AO and he could have made detailed enquiry to unravel the truth , but no concrete evidence/findings are brought on record to rebut contentions of the assessee that business of PAAN was carried out by his father from the same shop outlet in Civil Lines, Allahabad and the same has been offered for taxation by his father - since no material/evidence is available on record to prove that business of PAAN was carried out by assessee, we hereby delete the Addition made by the AO on account of business of PAAN which was later confirmed by the CIT(A). - Decided in favour of assessee. Addition with respect to advance discount given by M/s Pepsico in the month of August 2007 to the assessee - HELD THAT:- There is no justification offered by the assessee in not offering to tax the said amount of ₹ 5,00,000/- in ay: 2008-09 - there is no concrete argument backed with any evidence submitted by learned counsel for the assessee as to why the additions upheld by learned CIT(A) be not confirmed by us and under these circumstances we find that there is no justification that the said amount of ₹ 5,00,000/- should not be brought to tax in the hands of the assessee for impugned ay: 2008-09 . Thus we hold that ₹ 5,00,000/- is taxable in the hands of the assessee for the impugned ay: 2008-09 under consideration and hence we confirm this additions as were made AO which were later confirmed by learned CIT(A) , and dismiss these ground of assessee.
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2020 (11) TMI 864
Entitlement to cost of improvement and consequent indexed cost of improvement - Assessee jointly owned by the assessee and his wife - HELD THAT:- Structures show boundary wall, gate, windows, fitting etc but it is not clear that this structure is located on the same land which was sold by the assessee and his wife. As we have noted above, the assessee s wife who was holding 50% title on the said land, has not been allowed cost of improvement or indexed cost of improvement by the AO and no further appeal or any other proceedings have been initiated by her accepting the rejection of claim by the AO. No hesitation to hold that the assessee is not entitled for any cost of improvement and consequent indexed cost of improvement. Therefore, this claim of the assessee being not sustainable, stands dismissed. Benefit of section 54F denied as no investment whatsoever has been made in the name of the assessee - HELD THAT:- In this case, the assessee has purchased property in the name of his wife and son we are of the view that the exemption u/s. 54F cannot be denied to the assessee. In view of cases RAVINDER KUMAR ARORA [ 2011 (9) TMI 343 - DELHI HIGH COURT] , we set aside the orders of lower authorities and direct the AO to recalculate the exemption u/s.54F of the Act keeping in view the amount of investment made by the assessee towards purchase of said flat as per provisions of Section 54F. Also see SHRI KAMAL WAHAL [ 2013 (1) TMI 401 - DELHI HIGH COURT]
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2020 (11) TMI 863
Disallowance u/s 14A read with Rule 8D - absence of any exempt income reported by the assessee - CIT(A) deleted the said disallowance - HELD THAT:- No infirmity in the impugned order of the ld. CIT(A) deleting the disallowance made by the Assessing Officer u/s 14A of the Act by holding that in the absence of any exempt income reported by the assessee during the year under consideration, there was no question of making any disallowance u/s 14A of the Act. The same is accordingly upheld on this issue dismissing the appeal of the Revenue.
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2020 (11) TMI 862
TDS u/s 194C - determination of milling cost paid by the assessee - payments which were made in kind - AO observed that the amount need to be increased by the cost of by-product for the purpose of deduction of tax at source - short deduction of TDS - HELD THAT:- As decided in own case [ 2018 (12) TMI 398 - ITAT CHANDIGARH] the property in the by-products comes into ownership of the millers from the very point of coming of it into existence, hence, in this case the assessee were not the owners of the by-products. Another factor for consideration is that the property passed 'in kind' should have some ascertainable and determinable value, which can be taken as part of the consideration paid for the work done. It is the nature of the contract, term of the agreement, the intention of the parties and overall facts and circumstances of the case which are required to be analyzed and considered for determining whether the provisions of section 194C or other similar provisions of the Chapter would be attracted or not in a particular case. As discussed above in detail, since we have held that the property in the by-product was not passed on by the assessee / Procurement Agencies as milling charges, hence, it is held that TDS provisions of section 194C are not attracted in this case. This issue is decided in favour of the assessee
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2020 (11) TMI 861
Assessment made without issuing statutory notice u/s. 143(2) - HELD THAT:- The parties were directed to address their arguments whether a remand back to the ld. CIT(A) would satisfy the grievance as admittedly the fact whether notice u/s. 143(2) was issued or not needs to be verified. Its mere existence on the file cannot be said to meet the legal requirements which position stands well settled by Courts. Both the parties agreed to remand the issue back to the file of the ld. CIT(A). In the interests of justice, a categoric finding has to be available as to whether notice u/s. 143(2) was issued to the assessee or not. Accordingly, the impugned order is set aside in toto and the issues are restored back to the file of the CIT(A) with a direction to pass a speaking order in accordance with law addressing the specific grievance. appeal of the assessee is allowed for statistical purposes.
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2020 (11) TMI 860
Revision u/s 263 - order of AO was erroneous since it had been passed without inquiring on the issue in consideration before him in the proceedings u/s. 147 - assessee having availed contrived losses by resorting to Client Code Modification(CCM) - AO had accepted the generic reply of the assessee and not cared to enquire as to under what circumstances such huge number of edits were required to be done in the client codes - HELD THAT:- The figure has been incorrectly taken as ₹ 11,58,692.40 instead of ₹ 1,15,86,912.40. Further the 'mtm' markings are not the profits earned by the assessee on account of trading in futures and options, but represent the daily settlement of the unsold trades at their prevailing market price. PCIT we find has neither picked up the correct figures from the statement of accounts submitted by the brokers, nor understood what the figures represented and accordingly arrived at an incorrect finding that the assessee had not reflected true profits, running in crores, earned on trading in futures and options. The vague and illogical show cause notice, the incorrect interpretation of documents by the Ld. Pr. CIT all show the arbitrary manner in which this extraordinary power to revise the order of the AO has been exercised by the Ld. Pr. CIT. Issue on which Ld. PCIT has exercised her powers u/s. 263 as per the show cause notice, is too trivial, involving income of ₹ 2.54 lacs only, to justify exercise of the extraordinary power of revision u/s. 263 of the Act, which has grave and serious consequences, to the prejudice of assesses, of relooking into an already concluded assessment. Since we have found the impugned order of the Ld. Pr. CIT u/s. 263 of the Act, to have been passed in an arbitrary manner, without confronting the assessee with the error in the order of the AO, and based on incorrect appreciation of facts, we have no hesitation in setting aside the order of the Ld. PCIT passed u/s. 263 - Decided in favour of assessee.
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2020 (11) TMI 859
Reopening of assessment u/s 147 - Deduction u/s 80IB - Disallowance of difference in opening stock outside the books of accounts - CIT-A deleting the disallowance admission of additional evidence without giving an opportunity to the AO - HELD THAT:- The additional evidence was rightly admitted by the CIT (Appeals) as the copies/documents which were not available during the assessment proceedings were produced at the time of appellate proceedings before the CIT (Appeals). There is a clear finding by the CIT (Appeals) that in the balance sheet of the assessee company as on 31.03.2011 an amount of ₹ 18,85,46,088/- was shown as receivable from M/s. Abhinav Steels Limited. The transfer of inventory of ₹ 6,09,43,809/- was duly recorded in its books of accounts and thus the same cannot be regarded as the stock sold outside the books of accounts. These documents were very well available before the Assessing Officer as well. In the financial statements of the assessee, all these calculations and the inventory specifications were given which was placed before the CIT (Appeals). Since the demerger has taken place on book value, therefore, there is no capital gain/loss as per the provisions of the Income Tax Act. Thus, there is no need to interfere with the finding of the CIT (Appeals). Hence, appeal of the Revenue is dismissed.
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2020 (11) TMI 858
Addition on the basis of statement of son as recorded u/s 132(4) - documents as found and seized in search - HELD THAT:- Addition was made on the basis of admission of assessee s son during the course of search. As contended before us, that all these documents were properly recorded in the regular books of accounts of the persons to which these documents actually pertained. However, we find that the assessing officer did not establish the fact that any of the documents as found and seized was not recorded in the books of accounts of the persons to which these documents actually pertained. Therefore, we find force in the contention of the assessee that without referring to any of the documents was not binding on the assessee and the same cannot be used against the assessee as an evidence and that too in search assessment proceedings. No adverse material was filed by the revenue to controvert the factual submission advanced before us, we direct the assessing officer to delete the addition - Decided in favour of assessee.
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2020 (11) TMI 857
Disallowance u/s. 36(i)(iii) - interest expenditure in respect of interest free advances/payments made by the assessee to different parties - HELD THAT:- The issue is squarely covered by the various decisions of the High Courts as well as of the apex court of the country holding that if the assessee is possessed of sufficient own interest free funds to meet the investments/interest free advances, then, under the circumstances, presumption will be that interest free advances/investments have been made by the assessee out of own funds/interest free funds. Reliance in this respect can also be placed on the decision of the Hon'ble Supreme Court in the case of 'Hero Cycles (P) Ltd. [ 2015 (11) TMI 1314 - SUPREME COURT ] and in the case of 'CIT (LTU) Vs. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] - Thus, as per the settled law no disallowance u/s. 36(i)(iii) of the Act is warranted on this issue. The disallowance made by the AO on this issue is ordered to be deleted. The issue is accordingly allowed in favour of the assessee.
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2020 (11) TMI 856
Commission income for providing accommodation entries of marble sales - HELD THAT:- The assessee is also having two proprietorship concerns from where the assessee has admitted to have issued bills regarding bogus accommodation entries of sale. The Department has accepted this explanation of the assessee that the amount deposited in the bank account of the assessee is on account of bogus accommodation sale entries provided by the assessee to various parties and the assessee has earned only commission income on such deposit. AO as well as the ld. CIT(A) has applied 10% of the total cash deposit as commission income of the assessee by - In the absence of any contrary material the impugned order of the ld. CIT(A) confirmed - Decided against assessee.
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2020 (11) TMI 855
Addition of loss on derivate transactions - CIT-A deleted addition - HELD THAT:- Assessee had initially taken a loan of US$ 61 Lakhs on 04-12-2007, which got closed on 04- 06-2008 and has resulted in a loss of ₹ 1,77,81,500/- during the AY.2008-09 and again for the AY.2009-10, there was another loan of US$ 61 Lakhs on 05-06-2008 and on the closing date i.e., on 05-12-2008, this has again resulted in a loss of ₹ 16,99,460/-. CIT(A) has therefore correctly appreciated the facts of the case and has accordingly deleted the addition made by the AO. Ld.DR has not been able to rebut the findings of the CIT(A) with any evidence to the contrary. In view of the same, we see no reason to interfere with the order of the CIT(A) and the appeal of the Revenue is accordingly dismissed.
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2020 (11) TMI 854
Taxability of long term capital gain arising on sale of depreciable asset at 20% instead of 30% - assessee has not made such claim either in the original return of income or through a revised return of income - HELD THAT:- Assessee did make a claim through submissions that since the asset sold was held for more than three years, the rate of tax as applicable in case of long term capital gain would apply in terms of section 112. Both, the AO and Commissioner (Appeals) have rejected the aforesaid claim of the assessee on the ground that the assessee has not made such claim either in the original return of income or through a revised return of income as provided under section 139(5). The settled legal position as emerges from the decision of the Hon'ble Supreme Court in Goetz India Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] and CIT v/s Pruthvi Brokers and Shareholders Pvt. Ltd.[ 2012 (7) TMI 158 - BOMBAY HIGH COURT] the appellate authority certainly has power and jurisdiction to entertain a fresh claim of the assessee if the relevant fact for deciding such issue are available on record. Therefore, in our considered opinion, Commissioner (Appeals) was not justified in rejecting the claim of the assessee without deciding it on merit. - Grounds raised by the assessee are allowed for statistical purposes.
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2020 (11) TMI 853
Exemption u/s 10(23C)(vi) denied - assessee trust was not registered under section 12A - HELD THAT:- Since these two appeals are filed by the assessee against the orders of the Assessing Officer in denying benefit of exemption claimed u/s.10(23C) of the Act and the very same matter has been gone back to the file of the Chief Commissioner of Income-tax, Coimbatore for reconsideration, the assessment orders passed by the Assessing Officer consequential to rejection of exemption claimed u/s.10(23C) of the Act cannot survive under the law. Therefore, we are of the considered view that appeals filed by the assessee for assessment years 2010-11 and 2012-13 need to go back to the file of the learned Assessing Officer for re-consideration of the issue after the outcome of the proceedings before the Chief Commissioner of Income-tax, Coimbatore regarding eligibility of the assessee for exemption u/s.10 (23C) of the Act. Hence, we set aside the impugned orders and remit both the appeals back to the file of the Assessing Officer and direct him to redo the assessments in accordance with the law.
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2020 (11) TMI 852
Disallowance being ten percent of the claim in respect of travel expenditure u/s. 37(1) - expenditure is not fully supported by proper bills and vouchers and, besides, travel for personal purposes (of the Directors, etc.) could not be ruled out, so that a disallowance, accordingly, at 10% of the claimed sum stands made - HELD THAT:- The primary burden on the assessee afore-stated is for the reason that only it is in the knowledge of the facts of its case, and could therefore substantiate/explain the same. But that does not empower the Revenue to impute, without any factual basis, either absence of supporting bills/vouchers or a non-business purpose. It is only when called upon to demonstrate the business purpose of a travel that it could be said that the assessee has, or has not, been able to prove the same, which would, in that case, be a matter of the evidence/s led and explanation/s furnished. No such exercise has been carried out in the instant case, and the Revenue s charge is, we are afraid, no more than a bald claim. Why, there is in fact even no claim of the expenditure incurred being at a disproportionate or substantial increase over that incurred under the same head in the past. No wonder the ld. Departmental Representative (DR) was unable to answer any of the queries raised by the Bench in this regard during hearing. No hesitation in directing the deletion of the impugned disallowance, and the assessee succeeds. Disallowance of expenditure claimed toward vehicle repair running - HELD THAT:- What is meant thereby is for the personal purposes of the person concerned, so that it becomes an other than business, or non-business expense in the hands of the company claiming the same, disallowable u/s. 37(1) - It is only where the same is contractually provided by the company, and taken into account in computing salary income, i.e., at the perquisite value thereof, of the person/s concerned, that no disallowance on this count, i.e., euphemistically called personal expenditure, could be made in the hands of the employer-company. Revenue is, thus, justified in making a disallowance toward estimated expenditure for such non-business purpose, which, at less than 4% of the total expenditure, seems fairly reasonable, being even otherwise around ₹ 4,000 per month only. No claim of an excess disallowance has in any case been made. The disallowance is, accordingly, upheld, and the assessee fails.
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Corporate Laws
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2020 (11) TMI 851
Restoration of name of the Company in the Register of Companies, maintained by the Registrar of Companies - Section 252 of the Companies Act, 2013 - HELD THAT:- The provision pertaining to the restoration of the name of the Company as provided in Section 252 (3) of Companies Act. I had gone through the report dated 06.07.2020 submitted by Registrar of Companies in the instant appeal. I have also gone through the latest Balance Sheets and Financial Statements of the Company for the year ending 31st March 2019 and also the Income Tax Return Acknowledgment for the Assessment Year 2019-20. I have given careful consideration to the submission made by the learned counsel for the Appellant in regard to the production of NOC etc. This Tribunal is of the opinion that it would be just and equitable to order restoration of the name of the Company in the Register of Companies, in the certain conditions - The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the company has not been struck off from the Register of Companies and take all consequential actions like change of company s status from Strike off to Active (for e-filing) and to intimate the bankers about restoration of the name of the company so as to defreeze its accounts, provided the Appellant Company produce the documents. Application allowed.
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Insolvency & Bankruptcy
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2020 (11) TMI 850
Jurisdiction of the NCLT to hear applications under Section 43 after the approval of the Resolution Plan - Whether an application filed under Section 43 for avoidance of preferential transactions can survive beyond the conclusion of the resolution process and the role of the RP in filing/pursuing such applications? Structure of the IBC 2016 and Role of Resolution Professionals - HELD THAT:- Under Section 31, if the NCLT is satisfied with the Resolution Plan, it shall approve the same which shall be binding on the Corporate Debtor, all its employees, members, creditors, Central and State Governments, including all local authorities to whom dues may be owed, and all other stakeholders and guarantors. The NCLT has to also satisfy itself that the Resolution Plan has sufficient provisions for its implementation. Once a Resolution Plan is approved, the moratorium order under Section 14 shall cease to have effect and the RP shall forward all the records relating to the CIRP and the Resolution Plan to the Board to be recorded on its database. Thus, the role of a RP comes to an end here. Applications for Avoidance Transactions - HELD THAT:- Similar is the situation in respect of undervalued transactions, transactions defrauding creditors and extortionate credit transactions. In the present case however, this Court is only concerned with preferential transactions - A perusal of Section 43, would show that not all transactions with related or unrelated parties would fall within this category. The same is limited by time. In relation to a related party, the transaction would be preferential if it has taken place two years before the insolvency commencement date and if it has put such party in a beneficial position as against other creditors, sureties or guarantors. In case of an unrelated party, the period is one year. Chronology of Events - HELD THAT:- This Court had entertained the writ petition as there were fundamental issues of jurisdiction which were raised by the Petitioner. Vide order dated 23rd August, 2019, parties were directed to seek an adjournment before the NCLT. The said order continues till date - The matter was part-heard, when court hearings had been suspended due to the lockdown caused by pandemic. Thereafter, the matter was reheard in September, 2020. In the meantime, on 26th March, 2020, the erstwhile Corporate Debtor, now managed by Tata Steel Ltd i.e. Tata Steel BSL Ltd. informed the Petitioner that the contract between them expired on 31st March, 2020 and would not be renewed. Findings and Conclusions - HELD THAT:- While the IBC itself does not fix any time limits for filing of avoidance applications in respect of any transactions, the 2016 CIRP Regulations in Chapter X clearly stipulate the structure and methodology for dealing with objectionable transactions. Under Regulation 35A, as amended with effect from 3rd July, 2018, a specific timeline has been provided, by which the RP has to form an opinion if the Corporate Debtor has been subjected to any of the objectionable transactions. The time limit prescribed earlier was 105 days from the insolvency commencement date, which has now been reduced to the 75th day from the insolvency commencement date - A conjoint analysis of Sections 43 and 44 read with the applicable Regulations clearly shows that the assessment by the RP of the objectionable transactions including preferential transactions cannot be an unending process. The examination has to commence on the insolvency commencement date. The RP has to form an opinion by the 105th day (pre-amendment) and 75th day (post-amendment). If the RP comes to the conclusion that the Corporate Debtor has been subject to preferential transactions, the determination has to be made by the 115th day. The RP also has to apply to the NCLT for appropriate relief on or before the 135th day. RP cannot continue to file applications in an indefinite manner even after the approval of a Resolution Plan under Section 31. The role of a RP is finite in nature. He or she cannot continue to act on behalf of the Corporate Debtor once the Plan is approved and the new management takes over. To continue a RP indefinitely even beyond the approval of the Resolution Plan would be contrary to the purpose and intent behind appointment of a RP. The Resolution Professional (RP), as the name itself suggests has to be a person who would enable the resolution. The role of the RP is not adjudicatory but administrative in nature. Thus, the RP cannot continue beyond an order under Section 31 of the IBC, as the CIRP comes to an end with a successful Resolution Plan having been approved. This is however subject to any clause in the Resolution Plan to the contrary, permitting the RP to function for any specific purpose beyond the approval of the Resolution Plan. In the present case, no such clause has been shown to exist. The Resolution Applicant whose Resolution Plan is approved itself cannot file an avoidance application. The purpose is clear from this itself i.e., that the avoidance applications are neither for the benefit of the Resolution Applicants nor for the company after the resolution is complete. It is for the benefit of the Corporate Debtor and the CoC of the Corporate Debtor. The RP whose mandate has ended cannot indirectly seek to give a benefit to the Corporate Debtor, who is now under the control of the new management/Resolution Applicant, by pursuing such an application. The ultimate purpose is that any benefit from a preferential transaction should be given to the Corporate Debtor prior to the submission of bids and not thereafter. The fact that the new management can take a decision in respect of any agreement which is deemed to be not beneficial to it also supports the interpretation that after the Plan is approved, the company is completely in the hands of the new management and neither the NCLT nor the RP has any right or power in respect of the said company. As can be seen in the present case, the Corporate Debtor in its new avatar has terminated the agreement with the Petitioner. The above discussion is only in the context of Resolution processes and would however not apply in case of liquidation proceedings. In the case of a liquidation process, the situation may be different inasmuch as the liquidator may be able to take over and prosecute applications for avoidance of objectionable transactions. The benefit of orders passed in respect of such transactions may be passed on to the Corporate Debtor which may assist in liquidating the company at the final stage. However, that is not the case in the present petition. The order of the NCLT impleading the Petitioner and any consequential orders are liable to be set aside - Petition allowed.
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2020 (11) TMI 849
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - default made by employees of Operational Creditor - existence of debt and dispute or not - HELD THAT:- The intent of Legislature is very vital for interpreting any law, which can be well deduced from the words of Section 8(2)(a) of I B Code existence of a dispute if any . It can be easily inferred that dispute shall not be limited to instances specified in the definition as provided under Section 5(6), as it has far arms, apart from pending Suit or Arbitration as provided Under Section 5(6) of IBC. The IBC is not a substitute for a recovery forum - Section 9 of the IBC makes it very clear for the Adjudicating Authority to admit the application if no notice of dispute is received by the Operational Creditor and there is no record of the dispute in the information utility. Whereas, on the other hand, Section 9 also states that the Adjudicating Authority to reject the application so filed if the Operational Creditor has received a notice of a dispute from the Corporate Debtor . The Operational Creditor cannot take recourse that the payment if any made to the employees were in their personal capacity and not on account of Operational Creditor. As it is a well settled principle under Law of Agency that where an employee does some wrongful act, within the course of his employment, then for that act the employer s liability shall arise. The employee would be liable for the wrongful act he has done, whereas the employer would be liable vicariously for the act due to the principal-agent relationship between the two. In that situation, the aggrieved person is at the choice whether to sue principal or agent or both. Therefore, fraud committed by any of the employees of the Operational Creditor cannot be said to be done in their personal capacity. The Operational Creditor has admitted before the Adjudicating Authority that the Corporate Debtor have made the payment of ₹ 14,17,000/-, saying that those payments were towards the out of pocket expenses incurred during the process of custom clearing of Corporate Debtor s goods - since there was a dispute existing prior to the issuance of Section 8 notice, the insolvency provisions cannot be invoked - Application admitted.
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2020 (11) TMI 848
Approval of Resolution plan - Whether a third party company, i.e. Facor Power Limited (FPL) can be dealt with in a Resolution Plan under corporate insolvency resolution process against the Corporate Debtor 'Ferro Alloys Corporation Limited' (FACL)? - HELD THAT:- The Resolution Professional submits that in accordance with Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulation 2016, (in short CIRP Regulation), two independent valuers were appointed to conduct a valuation of the assets of the Corporate Debtor (including the shares held by the Corporate Debtor in FPL), in order to arrive at the fair value and liquidation value of the Corporate Debtor. Further, a detailed presentation on the Valuation Report was duly discussed with the Members of the erstwhile COC of the Corporate Debtor on 11th November 2019, i.e. before voting on the Resolution Plan took place. It is also important to observe that out of the average liquidation value of ₹ 305 Crores, approximately one-third value i.e. ₹ 95 Crores is attributable to the shareholding of the Corporate Debtor in FPL - thus, it is clear that objection regarding the valuation of shares of Facor Power Ltd (FPL) is also not sustainable. It is pertinent to mention that the shareholding pattern in any company demonstrates the extent of control that a shareholder has and can exercise over the said Company. Hence, even in the absence of such an express provision in Resolution Plan, the Resolution Applicant after taking over the Corporate Debtor is entitled to exercise its right over its subsidiary company - the Appellant s objection regarding the inclusion of the subsidiary company of the Corporate Debtor in the Resolution Plan is not sustainable. Whether the Adjudicating Authority can approve a Resolution Plan which is discriminatory and gives differential treatment amongst the same Class of the Financial Creditors, merely based on assenting or dissenting Financial Creditors? - HELD THAT:- The Amendment to Regulation 38(1) of CIRP Regulations mandates priority in payment to dissenting Financial Creditors. This amendment came into effect on 27th November 2019, i.e. post the approval of Resolution Plan by the erstwhile COC of the Corporate Debtor. Therefore, as on the date of approval of the Resolution Plan by the erstwhile COC, the only requirement under the provision of the Code qua the dissenting Financial Creditors was the payment of the minimum liquidation value, which is duly complied in the present Case - It is settled position in Law that provisions in a Statute would operate prospectively unless the retrospective operation is expressly provided for. There being no clarification provided to that effect, the amended Regulation 38 cannot be said to have retrospective application. The approved Resolution does not give differential treatment among the same Class of Financial Creditors merely based on assenting or dissenting Financial Creditors. Thus, the approved Resolution Plan is not discriminatory. Whether approved Resolution Plan filed by Sterlite Power Transmission Limited is violative of Section 30(2) of the I B Code, 2016? - HELD THAT:- The legal position is well settled that an approved Resolution Plan can deal with the related party claim and extinguish the same which shall ensure that the Successful Resolution Applicant can take over the Corporate Debtor on a clean slate. The related Parties are being kept out to ensure continuity of operation of both FACL and FPL following the provisions of the Code. There are also no substance based on which it can be inferred that the Resolution Plan is not in conformity with the provisions of Code as provided under Sec 30(2) of the Insolvency and Bankruptcy Code, 2016. Appeal dismissed.
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2020 (11) TMI 847
Liquidation of Corporate Debtor - section 33 34 of the Insolvency and Bankruptcy Code, 2016 - exemption of Lockdown period from the filling of the instant application - HELD THAT:- It is found that there is no possibility of receiving any Resolution Plan. Therefore, the CoC has resolved for liquidation of the Corporate Debtor vide its Sixth meeting dated 17.02.2020. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC as observed in K. Sasidhar's case [ 2019 (11) TMI 731 - SUPREME COURT ]. The Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Neuromed Imaging Centre Private Limited - Application allowed.
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2020 (11) TMI 846
Inclusion of name of applicant in the CoC - related party or not - Applicant states that the Respondent/IRP acted in violation of the well established principles of the judicial process - whether this Deed of Assignment was entered to keep bunch of their men in the CoC? - HELD THAT:- The Corporate Debtor was already a sinking ship in a very deep financial crisis. At that point of time, the loan was assigned to the Applicant may be with a foresight to put their men in the CoC Meeting. However, the decision of the Respondent/IRP that Applicant is a Related Party is not challenged in this application. The Applicant states that during the meeting of committee of creditors a biased opinion was formed by the Financial Creditors and the creditors alleged that Gita Power is a Related Party of the Corporate Debtor. Therefore, the Applicant being an assignee of Gita Power is Financial Creditor under the IBC, 2016. As to the present case, it is seen that the Applicant was the Assignee of a loan from the Related Party of the Corporate Debtor and by following the principles laid down in the Judgment of the Hon'ble NCLAT, in Pankaj Yadav Anr. [ 2018 (9) TMI 1223 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] as enumerated in para 7, the rights of the 'Assignee' are no better than those of the 'Assignor', the Applicant is stepping into the shoes of the Assignor and thereby takes over the right of the Assignor with the onerous crown, which also includes the disadvantage as found in the Assignment Agreement. Thus, if the Assignor of a debt is a Related Party of the Corporate Debtor, as per the ratio laid down by the Hon'ble NCLAT, the Assignee, who is a third party, is also liable to be held as a Related Party of the Corporate Debtor. This Tribunal is of the considered view that the Applicant being Assignee of the Loan from the Assignor, is also a Related Party of the Corporate Debtor and as such the Application as filed by the Applicant is liable to the dismissed - Application dismissed.
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Service Tax
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2020 (11) TMI 845
Rejection of Declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - direction to the respondents to consider afresh such application (declaration) as per the scheme - alleged non-payment of service tax dues pertain to the period from April, 2013 to June, 2017 - HELD THAT:- From a conjoint reading of sub sections (1), (2) and (3) of section 127, the picture that emerges is that if the amount estimated by the Designated Committee is equal to the amount declared by the declarant, then the Designated Committee shall issue a statement in electronic form indicating the amount payable by the declarant. However, if the amount estimated by the Designated Committee is higher than the amount declared by the declarant, the Designated Committee shall give an opportunity of hearing to the declarant - Once the determined amount is paid, discharge certificate is issued by the Designated Committee under sub section (8) of section 127. The proprietor of the petitioner in his statement recorded on 11.01.2018 by the investigating authority admitted the service tax liability of ₹ 60 lakhs (approximately) to be outstanding for the period from 2015-2016 to June, 2017. This was corroborated by the departmental authority in the letter dated 24.01.2018 which we have already noted and discussed. Therefore, present is a case where there is acknowledgment by the petitioner of the duty liability as well as by the department in its communication to the petitioner. Thus, it can be said that in the case of the petitioner the amount of duty involved had been quantified on or before 30.06.2019. In such circumstances, rejection of the application (declaration) of the petitioner on the ground of being ineligible with the remark that investigation was still going on and the duty amount was pending for quantification would not be justified. In a case where the amount estimated by the Designated Committee exceeds the amount declared by the declarant, then a hearing is given by the Designated Committee to the declarant before determining the amount to be paid by the declarant. In a situation where Designated Committee grants hearing to a declarant when the amount estimated by it exceeds the amount declared by the declarant, then it would be wholly inconceivable that before an application (declaration) is rejected on the ground of ineligibility, no hearing is granted to the declarant. Matter remanded back to the Designated Committee to consider afresh the application (declaration) of the petitioner dated 12.12.2019 as a valid declaration and grant the consequential relief after giving due opportunity of hearing to the petitioner, who shall be informed about the date, time and place of the hearing. Such decision shall be in the form of a speaking order with due intimation to the petitioner - petition allowed by way of remand.
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2020 (11) TMI 844
Recovery of arrears of duty - Section 121(c) of Finance Act - Validity of circular dated 25.09.2019 - HELD THAT:- The words amount payable has been defined in Section 121 (e) of the Act. It means the amount calculated by the authority as the amount of tax dues less the tax relief. Thus, the amount of tax dues being the amount in arrears in terms of provisions of Section 124(1) (c) read with Section 121(c) of the Finance (No.2) Act, 2019 is the amount of duty which is in arrears as per order in original dated 29.03.2019 i.e. ₹ 1,74,66,374/which has been reflected in the SVLDRS3, by the designated authority who computed the amount of tax relief under Section 124(1)(c) at ₹ 69,86,549.60/. Thus the balance amount as estimated amount payable has been determined at ₹ 1,04,79,824.40. Thus, neither the circular appears to be in breach of the provisions of Section 124(1)(c) or subsection (2) of Section 124 nor the amount estimated as per SVLDRS3 dated 01.02.2020 suffers from any error. As prayed by learned counsel for the petitioner, put up this case in the additional cause list on 25.11.2020 at 02.00 p.m.
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2020 (11) TMI 841
Refund of Excess Service tax paid - rejection on the ground of time limitation - HELD THAT:- Identical issue came up for consideration before the Gwalior Bench of this Court in THE COMMISSIONER, CGST AND CENTRAL EXCISE VERSUS M/S NATIONAL FERTILIZERS LIMITED [ 2019 (8) TMI 1592 - MADHYA PRADESH HIGH COURT] , wherein, while relying on the decision in COMMISSIONER OF C. EX., MUMBAI-II VERSUS ALLIED PHOTOGRAPHICS INDIA LTD. [ 2004 (3) TMI 63 - SUPREME COURT] and M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [ 2019 (5) TMI 657 - SUPREME COURT] it was held that the Tribunal has grossly erred in law in holding that the claim for refund rejected for the reason being time barred, should be treated as within time and the claims are to be processed , which deserves to be and is hereby set aside. Even shifting the burden on the department to find out as to whether the assessee has not passed the burden of tax on the final consumer cannot be countenanced in the given facts of present case. Impugned order set aside - refund is to be allowed - appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (11) TMI 843
CENVAT Credit - input service - Deposit Insurance and Credit Guarantee Corporation to the banks for insuring the deposits of the public - HELD THAT:- The issue decided in the case of BANK OF MAHARASHTRA, BANK OF BARODA (FORMERLY KNOWN AS DENA BANK) , BANK OF BARODA, UNION BANK OF INDIA, STATE BANK OF INDIA VERSUS COMMISSIONER, CGST CX, PUNE-II, COMMISSIONER OF SERVICE TAX-I AND IV, MUMBAI, COMMISSIONER OF CENTRAL EXCISE [ 2020 (10) TMI 300 - BOMBAY HIGH COURT ], where it was held that All the appeals are remanded back to the CESTAT for fresh decision in conformity with the decision rendered by the larger bench. Appeal is remanded back to the CESTAT for fresh decision in conformity with the decision rendered by the Larger Bench - appeal allowed.
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2020 (11) TMI 842
Validity of delayed adjudication of SCN - Inordinate delay of 13 years in adjudication of SCN - whether in the facts and circumstances of the case, such delayed adjudication of the show-cause notices would be just, proper and legal? - HELD THAT:- This Court held that a show-cause notice issued a decade back should not be allowed to be adjudicated upon by the revenue merely because there is no period of limitation prescribed in the statute to complete such proceedings. Larger public interest requires that revenue should adjudicate the show-cause notice expeditiously and within a reasonable period. What would be the reasonable period would depend upon the facts and circumstances of each case but certainly a period of 13 years cannot be termed as a reasonable period. Secondly, regarding keeping the show-cause notice in the dormant list or the call book, this Court held that such a plea cannot be allowed or condoned by the writ court to justify inordinate delay at the hands of the revenue. To accept such a contention would defeat the rule of law itself. Taking cognizance of such an aspect would amount to giving credence to extraneous matters. In any case such a procedure internally adopted by the respondents is not binding on the Court. In the present case, it is evident that the delay in adjudication of the show-cause notices could not be attributed to the petitioner. The delay occurred at the hands of the respondents. For the reasons mentioned, respondents have kept the show-cause notices in the call book but without informing the petitioner. Upon thorough consideration of the matter, we are of the view that such delayed adjudication after more than a decade, defeats the very purpose of issuing show-cause notice. When a show-cause notice is issued to a party, it is expected that the same would be taken to its logical consequence within a reasonable period so that a finality is reached. A period of 13 years as in the present case certainly cannot be construed to be a reasonable period. Petitioner cannot be faulted for taking the view that respondents had decided not to proceed with the show-cause notices. An assessee or a dealer or a taxable person must know where it stands after issuance of show-cause notice and submission of reply. If for more than 10 years thereafter there is no response from the departmental authorities, it cannot be faulted for taking the view that its reply had been accepted and the authorities have given a quietus to the matter. Also, respondents had not taken any action pursuant to the show-cause notices for long 13 years till issuance of notice for personal hearing on 13.08.2019. After the petitioner approached this Court by filing the present writ petition on 06.09.2019 with due intimation to the respondents, respondent No.3 went ahead and passed the order-inoriginal dated 11.11.2019. We fail to understand when the respondents could wait for 13 long years after issuance of the show-cause notices, there could not have been any earthly reason to proceed at such great speed and pass the order-in-original before the Court could adjudicate on the correctness of the action of the respondents. There are no hesitation to hold that respondents were not justified in commencing adjudication proceeding 13 years after issuance of the show-cause notices dated 01.06.2006 and 28.11.2006. Such adjudication proceeding is therefore, held to be invalid - petition allowed - decided in favor of petitioner.
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2020 (11) TMI 840
Refund of amount paid as supervision charges - Interest for the amount paid as supervision charges - Board s circular dated 23.04.2003 - HELD THAT:- It was observed by the board that even though the circular dated 01.01.2002 does not envisage any physical supervision of such storage premises /godown by the Central Excise, the field formations are still collecting merchant overtime charges / charges on cost recovery basis as per earlier concept of physical supervision of godowns / storage places in terms of Board s Circular dated 14.04.1986. Therefore, the board s circular dated 01.01.2002 and the earlier instructions of the State have stood modified to the said extent. Thus, the over-time supervision charges could not have been charged by the respondents. Therefore, the appellant was entitled for refund of the over-time supervision charges. The board s circular dated 24.04.2003 was required to be applied and the refund was to be granted to the appellant. Interest for the amount paid as supervision charges - HELD THAT:- Since the supervision charges were not to be charged by law, the appellant would be entitled for payment of interest on refund of the said amount. However, the earlier payment of the supervision charges has been made by a mistaken notion of law - the department cannot be held completely responsible for collection of these amounts. Therefore, in order to balance equities, a notional interest is liable to be imposed - interest @ 3% per annum will be paid from the date of deposit made by the appellant till the date of payment to be made to the appellant by the respondents. The substantial question of law is answered in favour of the appellant and against the department by holding that the appellant is entitled for refund of the amount paid by him towards supervision charges - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (11) TMI 839
Amnesty Scheme - auction - recovery of arrears of tax - It is the petitioner's contention that this forfeited amount must go to reduce the liability of the petitioner, for the realization of which the Government had resorted to the auction procedure under Revenue Recovery Act - HELD THAT:- The auction steps initiated by the respondents have to be seen as for the purposes of realization of tax dues from the petitioner. It would follow, therefore, that any amount realized by the Government through the auction procedure that was resorted to for the purposes of realization of the dues from the petitioner, must go to reduce the liability of the petitioner to the Government. Although, it is a fact that the auction sale did not materialize, the forfeited amount must be seen as a portion of the sale consideration that the auction purchaser had paid, but which stood forfeited to the Government on account of the default committed by him in making the payment of the balance consideration. The said amounts forfeited to the Government should go to reduce the liability of the petitioner to the State Government. The Ext.P5 amnesty application preferred by the petitioner should be considered as a valid one for the purposes of the amnesty scheme, and the respondent should now act on the same and compute the balance amount payable by the petitioner in accordance with the amnesty scheme - Petition allowed.
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Indian Laws
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2020 (11) TMI 838
Smuggling - Drug Trafficking - petitioner has prayed for bail on the ground that petitioner is innocent and has been falsely implicated - It is submitted that presumption of innocence lies in favour of the petitioner till the guilt is proved beyond reasonable doubt - HELD THAT:- The petitioner Nagary Ally Kombo had directed Chinedu to handover the bag containing contraband to co-accused Kelvin. During investigation of the case, Mobile phones of the petitioner as well as other accused persons were examined and it was revealed that they were in touch and which prima facie shows that they are member of a drug syndicate and involved in the drug trafficking. The accusation in the present case is with regard to commercial quantity. As per Section 37 of the NDPS Act, if a person is accused of enumerated offences under the said provision and in case, the Court proposes to grant bail to such a person, two conditions are to be mandatorily satisfied in addition to the normal requirements under the provisions of the Cr.P.C. or any other enactment. Firstly the Court must be satisfied that there are reasonable grounds for believing that the person is not guilty of such offence. Secondly that person is not likely to commit any offence while on bail. The facts appearing on record prima facie reveal that petitioner is involved in drug trafficking and this Court is of the opinion that there are no reasonable grounds to believe that he is not guilty of offence charged. Huge quantity of Pseudoephedrine weighing 24.5 kg, has been recovered. Moreover, since the charge-sheet prima facie reveals that petitioner is member of a drug syndicate, it cannot be said that he will not commit any offence if released on bail. Thus, appearing on record and nature of offence, no grounds for grant of bail to the petitioner are made out - bail application dismissed.
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2020 (11) TMI 837
Dishonor of Cheque - insufficiency of funds - time limit for presuming service of notice - HELD THAT:- Presumption of service of notice within a reasonable time is to be raised. It should be deemed to have been served at best within a period of thirty days from the date of issuance thereof. Meaning thereby, the reasonable period for presumption of service may be up to 30 days from date of its issuance. Hence, in present case, notice issued was said to be served and it was issued on 18.12.2017. It was sent through speed post and it was deemed to be sufficiently served up to 17.1.2018 and within fifteen days payment was not made. Then after within thirty days this complaint was filed. Hence, apparently this complaint was not time barred. On the basis of statement recorded under Section 200 and documentary evidence given under Section 202 of Cr.P.C., offence punishable under Section 138 of N.I. Act was, prima facie, made out. But learned trial Court has failed to appreciate facts and law, has presumed service of notice within 20.12.2017 and has dismissed complaint. This order is apparently erroneous on the face of it and is under mis-exercise of jurisdiction of learned trial Court. Accordingly, this revision merits its allowance. Revision allowed.
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2020 (11) TMI 836
Dishonor of Cheque - petitioner submitted that, after the institution of the complaint the complainant has paid the entire cheque amount and has collected back the cheque in question, as such, the private complaint filed by him, does not survive - maintainability of complaint - HELD THAT:- When the complaint lodged by the respondent herein is verified, the respondent as a complainant, has narrated the very same alleged facts in his complaint and contended that the accused only with an intention to harass him and for putting him to some difficulty, had secured a withdrawal slip which was unconnected with his Bank account and by forging his signature had filled the cheque for a huge amount by themselves and presented it for its realisation. If the argument of the learned counsel for the petitioner that the learned Magistrate ought not to have taken cognizance in the absence of production of the said cheque by the complainant is verified, the only answer that comes is, in the absence of any material to show that the complainant had paid the cheque amount to the accused and collected the said cheque back, as contended by the learned counsel for the petitioner, it cannot be expected that the complainant was required to produce the alleged cheque along with his complaint in the Court below - the continued argument of the learned counsel for the petitioner that the non-initiating of any criminal case against the present complainant for the offence punishable under Section 138 of N.I.Act, itself would prove that the cheque was returned to the complainant, also is not acceptable, for the reason that, in the light of Annexures-A B and the contents of the complaint at this stage and prima facie, it can be inferred that the accused after giving the reply as per Annexure-B realised that the complainant has given a suitable reply to that notice and he may initiate a legal action against them have now come up with the said defence that the cheque amount of ₹ 25,00,000/- has been paid to them in cash and the cheque has been collected back by the present complainant (respondent). Maintainability of complaint - HELD THAT:- The argument of the learned counsel for the petitioner that, when the Banker has stated that the said cheque was not issued to the complainant, the present complainant/ respondent cannot initiate the present complaint, as such, the present complaint is not maintainable, is also not acceptable, for the simple reason that, when the accused through their legal notice at Annexure-A have alleged that the complainant had issued a cheque for a sum of ₹ 25,00,000/- to them and the same got dishonoured, then the complainant who has taken a defence that the cheque has got nothing to do with him and his signature in the alleged cheque has been forged, gets every right to prosecute the alleged payee in the cheque, in accordance with law - the contention of the learned counsel for the petitioner that the complaint is not maintainable is also not acceptable. There are no reason to hold that there is any possibility of the abuse of process of law or any grave injustice being caused to the present petitioner - petition dismissed.
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2020 (11) TMI 835
Dishonor of Cheque - Vicarious liability of Director - dishonor of collateral security cheques which were issued in discharge of alleged outstanding of a term loan sanctioned by the bank - fundamental argument of learned counsel for the petitioner is that the petitioner cannot be prosecuted for dishonor of cheques, as the liability was that of Company and not of the petitioner as an individual - HELD THAT:- There is merit in the contention of learned counsel for the petitioner. Given the facts of case read with allegations in the impugned Bombay High Court complaint, as an individual Director, petitioner seems to have been wrongly fastened with criminal liability of accused company M/s Supreme Tex Mart Ltd., particularly, after appointment of the Interim Resolution Professional and suspension of the directors under the IBC. It is though not stated in the impugned complaint but on a query of this court, it transpires that petitioner had signed the cheques in question on behalf of the accused company. However, following the appointment of IRP, the petitioner was forthwith suspended to act as Director of the accused company and he was/is thus not in a position to pay or settle on behalf of the company. The primary liability of cheque bouncing in this case is of the accused drawer Company. All accounts are currently since under the control of a Interim Resolution Professional, it would not be fair to impose liability on a suspended Director of the Company. Under the Insolvency and Bankruptcy Code-2016,once an insolvency petition is admitted , the resolution process gets initiated. The existing management automatically gets suspended. The Interim Resolution Professional takes over the operations of the company. Under Section 25 of IBC the Resolution Professional is under mandate to protect and preserve the assets of the corporate debtor company . Subsequent thereto, the committee of creditor is required to submit a resolution plan for approval of the committee of creditors . After such approval, the resolution plan is presented to the Adjudicating Authority - In the premise, due to insolvency proceedings against the accused company and imposition of moratorium, two consequences arise, namely, (a) option to compound a cheque bounce is not available to its directors (erstwhile) and; (b) claims of the creditors have to be submitted before a committee of creditors. The primary liability in a cheque bounce case where cheque has been issued on behalf of the company is upon the drawer-Company. Though the accounts of the drawer company herein are under the control of a Resolution Professional but sword of liability qua cheque issued on behalf of company has been vicariously imposed on the suspended director/petitioner. The impugned complaint and summoning order are set aside only qua the petitioner/director - the complaint proceedings shall continue further against the Company/accused No.1, in accordance with law - Application disposed off.
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