TMI Tax Updates - e-Newsletter
December 3, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA CST, VAT & Sales Tax Indian Laws

Articles

1. LIST OF STAKEHOLDERS TO BE FILED BY LIQUIDATOR IN LIQUIDATION PROCESS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Module wise new functionalities deployed on the GST Portal for taxpayers

2. Income Tax Department conducts search operations on a real estate group in Mumbai and Navi Mumbai Region of Maharashtra

3. Income Tax Department conducts search operations in Pune, Maharashtra

Notifications

GST

1. 37/2021 - dated 1-12-2021 - CGST

Central Goods and Services Tax (Ninth Amendment) Rules, 2021

GST - States

2. F A 3-16/2021/1/V(81) - dated 23-11-2021 - Madhya Pradesh SGST

Madhya Pradesh Goods and Services Tax (Amendment) Rules, 2021.

3. F.12(1)FD/Tax/2021-84 - dated 1-12-2021 - Rajasthan SGST

Amendment in Notification No. F12(56)FD/Tax/2017-Pt-I-55, dated the 29th June, 2017

4. F.12(1)FD/Tax/2021-83 - dated 1-12-2021 - Rajasthan SGST

Amendment in Notification No. F.12(56)FD/Tax/2017-Pt-I-50, dated the 29th June, 2017

5. F.12(1)FD/Tax/2021-82 - dated 1-12-2021 - Rajasthan SGST

Amendment in Notification No. F.12(56)FD/Tax/2017-Pt-I-49, dated the 29th June, 2017

6. F.12(1)FD/Tax/2021-81 - dated 1-12-2021 - Rajasthan SGST

Amendment in Notification No. F.12(56)FD/Tax/2017-Pt-I-40, dated the 29th June, 2017

VAT - Delhi

7. F.10/45/2021-22/SRD/Fin/3221-3231 - dated 1-12-2021 - DVAT

Amendments in the Fourth Schedule of the Delhi Value Added Tax, 2004

Circulars / Instructions / Orders

SEZ

1. K-43014(22)/32/2020-SEZ - dated 2-12-2021

Revised user charges for SEZ-Online services will be as under and would be effective from 15.11.2021

SEBI

2. SEBI/HO/MIRSD/DOP/P/CIR/2021/676 - dated 2-12-2021

Publishing Investor Charter and disclosure of Investor Complaints by Stock Brokers on their websites

Customs

3. Instruction No. 26/2021-Customs - dated 1-12-2021

Import of Sajji Khar/ Pappad Khar.

Highlights / Catch Notes

GST

• Manual Refund Applications Allowed u/r 97A of CGST Rules, Overriding Electronic Filing Mandate in Rule 89.

  Case-Laws - HC : Application for refund filed manually - Since rule 97A contains a non-obstante clause, it is intended to override rules 89 to 97 of the CGST Rules forming part of Chapter X. The plain and simple construction of rule 97A is that despite rule 89 providing for electronic filing of applications for refund on the common portal, in respect of any process or procedure prescribed in Chapter X any reference to electronic filing of an application on the common portal shall, in respect of that process or procedure, include manual filing of the said application - thus, the impugned circular would certainly be applicable to all applications filed electronically on the common portal, but the impugned circular cannot affect or control the statutory rule, i.e., rule 97A of the CGST Rules or derogate from it. - HC
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• GST Applies to Leased Residential Land with Premium; Exemption Limited to Existing Residential Dwellings Only.

  Case-Laws - AAR : Levy of GST - providing residential land on lease basis for which lease premium charged/received - Since the entry grants the exemption to a leased / rented residential dwelling, the benefit is therefore restricted to a residential building which has been let out and does not extend to a parcel of land which has been taken on lease for construction of a residential dwelling on the said land. - AAR
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Income Tax

• High Court Affirms No Grounds for Reopening Assessment u/s 148, Clarified by Circular No.717 on Section 33AC.

  Case-Laws - HC : Reopening of assessment u/s 147 - No doubt this matter has also been set to rest by Circular No.717 issued by the Central Board of Direct Taxes wherein the Board explained the provisions of the amendment made to Section 33AC of the Act. It is clearly stated therein that the deduction prior to the amendment was available to the extent of the total income provided the amount was credited to reserve account and was utilised for the purchase of a new ship within the specified period. - no ground for initiating proceedings under Section 148 - HC
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• Reconditioning Plant Machinery Deemed Revenue Expenditure: No Long-Term Advantage, Only Maintenance Benefit.

  Case-Laws - AT : Nature of expenditure - reconditioning/repair of plant and machinery - so long as only part of the machinery has been replaced as in the instant case to preserve and operate the existing machinery/assets without any enduring advantage, it would be treated as revenue expenditure - expenditure incurred by the assessee for reconditioning of plant and machinery are to be treated as revenue expenditure - AT
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• Assessee Eligible for Income Tax Exemption u/s 11 Due to Society's Section 12A Registration Since 2015-16.

  Case-Laws - AT : Exemption u/s 11 - The society had no other institution other than the present assessee. The society on its own has not claimed any exemption u/s 12A of the Act and in fact had not filed any income tax return separately until it got separate PAN from the assessment year 2015-16. - Therefore, the society and the present institution are one and the same and therefore, the assessee is eligible to get benefit u/s 11 of the Act on the basis of registration granted to the society under section 12A - AT
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• Section 40(a)(ia) TDS Requirements Not Met: Assessee Not Liable Due to Indirect Payment by Bank.

  Case-Laws - AT : Disallowance u/s 40(a)(ia) - the TDS provisions will be applicable only when the services are utilized, respective payments made directly to the service provider. In this case, assessee is only the observer and the respective payments were made by the bank and recovered from the assessee. Therefore, provisions of section 40(a)(ia) of the Act is not applicable in the present case. - AT
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• Section 68 Addition for Unexplained Loans Deleted Due to Sufficient Evidence on Identity and Creditworthiness.

  Case-Laws - AT : Addition u/s 68 - Unexplained loans - the appellant by filing ample documentary evidences sought to justify the identity and creditworthiness of the parties and genuineness of the transactions as entered into with these parties. It seems that the assessee satisfactorily discharged its primary onus cast upon it under Section 68 - Hence, the addition as made to the total income of the appellant under Section 68 of the Act on account of advance received from parties is not sustainable and, thus, deleted. - AT
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Customs

• High Court Upholds Penalty on Customs House Agent for Transporting Prohibited Red Sanders Disguised as Coco Peats.

  Case-Laws - HC : Levy of penalty on CHA - It is clear that the appellant had not discharged these obligations, which cast on him. It is a case where under the guise of Coco Peats, prohibited goods namely, Red Sanders weighing 10.760 MTs. has been transported. The DRI based on the intelligence gathered, had rescued the goods and found the Cargo was transported based on the Annexure-A containing the signature of the appellant Customs House Agent. - the appeals challenging the order of CESTAT deserves to be dismissed - HC
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Indian Laws

• Defendant's Cheque Dishonored: Failure to Rebut Presumption u/s 118 of the Negotiable Instruments Act, 1881.

  Case-Laws - HC : Dishonor of Cheque - Though the defendant has taken a stand that the cheque is issued as a security towards the transaction between the plaintiff and the defendant, since the plaintiff is able to establish supply of materials specified in the purchase order and the defendant having failed to establish alleged short supply/delayed supply, assuming that the cheque was issued towards security, then also the said cheque would attract presumption under Section 118 of the Negotiable Instruments Act, 1881 and the defendant has failed to rebut the presumption under Section 118 of the Negotiable Instruments Act, 1881. - HC
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IBC

• Corporate Debtor's Cheque Dishonor: IBC vs. NI Act in Business Disputes; Genuine Disputes Exempt IBC Provisions.

  Case-Laws - AT : Dishonor of cheque - Corporate Debtor failed to repayment of its dues - business dispute including the disputes with respect of dishonoured of cheques - applicability of provisions of NI Act or IBC - IBC is not intended to be a substitute to a recovery forum and also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked. - AT
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Case Laws:

• GST

• 2021 (12) TMI 63
  Application for refund filed manually - failure to upload Statement 5B along with refund applications - applications returned in terms of Circular No. 125/44/2019-GST dated 18th November 2019 - HELD THAT:- The origin of the impugned circular can be traced to section 168 of the Central Goods and Services Tax Act, 2017, which empowers the Central Board of Indirect Taxes and Customs (hereafter the Board , for short) to issue such orders, instructions or directions to the central tax officers as it may deem fit and thereupon all such officers and all other persons employed in the implementation of the CGST Act shall observe and follow such orders, instructions or directions. There can hardly be any dispute that the said Superintendent was under an obligation to follow the terms of the impugned circular - the said Superintendent failed to appreciate that the impugned circular could not have been ignored on the face of rule 97A, which is equally binding on him in the discharge of his duties. Since rule 97A contains a non-obstante clause, it is intended to override rules 89 to 97 of the CGST Rules forming part of Chapter X. The plain and simple construction of rule 97A is that despite rule 89 providing for electronic filing of applications for refund on the common portal, in respect of any process or procedure prescribed in Chapter X any reference to electronic filing of an application on the common portal shall, in respect of that process or procedure, include manual filing of the said application - thus, the impugned circular would certainly be applicable to all applications filed electronically on the common portal, but the impugned circular cannot affect or control the statutory rule, i.e., rule 97A of the CGST Rules or derogate from it. The impugned circular is clarified and it is observed that its terms shall be applicable only to applications filed electronically on the common portal but would have no applicability to an application for refund which is filed manually - Petition allowed.

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• 2021 (12) TMI 62
  Violation of Principles of Natural Justice - opportunity of personal hearing not granted - HELD THAT:- Even if the provisions are silent for personal hearing, the Principles of Natural Justice mandate a personal hearing - Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 makes it clear that an opportunity of hearing shall be granted wherever a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. These writ petitions are thus disposed at the time of admission considering the fact that the impugned orders dated 01.02.2021 and 12.12.2019 have been passed by the respondents against the petitioners without affording an opportunity of personal hearing to the petitioners. The case is thus remitted back to the respondents to pass appropriate orders after giving an opportunity of personal hearing to the petitioners in terms of Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017. Petition allowed by way of remand.

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• 2021 (12) TMI 61
  Levy of GST - providing residential land on lease basis for which lease premium charged/received - maintenance charges - lease rent received on such residential land - provision of law under which benefit claimed, is not stated - HELD THAT:- In the given facts of the case, even though the applicant has not stated the provision of law or the Entry No. of Notification No. 12/2017-Central Tax (Rate), which has led the applicant or the applicant s customers to believe that GST is not payable on the lease of residential land. It is believed that it shall be injustice if the question remains unanswered because of the short comings in the application. Therefore. in the interest of justice, we are proceeding on premise that the applicant is seeking relief under Entry No, 12 of the Notification. It is well accepted that in the case of ambiguity in a provision of law, the interpretation shall be liberal. However, in the case of an exemption notification, the interpretation shall be strict. In this case, the entry grants exemption to Services by way of renting of residential dwelling for use as residence. It does not refer to land whether as part of the residential dwelling or otherwise. There are many instances, where the legislature, where it intends a separate dispensation for land or specific treatment of land uses the phrase building and land appurtenant thereto . No such phrase has been found in Entry No. 12. In the case of a single unit built on a parcel of land, the land is part of the building and in the case of multiple residential units on a parcel of land, there is share of undivided land that is part of each flat - The building constructed is not considered while decided on the renewal of the lease. Thus, in the case of residential building constructed by the lessee on leased land, it is always the lease of the land that is renewed. The building does not attain the character of a leasehold property. Since the entry grants the exemption to a leased / rented residential dwelling, the benefit is therefore restricted to a residential building which has been let out and does not extend to a parcel of land which has been taken on lease for construction of a residential dwelling on the said land.

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• Income Tax

• 2021 (12) TMI 60
  Addition u/s 69A - disallowance on account of undisclosed money - HELD THAT:- We do not see any reason to interfere with the order impugned. The crux is that there was no evidence found against respondent and no enquiry was carried out by the AO to find out more details and the entire addition has been made on hypothetical basis. ITAT has also accepted the explanation of respondent that initially the said flat, of which the letter was found, was negotiated and sold for a sum of Rs. 59,34,000/- to one Mr. Milind Bhingare and the party had made a token payment of Rs. 1 lakh. The booking was cancelled on the ground that the agreed price was much higher than prevailing market price and Rs. 1 lakh was returned to Mr. Milind Bhingare. Thereafter, Mr. Devendra Singh Tomar approached respondent and negotiated to purchase the flat at Rs. 49,18,000/- which amount the said Devendra Singh Tomar paid in three installments. The said Devendra Singh Tomar has also filed an affidavit giving details as well as proofs of payment. In our view, the conclusions of the Assessing Officer and supported by CIT (A) are all conjectures. Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

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• 2021 (12) TMI 59
  Reopening of assessment u/s 147 - TDS u/s 195 - whether petitioner should have deducted tax at source on 65% being remitted to Reuters UK? - HELD THAT:- Conclusion of the AO for reopening assessment is based on the agreements between petitioner as well as Reuters UK. We have to note that all these agreements were made available to the AO by petitioner when it applied for no objection certificate as noted earlier. ACIT (TDS) had all these documents before him to consider, before issuance of no objection certificate. Even if we interpret clauses in the agreement between petitioner and Reuters UK and for the sake of argument concur with the opinion of Assessing Officer in the reasons recorded for reopening, still the certificate issued by ACIT (TDS) cannot be invalidated when the certificate otherwise satisfy the requirement of Section 197 - Even if we agree with the views expressed and the reasons for reopening, still, determination of ACIT (TDS) is error in law, would not cease to be determination on which assessee could legitimately act and it is not open to the Revenue to hold the assessee liable for short deduction of tax made on the basis of such certificate and that by itself would not enable the Revenue to impose liability on the assessee, who had acted upon the certificate. Moreover to the further affidavit of petitioner filed through one Ojas Chowkshi REUTERS LIMITED VERSUS DY. COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) -RANGE 2 (1) , MUMBAI [ 2015 (9) TMI 844 - ITAT MUMBAI] has concluded for Assessment Year 1997-1998 that petitioner cannot be regarded as being in default when it has made payment to Reuters UK based on the Nil certificate issued by Revenue under section 195 of the Act. It has also held that Reuters UK does not have permanent establishment in India and therefore the distribution fees received by Reuters UK cannot be held to be taxable in India - Even on merits, reasons recorded for reopening cannot be accepted.

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• 2021 (12) TMI 58
  Validity of Reopening of assessment u/s 147 - eligibility of reasons to believe - Notice after expiry of 4 years from the relevant Assessment Year - HELD THAT:- There is not even a whisper that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that year. Failure to disclose would render the notice issued under Section 148 being held as without jurisdiction.

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• 2021 (12) TMI 57
  Reopening of assessment u/s 147 - Notice after expiry of four years from the end of the relevant Assessment Year - eligibility of reasons to believe - excess deduction allowed to petitioner u/s 33AC - HELD THAT:- Reasons disclosed by the Assessing Officer, on the face of it, does not indicate any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It is settled law that in view of the proviso to Section 147 of the Act no action for re-opening after four years could be taken unless the AO has reason to believe that income has escaped assessment by reason to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Admittedly, the period of four years has expired. Even the reasons do not disclose any finding that petitioner had failed to disclose fully and truly all material facts necessary for assessment. The reasons, in fact shows that the conclusion have been drawn from the case record of assessee itself. The entire reasons proceeds on the basis of perusal of details and on perusal of records . It also says that the assessee has wrongly claimed certain amounts as deducted taxable income which has been accepted by the Assessing Officer. Excess deduction u/s 33AC in respect of the dividend income - Scope of amendment - Deduction under Section 33 AC of the Act as it stood in the relevant year was to be allowed on the basis of total income. The Finance Act, 1995, amended the said provisions with effect from 1st April, 1996 to provide that the deduction is to be allowed at 50% of the profits derived from the business of operation of ships (computed under the head Profits and gains of business or profession before making a deduction under that section). The deduction prior to the amendment was available to the extent of the total income provided the amount was credited to reserve account and was utilised for the purchase of a new ship within the specified period. The circular further goes to state that it was noticed that shipping companies had diversified into other activities and are claiming deduction under Section 33AC of the Act even in respect of their income for the activities other than shipping for which there is no justification. Accordingly, it was decided to amend the provisions with effect from 1st April, 1996 to restrict deduction to 50% of the income derived from the business of operation of ships. Therefore, the fact that petitioner has been allowed a deduction under Section 33AC of the Act in respect of income from dividends, long term capital gains and interest, in our view is no ground for initiating proceedings under Section 148 of the Act. - Decided in favour of assessee.

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• 2021 (12) TMI 56
  Seeking issuance of directions to respondents to forthwith rectify Form 3 - allowing credit of all taxes paid/deducted under provisions of Income Tax Act, 1961 in respect of petitioner Assessment for assessment year 2014-15 and refund excess amount with interest to petitioner - HELD THAT:- As petitioner state that thereafter, on the next day Form 3 of the petitioner was rectified and the petitioner was shown to be entitled to get refund of Rs. 6 crores but nothing has been paid till date. Learned Standing Counsel appearing on behalf of the respondents is not in a position to deny these factual assertions. In view of these facts and circumstances, we deem it appropriate to dispose of this writ petition with a direction to the respondents that in case the petitioner is entitled to refund the same be paid to him within 15 days from the receipt of certified copy of this order.

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• 2021 (12) TMI 55
  Non filling revised return online - Time limit to file the revised return u/s 139(5) had expired - delay occurred on account of the time taken to obtain the sanction of the Schemes of Arrangement and Amalgamation from the NCLT - HELD THAT:- The petitioner s revised return was not considered obviously because that is impermissible as the same was not filed electronically - This was in complete disregard to the fact that the order of the NCLT had come on 17.03.2020 and therefore, it was not possible for the petitioner to so do it within time framed as set u/s 139(5) of the Act as the appointed date as per the order of the NCLT is fixed on 01.04.2017, the petitioner would be entitled to file the revised return and in wake of the decision of this Court in case of Babubhai Ramanbhai Patel [ 2017 (7) TMI 744 - GUJARAT HIGH COURT ] the original return u/s 139(1) will pay insignificance and would not survive. The respondent authority therefore not considered the revised return and needs indulgence at the ends of the Court. Resultantly, the assessment which has been finalized shall need to be quashed permitting the respondent to process considering the revised return which has been filed by the petitioner. If it is not filed in an electronic manner as has been reflected in the affidavit-in-reply, he should be permitted to do that by a specific order and granting him reasonable time of minimum one week to so do it. Otherwise, his physical copy which he has dispatched shall be taken into consideration. As a parting note the Court needs to make a mention that the matter has travelled to this Court only because the revised return was not permitted beyond the prescribed time limit as set u/s 139 (5) - Thus, Apex Court in case of DALMIA POWER LIMITED [ 2019 (12) TMI 991 - SUPREME COURT ] has categorically held and observed that Section 119 of the IT Act in such matters also would not be applicable and therefore, when the respondents are desirous of operating in the regimes of electronic mode and faceless assessment, it shall need to improvise the software and allow the revised return more particularly, when the law has been made quite clear by virtue of the direction of the Apex Court. Let the care be taken in improvising the software wherever necessary since its limitations have tendency to swell the Court litigation. The petitioner could have been saved from this ordeal, had such a care taken to permit the revised return in an electronic mode once the direction of the NCLT was communicated along with the decision of the Apex Court.

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• 2021 (12) TMI 54
  Nature of expenditure - reconditioning/repair of plant and machinery - revenue or capital expenditure - HELD THAT:- As from the production chart available it is proved that machine was not operating state in April, 2010; that from the inspection and investment proposal note dated 02.03.2010 it is proved that there was a problem of size variation affecting the repair of the machine; that from the internal production report regarding WMB Internal Grinding machine which was giving problem due to size variation, proposal for overhauling the machine was put up and on the basis of which order was placed with Sharpline Automation for supply of CNC Control panel and to do various jobs at the cost of Rs. 36,35,125/- whereas for purchase of new similar machine of Euro equivalent was costing Rs. 2.98 crores as per quotations available that it was a business decision of the assessee that overhauling old machine for Rs. 36,35,125/- as against cost of new machine of Rs. 2.98 crores is a prudent business decision. In view of order passed by the coordinate Bench of the Tribunal in assessee s own case for AYs 1995-96 to 1999-00 and following the decision rendered in case of Neyelli Lignite Corporation Ltd. [ 2016 (4) TMI 675 - MADRAS HIGH COURT] , we are of the considered view that it was a case of merely overhauling machine by replacing its old parts as it was having problem due to size variation. Overhauling the old machine at less than of 1/6th of its price as a new unit i.e. for Rs. 36,35,125/- as against new unit for Rs. 2.98 crores is a prudent business decision and by overhauling the old machinery, no new asset has been created and as such, these are to be treated as revenue expenses - so long as only part of the machinery has been replaced as in the instant case to preserve and operate the existing machinery/assets without any enduring advantage, it would be treated as revenue expenditure - expenditure incurred by the assessee for reconditioning of plant and machinery are to be treated as revenue expenditure - Decided in favour of assessee.

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• 2021 (12) TMI 53
  Exemption u/s 11 - denial of claim on the ground that the assessee was neither registered before the Registrar of Societies nor registered u/s 12A - HELD THAT:- The parent body Raebareli Polytechnic Association has been granted the registration u/s 12A of the Act vide order of the CIT, Faizabad - This registration u/s 12A to the society has been given on the direction of the Tribunal and the CIT, Faizabad, while allowing registration to the assessee, has mentioned in the order that the registration granted to the assessee is subject to the outcome of order of the appeal filed by the Revenue in the Allahabad High Court. The society had no other institution other than the present assessee. The society on its own has not claimed any exemption u/s 12A of the Act and in fact had not filed any income tax return separately until it got separate PAN from the assessment year 2015-16. Therefore, the society and the present institution are one and the same and therefore, the assessee is eligible to get benefit u/s 11 of the Act on the basis of registration granted to the society under section 12A - we find that the assessee has been getting exemption u/s 12A from assessment year 2010-11 onwards. The copies of assessment orders, passed u/s 143(3) - Such exemption has been granted to the assessee on the strength of registration granted to the society u/s 12A of the Act. Therefore, keeping in view the fact of consistency also, the assessee is entitled to exemption u/s 11 - Decided in favour of assessee.

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• 2021 (12) TMI 52
  Estimation of income - bogus purchases - CIT-A estimating profit @12.5% on alleged bogus purchases - HELD THAT:- Assessee is trading in fabrics and that the purchases made from the aforesaid five suppliers were in respect of purchases of fabrics. It is not in dispute that the sales made out of purchases made from aforesaid five suppliers were not doubted by the Revenue. It is not in dispute that purchase of fabrics does not get eligible for levy of VAT. Hence, the profit element to be estimated on the value of ingenuine purchases should certainly exclude the VAT portion in the instant case and only incidental benefit that assessee derives by making purchases out of cash in the grey market should be ultimately brought to tax. As relying on M/S. MAX REALITIES LLP [ 2021 (8) TMI 861 - ITAT MUMBAI] we direct the ld. AO to add only 1% of value of ingenuine purchases - Appeal of the assessee is partly allowed.

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• 2021 (12) TMI 51
  Revision u/s 263 by CIT - Bogus purchases - disallowance at 20% of such bogus purchases - HELD THAT:- As in the facts and situation wherein bogus purchases were made and they were consumed, the Hon ble Jurisdictional High Court has held 10% addition of such bogus purchases to be reasonable, whereas, in this case, the AO in the assessment order has made disallowance at 20% of such bogus purchases which is more than that held by M/S. PARAMSHAKTI DISTRIBUTORS PVT. LTD. [ 2019 (7) TMI 838 - BOMBAY HIGH COURT] . In such scenario, there should not be any grievance of the Revenue and revisionary jurisdiction assumed by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Act is therefore uncalled for. Accordingly, we hold that the order passed by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Act is not valid in law under the given circumstances. Hence, we allow the appeal of the assessee.

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• 2021 (12) TMI 50
  Estimation of income - Bogus purchases - e stimation of profit element - HELD THAT:- We agree with the view of the lower authorities that there should be an estimation of profit element from these purchases and should be estimated reasonably as the assessee could not conclusively prove that the purchases made are from the parties as claimed, especially in the absence of any confirmations from them. Taking the totality of facts and circumstances, keeping in view the nature of business of the assessee i.e., Trading in Ferrous and Non-Ferrous metals and the submission of the Ld. Counsel for the assessee that the benefit what the assessee got by way of VAT is 4% and the probable profit element may be adopted at 1% totaling to 5%, it would be justified if the profit element embedded in those purchases are estimated at 6%. We direct the Assessing Officer to estimate the profit element from the non-genuine purchases at 6% and restrict the disallowance of purchases to 6% and compute the income accordingly - Appeal of the assessee is partly allowed.

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• 2021 (12) TMI 49
  Disallowance on account of an expenditure incurred with respect to leave encashment - As submitted that since the learned CIT(A) remitted this issue back to the file of the Assessing Officer to verify the claim of the assessee and he directed only payment made by kochi unit - HELD THAT:- This issue has already remitted back to Assessing Officer and this issue requires factual verification, we direct the Assessing Officer to verify the payments made by the assessee for all the units during this year. Needless to say that an opportunity may be granted to the assessee to submit in detail and we direct the Assessing Officer to allow the payments made during this assessment year including Rasayani and Kochi Unit. If found credible, proper deduction may be allowed. Accordingly, the ground raised by the assessee is allowed for statistical purposes. Disallowance u/s 40(a)(ia) - As submitted said amount is nothing but the reimbursement made to the bank - HELD THAT:- It is clear that no doubt the charges were ultimately collected from the assessee but the services were provided exclusively for the purpose of securing the mortgage property assigned to the bank. The services were assigned and respective payments were made by the bank directly. Since, the assessee is neither appointed the consultant nor paid the consultancy charges to them. Therefore, the TDS provisions will be applicable only when the services are utilized, respective payments made directly to the service provider. In this case, assessee is only the observer and the respective payments were made by the bank and recovered from the assessee. Therefore, provisions of section 40(a)(ia) of the Act is not applicable in the present case. Accordingly, the ground raised by the assessee is allowed. Disallowance being interest expenditure treating the same as prior period expenses - HELD THAT:- We find that in similar situation in the case of Saurashtra Cement Chemical Industries Ltd [ 1994 (10) TMI 30 - GUJARAT HIGH COURT ] as decided the issue in favour of the assessee as held that the true profit and gain of a previous year are required to be computed for the purpose of determining tax liability. The basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expenses relates, the mercantile system does not call for an adjustment in the books of account on estimate basis. It is actually known income or expenses, right to receive or liability to pay which has come to be crystallized is to be taken into account under mercantile system of maintaining books of account. An estimated income or liability, which is yet to be crystallized, can only be adjusted as contingency item but not as an accrued income or liability of that year. Thus, the Tribunal was not justified in holding that the impugned expenditure was not allowable in the relevant previous year on the ground that the liability had arisen in the earlier year. Addition on account of repairs and maintenance - AO observed that assessee has not submitted any evidence to prove that these are of current year consumption, accordingly, he made addition - CIT(A) sustained the additions made by the Assessing Officer - HELD THAT:-. Even before us, the learned AR has not submitted any relevant document to prove that material consumption relates to current assessment year. Accordingly, these grounds of appeal are dismissed.

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• 2021 (12) TMI 48
  Addition u/s 68 - Unexplained loans - onus to establish the creditworthiness of the investor companies - none attended on behalf of the companies imparting loans in the enquiry to examine third party or verify the genuineness or creditworthiness of the loan providers could not be done and the loan providers have been found to be fake and not in existence - HELD THAT:- It appears from the records that the assessee received loans from all the parties through account payee cheques. Confirmation in respect of loans as received by the assessee was also obtained and placed before the Ld. CIT(A). The PAN of loan creditors, the copy of Income Tax Return, the Bank statement, Master records and balance sheet of those parties were duly placed before the CIT(A). Thus, the assessee has properly discharged its onus by providing the identity, creditworthiness and genuine of the unsecured loans as received. While confirming the addition made by the Ld. AO relying upon the Remand Report the Ld. CIT(A) observed that the investor companies has not established the source of funds from which the investment was ultimately made. Further that he has relied upon a judgment passed in the matter of NRA Iron Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] and came to the finding that the onus to establish the creditworthiness of the investor companies was not discharged by the assessee; the entire transaction made in that particular matter seemed bogus and lack credibility. AO though initiated enquiry but was not been able to proceed further since no one appeared on behalf of the investor companies and, therefore, finally the addition was confirmed. In the instant case by producing various documents the appellant had proved that balance of convenience was in its favour. Considering the entire aspect of the matter we find no rational for sustaining the addition made to the total income of the assessee on account of advance received from these parties solely on the reason that notices issued u/s 133(6) of the Act either not served or no reply was received in response to such notices - the appellant by filing ample documentary evidences sought to justify the identity and creditworthiness of the parties and genuineness of the transactions as entered into with these parties. It seems that the assessee satisfactorily discharged its primary onus cast upon it under Section 68 - Hence, the addition as made to the total income of the appellant under Section 68 of the Act on account of advance received from parties is not sustainable and, thus, deleted. Hence, assessee s appeal is allowed.

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• Customs

• 2021 (12) TMI 47
  Levy of penalty on CHA - Enhancement in the quantum of penalty u/s 114(i) of the Customs Act - export of prohibited goods by mis-declaration - Red Sanders - authorities have failed to properly appreciate the facts and circumstances of the case - HELD THAT:- The Customs House Agents Licensing Regulations, 2004 is nothing but supporting legislation passed in exercise of the powers conferred by sub-section 2 of Section 146 of the Customs Act, 1962. The role and responsibility of the Customs House Agent in case of mis-declaration of goods has to be dealt with based on mens rea to the contribution of the Customs House Agent allowing the smugglers to misuse the licence issued to him. In the present case, Red Sanders has been stealthily exported to Malaysia in a Container bearing No.VMLU 3200873 covered under Shipping Bill No.1955099, dated 09.07.2008 along with Annexure A signed by the appellant herein. It is admitted by the appellant that the blank signed Annexure A was handed over to his employee one Ravi working at Tuticorin. The very admission itself is sufficient to hold that the appellant was reckless and negligent in using his Customs House Agent Licence. The declaration of goods found in the shipping bill hold sway by Annexure A. In a scheme of conspiracy, the Customs House Agent cannot escape from liability pleading ignorance of the transaction - Plea that action against the erring Customs House Agent can be initiated only as per the procedure under CHALR 2004 and not under Section 114(i) of the Customs Act is baseless argument. It is clear that the appellant had not discharged these obligations, which cast on him. It is a case where under the guise of Coco Peats, prohibited goods namely, Red Sanders weighing 10.760 MTs. has been transported. The DRI based on the intelligence gathered, had rescued the goods and found the Cargo was transported based on the Annexure A containing the signature of the appellant Customs House Agent. Customs House Agent is governed by the Regulations framed by the Government in exercise of the powers conferred under the Customs Act, 1962. Therefore, misdeclaration of goods and attempt to export such goods is punishable under Section 114 of the Customs Act - The licence issued to the Customs House Agent under conditions not to commit any grave offence. If action under the Regulations not sufficient for the grave offence, the Customs House Agent is liable also to be proceeded under the Customs Act. There is no legal impediment to proceed against the Customs House Agent under the Customs Act besides action under the Regulations. There can be no excessive exercise of power in imposing penalty of Rs. 5,00,000/-. Hence, this Court holds that the appeals challenging the order of CESTAT deserves to be dismissed - Petition dismissed.

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• Corporate Laws

• 2021 (12) TMI 46
  Seeking restoration of the name of the struck off company in the Register of Companies maintained by the Registrar of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- On perusal of the balance sheet for the year ended on 31.03.2020, it is noted that the company has share capital of Rs. 100,000/-; cash and cash equivalents is Rs. 59,355/-. It is considered just and proper to restore the name of the company in the Register of Companies, from date of its striking off subject to payment of cost for non-compliance of rules relating to filing the Statutory Returns and Audited Financial Statements. The Registrar of Companies, Hyderabad, Telangana, the respondent herein is directed to restore the original status of the applicant/Company as if the name of the applicant/company has not been struck off from the Register of Companies with resultant and consequential actions like changing status of Company from Struck off to Active. The name is restored - application allowed.

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• Insolvency & Bankruptcy

• 2021 (12) TMI 45
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The Respondent extended a loan facility for an amount of INR 5,50,00,000/- to SN Jee Build Well Pvt. Ltd. (Corporate Debtor) by entering into a Loan Agreement dated 02.08.2013 - It is also admitted fact that the Respondent through its advocate issued a legal notice to the Corporate Debtor on 25.10.2019 (at page 138 to 142 of the Appeal Paper Book) demanding the unpaid amount. Admittedly, neither any reply to the said notice nor any payment has been received by the Respondent. The Ld. Adjudicating Authority in para 24 of the impugned order rightly taken note of the fact and also the fact that the Forensic Audit Report, the Auditor has admitted this fact that the fund of Rs. 375 lakhs were received from the Indian Delco Private Limited and it is also admitted that out of that amount Rs. 150 lakhs were properly utilized in the Company. There is no illegality committed by the Ld. Adjudicating Authority while passing the impugned order - Appeal dismissed.

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• 2021 (12) TMI 44
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT:- There is overwhelming material on record to come to the conclusion that there was dispute between the parties since prior to issuance of Demand Notice on 13.09.2017. The learned Counsel for the Appellant has placed much reliance on Certificate dated 16.04.2015 issued by Rajya Vidyut Utpadan Nigam Ltd. The certificate mentions that Appellant has carried out erection work conveying System vide supplementary work order through M/s Indure Pvt. Limited. The above Certificate cannot wipe out the inter-se dispute between the Corporate Debtor and the Appellant, who is sub-contractor of Corporate Debtor. On the strength of Certificate dated 16th April, 2015, the emails and letters, which were issued by the Respondent to the Appellant pointing out various deficiencies in service, cannot be overlooked and no conclusion can be arrived that there was no dispute between the Corporate Debtor and the Appellant. Whereas, to the contrary many disputes have been referred to in reply to the Demand Notice and in reply to Section 9 Application, which have been considered by the Adjudicating Authority. No error has been committed by the Adjudicating Authority in not entertaining the Application on the ground of pre-existing dispute. It is made clear that the rejection of Application under Section 9 of the IB Code shall not preclude the Appellant to raise his claim for payment of bills, if any, in accordance with terms and conditions of the work order. Appeal dismissed.

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• 2021 (12) TMI 43
  Dishonor of cheque - Corporate Debtor failed to repayment of its dues - business dispute including the disputes with respect of dishonoured of cheques - applicability of provisions of NI Act or IBC - Appropriate forum for recovery of dues - HELD THAT:- It cannot be said that the transaction erupted only in the year 2017 between the parties seems there is a long term relationship between the parties but because of delayed supplied material against February 2017 PO, thereafter, hold on supply against PO of April 2017 enunciated difference and dispute between the parties which includes sub-standard supply of material by the OC to the CD and delayed supply resulting into disruption of production to the CD due to the default of OC. In any case, these are business dispute including the disputes with respect of dishonoured of cheques which are regulated as per provisions of The Negotiable Instruments Act, 1881 . All these disputes are of civil nature and needs to handle under the relevant commercial laws . Section 9 can be initiated only if, there is a debt legally liable to be paid to the OC, there must be default by the CD and the invoices/dues are undisputed - it is further reiterated that Section 9 of the Code can be enforced only the Debt is due and payable in law. There is a default by the CD and there is no notice of dispute. Reference is invited to the Hon ble Supreme Court in TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED VERSUS EQUIPMENT CONDUCTORS AND CABLES LIMITED [ 2018 (10) TMI 1337 - SUPREME COURT] where it is already held that IBC is not intended to be a substitute to a recovery forum and also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked. Appeal dismissed.

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• PMLA

• 2021 (12) TMI 42
  Money Laundering - proceeds of crime - possession of movable and immovable properties and pecuniary resources, disproportionate to the known source of income - predicate offence - Sections 13(2) r/w 13(1)(b) of Prevention of Corruption Act and Section 109 of IPC - HELD THAT:- The writ petitioners presume the impugned summon is for provisional attachment. Through this summon, the documents and details are sought from the petitioners in connection with investigation and there is no indication in the said summon that the authorities has reason to believe that the writ petitioners are in possession of proceeds of crime and same if not attached immediately, it will likely to frustrate proceedings under the PMLA. Even otherwise by virtue of second proviso to Section 5(1)(b) of the PMLA, the respondent has the competency and jurisdiction to issue the impugned summon. Unless final report in the predicate offence is filed, proceedings under the PMLA cannot be initiated is the second fallacy in the petitioners submission. After the insertion of Explanation to Section 44 and the second proviso to Section 5 (1) (b) of the PMLA, it is made clear in the statute that the proceedings under the PMLA not dependant to the predicate offence. Soon after registration of a schedule offence case, the authorities under the PMLA can act upon and register case under the PMLA, for money-laundering and also provisionally attach the proceeds of crime. Under first proviso to this Section in ordinary circumstances, the authorities shall wait till the filing of final report under Section 173 Cr.P.C. in the predicate offence. In extraordinary circumstances if the authority has reasons to believe that non-attachment of the suspected proceeds of crime will frustrate the proceeding under the PMLA, the authority need not wait for the schedule offence agency to file their final report, but shall proceed even prior to filing of final report by virtue of second proviso. Though the respondent has jurisdiction to issue summon, since the summon not being in the format prescribed under the statute and the deviation is prejudicial to the petitioners, the respondent is directed to issue fresh summons as per Form-V, fixing any future date for production of documents and other particulars. On receipt of the summons, the writ petitioners shall appear and produce the documents and particulars sought under the summons. In view of disposal of the Writ Petitions filed to quash the impugned summon issued by the respondent, the applications, filed to amend prayer for a Writ of Certiorarified Mandamus, seeking to quash the impugned summon issued by the respondent, and consequently, direct the respondent not to issue summon in any other future dates till the final report under Section 173 of Cr.P.C. is filed before the Competent Court by the Vigilance and Anti-Corruption Wing, Madurai, is preposterous and not maintainable, accordingly, dismissed - Petition dismissed.

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• CST, VAT & Sales Tax

• 2021 (12) TMI 41
  Non-deposit of C-Forms - application under Order I Rule 10 of the CPC - HELD THAT:- As per Order I Rule 10(2) of the CPC, the Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out. In MUMBAI INTERNATIONAL AIRPORT PVT. LTD. VERSUS REGENCY CONVENTION CENTRE HOTELS PVT. LTD. ORS. [ 2010 (7) TMI 1159 - SUPREME COURT] the Supreme Court stated that the general rule in regard to impleadment of parties is that the plaintiff in a suit, being dominus litis, may choose the persons against whom he wishes to litigate and cannot be compelled to sue a person against whom he does not seek any relief. The impleadment of a party can be on the basis that it is a necessary or a proper party to the proceedings. A necessary party is one against whom the plaintiff seeks relief or in whose absence an effective decree cannot be passed. A proper party is one against whom relief may not be sought but whose presence is essential for the determination of the questions involved in the suit. A reading of the clauses of the agreement between the respondent no.1/plaintiff and respondent no.2/defendant no.1 clearly demonstrates that the said agreement was on a principal-to-principal basis and the liability to make payment towards the goods supplied was that of the respondent no.2/defendant no.1. Clause 4 of the said agreement specifies that it is the respondent no.2/defendant no.1 who shall be responsible for default in the deposit of C Forms to the respondent no.1/plaintiff, even if the forms could be submitted by the respondent no.2/defendant no.1 or petitioner/defendant no.2 - taking into account the pleadings of the respondent no.1/plaintiff before the Trial Court and the conduct of the respondent no.1/plaintiff before this Court, it is found that neither was any relief sought by the respondent no.1/plaintiff against the petitioner/defendant no.2 nor was there a cause of action pleaded in respect of the petitioner/defendant no.2. The petitioner/defendant no.2 is neither a proper nor a necessary party to the suit. Accordingly, there is a manifest error in the impugned order passed by ADJ, which warrants interference by this Court under Article 227 of the Constitution of India. The only person interested in impleadment of the petitioner/defendant no.2 is the respondent no.2/defendant no.1 in order to avoid/reduce its liability, which may arise under the suit. The impleadment of the petitioner/defendant no.2 is not necessary to decide the issues raised in the plaint - Petition allowed.

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• Indian Laws

• 2021 (12) TMI 40
  Dishonor of Cheque - delayed supply of products specified in the purchase order - territorial Jurisdiction - whether the Commercial Court in Bengaluru has no territorial jurisdiction to entertain the suit on the premise that the cause of action has arisen in Delhi and the Courts in Delhi alone have the jurisdiction to entertain the suit? - HELD THAT:- The cheque was issued by the defendant company towards purchase of materials from the plaintiff. Now, the question that needs to be answered is whether all the materials were supplied to the defendant or not? The answer to this question is found in Ex.P9(a) i.e., the email sent by the defendant wherein the defendant has admitted that the issue relating to the software is resolved - From the above said communications, there is no difficulty to hold that hardware and software were delivered in time. The defendant had requested the plaintiff to hold the cheque for few more days. In the next email, the defendant has requested not to present the cheque on the premise there is delay in delivery of complete licenses. It is also relevant to note that the contract for supply of materials between the plaintiff and the defendant is at Ex.P3. This document does not stipulate any time limit for the plaintiff to supply the goods. The plaintiff has established supply of the products to be within time. The defendant has failed to establish short/delayed supply of materials. Thus, the defendant cannot evade the liability. Though the defendant has taken a stand that the cheque is issued as a security towards the transaction between the plaintiff and the defendant, since the plaintiff is able to establish supply of materials specified in the purchase order and the defendant having failed to establish alleged short supply/delayed supply, assuming that the cheque was issued towards security, then also the said cheque would attract presumption under Section 118 of the Negotiable Instruments Act, 1881 and the defendant has failed to rebut the presumption under Section 118 of the Negotiable Instruments Act, 1881. Territorial jurisdiction - HELD THAT:- Based on the admission of DW1, the Court has come to the conclusion that the cause of action has also arisen in Bengaluru. Moreover, the contention relating to the territorial jurisdiction is not a contention which goes into the root of the matter. The defendant had appeared and participated in the trial and led evidence. No prejudice is caused to the defendant by the act of the Commercial Court in entertaining and deciding the suit. Thus, this contention of the appellant again has no merit. Appeal dismissed.

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