TMI Tax Updates - e-Newsletter
February 16, 2022
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Exemption from GST or not - transaction of hiring/leasing of buses by the APSRTC to the Public Transport Division (PTD) of Government of Andhra Pradesh - In the instant case, the PTD, the state government department which is running this service shall by definition be termed as the 'State Transport undertaking'. - Benefit of exemption from GST is available - AAAR
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Income Tax:
TDS u/s 194A - TDS on deemed dividend - loan advanced by the assessee company to the other group companies - Even if, the appellant company hold 100% shares in these companies the deemed dividend would arise when these companies give loans to the appellant holding company and not other way around when holding company gives loan to subsidiary company. Thus, we find the observation made hereinabove by the ITO(TDS) is not on the correct proposition of law. - Law does not expect the payer company to deduct TDS when the payment is made to a non-shareholder. - AT
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Income Tax:
Revision u/s 263 by CIT - Second Pr. CIT find the order of Second AO erroneous for lack of enquiry - Scope of doctrine of merger - The Ld. Pr. CIT has made a bald statement that the AO’s assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to interfere with the order of AO. - AT
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Income Tax:
Revision u/s 263 - Period of limitation - the limitation prescribed under section 263(2) would run from original assessment in respect of issue alien to reasons recorded. Thus, when seen qua the original assessment, the revisional order on the second issue is clearly barred by limitation. The action of the PCIT on the second issue thus cannot be countenanced. - AT
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Income Tax:
Reopening of assessment u/s 147 - change of opinion - The impugned notice and the consequent action is legally unsustainable as the Revenue fails to satisfy the twin tests. Firstly, there is no assertion, much less material to indicate, that the income escaped assessment on account of failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment, and, secondly, the reasons recorded by the Assessing Officer should not fall within the ambit of “mere change of opinion” on the very same material. - HC
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Income Tax:
Disallowance of rent - allowable revenue expenditure u/s 37 or not? - In this case the appellant has not filed any documents to establish that the expenditure was incurred wholly and exclusively for the purpose of business of the expenditure. The burden of proof is on appellant. Appellant failed to discharge the same. - AT
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Income Tax:
Deduction u/s.35 AD(5)(aa) - whole of capital expenditure incurred for purpose of development of hotel claimed - We restore the issue to file of the Assessing Officer and direct the A.O. to examine claim of the assessee in light of arguments of the assessee that there was no fault from their side in getting approval from competent authority. In case, the Assessing Officer finds that there is a delay from competent authority side in granting approval, then the Assessing Officer is directed to allow claim of deduction u/s. 35AD of the Act, in respect of expenditure incurred for specified business - AT
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Income Tax:
Additions towards Hawala Transaction u/s. 69A - As against such alleged hawala transactions, no fresh unsecured loans have been found credited in the books of account of the assessee company for the subject assessment years. We also find that no such document or material was found or seized during the course of the search pertaining to the earlier years from which it could have been inferred that the assessee company was involved in such scrupulous activities. We also note that the AO has not conducted any independent enquiry to unearth and correlate the contents of the mobile messages with the financial affairs of the assessee company. - Additions deleted - AT
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IBC:
Jurisdiction to entertain the complaint filed by the respondents - which class of Special Courts, created by Companies Act (amendment) 2017, is empowered to try the offences under the I.B. Code? - it is clear that Special Court comprising of a Metropolitan Magistrate “Issue Process”, under Section ”, under Section or Judicial Magistrate First Class is to try “Issue Process”, under Section other offences”, under Section. The phrase other offences contained in section 435 (2) (b), “Issue Process”, under Section ”, under Section in contradistinction to section 435 (2) (a) of CA 2013, would include (1) offences under the I.B. Code, and (2) offences under the CA 2013 but carrying punishment of imprisonment of less than two years. - HC
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IBC:
Proceedings under PMLA while CIRP is in process - Provisional Attachment of the Properties - In fact, ‘The Prevention of Money Laundering Act, 2002’ is to fulfill our Country’s obligation in adhering to the United Nations Resolutions and in regard to Assets/Properties being the ‘Proceeds of Crime’, it takes a ‘primacy and precedence’ over the ‘Insolvency and Bankruptcy Code, 2016’ which promotes “Resolution’ as its objective over Liquidation in the considered opinion of this ‘Tribunal’. - AT
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Central Excise:
Classification of goods - dolachar or coalchar - waste item - classifiable under Chapter Heading 2619 of the First Schedule to the Central Excise Tariff Act or not - The issue already stands decided by this Tribunal - the product is akin to coal and accordingly is to be classified under 2701.00. - AT
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VAT:
Restoration of assessment order - it is settled law that “a court of appeal interferes not when the judgment under attack is not right, but only when it is shown to be wrong”. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (2) TMI 608
Exemption from GST or not - transaction of hiring/leasing of buses by the APSRTC to the Public Transport Division (PTD) of Government of Andhra Pradesh - Entry 22 of Notification No 12/2017-Central Tax (Rate) - HELD THAT:- In the instant case, the appellant classifies the transaction as 'leasing of movable and immovable assets', which is more of a general description. Whereas, the lower authority classified the same under Heading 9966 or Heading 9973 - On perusal of relevance of both the entries, Heading 9966 fits into the most specific description and should naturally be preferred over the general description as suggested by the appellant. Section 2 (42) of Motor Vehicles Act, 1988 defines State Transport undertaking, clearly envisages the possibility of this service being run / carried on by the Central Government or a State Government. In the instant case, the PTD, the state government department which is running this service shall by definition be termed as the 'State Transport undertaking'. The ruling of the AAR upheld.
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Income Tax
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2022 (2) TMI 607
Adhoc disallowance @ 15% of conveyance and vehicle expenses and miscellaneous expenses by the AO - HELD THAT:- We considering the turnover, nature of business operations and activities are of the opinion that such addition is without identifying the particular transaction and also the assessee could not substantiate the claims with the proper evidence and are not verifiable. We find the addition made by the AO @ 15% is on higher side and restrict the addition to the extent of 5% and this percentage is applicable for this assessment year only. Accordingly,we restrict the addition to the extent of 5% of the expenses discussed and modify the CIT(A) order sustaining the addition @ 5% and partly allow the grounds of appeal of the assessee. Unexplained Sales/investment - AO has treated the book stock and physical stock of the precious metals as out of book sale - with respect to the pearls, the AO has made the addition as excess stock and was confirmed by the CIT(A) by treating the difference between the book stock and physical stock of the pearls as unexplained investment in the course of stock valuation - HELD THAT:- AR submitted a chart reconciling the difference between the physical stock and stock as per the books of account for each precious metal with the documentary evidence and the minor difference arise due to weighing difference. Further the A. O. has not considered sales and sales return effected prior to the date of search. We considering the ratio of the decision of M/S. MAHENDRA BROTHERS EXPORTS PVT. LTD. AND (VICE-VERSA) [ 2021 (12) TMI 302 - ITAT MUMBAI] find that there is difference is stock which could not be reconciled completely in respect of the precious metals and supported with material evidence. Accordingly, we direct the Assessing officer to consider only gross profit in respect of said sale transactions difference after adjusting above said sales returns and partly allow the grounds of appeal of the Assessee.
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2022 (2) TMI 606
TDS u/s 194A - TDS on deemed dividend - loan advanced by the assessee company to the other group companies - whether TDS is to be made where loan has been advanced from one company to other group company in which there are common shareholders? - HELD THAT:- As decided in the case of ANZ Reality Pvt. Ltd. [ 2008 (10) TMI 268 - ITAT JAIPUR-B] holding that TDS under Section 194 is not required to be made unless the loan and advances are given to shareholder. Law does not expect the payer company to deduct TDS when the payment is made to a non-shareholder. Section 194 requires TDS when payment made to a registered shareholder only. We have further considered the alternative plea made by the appellant before us that the observation of the ITO to this effect that the appellant company hold 10% share in Amit Intertrace Pvt. Ltd., Dhanlaxmi Infrastructure Pvt. Ltd. and Palitana Sugar Mills Pvt. Ltd. whom loans and advances were given is deemed dividend is wrong per se. The same is factually incorrect since the appellant company does not owned 100% share in these companies and even if, the appellant company hold 100% shares in these companies the deemed dividend would arise when these companies give loans to the appellant holding company and not other way around when holding company gives loan to subsidiary company. Thus, we find the observation made hereinabove by the ITO(TDS) is not on the correct proposition of law. No justification in interfering with the order passed by the Ld. CIT(A) in deleting such addition made by the Ld. AO holding that under this particular facts and circumstances of the matter under Section 194 is not required to be made by the assessee - Decided in favour of assessee.
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2022 (2) TMI 605
Disallowance u/s 40A(2) - excessive interest paid to Director of the appellant - AO observed that assessee has paid interest @ 18% to one of its director, however, it has charged interest from two of the unrelated party @ 15% and @ 11% respectively - HELD THAT:- During the course of appellate proceedings before us, the ld. Counsel has referred the decision of CIT Vs. Aditya Mediasales Ltd. [ 2010 (5) TMI 823 - GUJARAT HIGH COURT] wherein it is held that interest of unsecured borrowing was always higher than rate of interest paid to the bank or financial institution from where the loan raised were secured loan and accordingly unsecured interest paid to sun pharmaceutical @ 24% per annum as reasonable. Also in KARTEX EXPORTS [ 2020 (2) TMI 1617 - ITAT MUMBAI] in the absence of any material to indicate that the interest rate paid by the assessee is excessive or unreasonable, the unsecured loan taken @ 18% or even @ 20% is quite in consonance with the ground reality in business. Issue of tax neutrality - The submission of the assessee of comparatively prevailing bank interest rate of secured loan was not controverted by the ld. CIT(A). Further, it is noticed that ld. CIT(A) has simply rejected the submission of the assessee on the issue of tax neutrality stating that no evidences was furnished. In this regard after perusal of the material available in the paper book, it is noticed that assessee has filed copy of Income Tax return of Bharat J. Patel for assessment year 2014-15 along with detail of unsecured loan as on 31st March, 2014, vide its submission dated 7.11.2016 made before the assessing officer demonstrating that because of showing of higher return of income of ₹ 3,86,04,868/- there was no any attempt to evade tax and the same was tax neutral. In the light of the above facts and circumstances we consider that decision of ld. CIT(A) is not justified, therefore, this ground of appeal of the assessee is allowed. Disallowance of fees paid towards Investment Advisory Services - HELD THAT:- During the year under consideration the assessee could not substantiate with relevant evidences that these expenses were related to loan syndication fees and the same was claimed as Investment Advisory Services without any break up of the detail of loan advances arranged by these two parties. Therefore, we do not find any infirmity in the decision of ld. CIT(A) after following the decision of coordinate bench of the ITAT [ 2019 (2) TMI 1996 - ITAT MUMBAI] Appeal of the assessee is partly allowed.
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2022 (2) TMI 604
Revision u/s 263 by CIT - Second Pr. CIT find the order of Second AO erroneous for lack of enquiry - Scope of doctrine of merger - Addition of unexplained cash credit being share premium received u/s 68 - second round of re-assessment proceedings challenged - second Ld. Pr. CIT again was pleased to set aside the reassessment/second assessment order of the AO and directed fresh assessment ( which means a third assessment to be framed) - whether the second AO carried out his role of an investigator? - HELD THAT:- AO has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to and we also by applying the presumption in section 114 of Indian Evidence act 1872, we presume that the quasi-judicial act of the second AO have been regularly performed. Moreover, the First Ld. Pr.CIT while setting aside the first AO s order has returned a finding that assessee in the first found itself has filed the relevant documents to prove identity, creditworthiness and genuineness of the share capital and assessee has discharged the onus on it at para4; And after perusing their replies and supporting documents and thereafter having verified their veracity, the second AO was satisfied with the explanation of assessee in respect to the nature and source of credit entries which view of second AO cannot be faulted. And we also note that all the shareholders are regular income tax assessee. Therefore, in the light of the aforesaid documents discussed their identity cannot be disbelieved and the AO s satisfaction in respect of identity of the shareholders is a possible view and cannot be termed as unsustainable in law or facts. Coming to the creditworthiness of the shareholders we note that the assessee and the shareholders have brought to the notice of Second AO that they (share subscribers) have enough net worth to invest in the assessee company and the share subscribing companies pursuant to the AO's notice u/s. 133(6) of the Act have furnished their respective audited accounts from which the aforesaid facts are clearly discernible and moreover the share subscribers have also filed before the second AO the source from which they subscribed to shares of assessee (though not required as per law in force for AY 2012-13), bank statement, audited balance sheet etc. Thus the assessee had discharged the onus on it about the creditworthiness of the share- holders. Source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque ) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. Based on the documents and materials called for by the AO who accepted the same after verification is an act of enquiry. And we note that revenue has not brought on record any material to challenge the veracity of the documents referred to above. Moreover, the second Ld. Pr. CIT in his impugned order has not brought any material to rebut the presumption of second AO to justify his intervention u/s. 263 of the Act and which would have upset the decision of the second AO's factual view on the identity, creditworthiness and genuinity of the share transaction. In such scenario, the second AO's view based on the documents referred to by him is a plausible view and in consonance with judicial precedents (supra) which we would like to discuss/ examine each share subscribers. The second Ld. Pr. CIT in his impugned order has not brought any material to rebut the presumption of second AO to justify his intervention u/s. 263 of the Act and which would have upset the decision of the second AO s factual view on the identity, creditworthiness and genuinity of the share transaction. In such a scenario, the second AO s view based on the documents referred to by him is a plausible view We note from the facts of this case that the second Ld. Pr. CIT 4 by passing the second revisional order dated 12.03.2019 has substituted the First Pr. CIT s order passed u/s. 263 of the Act dated 21.09.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 03.11.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter which inter alia was the issue flagged by CASS, which exercise since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital premium collected by assessee company. Resultantly the second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings Pr. CIT has made a bald statement that the AO s assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to interfere with the order of AO - Decided in favour of assessee.
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2022 (2) TMI 603
Revision u/s 263 - Period of limitation - assessee has claimed depreciation on bogus purchase of Plant Machinery - A.O. while making additions towards bogus purchase of Plant Machinery has omitted to disallow depreciation claimed thereon resulting in an error which is prejudicial to the interest of the revenue - HELD THAT:- Assessee fairy submitted that where the A.O. has made disallowance on Plant Machinery, it was permissible for the A.O. to disallow the consequential depreciation within the scope of section 147 - The issue being connected to the subject matter of reassessment, the action of the PCIT cannot be faulted per se without prejudice to the contentions on bonafides of purchases in the regular appellate proceedings. Averments made on behalf of the assessee and having regard to the fact of additions carried out towards bogus Plant Machinery in the assessment order, the .A.O has definitely committed error in not giving consequential effect to such action and thus failed to disallow depreciation as well. We thus see no reason to interfere with the directions given by the PCIT to the A.O. in this regard. Revisional powers of the designated authority u/s 263 to reassess order passed with reference to section 147 read with section 148 - Non verification of share application money and share premium receipt by AO - We observe that identical issue has come for adjudication in another case before the Co-ordinate Bench in the case of Shri Bhiva Shankar Rane [ 2016 (8) TMI 1565 - ITAT PUNE] where the legal issue was examined in detail and it was inter alia held that where the A.O. failed to make detailed probe or enquiries on escapement of other possible income unconnected to reasons recorded, the revisional authority cannot compel the A.O. to indulge in making fishing or roving enquiries in exercise of powers conferred under s.263 In the present case, the revisional authority has sought to exercise its powers under section 263 of the Act on the ground that the A.O. has failed to make enquiry on receipts of share application money and share premium. It is an admitted position that the aforesaid point did not form the basis for reopening the assessment. As held in Bhiva Shankar Rane vs. ACIT [ 2016 (8) TMI 1565 - ITAT PUNE] the revisional powers under section 263 of the Act cannot be read in a manner to expand the scope of section 147 of the Act. Therefore, revisional powers under section 263 cannot be invoked to set aside the reassessment order where the A.O. himself is not competent to embark upon roving enquiries on unconnected issues. Therefore, the subject reassessment order cannot be labelled as erroneous per se on the second issue and thus not susceptible to review contemplated under section 263 of the Act. The remedy available to the PCIT is only with reference to original assessment order passed under section 143(3) of the Act where the issue was subject matter of examination. However, in the light of decision of the Hon ble Supreme Court in CIT vs. Alagendran Finance Limited [ 2007 (7) TMI 304 - SUPREME COURT ] the limitation prescribed under section 263(2) would run from original assessment in respect of issue alien to reasons recorded. Thus, when seen qua the original assessment, the revisional order on the second issue is clearly barred by limitation. The action of the PCIT on the second issue thus cannot be countenanced. The directions given by the PCIT thus requires to be quashed and set aside in so far as second issue is concerned. - Appeal of the assessee is partly allowed.
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2022 (2) TMI 596
Reopening of assessment u/s 147 - change of opinion - 10% of the eligible profits u/s 10A were not fully taxed and yet, set off of the losses of local units to the extent was allowed and this resulted in short levy of tax - HELD THAT:- A bare perusal of the reasons indicates that the exercise was influenced by a mere change of opinion. To start with, it is imperative to note that the AO has commenced the recording of reasons with the expression, On perusal of records, it is seen that 10% of the eligible profits u/s 10A were not fully taxed and yet, set off of the losses of local units to the extent was allowed and this resulted in short levy of tax. Evidently, this assessment of the Assessing Officer betrays an intent to question the original assessment on the strength of very same material, by substituting his view for the conclusion recorded by the AO at the time of initial assessment. The alleged escapement of the income articulated under second head Correct computation of Business Income also suffers from the same vice of mere change of opinion. The third head under which the income allegedly escaped assessment, under the caption, Excess DIT Relief stands on a much weaker foundation. AO explicitly refers to the availability of two options for computation of deduction under section 10A and 80 HHE, namely, (i) exclusive method; and (ii) alternatively, profit of 10A units shall form part of calculation of 80 HHE and export turnover of 10A is to be excluded therefrom. According to the AO, the choice of the second method by the department resulted in escapement of income as excess DIT relief to the extent of ₹ 3,67,31,204/- had been allowed. This inference is a classic example of change of opinion as it is rooted in expediency of exercise of one option over another. The impugned notice and the consequent action is legally unsustainable as the Revenue fails to satisfy the twin tests. Firstly, there is no assertion, much less material to indicate, that the income escaped assessment on account of failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment, and, secondly, the reasons recorded by the Assessing Officer should not fall within the ambit of mere change of opinion on the very same material. Consequently, we are persuaded to hold that there was no material to justify the formation of a reason to believe that income escaped assessment and invoke the power under section 147 - The petition, therefore, deserves to be allowed.
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2022 (2) TMI 595
Deduction u/s 10B - determination of export turnover - whether Tribunal was right in holding that the expenditure incurred in foreign exchange for providing technical services outside India by way of onsite development of computer software should not be excluded from the export turnover for the purpose of computing deduction under Section 10B without properly applying the provisions of Explanation 2(iii) to Section 10B? - HELD THAT:- Issue decided in favour of assessee M/S. ZYLOG SYSTEMS LIMITED [ 2020 (3) TMI 181 - MADRAS HIGH COURT]
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2022 (2) TMI 594
Reopening of assessment u/s 147 - assessee sold immovable property for an aggregate value of ₹ 52 L akh and the same was not offered for tax in the return of income - HELD THAT:- We find merit in the contention raised that the reasons assigned by the Assessing Officer for reopening of the assessment for the relevant year are factually incorrect. In column No.8 of the same, we find reference of ₹ 52 Lakh towards full value of consideration. Although Mr. Bhatt tried to say something as regards the cost of acquisition with indexation, yet we are of the view that factually there is no foundation for the Revenue to reopen the assessment on the ground as alleged in the reasons assigned to the writ applicant assessee. Writ application succeeds and is hereby allowed
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2022 (2) TMI 593
Disallowance of rent - allowable revenue expenditure or not? - HELD THAT:- As fundamental principle in allowing expenditure u/s 37 is that it should full fill the conditions mentioned above. The expenditure should have been incurred wholly and exclusively for the purpose of business of the Appellant. In this case the appellant has not filed any documents to establish that the expenditure was incurred wholly and exclusively for the purpose of business of the expenditure. The burden of proof is on appellant. Appellant failed to discharge the same. Disallowance of Advertisement expenses - appellant has claimed advertisement expense under the broader head Administrative and Selling expenses - CIT(A) directed the AO to issue Summons u/s 131 of the Act ,to the persons to whom the appellant has claimed to have paid advertising charges - HELD THAT:- On going through the CIT(A) s order, it is observed that the CIT(A) has granted reasonable opportunity to the appellant. CIT(A) has also forwarded the copy of remand report to the appellant. However, the appellant failed to file documentary evidence to establish that the so-called advertising expenses were paid wholly and exclusively for the purpose of business of the appellant. In the absence of any evidence being filed by the appellant, CIT(A) has rightly confirmed the disallowance of ₹ 36,76,778/-. During the proceedings before this Tribunal, the appellant has not filed any evidence to establish that it was wholly and exclusively incurred for the purpose of business of the appellant. The conditions to be fulfilled for claiming deduction u/s 37 of the Act has already been mentioned in earlier para. The appellant failed to prove that it fulfilled the conditions required to be fulfilled for claiming deduction u/s 37 of the Act. - Decided against assessee. Disallowance of Security Expenses - Onus to prove - allowable revenue expenditure - HELD THAT:- Onus lies on the appellant to prove the genuineness of expenses claimed by the appellant as to prove by documentary evidence the genuineness of expenditure claimed and also as to prove that the expenditure was incurred wholly and exclusively for the purpose of business of the appellant. However, in this case, the appellant failed to prove the genuineness of expenditure and also failed that the expenditure was incurred wholly and exclusively for the purpose of business of the appellant. During the proceedings before this Tribunal, the appellant has not filed any document to prove the same. As mentioned earlier, initial onus is on appellant to prove that the said expenditure has been genuinely incurred wholly and exclusively for the purpose of business of the appellant. The conditions to be fulfilled for claiming deduction u/s 37 of the Act has already been mentioned in earlier para. The appellant failed to prove that it fulfilled the conditions required to be fulfilled for claiming deduction u/s 37 of the Act. Disallowance of Interest on Excise Duty - interest was not allowed as the same was shown by the appellant as payable as on 31.03.2012 due to changes in Union Budget therefore, CIT(A) concluded that the liability in question has not crystallized in the year under reference - HELD THAT:- Appellant could not file copy of any show cause notice or order of the Excise authorities to substantiate its claim. Only the crystallized clear liability can be allowed. As per section 43B of the Act, any sum payable by assessee by way of tax, duty, cess or fees by whatever name called is allowable only on actual payments. As mentioned earlier, it has been verified by the CIT(A) that the liability has not been crystallized during the year. Therefore, the disallowance of interest on Excise duty is upheld. The ground of appeal No.4 is thus, dismissed. Disallowance of Interest for delay in payment of TDS - HELD THAT:- The appellant has paid interest as interest for delay in payment of TDS. This is not an allowable expenditure. Therefore, disallowance by the CIT(A) is upheld. The ground of appeal No.5 is thus, dismissed.
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2022 (2) TMI 592
Unexplained investments - Addition on the basis of a new ground - Contention of the assessee that investment was made out of cash deposits in HDFC bank account of the assessee - investment relating to security transactions - Contention of the assessee that investment was made out of cash deposits in HDFC bank account of the assessee - no doubt was raised and Assessing Officer duly verified the same.no doubt was raised and Assessing Officer duly verified the same - HELD THAT:- CIT (Appeals) sustained the addition altogether on different ground. We find merit into the contention of the assessee. It is seen that the Assessing Officer did not doubt about the cash flow submitted by assessee. He made addition on the basis of unexplained peak purchases. However, this action of Assessing Officer was found not in accordance with law by the learned CIT(Appeals). Learned CIT(Appeals) proceeded to sustain the addition on the ground of unexplained source of investment. CIT(Appeals) did not confront the assessee regarding cash flow submitted by him. Under these facts when there is nothing on record to rebut the correctness of cash deposited in the bank account held with HDFC bank, the addition sustained by the learned CIT(Appeals) cannot be confirmed. Therefore, I hereby direct the Assessing Officer to delete the addition. - Decided in favour of assessee.
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2022 (2) TMI 591
Addition u/s 69A - Unexplained cash credit - HELD THAT:- We find the assessee before the AO had categorically stated that Mamaji Mataji were staying with the assessee and he used to handover business cash to them for safe custody whenever he used to go out of station for either business purposes or personal work. The assessee has also given the availability of cash on 07.07.2010 (the date of entry in the seized document) in the books of accounts of various proprietorship concerns and companies in which the assessee is a director which is more than the amount of ₹ 10.00 lakhs. Therefore, merely stating that the explanation is not acceptable is not justified. Since, the availabilities of cash on 07.07.2010 in the books of accounts of various concerns of the assessee is not doubted, therefore, we are of the considered opinion that the Ld. CIT(A) is not justified in sustaining the addition of ₹ 10,00,000/-. The order of the Ld. CIT(A) on this issue is, therefore, set-aside and the AO is directed to delete the addition Unexplained property purchased - search proceedings - HELD THAT:- We find the assessee had stated categorically before the AO that these are rough calculation for purchase of property which did not materialize. It is an admitted fact that no such document or papers pertaining to purchase of any property was found either during the course of search or post search enquiries. Apart from the noting in the seized papers, the revenue has no other evidence of purchase of any property by the assessee. No post search enquiry or investigation was conducted by the AO to find out if at all any property has been purchased - no document/paper relating to the so called property was either found during the course of search or post search enquiry and no independent evidence was either found during the course of search or collected subsequent to the search, therefore, in the light of the above decisions, the assessee in our opinion cannot be fastened with the liability. We, therefore, set-aside the order of the ld. CIT(A) on this issue and direct the AO to delete the addition. Ground of appeal No.4 is accordingly allowed. Addition u/s 69A - HELD THAT:- So far as argument of Learned Counsel for the Assessee that telescoping benefit should be given is concerned, the same is acceptable in view of the decision of the Hon ble Delhi High Court in the case of CIT vs. Sonal Construction reported [ 2012 (11) TMI 11 - DELHI HIGH COURT] where has accepted the theory of benefit of telescoping. We, therefore, direct the A.O. to allow the benefit of telescoping and deduct the addition of ₹ 10,55,000/- from profits from bogus purchases etc. added in the hands of the assessee and his proprietorship concerns and in the case of the 02 companies namely LV Rustore Applications (P) Ltd., and RR Carwell Private Ltd., where he is a Director and is the controlling person. The A.O. shall do the necessary calculation and the ground raised by the assessee on this issue is accordingly partly allowed in terms indicated above. Unexplained money - HELD THAT:- As letters were found and seized during the course of search and the letters clearly and categorically mention that an amount of ₹ 40 lakhs was given by R.A. Financial Services to Shri Rattan Prakash Mishra, President Omshanti Educational Society and the assessee was only an intermediary, therefore, adding the same to the income of the assessee, in our opinion, is not justified. Accordingly, the order of the Ld. CIT(A) on this issue is set aside and the ground of appeal number 8 raised by the assessee is allowed. Addition based on seized document as an MOU entered into between the assessee and Gyaneshwar Education Trust - HELD THAT:- In the instant case, we find it is peculiar case where the assessee is denying to have made any payment as per the MOU and the second party in the MOU is absconding and is a proclaimed person. However, it is also a fact that the MOUs were found from the premises of the assessee and therefore the onus is on the assessee to prove that the assessee has not paid the amount as mentioned in the first and second MOU and that these MOUs are only for securing the payments made earlier with interest and interest on interest. In our opinion, the matter requires a revisit to the file of the AO to examine certain things to find out the truth before making any addition. i. The AO shall summon and record the statement of Mr. Sanjay Gupta who is a witness to the MOU and the notary in whose register the same has been entered to find out the facts and veracity of the MOU. ii. The AO shall also summon and record the statement of Mr. O.P. Gulati in whose name receipts were found and which are related the MOU. iii. In case the above persons do not respond to the summons issued by the AO, the onus shall be on the assessee to produce them before the AO. If the assessee fails to produce them and they do not respond to the summons then the AO may take adverse view. AO shall decide the issue in the light of our above observation and in accordance with law after giving due opportunity of being heard to the assessee. Non-granting of credit received from Mr. Abhay Salwan and R.A. Financial Services while computing the peak cash balance - HELD THAT:- We find it is the contention of the ld. Counsel for the assessee that benefit of ₹ 50 lakhs as per receipt dated 01.01.2012 seized during the search and received back from Mr. Abhay Salwan and R.A. Financial Services should be given for computing the peak cash balance, Similarly, it is also his submission that the Assessing Officer has not given the benefit of ₹ 50 lakhs as per seized documents dated 15.12.2011 seized during the course of search relating to L.V. Rustor Application Pvt. Ltd. where the assessee is shareholder and director and amount being received back from Mr. Abhay Salwan and R.A. Financial Services along with interest should be considered for computing the peak cash balance. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the AO with a direction to decide the issue afresh. Addition being interest @ 2.6% of cash loan - HELD THAT:- Since, the issue relating to the addition on the basis of the MOU as per ground of appeal No.3 has been restored to the file of the AO for fresh adjudication, therefore, this ground is also restored to the file of the for fresh adjudication by the AO. Addition to the total income of the assessee being unsecured loans - HELD THAT:- As amount of ₹ 30,00,000/- received by the assessee are in fact the recovery of principal amount earlier given to Mr. Abhay Salwan and the addition made by the AO and sustained by Ld. CIT(A) are on presumption basis. It is the settled position of law that for allowing any cash credit as genuine, the onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the identity and creditworthiness of the loan creditor and genuineness of the transactions. However, the assessee in the instant case has not discharged the onus. The submission of the ld. counsel for the assessee that these are in fact recovery of principal amount also needs to be established by the assessee.
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2022 (2) TMI 590
Assessment u/s 153A - Disallowance on account of development fee received by the assessee trust from the students - HELD THAT:- We are of the considered view that the Ld. CIT(A) has returned correct findings on the basis of fact and law applicable thereto because when original assessment has already been completed u/s 143(3) of the Act the same cannot be disturbed by way of passing assessment order under section 153C of the Act, unless there is incriminating materials seized during the search operations. When undisputedly no incriminating material has been unearthed during the search operations qua the assessment years under consideration no addition can be made. Set off of brought forward deficits/losses, being excess of expenditure over receipts, of prior years against the income of the current years - This issue has already been decided in favour of the assessee trust for A.Y. 2011-12, 2012-13 2013-14 in the completed assessment framed under section 143(3) of the Act. Again it is a settled principle of law that in case of completed assessment framed under section 143(3) of the Act it cannot be disturbed by the AO by framing assessment under section 153A/153C of the Act unless incriminating material qua the issue in question has been unearthed during the search operation. Undisputedly, no such incriminating material has come on record. Revenue has raised this issue just to generate unnecessary litigation on the pretext that since Department has not accepted the decision rendered by the Hon ble Supreme Court in the case of M/s. Subros Educational Society [ 2018 (4) TMI 1622 - SC ORDER] the outcome of which has not been brought on record by theD.R. during the course of argument, which is not permissible under law. So in view of what has been discussed above, the CIT(A) has validly and legally decided this issue in favour of the assessee by relying upon the decision rendered by the Tribunal, Hon ble Bombay High Court and Hon ble Supreme Court.
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2022 (2) TMI 589
Addition made on account of unaccounted royalty - HELD THAT:- According to the reconciliation statement filed by the assessee, if methodology considered by the AO is adopted for computing royalty, then royalty income receivable by the assessee from M/s. Ford India Private Limited, shall work out to ₹ 91.68 crores, which is lesser than the amount of royalty income received by the assessee. The facts with regard to consideration of cost associated with those passenger vehicle models which has negative revenue base by the AO is not forthcoming from records. Reconciliation statement filed by the assessee explaining difference between royalty income computed by the assessee and royalty income determined by the AO was also not available with the AO. Therefore, to consider the above aspect and also reconciliation statement filed by the assessee, the issue needs to go back to the file of the AO for fresh consideration. Hence, we set aside the issue to file of the AO and direct the Assessing Officer to reconsider the issue in light of royalty agreement between the parties, revenue base of passenger vehicles assembled in India and reconciliation statement filed by the assessee explaining difference between royalty income computed by the assessee and royalty income determined by the Assessing Officer. Appeal filed by the Revenue is treated as allowed for statistical purposes.
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2022 (2) TMI 588
Deduction u/s.35 AD(5)(aa) - whole of capital expenditure incurred for purpose of development of hotel claimed - Claim denied on delay in getting approval from authority - HELD THAT:- As explanation of the assessee before the Assessing Officer as well as learned CIT(A) that although, the competent authority has accorded approval from subsequent financial year, but the assessee has obtained in principle approval from the competent authority on 30.11.2007 and same was valid for a period of five years and further, the assessee has filed application for approval on 12th May, 2011. The assessee further contended that there was a delay at the Department of Tourism, for processing application filed by the assessee and the assessee had to submit fresh applications for several times and process took considerable time at the Department of Tourism. Therefore, in the process, they have visited our facility only on 19.03.2014 and has granted approval w.e.f 21.03.2014 for the period from 21.03.2014 to 20.03.2019 Therefore, when the assessee has filed application much before date of commencement of business and has also incurred expenditure for specified business, merely for reason for delay in getting approval from authority, expenditure incurred for specified business cannot be disallowed. We are of the considered view that for ascertaining correct facts with regard to claim of the assessee that it was mistake of competent authority in granting approval for relevant assessment year, even though the assessee has filed application in time needs to be examined by the Assessing Officer in light of evidences filed by the assessee. Hence, we set aside order of the learned CIT(A) and restore the issue to file of the Assessing Officer and direct the A.O. to examine claim of the assessee in light of arguments of the assessee that there was no fault from their side in getting approval from competent authority. In case, the Assessing Officer finds that there is a delay from competent authority side in granting approval, then the Assessing Officer is directed to allow claim of deduction u/s. 35AD of the Act, in respect of expenditure incurred for specified business. Appeal filed by the assessee is treated as allowed for statistical purposes
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2022 (2) TMI 587
Rejection of book results - estimated the profit from the contract receipt @ 8% on the total contract receipt - HELD THAT:- Since the assessee in the instant case has already declared the net profit of 2.31% on the contract receipt as per the finding given by the CIT(A) himself therefore, respectfully following case RUPA PROMOTERS PVT. LTD. OTHERS [ 2012 (9) TMI 326 - ITAT DELHI] and MADHAV PROPCON PVT. LTD. [ 2015 (7) TMI 445 - ITAT DELHI] we hold that no further addition is called for on account of the contract receipt from PACL. Accordingly, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed.
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2022 (2) TMI 586
Rectification of mistake - legality of action of Pr.CIT u/s.263 - main arguments of the ld. AR of the assessee before us that the appeal of the assessee was wrongly dismissed by the Tribunal without considering the grounds raised by the assessee in Form No.36 - HELD THAT:- On careful perusal of the order of the Tribunal dated 10.05.2018, observe that the Tribunal has decided the appeal of the assessee on ground No.2 only but ground No.1 of assessee challenging the legality of action u/s.263 of the Act has not been adjudicated therein. However, the ld. AR before us submitted that the ground No.1 raised by the assessee in Form No.36 have not been decided by the Tribunal, which amounts to mistake apparent on record. Ld. CIT-DR did not controvert and also agreed to the above contentions of the ld. AR of the assessee. Considering the submissions of the assessee and looking to the facts and circumstances of the case, we allow the miscellaneous application filed by the assessee and order of the Tribunal dated 10.05.2018 is recalled for limited purpose i.e. for adjudication of ground No.1 of assessee only. The Registry is directed to list this case on 10.03.2022.
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2022 (2) TMI 585
Late payments towards EPF and ESI u/s 36(1)(va) - Deposits before furnishing the return of income under section 139(1) - HELD THAT:- As relying on RAJA RAM VERSUS THE ITO, WARD 3 AND SANCHI MANAGEMENT SERVICES PRIVATE LIMITED [ 2021 (11) TMI 370 - ITAT CHANDIGARH] the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
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2022 (2) TMI 584
Assessment us 153A - Addition of cash credits u/s 68 - Unsecured Loans and Disallowance of Interest Paid thereon u/s. 69C - assessment pursuant to search operations carried out u/s. 132 - HELD THAT:- As in response to the return of income furnished by the assessee u/s. 139(1) of the Act, no notice u/s. 143(2) of the Act was issued in the case of the appellant and therefore, the income so shown in the return u/s. 139(1) had attained finality prior to the date of the search. Thus, we find that the impugned addition on account of unsecured loans and interest payments thereon have been made by the AO in a completed assessment year i.e. A.Y. 2016-17 in respect whereof the time limit for issuance of notice under s.143(2) of the Act had already got expired and as such, no assessment proceedings were pending on the date of search. In such eventuality, the A.Y. 2016-17 cannot be considered as an abated assessment year. We also note that Ld.AO, while making the impugned additions, has also referred to some statements of Mr Mukesh Jhanwar and Mr. H.P. Agrawal recorded during the course of search but same were subsequently retracted during the course of the assessment proceedings and thus the same cannot be equated to incriminating material No addition could have been made by the AO in the assessee s income without having recourse to any incriminating material. Accordingly, we are inclined to delete the additions. Addition u/s 68 - We are of the considered opinion that the assessee could successfully establish the identity of all the loan creditor companies, the genuineness of the loan transactions carried out with such companies, and as also, the creditworthiness of such loan creditor companies beyond all doubts, by furnishing all the necessary documentary evidences. Further, it is also an undisputed fact that the AO, except relying upon the retracted statements and some list of so-called shell companies, has not brought any positive material on record to discredit the explanation and various documentary evidences furnished by the assessee. In such eventuality, in our view, the ld. CIT(A) was fully justified in deleting the additions Out of Books Cash Sales u/s. 69A - HELD THAT:- We find that the assessee has raised the Ground against the action of the ld. CIT(A) in not deleting the addition made by the AO u/s. 69A of the Act despite giving a specific finding that the AO was not justified in invoking the provisions of s.69A of the Act in its case as the addition was related to the finding of some suppressed sales in books of account and not related to any unaccounted money, bullion, jewellery or valuable article or thing. We do not find merit in this contention of the assessee and instead, we are in full agreement with the finding given by the ld. CIT(A) in his Order that mere mentioning of a wrong section by the AO would not ipso facto render the entire addition as illegal especially in a circumstance that such an addition has been made by the AO on the basis of some incriminating material. In such circumstances, we are not inclined to allow this ground of the assessee. Trading additions in its income without first rejecting the books of account by invoking the provisions of s.145(3) - HELD THAT:- These grounds of the assessee have no merit for the reason that the AO before making the impugned additions, had issued a specific show-cause notice to the assessee requiring it to make its explanation on the subject issue. The AO, after taking due consideration of the reply of the assessee, has made the impugned additions on the subject issue. Thus, in such circumstances, merely because the AO has not quoted the specific section for making the subject additions in the assessee s income, the entire addition cannot be regarded as illegal. Thus, in our opinion, the ld. CIT(A) has rightly dismissed this ground of the assessee. Net profit estimation - trading additions in its income without first rejecting the books of account by invoking the provisions of s.145(3) - HELD THAT:- We modify the orders of both the lower authorities and direct the Assessing Officer to work out profit of undisclosed sales transactions from trading business, aggregating to ₹ 3,55,27,000/- and ₹ 2,56,52,000/- respectively for A.Y. 2016-17 and A.Y. 2017-18, by applying a net profit rate of 3.5% instead of the net profit rate estimated by the ld. CIT(A) at 15%. Cash sales to retailers - HELD THAT:- We find that the AO, during the course of the assessment proceedings, had required the assessee company to furnish its explanation on such seized cash vouchers and in respose the assessee company furnished a statement before the AO containing the details of vouchers seized and corresponding recording thereof on various dates in the regular books of account of the assessee. Before the ld. CIT(A) as well as before us, the assessee company has demonstrated that the entire seized cash vouchers were duly recorded in the regular books of account of the assessee for the year under consideration and therefore, there was no case of suppression of sales on this count. In our view, merely because the sales were made in cash, no adverse cognizance can be made if such sales have been found duly recorded in the regular books of account of an assessee. In such circumstances, we do not find any reason to interfere with the action of the ld. CIT(A) in deleting the entire addition Unaccounted Cash Receipt from Syndicate - AO, while making the subject addition, has invoked the provisions of s. 69A - HELD THAT:- We find that the assessee has raised the Ground for A.Y. 2017-18 against the action of the ld. CIT(A) in not quashing the addition made by the AO u/s. 69A of the Act merely by holding that quoting of wrong section would not make the entire addition as non-genuine. We do not find merit in this contention of the assessee and instead, we are in full agreement with the finding given by the ld. CIT(A) in his Order that mere mentioning of a wrong section by the AO would not ipso facto render the entire addition as illegal especially in a circumstance that such an addition has been made by the AO on the basis of some incriminating material. In such circumstances, we are not inclined to allow this ground of the assessee. Profit of undisclosed sales transactions - Keeping in view the totality of facts and circumstances of the case, we modify the orders of both the lower authorities and direct the Assessing Officer to work out profit of undisclosed sales transactions aggregating to ₹ 30,00,000/- by applying a net profit rate of 3.5% instead of the net profit rate estimated by the ld. CIT(A) at 15%. Hawala Transaction u/s. 69A - HELD THAT:- We find merit in the contentions of assessee that mere finding of the messages in the personal mobile of an employee of the company regarding some alleged hawala transactions without bringing on record any corroborative material to establish such transactions cannot lead to any concrete conclusion against the assessee that it had carried out such hawala transactions - As against such alleged hawala transactions, no fresh unsecured loans have been found credited in the books of account of the assessee company for the subject assessment years. We also find that no such document or material was found or seized during the course of the search pertaining to the earlier years from which it could have been inferred that the assessee company was involved in such scrupulous activities. We also note that the AO has not conducted any independent enquiry to unearth and correlate the contents of the mobile messages with the financial affairs of the assessee company. In such circumstances, no adverse inference could have been drawn by the lower authorities against the assessee company. We are, therefore, of the view that the entire additions deserve to be deleted Applicability of Section 115BBE in respect of additions made in A.Y. 2017-18 and A.Y. 2018-19 - HELD THAT:- In view of the above categorical findings of the ld. CIT(A) and our examination of the fact that additions confirmed by us in the hands of assessee are arising out of the business carried out and do not fall under any of the provisions of as referred in section 115BBE of the act .Thus we do not find any merit in the grounds raised by the Revenue.
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Benami Property
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2022 (2) TMI 602
Benami transactions - indulgence in prohibited transactions - second appellant passed an order provisionally attaching the property of the respondent company under Section 24(4)(b)(i) of the Act pending adjudication by the first appellant - period of limitation for filing an appeal - as mainly contended on behalf of the respondents that the orders passed by the first appellant are barred by limitation - HELD THAT:- Learned Judge was not correct in entertaining the writ petitions, when there being an efficacious appeal remedy under Section 46 of the Act, where all the contentions, including whether the order has been passed by the Adjudicating Authority in accordance with Section 26 (7) of the Act, could have been raised and decided. As already discussed and delved in detail above, the words date of the order appearing in Section 46 can only be interpreted and read to mean date of receipt of the order for the purpose of computing the limitation for filing the appeal under Section 46 of the Act. Learned Judge without going into the question of maintainability of the writ petitions, travelled into the case on the ground of limitation raised by the respondents / writ petitioners, as prescribed under Section 26(7) of the Act and rendered a finding on the same. Therefore, this Court has to necessarily test the said order under appeal in the light of the provisions of the Act and the applicable legal principles. Accordingly, on such application, this Court has reached the firm conclusion that the orders passed by the first appellant do not suffer from infirmity on the ground of alleged violation of Section 26 (7) of the Act. In other words, the orders impugned in the writ petitions are well within the timeline as stated under Section 26 (7) and is immune from attack on this ground. Since the other aspects on the merits of the case are not the subject matter of this batch of appeals and all these intra court appeals have arisen from the order of the Learned Judge, where the only ground taken by the respondents/ writ petitioners was on the limitation as per Section 26(7) of the Act, this Court is not rendering any finding on the merits of the orders passed by the first appellant / Adjudicating Authority under Section 26 (3) of the Act. As therefore left open to the parties to challenge the orders impugned in the writ petitions before the Appellate Authority under Section 46 of the Act, which authority shall entertain the appeal, if it is filed within 45 days from the date of receipt of this judgment, so as to exclude the time consumed in litigation, in the interest of parties, and in consonance with the general principles of the law of limitation. Except the issue decided by this Court with regard to the validity of the orders passed by the first appellant in accordance with section 26(7) of the Act, all other issues are left open to be decided by the Appellate Authority, in accordance with law.
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2022 (2) TMI 601
Benami transaction - suit properties were the properties purchased by Kannapiran in the name of his wife as benami, for his benefit - independent right over the suit properties - Whether the plaintiff is entitled to divide their suit properties into seven equal shares as prayed for? - HELD THAT:- When there is a subsequent Will dated 05.02.2007, in respect of the suit properties, in the absence of production of Will dated 05.02.2007, Kannapiran cannot claim an independent right over the suit properties. May be there is no evidence produced by the respondent to show that the suit properties were purchased by her mother either from the funds provided to her by her parents or through money mobilized through chit transaction, recitals in Exhibits A8, A9 to A11, show that the suit properties are the self-acquired properties of deceased Lakshmi Ammal. Thus, it can be concluded that the appellants had treated the suit properties are the self-acquired properties of Lakshmi Ammal. The judgment reported NAND KISHORE MEHRA VERSUS SUSHILA MEHRA [ 1995 (7) TMI 64 - SUPREME COURT] relied in support of the case that the suit properties were purchased by Kannapiran in the name of his wife Lakshmi Ammal, this Court finds that it is not applicable to this case for the reasons stated above. This finding is fortified by the fact that Exhibit A8 release deed was executed by Kannapiran and defendants 4 to 6, only after getting a consideration of ₹ 18,00,000/- for releasing their right in the suit properties. If Exhibit B1 Will is true, what is the necessity for Kannapiran to relinquish his right in favour of his sons. When there is a release deed executed then, what is the necessity for again executing the settlement deeds. Thus, it is clear that the appellants had created documents one after other to deny the respondent, her right of share in the suit properties. From the oral and documentary evidence produced in this case, it can be concluded that suit properties are the self acquired properties of deceased Lakshmi Ammal and therefore, as a daughter, respondent is entitled to claim her share in the suit properties. The First Appellate Court considered the evidence in detail, reached right conclusion and decreed the suit. This Court finds no reason to take a different view of the matter and confirms the judgment of the First Appellate Court. Thus, substantial question of law is answered.
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Insolvency & Bankruptcy
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2022 (2) TMI 600
Jurisdiction to entertain the complaint filed by the respondents - which class of Special Courts, created by Companies Act (amendment) 2017, is empowered to try the offences under the I.B. Code? - challenge to issue process - Section 73(a) and Section 235A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It can be noticed that under Section 435 of the Companies Act, Special Court, comprising of Sessions Judge or Additional Sessions Judge, was in place since 2013 and it retained its jurisdiction to try the offences under the Companies Act. Amendment of 2017, for the first time brought into existence and empowered Central Government, to establish Court comprising of Metropolitan Magistrate or Judicial Magistrate First Class, as Special Court , after I.B. Issue Process , under Section , under Section Court came into force. Why for this another class of Court was created? The object to create another class of Special Court was to speed up the trial of offences under the I.B. Code. If that was not a object as contended by the Respondent, the question is, why for Central Government has been empowered to designate Court of Metropolitan Magistrate or Judicial Magistrate First Class as Special Court under Section 435 of the Companies Act? Answer is simple. It is after Section 236 of I.B. Code, came into force Section 435 of the Companies Act was amended (17th amendment Act) on 7th May, 2018 and another class of Court (Metropolitan Magistrate and Judicial Magistrate First Class) have been created as Special Courts for speedy trial in offences under the I.B. Code. Keeping in mind, the said object, legislature thought it fit, not to burden a Special Court comprising of Sessions Judge or Additional Sessions Judge with the trials, also under I.B. Code. If trials in offences under I.B. Code were also to be tried by the Special Court comprising of Sessions Judge or Additional Sessions Judge, it would frustate to object of the speedy trial for which, the Special Courts have been established. The plain reading of clause (a) of subsection (2) of Section 435 of the Companies Act in no uncertain terms implies or suggests that the Special Court consists of Judge holding office as a Sessions Judge is empowered to try the offences Issue Process , under Section under this Act , under Section. (emphasized). The phrase under this Act , only means the offences committed under the Companies Act. Therefore, the offences other than the Companies Act cannot be tried by the Special Court established under clause (a) of subsection 2 of Section 435. While on the contrary, Special Court consists of Metropolitan Magistrate or Judicial Magistrate First Class proposed in clause (b) is invested with jurisdiction to try the Issue Process , under Section case of other offences , under Section - it is clear that Special Court comprising of a Metropolitan Magistrate Issue Process , under Section , under Section or Judicial Magistrate First Class is to try Issue Process , under Section other offences , under Section. The phrase other offences contained in section 435 (2) (b), Issue Process , under Section , under Section in contradistinction to section 435 (2) (a) of CA 2013, would include (1) offences under the I.B. Code, and (2) offences under the CA 2013 but carrying punishment of imprisonment of less than two years. Special Court which is to try Issue Process , under Section offences under the I.B. Code is the Special Court established under Section 435 (2) (b) of the Companies Act, 2013 which consists of Metropolitan Magistrate or Judicial Magistrate First Class. The Petition is allowed.
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2022 (2) TMI 583
Proceedings under PMLA while CIRP is in process - Provisional Attachment of the Properties - property is a part of Proceeds of Crime or not - it is the plea of the Appellant that the Attachment Proceedings and its resultant order under PMLA being Civil Proceedings should have been stayed with effect from 06.09.2019 - constitutional validity of Section 32A of the I B Code - overriding effect of IBC - HELD THAT:- In the event of Resolution Plan is approved by the Committee of Creditors , the said Plan is to be placed before the Adjudicating Authority as per Section 31 of the Code. The Adjudicating Authority is to apply his judicial mind in respect of the Resolution Plan so submitted, who upon subjective satisfaction being arrived at that the Plan meets the requirements contemplated under Section 30 of the Code, can approve the Resolution Plan . In case the Resolution Plan does not satisfy the ingredients of the Section 30 of the Code, the Adjudicating Authority is to reject the said Plan . Ousting of Civil Court s Jurisdiction - HELD THAT:- In matters relating to Corporate Insolvency Resolution , the petition/application under Section 7 or 9 as the case may be has to be made only before the Adjudicating Authority . The National Company Law Tribunal and the National Company Law Appellate Tribunal have sole jurisdiction in respect of matters arising under the I B Code, 2016 - As per Section 430 of the Companies Act, 2013 the National Company Law Tribunal alone has jurisdiction in relation to the matters coming under the ambit of the Companies Act, 2013 or any other law, which means the I B Code, as opined by this Tribunal. Indeed, the exclusion under Section 63 of I B Code, 2016 limiting the powers of a Civil Court to grant injunction, is taken care of by means of the ingredients of Section 430 of the Companies Act. Prevention of Money Laundering Act, 2002 - HELD THAT:- The goal of Money Laundering operation is to hide either the source or the destination of money. The aspect of Money Laundering involves hiding, moving and investing the proceeds of Criminal Conduct. The proceeds of crime is a property derived by any person as a result of criminal activity pertaining to a schedule offence mentioned in Part A or Part-B or Part-C of the schedule to the Prevention of Money Laundering Act 2002 - It is pointed out that the Shell Companies do exist only on paper and they do not partake in the ordinary commercial sphere of activity. Undoubtedly, Money Laundering is a global menace. This Tribunal points out that in the decision Mahanivesh Oils Foods Pvt. Ltd. V. Directorate of Enforcement [ 2016 (5) TMI 981 - DELHI HIGH COURT] , it is held that the concerned Officer must have a Reason to Believe on the basis of material in his possession sought to be attached is likely to be concealed, transferred or dealt with in a manner which may result in frustrating any proceedings for confiscation. It comes to be known that upon Default committed by the Corporate Debtor in repayment of the loan amount, the Bank of India issued a Notice under Section 13(4) SARFECIE Act. On 23.07.2015 and took symbolic possession of the said property of the Corporate Debtor on 16.05.2018. The Corporate Debtor being dissatisfied with the action of the Bank of India in releasing the Auction Notice inviting bids towards sale of the property, filed necessary application before the Debt Recovery Tribunal , Nagpur which admitted the Application of the Corporate Debtor and granted injunction on the sale of the property - The plea of the Appellant is that the property could not be attached as per Section 8(1) of the Prevention of Money Laundering Act 2002, especially where there exists charge on the property, the fact of the matter is that the mortgaged was already created in favour of the Bank. It is to be relevantly pointed out that Section 32-A Liability for Prior Offences etc. was inserted by Act 1 of 2020 S. 10 (with effect from 28.12.2019) and in reality, this Section only bars attachment after approval of Resolution Plan by an Adjudicating Authority of course subject to the requirement of certain conditions being satisfied. In the instant case in hand, admittedly, there is no approval of Resolution Plan till date and as such, it is held by this Tribunal , that the Appellant cannot press into service the ingredients of Section 32-A(2) of the I B Code - this Tribunal points out that Section 32 A of the I B Code, 2016 in the present form and content in a cocksure manner will negate the action i.e. taken to discharge the criminally acquired asset/property in the considered opinion of this Tribunal . Further more, such Illgotten/ Illegitimate Assets will be legitimised after the Corporate Insolvency Resolution Process was completed. Although, Section 14 of I B Code deals with moratorium , it is not a hindrance for the Authority and the Officers under the Prevention of Money Laundering Act, 2002 to deny a person of the tainted Proceeds of Crime . Suffice it for this Tribunal to point out that a person who is involved in Money Laundering is not to be allowed to enjoy the fruits of Proceeds of Crime with a view to ward off is Civil indebtedness, in respect of his Creditors - As seen from the Prevention of Money Laundering Act, 2002 , the purpose of the Act is to prevent Money Laundering and it deals with confiscation of property derived from or concerned with Money Laundering etc. In fact, The Prevention of Money Laundering Act, 2002 is to fulfill our Country s obligation in adhering to the United Nations Resolutions and in regard to Assets/Properties being the Proceeds of Crime , it takes a primacy and precedence over the Insolvency and Bankruptcy Code, 2016 which promotes Resolution as its objective over Liquidation in the considered opinion of this Tribunal . In the instant case, there is no Resolution Plan as approved by the Tribunal and further no Liquidation Proceedings had ended in the sale of Liquidation Assets of the Corporate Debtor - the objective, purpose of two enactments (1) I B Code and (2) PMLA even though at the first blush appear to be at logger heads, there is no repugnancy and inconsistency between them, in lieu of the fact the text, shape and its colour are conspicuously distinct and different, operating in their respective spheres. More importantly, when confiscation of the Proceeds of Crime takes place, the said Act is performed by the Government not in its status/capacity/role as Creditor. There is no two opinion of the fact that the First Appeal to the Appellate Tribunal is as per Section 26 of the PMLA against the Order passed by the Adjudicating Authority under sub Sections 2 3 of Section 8 of the Act. This Tribunal makes it crystalline clear that the proper recourse to be resorted to by the Corporate Debtor is to approach the Competent Forum by pursuing its remedy in Appeal under the Prevention of Money Laundering Act, 2002 to its logical end or any other Jurisdictional Forum (other than the purview of I B Code, 2016,) of course in the manner known to Law and in accordance with Law, if it so desires/advised. Appeal dismissed.
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Central Excise
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2022 (2) TMI 599
Classification of goods - clearances of printed base papers/printed decorative paper in rolls - to be classified under CETH 4811 90 99 or under CETH 4911 99 90? - Time limitation - HELD THAT:- On the identical issue, in the case of M/S MATCHWELL VERSUS C.C.E. -AHMEDABAD-I [ 2019 (6) TMI 1019 - CESTAT AHMEDABAD] , the Tribunal has passed order in favour of the assessee however, the Revenue has filed Tax Appeal No. 9177/2019 before the Hon ble Supreme Court against the said order and Revenue s appeal stand admitted before the Apex Court on 19.02.2020. Though this Tribunal is not precluded from passing order in the aforesaid status of admission of appeal before the Hon ble Supreme Court but in the interest of justice, to avoid multiple litigations, this matter to be taken up by the Adjudicating Authority after the outcome of Hon ble Supreme Court judgment in the case of M/s. Matchwell. The appeal is allowed by way of remand to the Adjudicating Authority for passing a fresh order.
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2022 (2) TMI 598
Classification of goods - dolachar or coalchar - waste item - classifiable under Chapter Heading 2619 of the First Schedule to the Central Excise Tariff Act or not - HELD THAT:- The issue already stands decided by this Tribunal in the case of M/S. ALOK STEEL INDUSTRIES PRIVATE LIMITED, M/S. JHARKHAND ISPAT PRIVATE LIMITED, M/S. MAA CHHINNMASTIKA CEMENT ISPAT PRIVATE LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, RANCHI COMMISSIONERATE [ 2020 (1) TMI 581 - CESTAT KOLKATA] held that the co-ordinate Bench of the Tribunal at Bangalore in the case of COMMR. OF C. EX. CUS., BELGAUM VERSUS BELLARY STEELS AND ALLOYS LTD. [ 2017 (5) TMI 1710 - CESTAT BANGALORE] while dealing with the demand raised by the Department on dolachar under heading 2619 has held that the product is akin to coal and accordingly is to be classified under 2701.00. There are no reason to take a contrary view - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2022 (2) TMI 597
Restoration of assessment order - transaction between the petitioner and the 7 registered dealers in respect of the alleged sale of raw skins, was a fictitious/not genuine or not - transfer of property - sine qua non for a sale from the petitioner to the 7 registered dealers - question of fact or not - job tanning charges - wet blue skin after tanning of the raw skins alleged to have been sold to the 7 registered dealers - suppression on the basis of stock variation found in the inspection - HELD THAT:- The issues are essentially question of facts and the same do not give rise to any question of law warranting interference at the hands of this court - reliance placed in the case of METROARK LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CALCUTTA [ 2004 (1) TMI 397 - SUPREME COURT] where it was held that The Tribunal is the final fact-finding authority. Unless it is shown that there is something perverse in its finding, this Court would not interfere. No authority is required for this purpose. That apart, it is settled law that a court of appeal interferes not when the judgment under attack is not right, but only when it is shown to be wrong . The writ petition deserves to be dismissed as devoid of merit - Petition dismissed.
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