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TMI Tax Updates - e-Newsletter March 1, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST: Release of the goods and the conveyance - r It appears that the supplier has paid tax twice; first in point of time on 19.11.2021 and second in point of time 18.12.2021 alongwith the penalty. If the amount towards the tax and penalty has already been deposited, there should not any problem in ordering release of the goods and the conveyance. Even otherwise the goods are Areca Nuts. The goods could be said to be perishable in nature. - Goods to be released forthwith - HC Visit to Get Source GST: Classification of supply - supply of goods or supply of services - supply of food and beverages by the eating joints - the supply of food by the entity partially or completely cooked in the central kitchen through or from the various eating joints would be covered by 'restaurant service' and the supply of all the items of food and beverages offered by the eating joints/central kitchen of applicant are classifiable under HSN 9963 - it will attract 5% GST (2.5% CGST + 2.5% SGST) provided that credit of input tax charged on goods and services used in supplying the service has not been taken. - AAR Visit to Get Source GST: Exemption from GST - services supplied by the applicant by way of educating and training physical, mental and spiritual practices of Yoga - The training or coaching of various courses of Yoga for consideration by the applicant is nothing but “Physical well-being service and more suitably covered under Service Description “Physical wellbeing including health club and fitness centre” - Not exempted from GST - AAR Visit to Get Source GST: Classification of goods - Distillers Wet Grain Solubles (DWGS) - DWGS is by-product or residues? - DWGS (Distillers Wet Grain Solubles) is an inevitable outcome in the process of manufacturing of alcohol. Apart from nomenclature whether it is residue or by-product, we find that it is a kind of brewing or distilling dregs & waste and is classifiable under Chapter / Heading/Sub-heading / Tariff item 2303 of GST Tariff. - AAR Visit to Get Source Income Tax: Stay of demand - waiver of 20% of the pre-deposit - We fail to understand what is so magical in the figure of 20%. To balance the equities, the authority may even consider directing the assessee to make a deposit of 5% or 10% of the assessed amount as the circumstances may demand as a pre-deposit. The “High Pitched Assessment” means where the income determined and assessment was substantially higher than the returned income. - The application under Section 220(6) of the Act cannot normally be rejected merely describing it to be against the interest of Revenue if recovery is not made, if tax demanded is twice or more of the declared tax liability. - HC Visit to Get Source Income Tax: TDS u/s 195 - payment made for transponder charges - royalty u/s 9 (1) (vi) - in Article 12 (3) of India Malaysia Treaty it is “ Secret Formula or process” is the term used and not “ process” , therefore meaning of term “ process” cannot be incorporated in the treaty, even otherwise, because then, the meaning of word “secret “ in treaty would become redundant. CIT (A) has also dealt with this argument of ld AO in his order and then order of ld CIT (A) worded identically in the issues decided by coordinate bench has been upheld. Therefore, this argument also deserves to be dismissed. - Decided against revenue. - AT Visit to Get Source Income Tax: Income accrued In India - receipts for design and drawing - Permanent Establishment [PE] in India - There is no dispute that the assessee has supplied only engineering design, that too, from abroad and consideration in view thereof has also been received from outside India and since we have held that RIC is not DAPE within the meaning of Article 5 of the India - USA DTAA, there is no question of any attribution to the assessee. In light of the afore-mentioned discussion, the appeal of the assessee is allowed and that of the Revenue is dismissed. - AT Visit to Get Source Income Tax: Assessment u/s 153A/143 - Difference between assessments under section 143(3) and 144 - Mention of nature of the order as section 153A r.w.s. 143(3) was not a technical mistake or an error which can be cured by resorting to the provisions of section 292B of the Act. AO even though recording that no return had been filed and no notice under section 143(2) had been issued, continued to proceed as if he was making an assessment under section 143(3) - Hence, the order made under section 153A/ 143(3) is not legally tenable and ought to have been made under section 144 of the Act. - AT Visit to Get Source Income Tax: Disallowance of proportionate interest expenditure - capital attributable to project ‘B’ i.e. unfinished project - This interest expenditure disallowed was not related to borrowing for maintaining business infrastructure but it was related to specific real estate project. As no significant risks and rewards of ownership of the project ‘B’ were transferred by the assessee to prospective buyer, no revenue from said buyer was recognized following principle of percentage completion method. Thus, no liability in respect of interest expenses pertaining to project ‘B’ was accrued, hence it is not allowable in the year under consideration. - AT Visit to Get Source Income Tax: Disallowance of expenditure incurred towards free samples - On a perusal of material placed before us, it is noticed that the cost incurred by the assessee towards distribution of free samples in these assessment years is much lesser than similar expenditure incurred in the earlier and subsequent assessment years. Thus, keeping in view the peculiar circumstances of the case, we hold that no disallowance out of the cost incurred towards free physician’s samples is called for in any of these assessment years. - AT Visit to Get Source Income Tax: Revision u/s 263 by CIT - There remains no ambiguity to the fact that there was no document found from the search premises belonging to the assessee. Therefore the assessment in itself is bad in law. - Thus we hold that the assessment framed under section 153C read with section 143(3) of the Act is not sustainable. Once the assessment in itself is invalid then the same cannot be revised under the provisions of section 263. - AT Visit to Get Source Customs: Implementation of automation in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 with effect from 01.03.2022 - Circular clarifying the detailed procedure and steps Visit to Get Source Customs: Misdeclaration of imported goods - MS Plates in various thickness and various sizes (stock lot) - Commissioner has himself held that the impugned goods are “prime” and have cif value of US $ 425 per Tonne. With that finding on record the order holding goods as restricted as per Notification No 63/2008 cannot be sustained. - The impugned order is completely a non speaking order, passed without consideration of any submission and the law on subject - AT Visit to Get Source Indian Laws: Dishonor of Cheque - person responsible for day to day affairs of the company - In the facts of the present case, the only averment in the complaint is that the remaining accused persons are directly responsible for day to day affairs of the accused No.1 company. Considering the fact that the petitioner is neither the signatory nor the Managing Director of the company nor is there any averment in the complaint as to how the petitioner is responsible and Incharge of the day to day affairs and conduct of the company, nor does the complaint attribute any conduct, act or omission on the part of the petitioner which would be sufficient to hold him vicariously liable for the act of the company, the impugned order summoning the petitioner is liable to be set aside. - HC Visit to Get Source IBC: Applicant/Petitioner had sought a direction to be issued to the ‘Liquidator to convene the Meeting of the Creditors (inclusive of all the Creditors i.e., “Respondent No. 2) and place before them the ‘Scheme of Compromise/Settlement’ for their consideration’, this ‘Tribunal’ taking note of the fact that if the Promoter is ineligible under Section 29A of I & B Code, 2016 cannot make an Application for ‘Compromise and Arrangement’ for taking the immovable property and actionable claim of the ‘Corporate Debtor’ - AT Visit to Get Source Central Excise: Confiscation of land, buildings etc. - invocation of powers under Rule 173(Q)(2) of Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings etc., when on such date, the rule 173Q(2) was not on the Statue Book having been omitted w.e.f. 17.05.2000 - in absence of provisions providing for First Charge in relation to Central Excise dues in the Central Excise Act, 1944 or not, whether the dues of the Excise department would have priority over the dues of the Secured Creditors or not? - Confiscation order quashed - SC Visit to Get Source Central Excise: Refund of duty paid - deposit was made out of mistake of fact - Mere payment of an amount by the assessee and acceptance by the Department would not regularize such an amount as duty if it was not actually payable and paid by mistake. - the appellate authority i.e. the Commissioner of Central Tax (Appeals) is directed to take up the appeal and dispose of the same within a period of 2(two) months - HC Visit to Get Source Central Excise: Recovery of rebate claim - Inputs received in the factory or at the premises of job worker so as to claim rebate, or not - The department’s case of non-receipt of inputs by the appellant and the job worker and non-manufacturing of export goods is baseless and without any tangible evidence. On the contrary, the appellant have established that the appellant have received the inputs in their factory and at job workers premises and the goods manufactured there from have been exported - AT Visit to Get Source Central Excise: 100% EOU - Refund in cash of duty paid under protest - on introduction of the Good and Service Tax they were even permitted to carry forward the said credit to that regime. The appellants have by reversing the credit and filing the appeal subsequent to introduction created an instrument just to en-cash the CENVAT credit by resorting to Section 142 (6) (a) of the CGST Act. - it is also settled principle in law that nobody should be allowed the benefit of his own wrongs. - AT Visit to Get Source Central Excise: Clandestine Removal - availment of irregular CENVAT Credit - duty paying documents - the documents as that of invoices, gate registers, raw material registers, GRs and ledger account as have been relied upon by the appellants, since the stage of filing of reply to the show cause notice. The goods mentioned in the invoices were duly been received by the appellants. The invoices were Cenvatable invoices. Accordingly, the credit thereupon is therefore held to have been rightly availed. The order under challenge is therefore, set aside - AT Visit to Get Source VAT: Seeking lifting of attachment on Bank Accounts of Directors - recovery of dues of the company, while the bank accounts of Directors were attached - The attachment on the bank account of the writ applicant is hereby ordered to be lifted. The bank shall permit the writ applicant to operate the bank account - HC Visit to Get Source Articles NO GST ON GRANT OF ALCOHOLIC LIQUOR LICENSE Notifications GST - States G.O.MS.No.70 - dated 10-2-2022 - Andhra Pradesh SGST Supersession of the Go.Ms.No.377, Revenue (CT-II) Department, dated 30-12-2021 and Amendment to Go.MS.No.258, Revenue (CT-II) Department, dated 29.06.2017 G.O.MS.No. 06 - dated 11-1-2022 - Andhra Pradesh SGST Amendment in Go.Ms.No.258, Revenue(CT-II)Department, dated 29.06.2017 G.O.MS.No. 378 - dated 30-12-2021 - Andhra Pradesh SGST Amendment to Go.Ms.No.259, Revenue(CT-II) Department, dated 29.06.2017 G.O.MS.No. 377 - dated 30-12-2021 - Andhra Pradesh SGST Amendment to Go.Ms.No.258, Revenue (CT-II) Department, dated 29.06.2017 FTX.56/2017/Pt-IV/166 - dated 2-2-2022 - Assam SGST 02/02/2022 Seeks to appoint the 1st day of August, 2021, as the date on which the provisions of section 35 as at Sl. No. 4 and section 44 as at Sl. No. 5 of the Assam Goods and Services Tax (Amendment) Act, 2021 (Assam Act No. XXI of 2021), shall come into force. FTX.56/2017/Pt-I/165 - dated 2-2-2022 - Assam SGST Seeks to appoint the 1st day of June, 2021, as the date on which the provisions of section 50 as at Sl.No. 6 of the Assam Goods and Services Tax (Amendment) Act, 2021 (Assam Act No. XXI of 2021), shall come into force. FTX.56/2017/Pt-V/73 - dated 24-1-2022 - Assam SGST Seeks to amend notification no. FTX.56/2017/Pt-II/659 dtd. 10/08/2021 in order to extend due date of compliances which fall during the period from "15.04.2021 to 29.06.2021" till 30.06.2021. FTX.56/2017/Pt-V/71 - dated 24-1-2022 - Assam SGST Seeks to rationalize late fee for delay in filing of return in FORM GSTR-7 Circulars / Instructions / Orders DGFT - TRADE NOTICE No. 37/2021-22 - dated 28-2-2022 Implementation of Notification S.O. 624 (E) dated 11.02.2022 Customs - 04/2022 - dated 27-2-2022 Implementation of automation in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 with effect from 01.03.2022 News The combined Index of Eight Core Industries increases by 3.7 percent in January, 2022 Exports of Electronic Goods sees a jump of 88% since 2013-14 DPIIT to hold its first Post Budget Webinar on PM GatiShakti Case Laws: GST 2022 (2) TMI 1213 Release of the goods and the conveyance - requisite amount towards tax and penalty already deposited - Areca Nuts - perishable goods - HELD THAT:- It has been brought to our notice that the requisite amount towards tax and penalty aggregating to ₹ 9,55,840/- has already been deposited by the supplier i.e.M/s. Izaan Trading. It appears that the supplier has paid tax twice; first in point of time on 19.11.2021 and second in point of time 18.12.2021 alongwith the penalty. If the amount towards the tax and penalty has already been deposited, there should not any problem in ordering release of the goods and the conveyance. Even otherwise the goods are Areca Nuts. The goods could be said to be perishable in nature. The respondent no.3 is directed to release the goods as well as the conveyance at the earliest. If the Department wants to proceed further with the inquiry, it may do so in accordance with law - application allowed. 2022 (2) TMI 1212 Classification of supply - supply of goods or supply of services - supply of food and beverages (as per illustrative list mentioned in Statement of Facts above) by the eating joints - Dine In - Take Away - Delivery - applicable tax rate on the supply made by the applicant - Input tax credit if supply is treated as supply of goods and if supply is treated as supply of services - HELD THAT:- The applicant will have a dedicated central kitchen for the preparation of food items and there will be various eating joints under the brand name of applicant from where the food preparations will be offered to the customers. The consumers will only have access to such eating joints. A substantial part of cooking process of majority food items will be carried out at the central kitchen and the eating joints will receive the pre-cooked or semi-cooked preparations from the kitchen in different forms, containers or packaging having a shelf life as applicable for the food item. The preparations may be sent to the outlets in packed form to be offered to the customers as such or to be further processed for offering the food items or dishes at the choice and desire of consumers - the activity of sale of aforementioned food items alongwith services thereof to be performed by the applicant in respect of central kitchen/ eating joints by way of Dine In, Take away delivery is covered under 'supply' as per section 7 of the CGST Act. 2017 and liable to tax as per section 9 of the CGST Act, 2017. As per explanatory notes to the scheme of classification under heading 9963: Accommodation, Food and Beverage service, the activity to be performed by the applicant will be classified under heading 996331 services provided by Restaurants, Cafes, and similar eating facilities including take away services, Room services, and door delivery of food . In present facts since the eating joints of the appellant are not intended to be located in any premises having hotel accommodation services. Hence the case of the applicant is not covered in exclusion as premises will be as standalone restaurant(s) - the supply of food by the entity partially or completely cooked in the central kitchen through or from the various eating joints would be covered by 'restaurant service' and the supply of all the items of food and beverages offered by the eating joints/central kitchen of applicant are classifiable under HSN 9963 under SI. No. 7(ii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended time to time and are taxable at the rate of 5% (without ITC). Classification and applicable tax rate on the supply - HELD THAT:- In the instant case supply made by the applicant is classifiable under Chapter, Section or Heading 9963 under SI. No. 7(ii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended time to time and is taxable at the rate of 5% (without ITC). Availability of Input Tax Credit (ITC) to the applicant if the supply considered as supply of goods or as supply of service - HELD THAT:- Supply to be made by the applicant is covered under restaurant service , as defined in notification No. 11/2017- Central Tax (Rate) as amended and attract 5% GST provided that credit of input tax charged on goods and services used in supplying the service has not been taken. The aforesaid notification is prescribing rate with specific condition, no option is provided. Wherever the intention to provide option is there, it is clearly mentioned by providing multiple rates 'with ITC' and 'without ITC'. Thus, the applicant is not entitled to take ITC as per condition laid down at SI. No. 7(ii) of Notification No. 11/2017 - CT (Rate) dated 28.06.2017. 2022 (2) TMI 1211 Exemption from GST - services supplied by the applicant by way of educating and training physical, mental and spiritual practices of Yoga - benefit of exemption under N/N. 12/2017-CT Rate dated 28.06.2017 under entry number 80? - HELD THAT:- The activity of offering of various courses of Yoga for improving mental and physical wellness for consideration in form of fees is covered under 'supply' as per section 7 of the CGST Act, 2017 - On going through entry 80 of the Notification No. 12- CT(R) dated 28-06-2017, it is said that there should be training or coaching in recreational activities. The entry No. 80 of the Notification No. 12/2017-CT(R) dated 28-06-2017 and entry No. 711 of the Notification No. 11/2017-CT(R) dated 28-06-2017, we are of the view that services by way of training or coaching of various Yoga courses by applicant for consideration, is not exactly for Recreation activity whereas the same is for 'Physical well-being activities' and hence, it is not covered under entry No. 80 of the Notification No. 12/2017-CT(R) dated 28-06-2017. Further, as per circular No. 66/40/2018-GST dated 26.09.2018, only those services which provided by entity registered under Section 12AA of the Income Tax Act, 1961 by way of advancement of religion, spirituality or yoga, are exempt. The essence of the said circular is to provide exemption in respect of services of advancement of yoga to only those entities who registered under Section 12AA of the Income Tax Act, 1961 - the intention of the law maker in respect of entry No. 80 of the Notification No. 12/2017-CT(R) dated 28-06-2017, is to provide benefits of GST exemption to only those entities which are registered under Section 12AA of the Income Tax Act, 1961. This intention also confirmed from the aforesaid circular No. 66/40/2018-GST dated 26.09.2018. As the applicant (as mentioned in their written submission) is not registered under Section 12AA of the Income Tax Act, 1961, therefore in light of the circular, the applicant is not eligible to avail benefits of entry No. 80 of the Notification No. 12/2017-CT(R) dated 28-06-2017. The training or coaching of various courses of Yoga for consideration by the applicant is nothing but Physical well-being service and more suitably covered under Service Description Physical wellbeing including health club and fitness centre under Entry No. 711 of the Notification No. 11/2017-CT(R) dated 28-06-2017 and attracts GST @ 18% as per Entry No. 35 of the Notification No. 11/2017-CT(R) dated 28-06-2017. 2022 (2) TMI 1210 Classification of goods - Distillers Wet Grain Solubles (DWGS) - DWGS is by-product or residues? - to be classified under Tariff Entry 2309 of GST Tariff or otherwise? - DWGS which is sold as Cattle Feed in the Trade are to be classified under Tariff Entry 2309 of GST Tariff? - HELD THAT:- Entry no. 102 of the N/N. 2/2017-Central Tax (Rate), dated 28th June, 2017 clarifies the picture of feeds, supplement husk of pulses, concentrates additives, wheat bran de-oiled cake etc. As far as relevancy of term 'cattle feed' in the case, it is opined that DWGS (Distillers Wet Grain Solubles) cannot be categorized as cattle feed mere being slight valuable in the market and mere installation of huge machinery for its production. The items/description of goods falling under entry No. 102 is quite different from DWGS and only for the purpose of just availing the benefits of exemption under Notification No. 2/2017-Central Tax (Rate), dated 28th June, 2017, it cannot be termed as 'cattle feed'. Entry No. 102 of the said notification is separate entry and items pertaining to this entry do not fit in the frame as by-product or residue whatever name it called of brewery, generated during the process of manufacturing of alcohol - As per meaning provided in Wikipedia, the Brewing is the production of beer by steeping a starch source (commonly cereal grains, the most popular of which is barley/wheat) in water and fermenting the resulting sweet liquid with yeast. In the instant case, it is fact that in the process of manufacturing of alcohol, the 'starch portion' present in the wheat grain is utilized through distillation process. Means 'starch present in the wheat grain' is being processed in brewery. Hence, main key element i.e. 'starch' is present here. Further, the applicant company is a kind of brewery where brewing or distilling process are being undertaken. In the result of manufacturing process of alcohol, several residues, dregs and waste are come into picture - As far as nature of DWGS (Distillers Wet Grain Solubles) is concern, it is nothing but brewing or distilling dregs and waste as it is come out in the picture as a result of brewing or distilling process. DWGS (Distillers Wet Grain Solubles) is an inevitable outcome in the process of manufacturing of alcohol. Apart from nomenclature whether it is residue or by-product, we find that it is a kind of brewing or distilling dregs waste and is classifiable under Chapter / Heading/Sub-heading / Tariff item 2303 of GST Tariff. Income Tax 2022 (2) TMI 1209 Deduction u/s 80IB(5) - Scope of definition of the term manufacture which included process - process of making poultry feeds as manufacture or production of article or thing - assessee claimed deduction on the ground that the activity done by them in their factory is a manufacturing activity by manufacturing poultry feed and, therefore, they are entitled for deduction - AO said there was no manufacturing done by the assessee but what was done by the assessee is mixing various product, each one of them had an individual identity and cannot be construed to be an input for manufacturing of poultry feed - HELD THAT:- The process involves steam cooking which is done after the materials are mixed and the assessee has a one tonne per hour boiler which generates steam at 10 kgs/cm2 pressure and they also have insulated pipeline which carries the steam to the pellet section. The pressure reducing valve (PRV) is fitted before the pellet section which is reducing the pressure from 10 kgs to 1.5 kg/cm2 which will ensure that the steam entering the conditioning section is released slowly into the material for good conditioning. Thereafter, there are two other conditioning processes in which the poultry feed comes into contact with steam which is stated to ensure that the starch contained in the feed is gelatinised which is better for the growth of the chicken and at that level the feed attains a temperature of 850C thereby all the bacteria like E Coli, salmonella and other microbes get destroyed. After conditioning, the product goes in the pelleting section, then to the cooling section, then to the crumbling section, then to the sieving section and after passing the quality control test, it is ready for bagging. The assessee had also furnished details as to what are the raw materials required to make the poultry feed. We would be well-justified in following the decision in Sona Vets Pvt. Ltd. [ 2020 (3) TMI 130 - CALCUTTA HIGH COURT] which had considered the same product as that of the product produced by the assessee. Therefore, we hold that the tribunal was right in confirming the order of the CIT(A) and granting relief under Section 80IB of the Act. In the result, the substantial questions of law framed on this issue are decided against the revenue. Disallowance under Section 14A - ITAT directed the assessing officer to compute the disallowance as per Rule 8D by taking into consideration only those shares which have yielded dividend income in the year under consideration - HELD THAT:- Though the Tribunal has noted the decision of the Tribunal in REI Agro Ltd. [ 2013 (12) TMI 1517 - CALCUTTA HIGH COURT] ,there are several other decisions on the said point and the machinery provision under Rule 8D can be applied only with regard to the shares which yielded dividend income in the year under consideration. Therefore, we find that the tribunal rightly applied the legal principle and granted relief. Accordingly, the substantial question of law framed on the said issue, namely, the deduction under Section 14A of the Act is decided against the revenue. 2022 (2) TMI 1208 Stay of demand - waiver of 20% of the pre-deposit essentially on four grounds (i) high pitched assessment (ii) only source of income through Avani Petrochem Pvt. Ltd. (iii) stereo type order passed by the Principal Commissioner and (iv) adverse effect on the financial affairs due to the Covid-19 pandemic - HELD THAT:- In the case on hand, unfortunately, the respondent No.2 has not considered anything and has just mechanically declined to grant relief as prayed for by the writ applicant. When the writ applicant pointed out to the respondent No.2 that the case on hand is one of high pitched assessment, the same came to be dismissed by the respondent No.2 by merely saying that the issue has been discussed threadbare during the assessment proceedings - finding recorded by the respondent No.2 is that the assessment order came to be passed by the Assessing Officer after granting sufficient opportunities and after due consideration of all the relevant aspects of the matter and, therefore, the issue of high pitched assessment need not be considered. The findings recorded in para-3 of the order dated 17.12.2021 are not appealing to us at all. The matter has not been considered by the respondent No.2 in its proper perspective. Many times in the over zealousness to protect the interest of the Revenue, the authorities render their discretionary orders susceptible to the complaint that those have been passed without any application of mind. We fail to understand what is so magical in the figure of 20%. To balance the equities, the authority may even consider directing the assessee to make a deposit of 5% or 10% of the assessed amount as the circumstances may demand as a pre-deposit. The High Pitched Assessment means where the income determined and assessment was substantially higher than the returned income. For example, twice the returned income or more. The exercise of discretion is essentially the discernment of what is right and proper; and such discernment is the critical and cautious judgment of what is correct and proper by differentiating between shadow and substance as also between equity and pretence. A holder of public office, when exercising discretion conferred by the statute, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The requirements of reasonableness, rationality, impartiality, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion. It is hardly of any debate that discretion has to be exercised judiciously and, for that matter, all the facts and all the relevant surrounding factors as also the implication of exercise of discretion either way have to be properly weighed and a balanced decision is required to be taken. The mandate of Parliament in sub-section (6) seems to be that the lower Assessing Officer should abide by and being bound by the decision of the appellate authority, should normally wait for the fate of such appeal filed by the assessee. Therefore, his discretion of not treating the assessee in default, conferred under sub-section (6) should ordinarily be exercised in favour of assessee, unless the overriding and overwhelming reasons are there to reject the application of the assessee under Section 220(6) - The application under Section 220(6) of the Act cannot normally be rejected merely describing it to be against the interest of Revenue if recovery is not made, if tax demanded is twice or more of the declared tax liability. The very purpose of filing of appeal, which provides an effective remedy to the assessee is likely to be frustrated, if such a discretion was always to be exercised in favour of revenue rather than assessee. Civil application allowed - impugned orders passed by the respondent No.2 are set aside and the respondent No.2 is directed to consider the application filed by the writ applicant under Sections 220(3) and 220(6) respectively of the I.T. Act afresh in conformity with all the CBDT instructions and the parameters laid as above by providing an opportunity of being heard to the writ applicant and pass orders in accordance with law preferably within a period of two weeks from the date of the receipt of the writ of this order. Section 251 of the Act clearly stipulates that in disposing of an appeal, the CIT (Appeals) can confirm, reduce, enhance or annul the assessment. Section 251 (1) (c) of the Act further provides that in other cases, he may pass such orders in appeal as he thinks fit. These words harmoniously read, definitely mean that powers of appellate authorities under the Act are wide enough. Such powers could not be intended to be drained out or rendered meaningless, if the power to grant stay against the recovery of disputed demand is to be taken away from the first appellate authority. Such implied, necessary and inherent power must necessarily be read into these provisions conferring the powers upon the appellate authority to modify the impugned assessment order in any manner. In specific terms, the first appellate authority can even enhance the taxable income, while he has the power to reduce or completely set at naught the assessment. The words as he thinks fit in Section 251 (1) (C) are not redundant, as no such redundancy can be attributed to the Parliament. Therefore, mere absence of words power to grant stay in Section 251 of the Act cannot mean that such powers are specifically excluded from the jurisdiction of the first appellate authority. 2022 (2) TMI 1207 Revision u/s 263 by CIT - unexplained cash credit u/s 68 - HELD THAT:- A specific query as regards to source of cash deposits were raised during the course of limited scrutiny assessment and in reply thereof, the appellant disclosed three sources of cash receipts namely; out of professional receipts and withdrawal from the capital balances of partnership firm and withdrawal from bank loan, and further it was brought to the notice that, during the year under consideration the appellant has purchased a new house property out of the advance sale proceeds received by him against sale of other house property. The records of the assessment undoubtedly reveals that, all the transactions and entries were inquired into from the aforementioned statements with respect to sources there of and upon finding the discrepancies on such inquiries, same was brought to tax as unexplained cash credit u/s 68. During the course of revisionary proceedings, it is evident that, the appellant indifferently disclosed three sources of cash receipts namely; out of professional receipts, withdrawal from the capital balances of partnership firm and withdrawal from bank loan, and established that there remained no un-disclosure before the lower tax authority. We concur with the contention of Ld AR that, the statements were duly verified and discrepancies were taxed after due inquiries as embedded in the statutory provisions of law and the law laid down in MALABAR INDUSTRIAL CO. LTD. VERSUS COMMISSIONER OF INCOME-TAX [ 2000 (2) TMI 10 - SUPREME COURT] PCIT sitting on the same fence overlooked the inquiries conducted by the lower tax authority like leaving the dead unattended and hence we do not concur with the views of Ld PCIT that, assessment lacks proper inquiry into sources of cash receipt / deposits for the reasons set in the preceding paragraphs. Thus the assessment proceeding suffers from no-infirmity so far as the conduction of inquiry is concern; consequently, we do not hesitate in upholding the order of Ld PCIT with infirmity and quashed the revisionary order passed u/s 263. - Decided in favour of assessee. 2022 (2) TMI 1206 Belated remittance of employees contribution to PF - Deduction made before the due date of filing of the return of income u/s 139(1) - HELD THAT:- Employees contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income. In the case of APEPDCL [ 2016 (9) TMI 1040 - ITAT VISAKHAPATNAM] after considering the decision of Hon ble Karnataka High Court in the case of Essae Teraoka (P) Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] and the decision of coordinate bench of ITAT Hyderabad in the case of Tetra Soft (India) Pvt. Ltd. [ 2015 (10) TMI 1601 - ITAT HYDERABAD] and also taking support from the decision of Hon ble Supreme Court in the case of CIT Vs. M/s Vegetables Products Ltd.[ 1973 (1) TMI 1 - SUPREME COURT] decided the issue in favour of the assessee. 2022 (2) TMI 1205 Penalty u/s 271D - transaction of acceptance of cash trading advances violative of provisions of section 269SS - HELD THAT:- In the instant case, it is undisputed fact the assessee during the course of his regular business found accepted deposit in cash from five persons and transferred for the urgency of his principal, however the assessee dejectedly failed to establish vis- -vis substantiate his proposition such receipts were trading advances in the light of evidential material such as sales invoices, delivery challans and vouchers etc. - the appellant also remained unsuccessful in proving any of the intractable circumstances which leads to acceptance of deposit in cash or even demonstrate his case falling within the realm of exceptions laid in the provision or evince of reasonable cause of led such violation, consequently we obstinate with the findings of tax authorities below. Once the violation of provisions of section 269SS is manifested, it inevitably triggers penalty provision as laid in section 271D unless the sheltered within the umbrella of 273B. Hon ble High Court of Judicature at Bombay in a similar circumstance in Manish Nitin Wadikar [ 2019 (6) TMI 444 - BOMBAY HIGH COURT] held that, where the assessee failed on a given sufficient opportunities to establish any reasonable cause of violation of provisions of section 269SS, per contra makes mere assertion against the proposition of tax authorities without any supporting material in substantiating such assertion, is essentially sufficient to draw conclusion against the assertion made by the assessee, consequently the penal provision shall follow. Tribunal had occasioned to considered the correctness of levy of penalty u/s 271D for the violation of provisions of section 269SS triggered out of bonafide transaction but in the absence of any reasonable cause as contemplated in section 273B in the case of Deepak Sales Properties Pvt Ltd [ 2018 (7) TMI 1314 - ITAT MUMBAI] Held that the penalty u/s 271D is invincible in the absence of reasonable cause. We find no illegality in the penalty order; consequently, we upholding the order of Ld JCIT with no infirmity. - Decided against assessee. 2022 (2) TMI 1204 Exemption u/s 11 - registration u/s 12AA denied - Proof of charitable activity u/s 2(15) - assessee is a society registered under Societies Registration Act and is running educational institutions - whether the assessee is eligible for registration u/s 12A / 12AA? - HELD THAT:- The main objects are to provide education through English medium school to the rural population and also to encourage literary, library, cultural and sports activities - if the assessee society is genuinely carrying the charitable activity based on the objectives of the society, the registration u/s 12AA must be granted. For that matter, the primary duty of the Ld.CIT(E) is to examine the objectives of the Society and if he is having any doubt about the genuineness of the activity carried on by the assessee society, it is open to the Ld.CIT(E) to depute income tax officials to examine the objectives of the society by conducting enquiries and after receipt of the enquiry report, the Ld.CIT(E) is empowered to exercise his discretion based on the material available on record, whether to grant registration u/s 12A/12AA of the Act or not. In the present case on hand, the Ld.CIT(E) simply rejected 12AA registration on the ground that the assessee has claimed exemption u/s 11 without having registration u/s 12AA during the A.Ys 2015-16 to 2017-18. In our opinion, the Ld.CIT(E) has not at all looked into the objectives of the society and simply rejected registration u/s 12AA based on the wrong claim made by the assessee during the A.Y.2015-16 to 2017-18. Upon perusal of the order of the Ld.CIT(E), there is no such finding in the impugned order. The decisions, which were relied on by the Ld.CIT(E) has no application in the present case. After considering the provisions of section 12A and 12AA of the Act, we are of the view that the Ld.CIT(E) could have examined only the genuineness of the objectives of the Trust and it s activities. There was no finding given by the Ld.CIT(E) that the objectives and activities of the Trust are not genuine. Therefore, we hold that the ground raised by Ld.CIT(E) for rejection of registration to the assessee cannot be sustained. In the light of the above findings, the impugned order passed by the Ld.CIT(E) is set aside. CIT(E) is directed to grant registration as requested by the assessee in terms of section 12AA of the Act. Accordingly, the grounds raised by the assessee are allowed. 2022 (2) TMI 1203 Disallowance u/s 80IC - allowance of claim of deduction u/s. 80IC by the Ld. CIT(A) on incomes pertaining to Interest on Electricity Deposit, Recovery from Transporters and Sundry Balances of Vendors written off - Claim denied by A.O holding that they were not in the nature of incomes derived from the business of the assessee for the purposes of being eligible to claim deduction of profits thereon - HELD THAT:- The basis on which the Ld. CIT(A) had allowed the assessee s claim of deduction u/s. 80IC in relation to income being Interest on Electricity Deposit, Recovery from Transporters and Sundry Balances of Vendors written off, being the order of the Ld. CIT(A) for Assessment Year 2012-13 2013-14. [ 2019 (10) TMI 119 - ITAT AHMEDABAD] the same has been upheld by the ITAT. We have noted that the ITAT with respect to the very same nature of incomes as in the impugned order had held that such incomes has affirmed the findings of the Ld.CIT(A) that they are derived from the manufacturing activity and therefore were eligible to claim deduction of profits earned thereon u/s. 80IC of the Act. D.R. was unable to point out any distinguishing fact before us nor was any decision of the higher authorities brought to our notice holding to the contrary. No reason to interfere in the order of the Ld. CIT(A) allowing assessee s claim of deduction u/s. 80IC of the Act on Electricity Deposit, Recovery from Transporters and Sundry Balances of Vendors written off. - Decided against revenue. Disallowance of foreign commission paid to non-residents - CIT-A deleted the addition - HELD THAT:- CIT(A) deleted the disallowance of commission expenses finding that the issue was identical to that in Assessment Year 2013-14 [ 2019 (10) TMI 119 - ITAT AHMEDABAD] wherein identical disallowance was deleted and further noting on facts that most of the commission agents were same as in Assessment Year 2013-14, while the new commission agents fulfilled the criteria laid down for non deduction of tax at source on the commission so paid.We have also noted that the ITAT has upheld the order of the Ld. CIT(A) in Assessment Year 2013-14. Since the the Ld. D.R. was unable to point out any distinguishing fact before us nor was any decision of the higher authorities brought to our notice holding to the contrary nor any infirmity pointed out in the findings of the Ld.CIT(A) vis a vis the new commission agents, we see no reason to disagree with the Ld.CIT(A).the deletion of disallowance of commission expenses is accordingly upheld. - Decided against revenue. 2022 (2) TMI 1202 Disallowance of Employee's contribution of ESI and PF - amount paid to the said funds' accounts late but before the due date of filing of return u/s 139(1) - Scope of amendment - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case. See SHRI GOPALAKRISHNA ASWINI KUMAR [ 2021 (10) TMI 952 - ITAT BANGALORE] . Thus addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted - Decided in favour of assessee. 2022 (2) TMI 1201 Bogus LTCG - exemption u/s 10(38) - shares of a pre-determined Penny stock company transaction - HELD THAT:- Despite lapse of almost four months from the date of direction given by the Bench, the Revenue could not file any document to substantiate that the Investigation carried out by the Directorate of Investigation of Kolkata or SEBI has any link with the instant transactions of the assessee. We further find the report of the SEBI is of 2015, whereas, in the instant case the assessee has purchased the shares in off market dealing in 2012 and sold the same in 2014 through stock exchange, meaning thereby that the transactions are of a date prior to the date of SEBI Report. In view of the above decision of the Tribunal in the case of Smt. Karuna Garg cited [ 2019 (8) TMI 450 - ITAT DELHI] and since the Revenue has failed to comply to the direction of the Bench in furnishing any report from the AO as to in what manner, the investigation carried out by the Directorate of Investigation, Kolkata and report of SEBI has any link with the transactions carried out by the assessee, we allow the claim of Long Term Capital Gain on account of sale of shares of M/s Esteem Bio Organic Food Processing Ltd. and consequently the exemption claimed u/s 10(38) of the Act. The grounds raised by the assessee are accordingly allowed. 2022 (2) TMI 1200 TDS u/s 195 - payment made for transponder charges - royalty u/s 9 (1) (vi) under the relevant double taxation avoidance agreement - Indo-US DTAA - HELD THAT:- As relying on own case [ 2022 (1) TMI 939 - ITAT MUMBAI] we are of the view that there is no infirmity in the order of The ld CIT (A) in holding that payment by assessee to a foreign company for utilization of transponder centered on a satellite is not in the nature of Royalty in terms of various Article of above Three DTAAs. Coming to the argument of the ld DR that relying on Article 3 (2) of The Treaty, term process as defined in Explanation [6] to section 9 (1) (vi) of The Act, should be read in to the treaty as the term process used in the treaty Article 12 (3) is not defined in Treaty, hence, meaning assigned domestic law should be used. We find that in Article 12 (3) of India Malaysia Treaty it is Secret Formula or process is the term used and not process , therefore meaning of term process cannot be incorporated in the treaty, even otherwise, because then, the meaning of word secret in treaty would become redundant. CIT (A) has also dealt with this argument of ld AO in his order and then order of ld CIT (A) worded identically in the issues decided by coordinate bench has been upheld. Therefore, this argument also deserves to be dismissed. - Decided against revenue. 2022 (2) TMI 1199 Addition u/s 68 - bogus unsecured loans - search and seizure operation conducted on the residential and business premise of the PKJ and on the basis of evidences recovered and statements of various persons recorded, Assessing Officer observed that it was found that PKJ was not doing any genuine business activity and was engaged in the activity of providing accommodation entries - HELD THAT:- The search and seizure operation u/s. 132(1) was conducted in Mangal Group of cases on 01.10.2013 it is relevant to note that Mangal group is owned by Shri Mangal jain and Shri Ajit Jain and family members and they hold major shares and directorship in companies of Mangal group. Assessee is also part of Mangal group which is owned by Shri Mangal Jain and others. In the case of Mangal group, Assessing Officer observed that assessee made additions related to transactions with PKJ group by way unsecured loans/ share application money/bogus purchases. We observed that in the instant case also assessee made similar additions which is relating to unsecured loans and it is pertinent to note that the above said unsecured loans were repaid during the assessment year or in subsequent Assessment Years - Decided in favour of assessee. 2022 (2) TMI 1198 Addition u/s 68 - unexplained cash credit - HELD THAT:- The return for a negligible taxable income filed by the depositors which creates doubt about the genuineness of the transaction. CIT A noted a peculiar aspect that the above sum of ₹ 7.86 crores were invested in lot of ₹ 20 lakhs which clearly shows that the initially funds were received as an advance but a letter on treated as preferential capital. The terms and conditions of the preferential capital whether those are redeemable, rate of dividend, nature of cumulative or non-cumulative dividend was not at all forthcoming - uncontroverted findings of the lower authorities and absence of the assessee to produce any further evidence , despite repeated opportunities of hearing , we confirm the finding of the learned CIT- A wherein the addition made by the learned assessing officer under section 68 is made. In view of this, ground No. 1 of the appeal is dismissed. Set off of unabsorbed business losses and unabsorbed depreciation - HELD THAT:- We fully agree with the findings of the CIT A that the provisions of section 72 speaks about setting off of brought forward business losses against business income only and as the above sum of ₹ 7.86 crores has been taxed u/s 68 of the act, same cannot be said to be a business income and therefore the brought forward business losses cannot be allowed to be set off against that addition stop similarly is the case for the set off of unabsorbed depreciation under section 32 - In view of this we do not find any infirmity in the order of the CIT- A in confirming the action of the learned assessing officer in not allowing set off of business losses carried forward and unabsorbed depreciation against the above addition. Accordingly ground No. 2 of the appeal is dismissed. 2022 (2) TMI 1197 Addition on account of retention money - matter has not been verified whether or not the retention money has been offered in subsequent years - CIT-A deleted the addition - HELD THAT:- We find that CIT(A) while granting relief to the assessee specifically mentioned that Assessing Officer himself has not addition any addition on account of retention money in order giving effect in all cases vide his order dated 19.11.2016. Despite accepting the contention of the assessee in all earlier in his own order on 19.12.2016, filed present appeal on similar issue on 20.12.2019. Before us Ld. Sr.DR for the Revenue vehemently argued and insisted that principle of consistency should have been followed by ld CIT(A) and now the issue be restored to the file of AO. We are unable to persuade ourselves on the submission of Ld. Sr.DR for the revenue, as the AO himself deleted the similar addition by accepting the contention of assessee on the retention money and again filed the appeal on the same issue. Therefore, we do not find any infirmity in the order passed by Ld. CIT(A). Accordingly, we affirm the same. - Decided against revenue. 2022 (2) TMI 1196 Addition of agricultural expense on presumptive basis - AY 2014- 15 - HELD THAT:- We have perused case file as well as paper books furnished by assessee. We find no substance in the arguments of ld AR of the assessee. The ld AR instead of giving proper justification has roamed here and there. We have gone through the findings of ld CIT(A) and observed that Ld CIT(A) after considering the evidences and documents submitted by assessee has deleted part addition and granted appropriate relief to the assessee. We have gone through the order of ld CIT(A) and noted that Ld. CIT(A) has passed a reasoned and speaking order after considering the submission made by assessee. The ld CIT(A) has examined the assessee`s facts and evidences, and has granted appropriate relief. That being so, we decline to interfere with the order of Id. CIT(A), his order on this issue is, therefore, upheld and the grounds of appeal of the assessee are dismissed. For A.Y. 2015- 16 - We note that assessee is blowing hot and cold. The assessee as per his own wish showing more agricultural income and when assessee is caught by income tax authorities, then showing less agricultural income! If someone blows hot and cold, they keep changing their attitude towards something, sometimes being very enthusiastic and at other times expressing no interest at all. The assessee under consideration has not explained with cogent evidence that how and why he has reduced agricultural income. We note that in the appellate proceedings, the assessee reiterated that affidavits filed before the AO to claim reduced agriculture income of ₹ 7,81,363/-only as against ₹ 31,42,190/- shown in the ROI filed on 27.03.2016. From the assessment order, it is apparent that the assessee had filed affidavit at the fag end of assessment proceedings as the assessment order is dated 20.09.2017 and the affidavit dated 20.09.2017 appear to be have been filed on the same date. This fact clearly indicates that the assessee was not in a position to explain the agriculture income and as an afterthought, the affidavit could have been filed in response to final show cause notice by the AO. CIT(A) observed that there are various decisions of Hon'ble ITAT Benches and courts whereby disallowance in the range of 30% to 40% of the net agriculture income shown in the return of income was considered fair and reasonable. Accordingly, net agriculture income of ₹ 31,42,190/- was reduced by ₹ 9,42,657/-(30% of ₹ 31,42,190/-) to account for agriculture expenses. Hence, ld CIT(A) restricted the addition from ₹ 25,03,302/-, to ₹ 9,42,657/- (30% of ₹ 31,42,190/-), only. Therefore, we note that a reasonable relief has already been provided by the ld CIT(A). Hence, we do not find any infirmity in the order of ld CIT(A) - Decided against assessee. 2022 (2) TMI 1195 Reopening of assessment u /s 147 - validity of the jurisdiction assumed by the A.O, viz. ITO, Ward-1(3), Bathinda for reopening the assessee s case u/s 147 - requisite sanction u/s 151 obtained from PCIT or not? - HELD THAT:- A.O in the present case before us had failed to obtain the approval of the prescribed authority as contemplated u/s 151 of the Act, i.e, qua the reasons to believe recorded by him on 14.03.2017, that it is a fit case for issuance of Notice u/s 148 therefore, he had wrongly assumed jurisdiction and de hors satisfaction of the aforesaid statutory requirement issued Notice u/s 148, dated 24.03.2017 and framed the assessment u/s 143(3) r.w.s 147, dated 22.11.2017. We, thus, in terms of our aforesaid observations hold the Notice u/s 148, dated 24.03.2017 issued by the A.O, i.e, ITO, Ward-1(3), Bathinda as invalid in the eyes of law and quash the assessment framed by him u/s 143(3) r.w.s 147, dated 22.11.2017. Accordingly, the order passed by the CIT(A) is set-aside and, the assessment framed by the A.O u/s 143(3) r.w.s 147 of the Act, dated 22.11.2017 is quashed for want of valid assumption of jurisdiction by him. As we quashed the assessment framed by the A.O u/s 143(3) r.w.s 147, dated 22.11.2017, for want of jurisdiction on his part, therefore, we refrain from adverting to and therein adjudicating the other contentions so raised by him as regards the validity of the jurisdiction assumed by the A.O for framing the impugned assessment, as well as those advanced by him as regards the sustainability of the addition on the merits of the case, which, thus, are left open. Appeal of assessee allowed. 2022 (2) TMI 1194 Income accrued In India - receipts for design and drawing - Permanent Establishment [PE] in India in the nature of Dependent Agent PE [DAPE] as per the provisions of Article 5(4) of the India - USA DTAA - Whether DRP erred in holding that the receipts for design and drawing should be taxed u/s. 44DA of the Act instead of FTS u/s. 9(1)(vi) of the Act? - appellant company is an entity incorporated in the United States of America and is engaged in manufacturing and selling of products and equipments primarily for the North American Steel Industry - HELD THAT:- A perusal of the entire contract with RIC shows that RIC is an independent consultant having no rights to conclude contract on behalf of the assessee so as to construe as a permanent establishment in India. Since, in its independent professional capacity it provides similar services to other clients as mentioned elsewhere. Further probe of facts show that one Shri Anand Mathur runs a consultancy business in the name and style of M/s. Rajlaxmi International Corporation and the assessee seeks his service to represent it in India for its project in India. The assessee executes projects i.e. supply, erection and commission of desulphurization plant on turnkey basis through international competitive bidding process. The role of the RIC Shri Anand Mathur, representative, was by and large to find a project partner for the assessee to undertake the supply and erection of indigenous components. Besides, RIC is engaged for the liasoning service of the project on behalf of the assessee who neither intended nor empowered to conclude a project on behalf of the assessee. On careful appreciation of facts, we are of the considered view that RIC is an independent consultant to provide certain liasoning service. In fact, the project is executed jointly by the assessee and its consortium partner in India M/s. Beekay Engineering Corporation In the case of RINL, consortium partner M/s. Beekay Engineering Corporation is 78% of the contract value and in the case of the contract with SAIL [Bhilai Steel Plant], the value of supply services and erection done by the consortium partner is 69%. Considering agreement with RIC, we are of the considered opinion that RIC does not constitute DAPE of the assessee under the relevant article of the India - USA DTAA. The consortium partner M/s. Beekay Engineering Corporation has done its work by way of a separate contract and, therefore, the same cannot be held as installation PE of the assessee. There is no dispute that the assessee has supplied only engineering design, that too, from abroad and consideration in view thereof has also been received from outside India and since we have held that RIC is not DAPE within the meaning of Article 5 of the India - USA DTAA, there is no question of any attribution to the assessee. In light of the afore-mentioned discussion, the appeal of the assessee is allowed and that of the Revenue is dismissed. 2022 (2) TMI 1193 Addition u/s 40(a)(ia) - assessee had failed to deduct tax at source on the interest/finance charges that was paid/credited by it to M/s Magna Fincorp Limited - default u/s 201(1) - HELD THAT:- We find that the aforementioned payee, viz. M/s Magna Fincorp Limited (supra) had duly accounted for the aforesaid interest/finance charges received from the assessee in its return of income for the year under consideration and had paid the corresponding taxes on the same. The aforesaid factual position can safely be gathered from the certificate of the Chartered Accountant, dated 19.12.2014(supra) that has been filed by the assessee before us In our considered view, now when the aforesaid payee, viz. M/s Magna Fincorp Limited(supra) had duly accounted for the interest/finances charges in its return of income and had paid the corresponding taxes, therefore, as per the 2nd proviso to Sec.40(a)(ia) of the Act the aforementioned amount could not have been brought within the realm of the disallowance contemplated under the said statutory provision. Apart from that, as stated by the Ld. AR, and rightly so, we find that the Hon'ble Supreme Court in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. [ 2007 (8) TMI 12 - SUPREME COURT] had observed, that in case the payee of the amount in question had paid the taxes on the same, then, the payer cannot be held as an assessee-in-default as regards the said amount for the purpose of enforcing the recovery of the corresponding tax liability u/s. 201(1) - Decided in favour of assessee. 2022 (2) TMI 1192 Reopening of assessment u/s 147 - Eligibility of reasons to believe - independent application of mind by AO - Scope of borrowed satisfaction - information received from CIB that the assessee had during the year under consideration booked bogus purchases - HELD THAT:- Though there was material/information with the AO on the basis of which he could have arrived at a bonafide belief that the income of the assessee chargeable to tax has escaped assessment, however, we find that he had failed to apply his mind to the material/information before him and had reopened the case of the assessee by merely referring to the information that was received by him from CIB. As per the settled position of law, the reopening of a concluded assessment presupposes application of mind by the Assessing Officer to the material/information before him, on the basis of which he arrives at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. In the case before us, the Assessing Officer had merely acted in a mechanical manner on the information that was received by him from the CIB, and without applying his mind to the said information/material had reopened the case of the assessee u/s.147 of the Act. In our considered view, the Assessing Officer by reopening the case of the assessee on the basis of a borrowed satisfaction, had thus, wrongly assumed jurisdiction u/s.147 of the Act, which, thus, on the said count itself on the said count itself cannot be upheld and is liable to be quashed - Addition made by the Assessing Officer has no plausible nexus with the reasons on the basis of which the case of the assessee was reopened. On the one hand, the Assessing Officer had alleged that the assessee had booked bogus purchases to suppress his real income, however, on the contrary, he had made the addition in his hands on the ground that the purchases in question were in the nature of unexplained investment. In our considered view, as the very addition made in the hands of the assessee militates against the very reason on the basis of which the case of the assessee was reopened, therefore, the addition on the said count also is liable to be struck down. - Decided in favour of assessee. 2022 (2) TMI 1191 Disallowance of wages and salary expenses - Gross profit/Net profit ratio of the assessee had declined in comparison to preceding year; and that the vouchers in support of the salary and wages expenses did not contain the requisite details - HELD THAT:- Admittedly, the Gross profit/Net profit ratio of the assessee had declined as in comparison to the preceding years - perusal of the details culled out by the AO, therein, at the very face of it does not instill any confidence as regards the view taken by him that the assessee had inflated certain expenses for suppressing his income - though there can be multiple reasons for fluctuation in the Gross profit/Net profit ratio and fall in the same, but the said fact on a standalone basis can by no means justifiably lead to the conclusion that the assessee had inflated expenses for facilitating suppression of his business income. In case the assessee's claim for deduction of expenses is not supported by the requisite documentary evidences, then, the same would be liable to be disallowed by the A.O. However, we cannot remain oblivious of the fact that the Assessing Officer before drawing adverse inferences as regards the assessee's claim of expenses is obligated to specifically point out those expenses which as per him are not supported by the requisite corroborating documentary evidences. AO in the case before us had though pointed out that vouchers produced by the assessee did not contain requisite details, i.e., working hours, duration of work, bifurcation of skilled/semi-skilled labour etc., but then, we cannot be oblivion of the fact that there is no whisper of any single instance of expenditure in the body of the assessment order which as per the AO could not be verified. In our considered view, a generalized observation as regards the non-verification of the assessee's claim for deduction of any expenditure cannot, on the said standalone basis, justify the disallowance of the said expenditure - AO had not uttered a word as regards the basis for determination of the ad-hoc disallowance of the salary and wages expenses at ₹ 2.50 lac. Backed by our aforesaid observations, we not being able to persuade ourselves to subscribe to the ad-hoc disallowance of ₹ 2.50 lac(out of salary and wages expenses), thus, vacate the same. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and vacate the disallowance of ₹ 2.5 lac (supra) made by the Assessing Officer. The Ground of appeal No. 1 is allowed. 2022 (2) TMI 1190 Addition u/s. 40(a)(ia) - interest/finance charges received from the assessee firm in its return of income - HELD THAT:- As matter of fact borne from the record that the assessee firm had failed to deduct tax at source on the interest/finance charges that was paid/credited by it to M/s. Magna Finance Ltd.. However, we find that the aforementioned payee M/s. Magna Finance Ltd. (supra.) had duly accounted for the aforesaid interest/finance charges received from the assessee firm in its return of income for the year under consideration and had paid the corresponding taxes on the same. The aforesaid factual position can safely be gathered from the Certificate of Chartered Accountant, dated 09.06.2016(supra.) that has been filed by the assessee before us. Now when the aforesaid payee, viz. M/s. Magna Finance Ltd. (supra.) had duly accounted for the interest/finance charges in its return of income and had paid the corresponding taxes on the same, therefore, as per the '2nd proviso' to section 40(a)(ia) of the Act, the aforementioned amount could not have been brought within the realm of disallowance as contemplated under the aforesaid statutory provision. Apart from that, as stated by the Ld. AR, and rightly so, we find that in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT[ 2007 (8) TMI 12 - SUPREME COURT] had observed, that in case if the payee of the amount in question had paid the taxes on the same, then, the payer i.e. the assessee cannot be held as an assessee-in-default as regards the said amount for the purpose of enforcing the recovery of the corresponding tax liability u/s. 201(1) of the Act. We are unable to subscribe to the disallowance made by the Assessing Officer u/s. 40(a)(ia) of the Act. Accordingly, we herein set-aside the order of the CIT(Appeals) and vacate the disallowance of ₹ 3,95,301/- made by the Assessing Officer. The Ground of appeal No. 1 is allowed. 2022 (2) TMI 1189 Reopening of assessment u/s 147 - unexplained bank deposits - valid approval from the appropriate authority as contemplated u/s 151 or not? - non application of mind by the approving authority, viz. Additional CIT-Range VI, Pathankot - HELD THAT:- As in case of the assessee before us the prescribed authority, viz. Additional CIT-Range VI, Pathankot had granted the approval u/s 151 of the Act in a mechanical manner, i.e, without application of mind to the facts of the case as were there before him, therefore, the assessment framed by the AO u/ss. 147/143(3) of the Act, dated 24.02.2014 cannot be sustained and is liable to be vacated on the said count itself. Accordingly, for want of valid assumption of jurisdiction by the AO the assessment framed by him u/s 147/143(3) of the Act, dated 24.02.2014 is herein quashed. - Decided in favour of assessee. 2022 (2) TMI 1188 Assessment u/s 153A/143 - Difference between assessments under section 143(3) and 144 - HELD THAT:- Consequences of assessments under section 143(3) and 144 are distinct and different. Assessment under section 143(3) is made after perusal of return of income and seeking evidences in respect of the incomes and expenditure disclosed in such return of income. A best judgment assessment u/s 144 is made without the benefit of return of income and the AO can resort to a rejection of books of account and estimation of income. In a best judgement assessment, the interest is calculated under section 234A of the Act till the date of completion of the assessment whereas in assessment under section 143(3), the terminal date of calculating interest is the date of filing of return. Under section 246A of the Act, separate appeal is provided for the assessment made under section 144 of the Act. In the case of a best judgment assessment, as per the provision of section 142(3), there is no requirement of any opportunity of being heard to the assessee in respect of the material gathered by the AO whereas in an assessment under section 143(3) whatever evidence is being gathered has necessarily to be confronted. Thus, very different consequences flow from an assessment under section 144 of the Act. Mention of nature of the order as section 153A r.w.s. 143(3) was not a technical mistake or an error which can be cured by resorting to the provisions of section 292B of the Act. AO even though recording that no return had been filed and no notice under section 143(2) had been issued, continued to proceed as if he was making an assessment under section 143(3) - Hence, the order made under section 153A/ 143(3) is not legally tenable and ought to have been made under section 144 of the Act. There is a clear distinction between the two forms of orders i.e. section 143(3) and section 144 and therefore, in the present case, the orders ought to have been passed under section 144 of the Act. Hence the orders so passed by the AO u/s 143(3) for the A.Y 2012-13 and under section 153A read with section 143(3) for the A.Ys 2011-12 and 2009-10 suffer from an incurable jurisdictional defect and cannot be upheld. On this count alone the assessment orders in respect of A.Ys 2012-13, 2011-12 and 2009-10 do not survive and are liable to be quashed. Assessment orders for the AY s 2009-10, 2011-12 and 2012-13 are invalid and we are not required to go into the merits of the case. However, in respect of the AY 2010-11, the return of income was filed and the assessment was correctly framed u/s 153A read with section 143(3) of the Act. Seized diaries and the income arising therefrom do not belong to the assessee - assessee has stated that the income that has been assessed in the hands of the assessee does not belong to him - It is trite that income has necessarily to be assessed in the hands of the correct person i.e. person who has earned it. This is manifest from the section 4(1) of the Income-tax Act which states that the income tax is to be levied on the total income of every person who is liable to pay tax on the same - correct person who is liable to pay income-tax on the income has to be assessed and if for any reason a wrong person has been taxed, it does not preclude the AO from taxing the right person. This judgment is the guiding force for the principle that the Assessing Officer has to tax the right person and the right person alone who is liable to pay income tax in accordance with law and has no option to tax in accordance with his belief or notion or discretion. Whether the income belongs to the assessee or not, is a jurisdictional/ foundational issue which can be adjudicated upon at any stage of the proceedings based on the facts available on record. AO cannot assess any person simply because it is more convenient to do so or it is in the interest of revenue. Similarly, just because the assessee claims that income may be taxed in his hands which he retracts later, he can t be assessed in respect of the said income if the overwhelming facts establish that the income does not belong to him. The expenses in the profit-loss account are on account of sales expenses, commission on sales, purchase for waste sales from J Polymer, factory wages, office wages, interest, telephone charges, water charges transport outward etc. There is a statement of affairs drawn which shows unsecured loans and its utilization on the asset side - unsecured loans that have been taken have been used for building construction, land purchase and to fund the business activities as stated in the seized diary A/OPJ/03. The names of J Polysacks, J Polyfibre, Chinnaswami Godown, G Prakash and chit funds as current assets, loans and advances and investment also feature in the said statement of affairs. The CIT(Appeals) besides computing gross profit on undisclosed trading receipts has also computed undisclosed income of ₹ 4,10,58,508/- on account of cash receipts from debtors and other advances, chit funds and cash loans as per the seized diary in the A.Y 2012-13. Then facts are clearly indicatives of business activities of the companies and not the assessee. There is a sum of ₹ 15 lakhs as cash loan given by Om Prakash Jakhotia. This shows that Om Prakash Jakhotia had given a loan of ₹ 15 lakhs which also is indicative of the fact that all the entries contained in the seized diary A/OPJ/03 do not belong to him. Why would Om Prakash Jakhotia give loan to himself and record the same. This is also a reflection that the books do not pertain to Om Prakash Jakhotia but perhaps belong to the companies. Books for the earlier period were not found during the course of search. From the statement of affairs drawn by the assessee on the basis of seized diary A/OPJ/03, it clearly comes out that the money was used for the business of the companies and the land and other investments were made also for the companies. It is also a fact that the assessee in his individual capacity did not have any registration under VAT, PF, ESI which is required to do any business for running a company. He is only a director, promoter, shareholder or partner in these companies and these companies are having robust business of manufacturing of PPE woven sacks. We have already stated the legal principle propounded by the Hon ble Supreme Court in the case of CH. Atchaiah [ 1995 (12) TMI 1 - SUPREME COURT] and also the provision of section 4(1) of the Income-tax Act which says that the person who has earned the income and is liable to incometax, can only be assessed. We are also bound by the settled law laid down by the Hon ble Delhi High Court in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] that the income can be accessed only in the case of incriminating documents belonging to the person. In this case from the facts as is apparent from the seized diary A/OPJ/03 and also from the orders of the authorities below i.e. AO and the Ld. CIT (Appeals), it clearly comes out that the diary does not pertain to the assessee and income does not belong to him in his individual capacity. Since it does not belong to him, it cannot be taxed in his hands.Therefore, the income confirmed by the CIT (Appeals) in the hands of the assessee based on the seized diary A/OPJ/03 in the AY2009-10 to AY 2012-13 cannot be upheld. Addition on account of cash found during the course of search - HELD THAT:- Order of the Settlement Commission has been quashed by the Hon ble Delhi High Court. The assessee also retracted the statement. We have already held that the seized diary A/OPJ/03 belong to the companies and not the assessee in his individual capacity. There are numerous cash transactions that appear in the seized diary. There is no evidence that the cash belongs to the assessee in his individual capacity since he only derives passive income. The conclusion therefore, is inescapable, that the cash belongs to the companies and hence, cannot be assessed in the hands of the assessee. Additions of unexplained investment in immovable property and cash deposit in saving bank account made on the basis of AIR - HELD THAT:- We find that these two additions were made by the Assessing Officer on the basis of AIR information which was not confronted to the assessee at the stage of assessment proceedings and also at the first appeal stage. Also, as per the Form 26AS enclosed as Annexure-I to the synopsis, the Form does not contain any such information. Hence, the additions deserve to be deleted. Unexplained investment of share capital - AO has added this amount based on the statement given by the assessee during the course of search u/s 132(4) - HELD THAT:- The assessee has already retracted from the statement made during the course of search giving cogent reasons for the same vide his affidavit dated 29.10.2013. Besides, there is nothing to show that it is the assessee s money which has come in by way of the share capital in M/s Jakhotia Plastics Private Limited which is a separate legal entity and has robust business activities. The share capital was received by M/s Jakhotia Plastics Pvt. Ltd. from M/s Varad Vinayak Properties Pvt. Ltd through account payee cheques and the seized documents do not contain anything that suggest that any cash was given by the assessee in lieu of the share capital. We fail to understand how addition of the share capital and share premium can be made in the hands of the assessee especially when there is no evidence of any unexplained investment having been made by the assessee or any credit having been received by the assessee in his books of account. The cash credit has been received by M/s Jakhotia Plastics Pvt. Ltd. from a source which is completely distinct from the assessee i.e. M/s Varad Vinayak Properties Pvt. Ltd. and as there is nothing to show that it is the assessee s money which has found place in the company. Under these circumstances this addition cannot be sustained in the hands of the assessee and is therefore, deleted. Addition on account of kick-backs paid to Dalmia Cement - HELD THAT: We have already held that the seized books of accounts or diaries do not belong to the assessee but to the companies in which assessee was a director or partner and the assessee was not doing any business in his individual capacity. The dealings with Dalmia Cement are business dealings and do not pertain to the assessee in his individual capacity. Hence, the addition ought to be deleted in the hands of the assessee. 2022 (2) TMI 1187 Validity of Reassessment proceedings - mandation of servicing notice - HELD THAT:- In the instant case, although a notice has been issued by the AO, however, the same has not been served on the assessee since the notice issued by the AO through speed post was returned by the Postal Authorities unserved and there is no other evidence on record to show that the AO has made any other effort such as sending the Ward Inspector to serve the notice personally or through affixture - the reassessment proceedings finalised by the AO without serving the notice u/s. 148, in our opinion, is invalid. Therefore, set aside the order of the CIT(A) on this issue and allow the jurisdictional ground raised by the assessee challenging the validity of the reassessment proceedings. Since the assessee succeeds on this legal ground, the ground challenging the addition on merit becomes academic - Appeal of assessee allowed. 2022 (2) TMI 1186 TP Adjustment - International transaction under consideration is 'Receipt of commission' from sale of products of its AEs in India - Other method applied as MAM - TPO adopted 'other method' under Rule 10AB for determining the ALP of this international transaction - HELD THAT:- TPO ought to have considered Material cost and Depreciation contributing to the generation of income from manufacturing activity in the same way as he considered the Manufacturing and Marketing costs. If all the four costs are considered as generating the overall profit from the Manufacturing segment of the assessee, then the percentage of Marketing profit to sales comes to 0.59% as against 2.55% computed by the TPO, as has been depicted. When such percentage of Marketing profit to sales is applied to the sale value of the products of the AEs sold in India through the assessee's endeavour, then the amount of profit pertaining to Marketing effort comes to ₹ 3.14 crore. If the expenses incurred by the assessee on sale of the AEs products at ₹ 39.24 crore are added, the resultant gross amount which should have been received by the assessee as commission comes to ₹ 42.38 crore. As against that, the assessee actually received Commission income of ₹ 44.30 crore, which is explicitly at ALP. We, therefore, approve the conclusion of the Ld. CIT(A) in deleting the addition TPO applied `other method' as the most appropriate method for determining the ALP of the international transaction, which method came into vogue, as per Rule 10AB, only from the A.Y. 2012-13 under consideration and the assessee has not objected to the application of this method. This method obviously could not have been nor has actually been applied by the assessee or the TPO in any of the earlier years. There can be no denial that different amounts of the ALP emerge under different methods. Secondly, for the earlier years, the amount of Sale considered by the Revenue for determining the ALP consisted of sale of manufactured goods; sale of traded goods and commission. Au contraire, the amount of sale at ₹ 2075.81 crore considered in the entire exercise for the year under consideration is only of manufactured goods and has no components of traded goods or commission. In that view of the matter, the findings given by the Tribunal for such earlier years do not per se apply to the year under consideration. However, in view of our discussion made above pointing out infirmities in the TPO's ALP determination, we hold that the transfer pricing addition under `other method' as per rule 10AB was not justified, which has been rightly deleted in the first appeal. Deduction towards Education Cess - HELD THAT:- It is seen as an admitted position that the Tribunal in the assessee's own case for earlier years has allowed such additional ground by relying on the judgment of Hon'ble jurisdictional High Court in Sesa Goa Ltd.[ 2020 (3) TMI 347 - BOMBAY HIGH COURT] - However, it is pertinent to note that the Finance Bill, 2022 has proposed an amendment to section 40(a)(ii) by insertion of Explanation 3 w.e.f. 01-04-2005 as clarified that for the purposes of this sub-clause, the term 'tax' shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. For proposed amendment, it is manifest that the legislature has proposed to neutralize the effect of the above referred judgments granting deducting towards Education Cess. As the proposal mooted through the Finance Bill, 2022 is likely to be passed shortly, the deduction which was otherwise eligible and granted in earlier years, would become non-eligible retrospectively with effect from the assessment year 2005-06. Allowing such deduction now and then shortly thereafter recalling the order in the light of the Finance Act, 2022 will be an exercise in futility. We are thus not inclined to grant such deduction. The ld. AR fairly accepted the position. However, a liberty is given to the assessee to move rectification application in case the proposed amendment in the Finance Bill is either not enacted or enacted prospectively so as to align our decision with the resultant modification. This additional ground is, therefore, not allowed in the above terms. Claim of depreciation on the expenditure of premises - AR submitted that consequent to the decision of the Tribunal for the assessment year 2004-05 in relation to disallowance of expenditure on premises to the extent of 40% of such expenses being held as capital in nature, the assessee deserves to get the consequential depreciation on the same - HELD THAT:- We deem it proper to remit the matter to the file of the AO for carrying out necessary verification in this regard and then decide the issue accordingly. To clarify, if the AO, after capitalizing 80% of repairs cost for the assessment year 2004-05, continued with the enhanced value of block in the subsequent years as well, then the amount of depreciation on the excess 40%, [as the capitalization reduced by the CIT(A)], should be disallowed. If, on the other hand, the AO had not increased the value of block of assets in succeeding years by 80% of capitalization done by him for the assessment year 2004-05, then further depreciation should be allowed on 40% of the capitalization as upheld by the Tribunal in its order for the assessment year 2004-05. Needless to say, the assessee will be allowed reasonable opportunity of hearing to the assessee Additional ground of consequential claim of depreciation on the expenditure of software - HELD THAT:- We find that the additional ground of the assessee cannot survive if the AO, after capitalizing the software expenditure for the assessment year 2007-08, continued with the enhanced value of block of assets for the purpose of depreciation in succeeding years. It is only if the enhancement in the value of block of such assets made for the assessment year 2007-08 was not carried out in the later assessment years that the additional ground of the assessee would get accepted. The AO is directed to carry out necessary verification of this issue in the same way as directed for the second additional ground and then pass the order. Addition u/s.14A - HELD THAT:- The first component of disallowance is of interest expenditure treated as relatable to investments which yielded exempt income. Our attention has been drawn towards the fact that as against such investments amounting to ₹ 32.00 crore, the assessee had share capital of ₹ 22.56 crore and Reserves and Surplus at ₹ 802.78 crore. Thus, it can be seen that the shareholders fund of the company is far in excess of the investment yielding exempt income. Hon'ble Dehi High Court in CIT vs. Tin Box Company [ 2002 (11) TMI 75 - DELHI HIGH COURT] holding that when the capital and interest free unsecured loan with the assessee far exceeded the interest free loan advanced to the sister concern, disallowance of part of interest out of total interest paid by the assessee to the bank was not justified. More recently, the Hon'ble Supreme Court in CIT(LTU) VS. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] has reiterated the same view. When we examine the amount of Investments at ₹ 32.00 crore as against the availability of Share Capital and Reserves at ₹ 802.78 crore, it becomes evident that the amount of such Investments is much less than the amount of Shareholders' fund. We, therefore, order to delete the first component of disallowance on account of interest amounting to ₹ 8,61,647/-. Second component of disallowance towards administrative expenses, which was computed by applying 0.50% of the average value of the investments in terms of Rule 8D(2)(iii). Such disallowance made and sustained in the first appeal is strictly in conformity with the said rule and, therefore, does not require any interference. We, therefore, sustain the addition at ₹ 8.00 lakh as against ₹ 16.71 lakh made by the AO and approved in the first appeal. Assessee appeal partly allowed. 2022 (2) TMI 1185 Income earned as taxable in India - Services fall within the meaning of 'make available' under the tax treaty - Business support services provided/rendered by the Appellant - fees for technical services as per the India - Belgium tax treaty (read with India- Portugal tax treaty) - Whether services fall within the meaning of 'make available' under the tax treaty? - HELD THAT:- On perusal of the services clearly show that these are routine in nature and definitely do not make available experience, know-how to the recipient MIPL. In fact, the DRP itself has accepted at Para 6.2 of its order that as per the service agreement, the services provided by the assessee are in the nature of routine support services which are not very complex in nature. Considering the protocol to the India Belgium Tax treaty, tax treaty between India and Portugal has to be considered for most favourable nation clause. Under the India Portugal Trade Tax Treaty, fees for included services is defined as consideration for rendering of any technical or consultancy services if such services are ancillary and subsidiary to the application or enjoyment of the right, property or information of which royalty payment, as defined under Article 12(b) is received or make available technical knowledge, experience, skill, know how or processes or consist of the development and transfer of a technical plan or technical design which enables the person acquiring the services to apply the technology contained therein. Services received by MIPL do not make available technology, skill know how etc and such services cannot be considered to be in the nature of managerial, technical or consultancy in nature. Considering the facts of the case in light of the service agreement, we are of the considered view that the business support services rendered by the assessee from Belgium do not qualify the test of make available under the tax treat. Therefore, we direct the Assessing Officer to delete the impugned addition. Ground Nos. 2, 3 and 4 are accordingly allowed. Charging of surcharge and cess on the gross treaty rate - HELD THAT:- We are of the considered view that when tax rate is prescribed under DTAA, education cess is not leviable. Our view is fortified by the decision of the co-ordinate bench in the case of MFAR Hotels Ltd. [ 2013 (4) TMI 339 - ITAT COCHIN] which has been followed by this Tribunal in the case of JC Decaux SA [ 2020 (3) TMI 1075 - ITAT DELHI] . Following the decision of the co-ordinate benches, we direct the Assessing Officer to apply DTAA rate without applying surcharge and cess. This ground is accordingly allowed. 2022 (2) TMI 1184 Disallowance of proportionate interest expenditure - capital attributable to project B i.e. unfinished project - AO held that interest part on borrowing as well as partners capital attributable to project B i.e. unfinished project , cannot be allowed as an expense in respect of the profits derived from project A and same should be allowed to be capitalized to the work in progress (WIP) of project B - As per AO substantial amount of newly acquired unsecured loans and capital was used for the purchase of plot of land for project B , no income or revenue from said project has been credited, and therefore, he was of the view that interest on borrowings by way of capital and unsecured loans was required to be allocated project wise - Whether project completion method or percentage completion method for offering profit from the said projects for the purpose of the Income-tax? - HELD THAT:- The assessee has not clarified before the lower authorities that whether it was following project completion method or percentage completion method for crediting income to profit and loss account. Before us, the assessee has filed a copy of submission dated 23/12/2019 before the Assessing Officer in respect of assessment year 2017-18 i.e. subsequent assessment year. In the said submission, the authorised representative of the assessee has clearly mentioned that the assessee is following percentage completion method. It is also mentioned that in the earlier year also the revenue was recognized following the percentage completion method. The learned authorised representative has also mentioned that interest expense was not claimed in computation of taxable income for A.Y.2017-18 We find that under percentage completion of method the revenue from booking or sales is credited to the profit and loss account in proportion to the expenditure incurred on the project as compared to the total cost of the project. In the assessment year under consideration, the assessee has not credited any amount of revenue on the ground that no substantial construction work was executed in the year under consideration. In such circumstances, even under the percentage completion method also the interest expenditure which is specifically related to project B cannot be allowed and it shall be eligible for deduction in percentage terms of cost of construction debited following the percentage completion method. In the instant case interest which was specifically related to project B and neither expenditure on said project was claimed nor any revenue from said project was offered in the profit and loss account. The interest corresponding to the project A has already been allowed by the Assessing Officer and only part pertaining to project B has been disallowed. This interest expenditure disallowed was not related to borrowing for maintaining business infrastructure but it was related to specific real estate project. As no significant risks and rewards of ownership of the project B were transferred by the assessee to prospective buyer, no revenue from said buyer was recognized following principle of percentage completion method. Thus, no liability in respect of interest expenses pertaining to project B was accrued, hence it is not allowable in the year under consideration. - Decided against assessee. 2022 (2) TMI 1183 Addition u/s 68 - unsubstantiated unsecured loans - whether assessee had discharged the primary onus cast upon it ? - CIT -A deleted the addition - HELD THAT:- In the present case the AO has granted the impugned relief simply of the basis that amounts are received through banking channels and the supported by the balance confirmation and bank statement etc. which, accordingly to CIT(A), by itself prove genuineness of the transaction. Such an approach however is clearly unsustainable in law in view of the fact that the amounts having come through banking channels and the balance confirmation being on record cannot by itself prove or establish genuineness of the transaction while on the aspect of the matter we may usefully refer to following observations of the coordinate bench in the case of DCIT vs. Leena Power Tech Pvt Ltd. [ 2021 (9) TMI 1124 - ITAT MUMBAI ] Viewed thus the approach of the learned CIT(A) is clearly superficial and it does not need our judicial approval. Just because the money is received the through banking channels and the confirmations are on record, such facts by itself do not establish genuineness of transactions. We therefore deem it fit and proper to remit the matter to the file of the CIT(A) for fresh consideration in the light of the above legal position. While re-examining the matter learned CIT(A) will categorically deal with the stand of the Assessing Officer with respect to genuineness of the transaction and pass a speaking order and accordance with the law by way of speaking order on this point as well. - Decided in favour of Revenue. 2022 (2) TMI 1182 Disallowance of expenditure incurred towards free samples - AO disallowed 50% of the total cost incurred by the assessee towards free samples in the relevant assessment years - HELD THAT:- Assessee personally does not go and distribute free samples to doctors / medical practitioners. Rather, the assessee has appointed a number of marketing representatives to physically visit doctors / medical practitioners to distribute the samples - even accepting that the complete address of medical practitioners are not available in few instances, that by itself cannot be a reason to make the disallowance when the departmental authorities have accepted that distribution of free samples is a regular business practice and in fact, have not raised any doubt regarding the genuineness of the expenditure. Thus, when the assessee has furnished the required details relating to the expenditure claimed, there is no justifiable reason to disallow even a part of it. On a perusal of material placed before us, it is noticed that the cost incurred by the assessee towards distribution of free samples in these assessment years is much lesser than similar expenditure incurred in the earlier and subsequent assessment years. Thus, keeping in view the peculiar circumstances of the case, we hold that no disallowance out of the cost incurred towards free physician s samples is called for in any of these assessment years. Accordingly, we delete the additions. Ground 1 in all the appeals is allowed. 2022 (2) TMI 1181 Revision u/s 263 by CIT - As a result of search the documents pertaining to the assessee were found and therefore proceedings u/s 153C of the Act were initiated - CIT on perusal of the case records found that the assessee was engaged in providing accommodation entries - HELD THAT:- Admittedly, the search was conducted at the third party dated 10/03/2015 i.e. prior to amendment brought u/s 153C of the Act i.e. 01/06/2015. Under the old provision, proceedings u/s 153C of the Act, can only be initiated if any incriminating document found belonging to the assessee during the search carried out under section 132 of the Act at the premises of the 3rd party. However, in this connection we find that the AO in his satisfaction recorded has given categorical finding that the documents found pertain to the assessee. There remains no ambiguity to the fact that there was no document found from the search premises belonging to the assessee. Therefore the assessment in itself is bad in law. Thus we hold that the assessment framed under section 153C read with section 143(3) of the Act is not sustainable. Once the assessment in itself is invalid then the same cannot be revised under the provisions of section 263. Whether the assessment framed under section 143(3) read with section 153C of the Act can be challenged in the proceedings under section 263? - The proceeding under section 263 is collateral proceeding to original. Thus the validity of the original assessment can be challenged along the proceeding of section 263 Whether the assessment framed by the AO under section 153C read with section 143(3) of the Act is barred by limitation as provided under the provisions of section 153B? - The time-limit for completing the assessment in the case of other person shall be either two years from the end of the financial year in which the last of the authorisations for search under section 132 of the Act was executed or one year from the end of the financial year in which books of accounts or documents seized handed over under section 153C of the Act to the AO having jurisdiction over such other person whichever is later. The position of the law is unambiguous and there is no mention that in the case of common AO of the search as well as the other person the time limit as provided under section 153B(1) (a) or (b) will be applicable. When a search is conducted the documents are looked into by the AO during the proceedings, if he/she finds that any documents belongs to/pertains to the other persons then he/she can initiate proceedings against such other persons after recording the satisfaction to that effect. Now at what stage the AO will come to know during the proceedings that any of the documents found at the premises of searched person belongs/pertain to the other persons? This fact is not known and therefore the lawmakers have given extended time limit for framing the assessment of the other persons. Thus there will not be any change in the provisions of law despite the fact that there was the common AO of the searched as well as other party. Thus we disagree with the contention of the learned AR and accordingly reject the same by holding that the assessment order was not barred by time. Whether AO has made the assessment after making necessary enquiries? - The issue of the peak credit of the amount lying in the bank account has been duly verified by the AO during the assessment proceedings. Furthermore, it is also a fact on record that the income computed based on peak credit balance in the bank account in aggregate for the 6 years was less than the income offered by the assessee in the income tax return filed in response to the notice under section 153C of the Act for all the 6 years under consideration. Accordingly, the AO has chosen to tax the income of the assessee declared in the return of income. Thus the view taken by the AO was one of the possible view and therefore the same cannot be disturbed in the proceedings under section 263 . We hold that there was no error in the order passed by the AO causing prejudice to the interest of Revenue. Therefore, the same cannot be revised by initiating the proceedings under section 263. Appeal of assessee allowed. Customs 2022 (2) TMI 1180 Seeking direction against the Respondents to allow the export of the goods detained by D.R.I. - HELD THAT:- The intervenor has no locus to seek any relief in respect of goods which are subject matter of this Petition in this Writ Petition. The rights, if any, claimed by the intervenor on the basis of the agreement entered into between the Applicant and the Intervenor are subject matter of the arbitration proceedings. We are thus not inclined to Applicant/Intervenor to intervene in these proceedings. Intervention Application filed by the Intervenor bearing Interim Application No. 3417 of 2021 is accordingly rejected. There is no dispute that, the Writ Petition filed by the Petitioner seeking various reliefs is already admitted by this Court and is pending for hearing and final disposal. The goods in-question were seized on 27th December 2021. The goods are of perishable nature. The Assistant Commissioner of Customs himself has considered the grant of provisional release and allowed on two conditions. In so far as condition No.(a) is concerned, the Applicant has no objection to comply with the said condition. In so far as the condition No.(b) is concerned, in our view the bank guarantee insisted by the Respondents in the sum of ₹ 1,07,98,800/- can be reduced on the condition that, if the Applicant makes any claim for refund of any amount or any other incentive due to the Petitioner on completing the export of the consignments which are subject matter of the Order dated 12th January 2022, will not press for such claim during the pendency of the Writ Petition filed by it. The Applicant is directed to execute bond of full FOB value in the sum of ₹ 5,39,93,999/- within two weeks from today - In addition to the execution bond, the Applicant is directed to furnish bank guarantee in the sum of ₹ 25,00,000/- of a Nationalized Bank in the name of Principal Commissioner of Customs, Nagpur, in accordance with the Order dated 12th January 2022, duly modified by this Order within two weeks from today. 2022 (2) TMI 1179 Misdeclaration of imported goods - MS Plates in various thickness and various sizes (stock lot) - classified under CTH 720852390 or not - impugned goods were not covered by MTC - restricted goods vide Notification No.63/2008 dated 21.11.2008 as per Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, or not - HELD THAT:- The Public Notice no. 92/2009 itself envisages the situation wherein the MTC would not have been produced and directs that assessment should be made accordingly. It do not state that the proceedings leading to confiscation be initiated. Further Commissioner who has issued this public notice, directing that all the goods for which MTC is not produced be considered as Secondary / Defective / Seconds only and assessed accordingly. , has in the impugned order held the goods to be of prime quality. Having done so Commissioner could not have held any contravention in non production of MTC, which even as per Public Notice is not a mandatory requirement, but only prescribed as an aid for assessment of goods. Admittedly the impugned goods are classifiable as per ITC (HS) Code under the heading 7208 52 90 and the declared CIF value is US $ 425 per Tonne and hence as per this licensing note are freely importable. In the case of Sheikh Omer referred to by the learned authorized representative Hon ble Apex Court has clearly and unambiguously stated Any prohibition means every prohibition. In other words all types of prohibitions. Restriction is one type of prohibition. From item (1) of Schedule I, Part IV to Import Control Order, 1955, it is clear that import of living animals of all sorts is prohibited. But certain exceptions are provided for. But none the less the prohibition continues. Licensing Note 3 provides for exceptions and the situations in which these goods when imported are freely importable and not restricted. Commissioner has himself held that the impugned goods are prime and have cif value of US $ 425 per Tonne. With that finding on record the order holding goods as restricted as per Notification No 63/2008 cannot be sustained. The impugned order is completely a non speaking order, passed without consideration of any submission and the law on subject - Appeal allowed - decided in favor of appellant. Corporate Laws 2022 (2) TMI 1178 Seeking rectification of register of members of the appellant company - cancellation of excess 51,889 equity shares allotted to Respondent No.1 - HELD THAT:- Any aggrieved person may appeal to the Tribunal for rectification of the register. After filing of the application, the Tribunal (NCLT) either dismiss the appeal or direct rectification of the records of the register and has power to direct the company even to pay damages if any sustained by the party aggrieved. Therefore, the Tribunal has power to direct the authorities to rectify the Register of the Members by cancelling the shares. However, the NCLT in the impugned order taken a stand that the Appellant has not approached the Registrar of Companies. The NCLT has power to order/ direct the concerned authorities to rectify the register of members even by cancelling the excess shares. However, the NCLT erred in observing that the appellant has not approached the Registrar of Companies. This tribunal is of the view that the NCLT miserably failed to exercise the power and its jurisdiction as vested in it. Further the NCLT ought to have considered on the factual aspect of the inadvertent error and the appellant company bonafidely informed the RBI and its Regulators with regard to the inadvertent error / bonafide mistake crept in and sought permission to rectify the mistake by cancelling the excess shares. Even the R1 company also through its Board Resolution expressed their No Objection for cancellation of excess shares. This Tribunal comes to a resultant conclusion that the appellant has made out a prima facie case to allow the appeal - matter is remanded back to the NCLT and the learned NCLT is directed to consider cancellation of 51,889 equity shares allotted to Respondent No.1 and direct the ROC to carry out necessary rectification of records relating to share capital and share premium account - appeal allowed by way of remand. Insolvency & Bankruptcy 2022 (2) TMI 1177 Seeking approval of closure of the liquidation process - directions to Respondent No. 2 to make the payment of claim - Regulation 45 (3)(a) read with Regulation 32A and 33(1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - HELD THAT:- It is an admitted fact that the CIRP process was being conducted, since there was no Resolution Plan received till 15.04.2019, the Committee of Creditors in its meeting held on 25.04.2019 passed resolution with 100% voting rights approving liquidation of the Respondent No. 1 Company/Corporate Debtor. The Ld. Adjudicating Authority passed the liquidation order vide its order dated 31.05.2019. The valuation reports were obtained which showed the fair value at ₹ 24.63 crores and liquidation value of the Corporate Debtor/Respondent No. 1 Company at ₹ 18.45 crores - The Respondent No. 2 has already remitted the entire bid value of ₹ 18,45,86,646/- under e-auction process and the Respondent No. 2 has acquired all its assets and liabilities but through the impugned order dated 18.05.2020 passed by Ld. Adjudicating Authority has rejected the prayer for directions to Respondent No. 2 to make the payment of claim to the Applicant (Appellant herein). The sale as a going concern or as is where is whatever there is basis can be only with assets and not liabilities. As per the Regulation 32A of IBBI (Liquidation Process) Regulations, 2016, the Liquidator is authorized to sell a company on a going concern basis - the Oriental Bank of Commerce is the sole Financial Creditor and confirmed relinquishment of its security interest over Respondent No. 1, current and non-current assets, by its email dated 05.10.2019 sent to Respondent No. 3 and the Oriental Bank of Commerce higher in priority to all the 8 Operational Creditors of Respondent No. 1 including the Appellant. So, they paid the entire amount of INR 18,45,86,646 towards 13.17% of the admitted debt to Respondent No. 1 sole Financial Creditor. There is no merit in the Appeal. The Appeal is hereby dismissed. 2022 (2) TMI 1176 Pecuniary jurisdiction for entertaining the Petition - amount involved in the appeal after 24.03.2020 - applicability of Section 4 of the I B Code - relevant date on which debt becomes dues - on the date of application or not - HELD THAT:- In the present case, the Application in Form 5 before the Adjudicating Authority was filed by the Appellant/Applicant on 12.03.2021. The Notice of Demand was issued by the Appellant/Applicant to the Respondent/Corporate Debtor on 10.10.2020. The Respondent/Corporate Debtor had issued a Reply dated 02.11.2020 praying for 5-6 months time to pay the dues in question - It must be borne in mind that Section 4 of the I B Code specifies the minimum threshold limit of ₹ 1,00,00,000/- for the Default and in fact, the Central Government had raised the limit from ₹ 1,00,000/- to ₹ 1,00,00,000/- as per notification dated 24.03.2020. A mere running of the eye of the ingredients of Section 9 of the I B Code makes it lucidly clear that the date of initiation of Corporate Insolvency Resolution Process shall be on the date on which an application is made. To put it precisely, the date of default is not to come into operative play and the same ought not to be taken into account for anything but computing the period of limitation - in the present case, the application was made before the Adjudicating Authority by the Applicant/Appellant which came to be listed on 12.03.2021, however, the Demand Notice was issued on 10.02.2020, after the date of amendment to Section 4 of the Code. Even though the Appellant/Applicant had averred that ₹ 17,91,112/- being the outstanding sum claimed in the Application from the due date i.e. 29.12.2018 till 10.10.2020, in regard to the outstanding invoice dated 02.07.2018, the threshold limit under Section 10A of the Code for initiation of CIRP is ₹ 1 crore (vide Notification to Section 4 of the Code dated 24.03.2020), this Tribunal taking note of the fact that the Section 4 of the Code which specifies the minimum threshold of ₹ 1 crore, the same shall apply and since the sum claimed in the Application was ₹ 17,91,112/-, below the sum of ₹ 1 crore and the present application having been filed on 12.03.2021, before the Adjudicating Authority after the Notification dated 24.3.2020 in and by which, the threshold limit was increased from ₹ 1 lakh to ₹ 1 Crore, this Tribunal comes to an inevitable, inescapable and consequent conclusion that the Application filed by the Appellant is not per se maintainable because of the lack of pecuniary jurisdiction to the Adjudicating Authority, (National Company Law Tribunal, Division Bench, Court No.1, Chennai). Appeal dismissed. 2022 (2) TMI 1175 Eligibility to prefer an Application under Section 230-232 of the Companies Act, 2013 - eligibility of a person to be Resolution Applicant - HELD THAT:- Section 29A (c) of the I B Code, 2016 relates to persons not eligible to be Resolution Applicant and in fact, the Code has bifurcated such persons into two groups as seen sub clauses (c) (g) of Section 29A of the I B Code, 2016. Moreover, if an individual was a promoter/in the management, or control of a Corporate Debtor , in which a preferential transaction, undervalue transaction and extortionate credit transaction or a fraudulent transaction had taken place and in respect of which an Order was passed by the Adjudicating Authority in terms of the I B Code, 2016, such person was ineligible to submit a Resolution Plant under 29A (g) of the Code. In effect, only such individuals who do not come under sub-clause (g) of Section 29A of the I B Code, 2016, are eligible to furnish Resolution Plan under (c) of Section 29A, if they happen to be individuals, who are in the erstwhile management or control of the Corporate Debtor , as per decision of the Hon ble Supreme Court in Arcelormittal India Private Limited V. Satish Kumar Gupta, [ 2018 (10) TMI 312 - SUPREME COURT ]. Applicant/Petitioner had sought a direction to be issued to the Liquidator to convene the Meeting of the Creditors (inclusive of all the Creditors i.e., Respondent No. 2) and place before them the Scheme of Compromise/Settlement for their consideration , this Tribunal taking note of the fact that if the Promoter is ineligible under Section 29A of I B Code, 2016 cannot make an Application for Compromise and Arrangement for taking the immovable property and actionable claim of the Corporate Debtor coupled with Regulation 2B(1) of the Insolvency of Bankruptcy Board of India (Liquidation Process) Regulations 2016 comes to a resultant conclusion that the Applicant in I.A. No. 387/2021 in IB 197(ND) 2018 before the Adjudicating Authority is ineligible to prefer an Application under Section 230-232 of the Companies Act, 2013 and viewed in that perspective, the impugned order of dismissal passed by the Adjudicating Authority does not suffer from any material irregularity or patent illegality in the eye of law. Appeal dismissed. 2022 (2) TMI 1174 Seeking to declare that the Power of Attorney executed by Syndicate Bank shall not be enforced against the customers/borrowers of Canara Bank under the amalgamation scheme - Power of Attorney is invalid and void ab-initio, or not - seeking to declare that the authorised signatory Mr. Vamsidhar Naidu is not having valid Power of Attorney or authorization from Canara Bank to initiate present legal proceedings - HELD THAT:- It is clear from scheme of merger at Clause-8 that the Power of Attorney given to the Transferor Bank prior to the commencement of the scheme shall be of full force and effect against or in favour of the Transferee Bank and they may be enforced and acted upon as fully and effectively as if in the place of the Transferor Bank, the Transferee Bank is a party and as if it has been issued in favour of the Transferee Bank. Hence, by virtue of the above there need not be any further discussion to hold that the Power of Attorney given to the employee to the Syndicate Bank prior to the merger, who later has become the employee of the Canara Bank by virtue of the merger, would suffice and would be a proper authorisation for him to file this Application. Hence this application is dismissed. PMLA 2022 (2) TMI 1173 Seeking grant of anticipatory bail - availment of ineligible VAT refund - forged and fabricated documents regarding export of garments - proceeds of crime - Applicability of Section 45 of PMLA 2002 - HELD THAT:- This Court does find that Section 44 of PMLA 2002 duly provides for filing of a supplementary complaint against any other person in case it comes across some evidence against such person. No doubt, it was in the knowledge of the complainant that an amount of ₹ 30 lacs had been credited into the account of the firm of the complainant but the complaint filed initially against the co-accused i.e. complaint dated 22.12.2017 (Annexure P-3) clearly shows there was specific recital therein to the fact that investigation of the case is still continuing and is in progress and that if the role of other co-accused is ascertained, who may have participated directly or indirectly in laundering of proceeds of crime, a separate supplementary complaint will be filed before the Court. Since it was only about a month prior to filing of the complaint (Annexure P-3) against other co-accused as the same had to be filed to avoid the expiry of period of 90 days from arrest of co-accused and consequently, the time afforded to the investigating agency to verify all the assertions against the petitioner was short, the omission to array the petitioner as an accused in complaint dated 22.12.2017 cannot be said to be any illegality. The contention of the petitioner that the attachment of property of the petitioner has been set aside by this Court vide order dated 6.3.2020 (Annexure P-4) and that the same would help the petitioner or reflect on her innocence cannot be accepted inasmuch as attachment proceedings initiated under Section 5 of PMLA 2002 are in the nature of civil consequences which follow upon commission of a criminal offence and are independent proceedings. Given the nature of proceedings, which are independent civil consequences, setting aside of such proceedings would not ipso-facto affect continuation of criminal proceedings. In the present case, the order dated 6.3.2020 (Annexure P-4) vide which the attachment had been set aside does not express anything as regards the veracity of the allegations against the petitioner. Rather it has been held therein that the property attached had been purchased much prior to the alleged commission of offence and that the impugned order is bad as no reasons had been recorded therein to the effect that the property in question was likely to be concealed or transferred or dealt with in any manner. Thus, setting aside of attachment proceedings can not operate as any kind of bar for initiating or continuation of criminal proceedings against the petitioner. Applicability of Section 45 of PMLA 2002 - HELD THAT:- A perusal of Section 45 of PMLA 2002 does show that some kind of fetters on grant of bail have been imposed inasmuch as before granting bail the Court is to be satisfied that there are reasonable grounds for believing that such person is not guilty of the offence alleged and that if released on bail such person is not likely to commit such offence again - the provisions of Section 45 of PMLA 2002 apply with full force to a petition filed for grant of anticipatory bail as well and would be applicable even to petition filed in High Court. However at the same time, a proviso to Section 45 of PMLA 2002 itself carves out some kind of exception for leniency in cases of women. It is not in dispute that the petitioner is a lady aged 61 years. It is a case where an amount of ₹ 30 lacs had been credited in the account of the firm of the petitioner by the firm of her son. It will be debatable as to whether the amount credited in the account of her firm was credited while she was fully aware that the said amount is part of 'proceeds' of crime committed by her son or as to whether she had connived and conspired with her son. It is otherwise not unnatural for a son to deposit amount or pass on some amount to his/her parents - There is nothing to suggest that the petitioner would flee from justice. As such, the case of the petitioner can safely be said to fall in the first proviso to Section 45(1) of PMLA 2002, being a lady, aged 61 years, so as to entitle her to grant of bail. This Court is of the opinion that it is a fit case for grant of anticipatory bail - Application allowed. Service Tax 2022 (2) TMI 1172 Rectification of mistake - typographical error - first appellate authority denied to consider rectification - Refund of accumulated CENVAT credit - HELD THAT:- It is pointed out in the appeal memorandum that the first appellate authority, instead of specifying that the consequence of his findings was allowing of the appeal to the extent of ₹ 49,86,362/-, held as ineligible by the original authority, erred in stating it to be ₹ 45,94,327 for which the appellant had, vide, letter dated 15th January 2019, sought the intervention of the office of the appellate authority to set right - The refund releasing authority, in order dated 31st January 2019, did not consider it appropriate for the differential amount to be disbursed prompting this appeal for setting right the order of the first appellate authority. The disinclination on the part of the first appellate authority to consider rectification that does not compromise the intent of his order is inexplicable. It is certainly not the attitude expected of a senior functionary who is tasked with statutory empowerment to be discharged in a responsible and responsive manner. To offer the hapless appellant gratuitous advice of appellate recourse to the Tribunal is adding insult to injury. Heeding that advice, the assessee is before us with consequent expending of time and effort on the part of the Tribunal. Unless a serious, and punitive, view is taken of this episode, we encourage opening the floodgates of such upward delegation that is inimical to public interest. Cost of ₹ 5000, to be paid into the account of the Maharashtra Legal Aid Services Authority, is imposed on the officer concerned to be identified by the Commissioner of Customs (Appeals) upon due inquiry to fix responsibility for the lapse. The Tribunal, though not entrusted with responsibility for rectification of typographical/clerical errors in orders of lower authorities, cannot justify its existence within the judicial edifice in turning away an appellant, who is in conformity with the prescriptions of section 35B of Central Excise Act, 1944, from the portals of justice - the matter is remanded back to the first appellate authority for correction of such errors as are to be rectified. Central Excise 2022 (2) TMI 1171 Confiscation of land, buildings etc. - invocation of powers under Rule 173(Q)(2) of Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings etc., when on such date, the rule 173Q(2) was not on the Statue Book having been omitted w.e.f. 17.05.2000 - in absence of provisions providing for First Charge in relation to Central Excise dues in the Central Excise Act, 1944 or not, whether the dues of the Excise department would have priority over the dues of the Secured Creditors or not? - HELD THAT:- The Commissioner Customs and Central Excise, Ghaziabad vide order dt. 26.03.2007, ordered the confiscation of all the land, building, plant, machinery etc. of RIL. This confiscation order was passed under rule 173Q(2) of the Central Excise Rules, 1944. However, in the impugned order, the High Court has not considered that on the date of the confiscation orders i.e. 26.03.2007 and 29.03.2007, Rule 173Q(2) stood omitted from the statute books vide government notification dated 12.05.2000 - there are no merit in the submission of the learned Counsel for the Respondent that notwithstanding the omission of Section 173Q(2) from the 1944 Rules vide notification dated 12.05.2000, the Respondent No. 3 was entitled to continue the proceedings on account of Section 38A(c) and Section 38A(e) of the Central Excise Act, 1944, read along with Section 6 of the General Clauses Act, 1897. In the case at hand, the proceedings initiated under the erstwhile Rule 173Q(2) would come to an end on the repeal of the said Rule 173Q(2) of the Central Excise Rules, 1944. Respondent Counsel s submission that the proceedings would be saved on account of Section 38A(c) and 38A(e) of the Central Excise Act, 1944 and Section 6 of the General Clauses Act, 1897, is misplaced and lacks statutory backing. Firstly, as has been held by a Constitution Bench of this Court in Kolhapur Canesugar Works Ltd. Vs Union of India Ors. [(2000) 2 SCC 536], Section 6 of the General Clauses Act, 1897 is applicable where any Central Act or Regulation made after commencement of the General Clauses Act repeals any enactment. It is not applicable in the case of omission of a Rule . Hence, the question of applicability of Section 6 is decided in the negative. Secondly, on the issue of applicability of Section 38A(c) and 38A(e) of the Central Excise Act, 1944, it is held that the Respondent would not be able to enjoy its protection because Section 38A(c) and 38A(e) are attracted only when unless a different intention appears . In the present case, the legislature has clarified its intent to not restore/revive the power of confiscation of any land, building, plant machinery etc., after omission of the provisions contained in Rule 173Q(2) w.e.f 12.05.2000. This intention of the legislature can be drawn out from the fact that power to confiscate any land, building, plant, machinery etc. after omission w.e.f. 12.05.2000 has not been introduced in the subsequent Central Excise Rules, 2001, Central Excise Rules, 2002 and Central Excise Rules, 2017. Lastly, after omission of Rule 173Q(2) of 1944 Rules w.e.f. 12.05.2000 and after supersession of Rule 211 of 1944 Rules in the year 2001, the newly enacted Rule 28 of the Rules of 2001, Rule 28 of the Rules of 2002 and Rule 28 of the Rules of 2017, did not provide for confiscation of any land, building, plant, machinery etc. and their consequent vesting in the Central Government, as Rule 28 only provided for vesting in the Central Government of the Goods confiscated by the Central Excise Authorities under the Excise Act, 1944. This derivation of the legislature s intent, in conjunction with the ratio laid in the case of KOTAK MAHINDRA BANK LTD. VERSUS DISTRICT MAGISTRATE [ 2010 (9) TMI 758 - GUJARAT HIGH COURT] makes it apparent that the confiscation proceedings were not saved by these mentioned provisions and that the final confiscation order dated 26.03.2007 and 29.03.2007 were passed without jurisdiction by the Commissioner of Central Excise and Customs. Priority of secured creditor s debt over that of the Excise Department - HELD THAT:- The High Court in the impugned judgment has held that In view of the matter, the question of first charge or second charge over the properties would not arise. In this context, we are of the opinion that the High Court has misinterpreted the issue to state that the question of first charge or second charge over the properties, would not arise. This Court in DENA BANK VERSUS BHIKHABHAI PRABHUDAS PAREKH AND CO. AND OTHERS [ 2000 (4) TMI 36 - SUPREME COURT] , wherein the question raised was whether the recovery of sales tax dues (amounting to Crown debt) shall have precedence over the right of the bank to proceed against the property of the borrowers mortgaged in favour of the bank, where it was held that the Crowns preferential right of recovery of debts over other creditors is confined to ordinary or unsecured creditors. The common law of England or the principles of equity and good conscience (as applicable to India) do not accord the Crown a preferential right of recovery of its debts over a mortgagee or pledgee of goods or a Secured Creditor. Thus, the provisions contained in the SARFAESI Act, 2002, even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, will have an overriding effect on the provisions of the Act of 1944. The Commissioner of Customs and Central Excise could not have invoked the powers under Rule 173Q(2) of the Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings etc., when on such date, the said Rule 173Q(2) was not in the Statute books, having been omitted by a notification dated 12.05.2000. Secondly, the dues of the secured creditor, i.e. the Appellantbank, will have priority over the dues of the Central Excise Department, as even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, and the provisions contained in the SARFAESI Act, 2002 will have an overriding effect on the provisions of the Central Excise Act of 1944. The confiscation orders passed by the Commissioner Customs and Central Excise, Ghaziabad, are quashed - Appeal allowed. 2022 (2) TMI 1170 Refund of duty paid - deposit was made out of mistake of fact - refund rejected on the ground of time limitation u/s 11B of the Central Excise Act - HELD THAT:- The Hon ble Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION [ 2012 (7) TMI 22 - KARNATAKA HIGH COURT ] came to the conclusion that section 11B of the Central Excise Act was not applicable to a refund application filed by the petitioner based on mistake of law. The Hon ble Karnataka High Court fairly held that section 35B(1)(b) was inapplicable. Learned counsel for the petitioner further relied upon the challenge to the said order of the Hon ble Karnataka High Court before the Hon ble Supreme Court in case of Commissioner V. KVR Construction [ 2011 (7) TMI 1334 - SC ORDER ]. The Hon ble Supreme Court dismissed the challenge to the order passed by the Karnataka High Court referred hereinabove and came to hold that the Karnataka High Court had held that the provision of limitation under section 11B of the Central Excise Act, 1944 would not apply for refund of service tax paid by mistake on exempted services even though the assessee had filed claim under Form-R which shows that they had treated such payment as duty but later on claimed it as not a duty. Mere payment of an amount by the assessee and acceptance by the Department would not regularize such an amount as duty if it was not actually payable and paid by mistake. It was further held that writ petition against the order of Commissioner (Appeals) rejecting refund of Service tax paid on exempted services as time-barred, is maintainable and cannot be rejected on the ground of availability of alternate appellate remedy particularly when payment of Service Tax exempted services held not be Tax/duty so as to attract the provisions of Section 11B of Central Excise Act, 1944 and also the provision of Section 35B of the said Act relating to appeal to Appellate Tribunal is not applicable. The issue framed hereinabove is answered in the positive in favour of the petitioner and the appellate authority i.e. the Commissioner of Central Tax (Appeals) is directed to take up the appeal and dispose of the same within a period of 2(two) months from the date of communication of the copy of this order to the authorities concerned - petition disposed off. 2022 (2) TMI 1169 Recovery of rebate claim - Inputs received in the factory or at the premises of job worker so as to claim rebate, or not - entire case was made out of on the basis of investigation done by DGCEI - reliability of the statements of witnesses - Penalty on Shri Deepak Agarwal, Director of Appellant s company and Shri Sharad Gupta, agent - HELD THAT:- It is found from the finding of the Learned Commissioner that the duty paid inputs were in fact procured, transported and delivered to the appellant and sent to the job workers and manufactured goods were received back is established. Since the entire allegation in the Show cause notice, that the appellant has not received the input, does not survive after the above finding of the Learned Commissioner. On the basis of aforesaid order which attained finality as the revenue has not challenged the aforesaid finding, the learned Commissioner had no option except to discharge the show cause notice however, the learned commissioner proceeded to hold against the appellant on an entirely new ground which was not only not contained in the show cause notice but which in fact runs counter to the Show cause notice. The Commissioner came up with a new ground which is not there in the Show cause notice namely that para 4 of the rebate Notification 21/2004 permits sending the goods to job worker only for the limited purpose of tests, repairs, refining, reconditioning or manufacture of intermediates product and not for manufacturing of final product. He held that H.K Impex could not have sent the inputs to the job worker for the manufacture of Final product by the Job workers. The Commissioner has passed the present impugned order in original dated 30.09.2020 in which he has proceeded to hold the contrary and confirmed the Show cause notice by confirming the demand for rebate with interest and rejected the pending rebate claim. As per the above development, it is found that the main allegation which is the foundation of the case is that the appellant have not received the inputs and the same was not used in the export goods, therefore, the appellant is not entitled for rebate claim does not exist in terms of Commissioner s earlier order dated 13.08.2018 read with Tribunal s Miscellaneous order dated 06.08.2019. By this order settled that the appellant have received the inputs and used in the manufacture of export goods. On this undisputed conclusion the entire case of the department gets demolished. Scope of the remand order by this tribunal - HELD THAT:- Since after consideration of all the evidences and remand direction when the learned Commissioner in order in original dated 13.03.2018 read with Tribunal order dated 06.08.2019 concluded that the receipt of inputs by the appellant, use thereof at the job workers premises, manufacture of final product and export thereof. Since neither side challenged the finding of the commissioner s order dated 13.03.2018 and this tribunal s order dated 06.08.2019, the finding on the facts has discussed above attained finality. The appellant also raised the issue of jurisdiction of DGCEI whether they are empowered to issue the SCN or otherwise. Since we have decided the matter on merit we are not addressing the issue of jurisdiction. The allegation in the SCN is that the appellant have not received the inputs on which they have claimed the rebate. Prior to the commencement of investigation by DGCEI on 27.03.2006 in the normal course, the range officers visited the factory of the H.K Impex for verification of the extent of wastage in the Manufacturing process etc. in connection with the rebate claims. During such verification the officer took stock of the duty paid inputs, goods in process and finished goods for such verification. The officer has prepared their inspection report dated 10.03.2006 and 22.03.2006 - despite the fact of the inspection report on record no question was raised from the Superintendent and the Inspector who did the verification about the veracity of the inspection report. Therefore, the inspection report given by the officers which clearly established that the goods were received by the appellant cannot be brushed aside. In view of the settled position and the facts of the present case the witnesses whose statements were relied upon, since could not be produced for cross examination, their statements have no evidential value and in respect of the transporters whose statements were retracted during cross examination as they have stated that the goods have been received by the appellant and by the Job workers, the entire basis in the SCN which is the statements of the transporters gets demolished. It cannot be said that the appellant did not have sufficient machinery for manufacturing. It is also noticed that the DGCEI also obtained a Chartered Engineering Certificate regarding installed capacity of production of H K Impex at Umbergaon and their two job workers. However, no certificate of Chartered Engineering is produced to show that the machinery and power consumption were insufficient. As regard the allegation of lack of machinery and absence of manufacturing activity at job worker s premises at Vasai, it was found totally incorrect and unsustainable for the reason that the appellant have given address of the job workers, the DGCEI chose to carry out verification only at one unit of job worker whereas, the second unit located adjacently of which intimation had been given, was not verified by DGCEI - department s case is also on the allegation that the goods exported by H K Impex under claim for rebate were those purchased from Delhi suppliers through Shri Sharad Gupta. The report which was available in DGCEI file obtained under RTI by the appellant states that verification was done with Container Corporation of India Ltd. to ascertain whether the vehicle number under which export goods were received at Nhava Sheva port matched with the Vehicle Number in ARE-2/ Central Excise Invoices. The department s case of non-receipt of inputs by the appellant and the job worker and non-manufacturing of export goods is baseless and without any tangible evidence. On the contrary, the appellant have established that the appellant have received the inputs in their factory and at job workers premises and the goods manufactured there from have been exported - it is concluded that the appellant M/s HK IMPEX have received the inputs, used in the manufacture of final product and such final product has been exported. Therefore, the appellant are entitled for the rebate as claimed by them. Penalty on Shri Deepak Agarwal, Director of Appellant s company and Shri Sharad Gupta, agent - HELD THAT:- Since the penalty upon them imposed is consequential to allegation of wrong availment of rebate claim by M/s H.K Impex and such allegation does not survive . The personal penalties being consequential shall also not survive. Appeal allowed - decided in favor of appellant. 2022 (2) TMI 1168 100% EOU - Refund in cash of duty paid under protest - whether the appellant can be given the benefit of Section 142 (3) of the Central Good and Service Tax Act, 2017, and allowed the refund claim in cash? - HELD THAT:- Admittedly the present case is not in respect of any claim made for the refund of accumulated credit as per Rule 5, but is claim made under Section 11B for the duty erroneously paid under protest as per the direction of the departmental officers from the CENVAT account. It was also not the case that when the order for refund was made i.e. 05.05.2017 and when they had taken the credit they could not have utilized the same on account of closure of business etc. They were ongoing concern and were in position to avail the said credit. Further on introduction of the Good and Service Tax they were even permitted to carry forward the said credit to that regime. The appellants have by reversing the credit and filing the appeal subsequent to introduction created an instrument just to en-cash the CENVAT credit by resorting to Section 142 (6) (a) of the CGST Act. Since it is the submission of the appellant that the present refund claim has been filed by them under Section 11B, the issue of admissibility of interest needs to be adjudicated in terms of Section 11BB. Since both the authorities have considered the request as per section 11 BB and thereafter rejected the claim to interest in my view appeal should fail on this account also. It is also settled principle in law that nobody should be allowed the benefit of his own wrongs. Appeal dismissed. 2022 (2) TMI 1167 Clandestine Removal - availment of irregular CENVAT Credit - duty paying documents - allegation is that the credit availed fraudulently on the strength of Cenvatable invoices against which no goods i.e. Copper ingots were received by them physically in their factory premises - existence of manufacturing activity or not - sufficient evidences present or not - sufficient investigation done by the Department or not - demand based on third party evidences - HELD THAT:- Apparently and admittedly, there is no evidence on record as against the present appellant other than the statement of Shri Rajesh Chouhan, the authorised signatory of the appellant. Irrespective Shri Yogesh Singh, Director of M/s. Sypher Impex Alloys Pvt. Ltd. had repeatedly admitted for having no trading activity in his factory at Bhiwadi since 2013. But there is no evidence procured by the Department about any arrangements by M/s. Sypher Impex Alloys Pvt. Ltd. with the present appellant. Though the appellants have been receiving material through M/s. Amtek India Ltd. which in turn was receiving from Swastik the said Swastik was having invoices of M/s. Sypher Impex Alloys Pvt. Ltd. but this trail is highly insufficient to hold precisely the invoices in the hands of the appellants are such, against which no goods were sent. To substantiate his case the appellants have placed on record voluminous documents including the purchase orders, invoices, gate registers, GRRs and ledger account. Perusal thereof shows the clear connectivity in these documents reflecting that the appellants were purchasing the copper raw material for their final product against the duly issued invoices by the supplier. These invoices were precisely mentioning the details of the vehicles through which the goods were to be transported from the suppliers for being received by the appellant. Apparently and admittedly there is no investigation from the driver or owner of the said vehicles. The said lacunae creates a major bubble of doubt, the benefit of which is to be extended in favour of the appellants. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated various aspects - thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department. Hence the reliance of Commissioner (Appeals) merely on oral testimony is held not relevant and unjustified specially when there is no apparent admission as is alleged. Otherwise also the statements recorded are nothing more than third party evidence - Law is clearly settled that third party evidence cannot be held as the basis for proof of guilt of some other person. Admittedly no search was conducted in the appellants premises. No record was recovered from the appellants custody, nor any material was seized . The findings against the appellants are accordingly held to be nothing but outcome of assumptions based upon the Panchnama drawn in the factory premises of M/s. Sypher Impex Alloys Pvt. Ltd. Thus, it is held that the documents as that of invoices, gate registers, raw material registers, GRs and ledger account as have been relied upon by the appellants, since the stage of filing of reply to the show cause notice. The goods mentioned in the invoices were duly been received by the appellants. The invoices were Cenvatable invoices. Accordingly, the credit thereupon is therefore held to have been rightly availed. The order under challenge is therefore, set aside - Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2022 (2) TMI 1166 Disbursal of pending refund - disbursal of interest on account of delay in disbursing refund amount - refund of the amount collected from the writ applicant by the seller of natural gas and deposited with the respondent authorities under the Central Sales Tax Act, 1956 - HELD THAT:- The issue raised in the present litigation is squarely covered by a decision of a Coordinate Bench of this Court in the case of J.KI. Cement Ltd. vs. State of Gujarat, [ 2020 (3) TMI 140 - GUJARAT HIGH COURT ] where it was held that the respondents are directed to forthwith process the refund claims of the respective petitioners and grant refund of the tax amount collected from the petitioners and deposited by the seller in accordance with law within a period of twelve weeks of the receipt of a copy of this judgment. The respondents are directed to forthwith process the refund claim of the writ applicant and grant the refund of the tax amount collected from the writ applicant and deposited by the seller (IOCL) in accordance with law within a period of eight weeks of the receipt of a copy of this judgment - application allowed. 2022 (2) TMI 1165 Seeking lifting of attachment on Bank Accounts of Directors - recovery of dues of the company, while the bank accounts of Directors were attached - HELD THAT:- Unlike Section 179 of the Income Tax Act, 1961, there is no provision in the Sales Tax Act fastening the liability of the company to pay its sales tax dues on its Director. The attachment on the bank account of the writ applicant is hereby ordered to be lifted. The bank shall permit the writ applicant to operate the bank account - Application allowed. 2022 (2) TMI 1164 Input Tax Credit - benefit of input tax credit granted to the dealer without verifying the nature of transaction as discussed by the assessing authority as well as by the first appellate authority - HELD THAT:- The issue involved in the revisions is covered by the judgement and order passed by this Court COMMISSIONER COMMERCIAL TAX LKO. VERSUS S/S VIKRANAT ISPAT UDYOG [2022 (2) TMI 1116 - ALLAHABAD HIGH COURT], in which it was held that The Tribunal being the last court of fact has recorded the finding of fact in favour of the opposite party that all the transactions were made through Bank and were duly accounted for as well as verified. Further, the purchases made from the respective dealers were duly registered and verifiable from the official web site of the Department and therefore, it cannot be said that purchases were made from unregistered dealers. The present revisions are dismissed. Indian Laws 2022 (2) TMI 1163 Dishonor of Cheque - insufficiency of funds - legally enforceable debt or not - rebuttal of statutory presumption - territorial jurisdiction to adjudicate the complaint case - section 138 of NI Act - service of demand notice - HELD THAT:- In the case on hand, it is not in dispute that respondent No.1 has a bank account at the Yes Bank Branch in Thangal Bazar, Imphal. The date of opening of the said account does not have bearing on that irrefutable fact. The subject cheque was deposited at a Delhi Branch of Yes Bank for being credited to the said account. Mere presentation of the cheque at a Delhi Branch has no impact whatsoever in the light of the Explanation to Section 142(2)(a), which categorically states that even if the cheque is delivered in any other branch of the bank of the payee, it shall be deemed to have been delivered to the branch where the payee actually maintains an account. Therefore, presentation of the cheque at a Delhi Branch of Yes Bank is of no import at all - In the light of the amended provisions of the Act of 1881 and more so, Section 142(2)(a), and the edicts of the Supreme Court in relation thereto in M/S BRIDGESTONE INDIA PVT. LTD. VERSUS INDERPAL SINGH [ 2015 (12) TMI 777 - SUPREME COURT] and M/S HIMALAYA SELF FARMING GROUP ANR. VERSUS M/S GOYAL FEED SUPPLIERS [ 2020 (9) TMI 1240 - SUPREME COURT] , it cannot be doubted that institution of the complaint case before the Trial Court was strictly in accordance with law, as obtaining presently. The Trial Court has jurisdiction over the area in which respondent No.1 maintains her bank account, being the account to which the cheque amount was to be credited. Therefore, the Trial Court clearly has territorial jurisdiction to entertain and deal with the matter. In the light of the law laid down by the Supreme Court in CC. ALAVI HAJI VERSUS PALAPETTY MUHAMMED [ 2007 (5) TMI 335 - SUPREME COURT] , a presumption arises as to the service of the demand notice upon the petitioner as the address was shown correctly and there is no evidence of the said notice being returned unserved. Further, as pointed out in the said decision, this is a matter for evidence and cannot constitute a ground for non-suiting the complainant at the threshold. It is for the petitioner to rebut the statutory presumptions in this regard with satisfactory evidence - this Court finds that the learned Chief Judicial Magistrate, Imphal West, has territorial jurisdiction to entertain, try and adjudicate the subject complaint case and the pleas to the contrary by the petitioner, on all counts, are bereft of merit. The criminal petition is accordingly dismissed. 2022 (2) TMI 1162 Dishonor of Cheque - seeking to call for the records and quash the private complaint - primary ground taken by the petitioner is that the respondent/complainant himself admits in his complaint that a cheque bearing No. 844386 dated 06.06.2016, was issued for a sum of ₹ 14,50,991/- - HELD THAT:- The points raised by the learned counsel for the petitioner can be raised only during the trial and not to be decided in this quash application. This Court is not inclined to entertain this Criminal Original Petition. It is made clear that the observations made in this order are only for the purpose of the disposal of the above petition and the trial Court uninfluenced by the above observations may decide the case on merits accordingly. Finding that the case is kept pending for a long time, the trial Court is directed to complete the trial within a period of three months from the date of receipt of a copy of this order - Petition dismissed. 2022 (2) TMI 1161 Dishonor of Cheque - person responsible for day to day affairs of the company - Signatory of the cheque - vicarious liability - petitioner states that besides there being no averment in the complaint qua the petitioner, no legal notice was issued to the petitioner and notice of dishonour of cheque was issued only to the company - HELD THAT:- The accused No. 1 is the company in whose name the cheque was issued and the accused Nos. 2 and 3 were the Director and Managing Director of the company and signatories to the cheque. However, the petitioner was arrayed as accused No. 4 being the Finance Head of the accused company against whom there is no specific allegation except stating in para 3 of the complaint that the remaining accused persons were directly responsible for day to day affairs of the accused No. 1 company. In SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA [2005 (9) TMI 304 - SUPREME COURT], it was held that that in order to array an accused for an offence under Section 138 of the N.I.Act who is not signatory to the cheque, specific averments have to be made in the complaint as to the role attributable to the said accused and as to how he was responsible for the conduct and affairs of the company. In the facts of the present case, the only averment in the complaint is that the remaining accused persons are directly responsible for day to day affairs of the accused No.1 company. Considering the fact that the petitioner is neither the signatory nor the Managing Director of the company nor is there any averment in the complaint as to how the petitioner is responsible and Incharge of the day to day affairs and conduct of the company, nor does the complaint attribute any conduct, act or omission on the part of the petitioner which would be sufficient to hold him vicariously liable for the act of the company, the impugned order summoning the petitioner is liable to be set aside. The impugned order of the learned Metropolitan Magistrate is set aside - Petition allowed.
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