TMI Tax Updates - e-Newsletter
May 22, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Law of Competition Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. AN INSIGHT TO COMPOSITION LEVY

   By: VAIBHAV SINGH

2. Analysis of Amendments in GST on 18th May 2021 vide Not. No. 15/2021 - Central Tax:

   By: Vivek Jalan

News

1. Jackfruits from Tripura exported to London

2. Sovereign Gold Bond Scheme 2021-22 (Series II) – Issue Price

3. Apeda organises virtual buyer seller meet for boosting mango exports to South Korea;

Notifications

Customs

1. 48/2021 - dated 20-5-2021 - Cus (NT)

Exchange rates Notification No.48/2021-Cus (NT) dated 20.05.2021

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DF6/CIR/P/2021/565 - dated 21-5-2021

Enhancement of overall limit for overseas investment by Alternative Investment Funds (AIFs)/Venture Capital Funds (VCFs)

GST - States

2. TRADE CIRCULAR No. 04/2021 - dated 6-5-2021

Clarification in respect of certain challenges faced by the registered persons in implementation of provisions of GST Laws

Companies Law

3. CSR-01/4/2021-CSR-MCA - dated 20-5-2021

Clarification on offsetting the excess CSR spent for FY 2019-20

Highlights / Catch Notes

GST

• High Court Denies Bail to Middleman in GST Fraud Case; Investigation u/s 132(5) of CGST Act Continues.

  Case-Laws - HC : Bail application - petitioner was acting as middleman by procuring GST registration pertaining to defunct companies - petitioner was receiving commission for selling the details of GST registration of defunct companies - section 132 (5) of the CGST Act - Further, without his role as middleman, the whole crime could not have been perpetrated. The nexus of very many persons within the administrative framework could not be ruled out and a proper and full-fledged investigation is necessary to unearth the larger conspiracy involved behind the above - Bail not granted - HC
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Income Tax

• Commissioner Correctly Adjusts Turnover; Tribunal Supports Deletion of Inflated Sales Figures by Assessing Officer.

  Case-Laws - HC : Computation of gross profit - estimation and enhancement of turnover - As per tribunal opinion that the estimation of total sales without considering the actual purchases would inflate the sale, therefore, the CIT(Appeals) has rightly found that the total turnover was much lower as against the turnover estimated by the Assessing Officer. Therefore, the ClT (Appeals) has rightly deleted the addition made by the Assessing Officer. - HC
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• Tax Exemption Denied: Society's Building Activities Not Charitable, Says Commissioner; Section 12A(a) and 2(15) Under Review.

  Case-Laws - AT : Denial of registration u/s 12A(a) - proof of charitable activity u/s 2(15) - CIT(E) simply carried by the assumption that since society was formed for construction of building for its members, benefits of which only restricted to the members, and not to the general public at large. It is settled proposition of law that for the purpose of registration u/s 12AA of the Act, the threshold condition i.e. genuineness of the activities is to be decided with the object clause of institution.- AT
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• Court Upholds Assessing Officer's Decision: Assessee's Income Estimated at 10% of Turnover, Overrules CIT(A)'s Enhancement.

  Case-Laws - AT : Rejection of books of account - estimation of profit - we set aside the decision of the CIT(A) in enhancing the income of the assessee and uphold the order of the AO in estimating the income of the assessee @ 10% on the total turnover. CIT(A) has treated it as other income. The CIT(A) has co- terminus powers but once a pragmatic view has been formed by the AO, it should be changed as per the case law cited supra. Further, on perusal of the details of other income shown in the financial statement, this income is related to the primary business activity of the assessee. - AT
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• Accounting Delay Causes Negative Stock Entry, No Real Discrepancy Found in Sarki Khalli Case, Paper Book Confirms Timing Issue.

  Case-Laws - AT : Addition for sale of sarki khalli - as alleged assessee has not having any such stock - Goods were received 10 days prior from 17.2.2010 by Poonam Road Lines. So the assessee had stock of sarki khalli as on 17.2.2010 but since the bill was entered on 27.2.2010 there was a negative stock appearing in the quantitative details. The negative stock appeared since the Accountant entered the stock on 28.2.2010. Has it been made on 27.2.2010 there would have been no negative stock. This fact is discernable from the paper book. Thus in our considered view this is not a discrepancy and no addition was called for on account of sales without stock in hand. - AT
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• Section 69A: Unaccounted Business Receipts Added to Income, 8% Net Profit Rate Applied by Authorities.

  Case-Laws - AT : Addition u/s 69A - unaccounted business receipt - various submissions were filed by the assessee to explain the source but revenue authorities could not go deeper to bring the truth on record. Further Ld. A.O as well as Ld. CIT(A) have observed that it cannot not be denied that the alleged amount is an unaccounted business receipts. In our considered view and in the given facts and circumstances of the case and being fair to both the parties, we treat the alleged cash deposit as unaccounted business receipt and apply net profit rate of 8% on this amount and the same is added to the income of the assessee - AT
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• Court Upholds Deemed Dividend u/s 2(22)(e) Due to Conditions Met; Limited to Lender's Accumulated Profits.

  Case-Laws - AT : Deemed dividend addition u/s 2(22)(e) - Since all the conditions necessary for treating the deemed dividend of the amount received in the hands of concern (which in this case is the assessee) from other companies (three lender companies) stands fulfilled, in our considered view Ld. A.O has rightly invoked the provisions of Section 2(22)(e) of the Act and made addition for deemed dividend. - However, the addition for deemed dividend cannot exceed the accumulated profits of the lender company as appearing in the books before giving such loan and advance. - AT
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• Transactions Between MLFS and VSPL Not Deemed Dividends u/s 2(22)(e) for 2016-17; Authorities Erred in Classification.

  Case-Laws - AT : Deemed dividend made u/s 2(22)(e) - The alleged transactions are purely entered between the two concerns in the ordinary course of business as advance or loan for which interest was also paid by MLFS to VSPL for Assessment Year 2016-17. Thus the alleged transaction clearly falls in the exclusion (ii) to section 2(22)(e) of the Act and thus both the lower authorities have erred in treating the alleged sum as deemed dividend in the hands of the assessee for Assessment Years 2015-16 and 2016-17 respectively and therefore addition made is uncalled for. - AT
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• Commissioner of Income Tax's demand for tax on survey-disclosed income lacks merit; statements not under oath, per Section 132(4).

  Case-Laws - AT : Addition based on survey proceeding - Unexplained stock of gold and silver jewellery - The statement given during the course of survey is not a statement on oath as given u/s. 132(4) of the Act and therefore has no evidentiary value. Reliance should be placed upon the evidence/materials gathered during the course of survey operations while framing the assessment orders. Therefore this finding of Ld. CIT(A) that the assessee was required to honour income surrendered during the course of survey and offer it to tax finds no merit. - AT
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• Section 263 Revision: No Evidence Found Against Taxpayer in LTCG Case; Assessing Officer's Decision Upheld.

  Case-Laws - AT : Revision u/s 263 - genuineness of LTCG - there is not even an iota of material quoted against the assessee to have been engaged in all the foregoing artificial price rigging. We are observing in view of all these facts that the Assessing Officer had rightly accepted the assessee's LTCG keeping in making the overwhelming evidence forming part of records. - AT
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Customs

• Reconsideration Urged for Condonation of Delay in 'Brand Rate' Claims Due to Lack of Justification in Customs Cases.

  Case-Laws - AT : Condonation of delay in filing claims for fixation of ‘brand rate’ - The generality of the reasons adduced reflect failure to consider each of the claims for identification of the impediment that the elapse of time yoked the ascertainment of entitlement with. There is no justification for refusal to condone the delay in each application which must be returned for reconsideration of the claims from inception. - AT
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IBC

• Tribunal Upholds Liquidation Order as Committee of Creditors Rejects Resolution Plan with 76.02% Vote, Aligning with IBC Section 33(2.

  Case-Laws - AT : Liquidation of Corporate Debtor - This ‘Tribunal’ keeping in mind of a primordial fact that the decision of the ‘Committee of Creditors’ takes a pivotal seat based on ‘Commercial Wisdom’, taking note of the fact that the ‘Committee of Creditors Members’ with 76.02% voting share had voted against the ‘Resolution Plan’ and in the teeth of ingredients of 33(2) of the Insolvency and Bankruptcy Code, 2016, comes to a irresistible conclusion that the ‘impugned order of Liquidation’ in respect of the ‘Corporate Debtor’ passed by the ‘Adjudicating Authority’ is free from legal infirmities- AT
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• Court Grants Respondent Time to Settle Before Starting Insolvency Process Under Insolvency and Bankruptcy Code Provisions.

  Case-Laws - Tri : Initiation of CIRP - Since the learned counsel for the Respondent conveyed the willingness of Respondent to settle the claim in question, we are inclined to give one more chance to settle the claim before initiating CIRP as prayed for. Therefore, it would be just and proper to grant time to the Respondent to settle the claim by disposing of the Petition, instead of keeping the case pending for settlement, which is not contemplated under the provisions of Code. - Tri
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Central Excise

• EOU Achieves Positive NFE, Entitled to Utilize DTA Clearance Facility Under Paragraph 6.8 of Foreign Trade Policy.

  Case-Laws - AT : 100% EOU - DTA sales limit - In the instant case there is no allegation that export obligation has not been fulfilled and positive NFE was not achieved. A close look at the scheme of the EOU, gives an understanding that the scheme places on reliance of the value of exports and not the quantities. Therefore, positive NFE being achieved, the appellants are within their rights to avail the facility of DTA clearance in terms of Para 6.8 of FTP. - AT
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VAT

• Court Limits Input Tax Credit to 75% for Spare Parts in Works Contracts, Rejecting Petitioner's 100% Claim.

  Case-Laws - HC : Input tax credit - sale or not - The main thrust of the argument of the petitioner is that since the said transaction is an outright sale, 100% ITC has to be admitted. This argument of the petitioner cannot be appreciated for the reason that even if the user of spare parts and lubricants in the works contract amounts to sale, still the statute restricts the ITC to 75%. - HC
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Case Laws:

• GST

• 2021 (5) TMI 674
  Bail application - petitioner was acting as middleman by procuring GST registration pertaining to defunct companies - petitioner was receiving commission for selling the details of GST registration of defunct companies - section 132 (5) of the CGST Act - HELD THAT:- In the case on hand, it is the insistent stand of the respondent that the value of fraud is to the tune of around Rs. 55 Crores - A perusal of record shows that there are serious allegations against the present petitioner, who is the one of the main accused, that he along with co-accused, by perpetrating fraud and through paper transactions have claimed the relief to the tune of more than Rs. 55 Crores. The case is at preliminary stage and enlarging the petitioner at this point of time on bail would have a detrimental effect on the investigation. Further, without his role as middleman, the whole crime could not have been perpetrated. The nexus of very many persons within the administrative framework could not be ruled out and a proper and full-fledged investigation is necessary to unearth the larger conspiracy involved behind the above. It is not as if the petitioner has been under incarceration for a long length of time. In such a backdrop, this Court is of the considered view that the prayer for grant of bail by the petitioner cannot be acceded to. Petition dismissed.

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• Income Tax

• 2021 (5) TMI 672
  Validity of reopening of assessment u/s 147 - notice in name of dead person - HELD THAT:- The procedure followed by the revenue in this matter is contrary to the requirement that, proceedings for assessment, in order to be valid, should be preceded by notices that are issued to the assessee in question. No doubt, notice issued under Section 148 on 31.03.2017 is valid. However, for reasons best known to the Assessing Officer, this notice has not culminated in an order of assessment and has been allowed to lapse. The second notice dated 20.06.2019 has been again issued to K.Mangalam, despite the Assessing officer having been intimated that she has passed away on 16.04.2017. The counter affidavit filed by the respondent does not anywhere dispute the position that the Income Tax Department was unaware of the demise of K.Mangalam on 16.04.2017 though this is the sheet anchor of the petitioner s case. Thus, the non production of an acknowledgment from the Assessing officer in this case may not be material, since there is no averment in the counter denying this position. Even before me, learned counsel for the revenue does not dispute the fact. The intimation filed by the petitioner on 13.06.2017, enclosing the death certificate of K.Mangalam is well within the knowledge of the Assessing Officer. All proceedings issued thereafter in the name of K.Mangalam are invalid including notice under Section 148 - Decided in favour of assessee.

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• 2021 (5) TMI 670
  Computation of gross profit - estimation and enhancement of turnover - Revenue contended before the Tribunal stating that since the assessee consumed large quantity of packing material, the Assessing Officer rightly computed the gross profit by increasing the total turnover on the basis of packing material consumed - One kind of packing material is used to pack turmeric powder in sachet and the other is called as the primary packing material - HELD THAT:- As per tribunal opinion that the estimation of total sales without considering the actual purchases would inflate the sale, therefore, the CIT(Appeals) has rightly found that the total turnover was 19,75,167.60 Kgs as against 37,90,500 Kgs estimated by the Assessing Officer. Therefore, the ClT (Appeals) has rightly deleted the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the ClT (Appeals) and accordingly the same is confirmed. Similarly, all the other issues were also dealt with by the Tribunal in an elaborate manner i.e by examining the factual position, which was examined by the CIT(A) while granting relief to the assessee. Hence, we find that there is no question of law much less substantial question of law involved in this appeal.

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• 2021 (5) TMI 667
  Disallowance u/s 14A - Assessee claimed that it has got huge internal accruals and interest free funds for making the investment and therefore, no disallowance should be made u/s. 14A - HELD THAT:- Authorities below, therefore, was unable to have an opportunity to examine the interest free funds available with the assessee via-a-vis the investment made during the relevant year under consideration. The case laws relied upon by the assessee in its own case by the Co-ordinate Bench of the Tribunal [ 2021 (2) TMI 1138 - ITAT PUNE ] is substantially distinguishable on facts for the reason that in this relevant year, factually it was not established by the assessee and neither therefore, it was examined by the Sub ordinate Authorities that investments were made by the assessee in the year under consideration only from reserves and interest free funds available with the assessee. There is an observation by the Ld. CIT(Appeals) that investments were directly made from OD account where both own funds and interest bearing funds are intermixed. Therefore, it becomes necessary to factually verify whether the entire investments were made only from interest free funds. We are of the considered view, therefore, in the interest of justice, this issue should be remanded back to the file of the Assessing Officer for verification of investments made vis-a-vis interest free funds available with the assessee during the year under consideration Disallowance u/s. 54EC - HELD THAT:- Hon ble High Court in the case of CIT Vs. C. jaichander [ 2014 (11) TMI 54 - MADRAS HIGH COURT ] has held that as per the mandate of Section 54EC(1) of the Act, the time limit for investment is six months and the benefit that flows from the first proviso is that if the assessee makes the investment of Rs. 50,00,000/- in any financial year, it would have the benefit of Section 54EC(1) of the Act. The Hon ble High Court further held that however to remove the ambiguity in the above said provision the legislature by Finance (No.2) Act, 2014, with effect from 1.4.2015, has inserted after the existing proviso to sub-section (1) of Section 54EC of the Act, the second proviso which provides as per the investment made by an assessee in the long-term specified asset out of the capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed Rs. 50 lakhs. The said amendment was held to be applicable from assessment year 2015-16 and subsequent assessment years. In assessee s case the investments of the assessee have been made in assessment years 2013-14 and 2014-15. The Finance (No.2) Act, 2014 is effective from assessment year 2015-16 and therefore not applicable to the case of the assessee. Para 21.4 of the said circular (supra.) categorically reads that the amendment is only effective from 01.04.2015 and shall apply in relation to the assessment year 2015-16 and subsequent assessment years. In view thereof, we set aside the order of the Ld. CIT(Appeals) on this issue and direct the Assessing Officer to grant deduction u/s.54EC of the Act to the assessee as per law.

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• 2021 (5) TMI 664
  Undisclosed investment in the purchase of property in the form of payment of on-money consideration - on-money over and above stated consideration of the sale deed - addition made on mere statement made u/s 132(4) - HELD THAT:- In the present case, the additions are made merely based on statement of third parties without bringing on record any corroborative evidence. No such addition can be made. As held by the Hon ble Supreme Court in the case of CIT vs. Daulatram Rawatmull,[ 1964 (3) TMI 14 - SUPREME COURT] even the circumstances raises suspicion, suspicion cannot take place of the evidence. That apart, the contentions of the appellant i.e. the assessee that the vendors had declared additional income only in order to escape the rigouts of the law to claim the benefits u/s 54 of the Act remains uncontroverted. Therefore, we are of the considered opinion that the fact that the vendors had disclosed additional income on account of sale of land as additional income before the Settlement Commission cannot form any basis for the addition in the hands of the appellant herein. Thus we are of the considered opinion that the Department had failed to establish that the appellant had paid any on-money over and above stated consideration of the sale deed to the vendors of the property at the time of purchase of Savargaon land. Therefore, no addition can be made on the mere statement given by the third party. Therefore, the orders of the lower authorities are reversed, we direct Assessing Officer to delete addition for the assessment year under consideration. Addition on-money consideration at the time of purchase of the lands - HELD THAT:- It is settled position of law that onus lies upon the Department to collect cogent evidence to corroborate the notings on the loose sheets. The additions cannot be made merely on the basis of notings on the loose sheet papers which are in the nature of dumb documents having no evidentiary value. The onus lies on the Department to collect the evidence to corroborate the notings on the loose sheets. In the present case, it is undisputed position that as a result of search and seizure action in the case of respondentassessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands The Hon ble Supreme Court in the case of K.P. Varghese vs. ITO [ 1981 (9) TMI 1 - SUPREME COURT] held that the capital gains is intended to tax the gains of assessee not what an assessee might have gained and what is not gained cannot be computed as gain and the assessee cannot fastened with the liability on a fictional income. Similarly, the Hon ble Supreme Court in the case of CIT Vs. Shivakami Co. (P.) Ltd. [ 1986 (3) TMI 2 - SUPREME COURT] held that unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for making addition. In the present case, we do not find any material on record suggesting the payment of onmoney consideration at the time of purchase of land by the respondentassessee and its group companies. Therefore, it can be said that the Assessing Officer had failed to bring on record any reliable evidence to prove that the respondent assessee had made investment in purchase of lands over and above the stated consideration. Therefore, we do not see any perversity in the findings of the ld. CIT(A) in deleting the addition based on the seized material. The findings given by us in relation to the appeal filed by the assessee for the same year also equally holds good in respect of present appeal and therefore, we do not find any merit in the appeal filed by the Revenue and we dismiss the appeal. Accordingly, we dismiss the appeal filed by the Revenue.

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• 2021 (5) TMI 663
  Gain on sale of land - capital gain or business receipts - plot of land purchased followed by the development agreement - transfer of asset u/s 2(47) - HELD THAT:- As Learned counsel first of all stated very fairly that there is no dispute raised at the assessee s behest regarding correctness of the both the lower authorities action treating the impugned development agreement dt.15-08-2004 with M/s.Ashwini Abodes for construction of flats and to receive the developed area to this effect having ratio of 44:56; party-wise; respectively as amounting to transfer u/s.2(47)(v) of the Act. We thus affirm the learner lower authorities action to this effect. LTCG or Business income - As assessee s development agreement that she had herself not undertaken any development activity indicating the adventure component which in fact had been borne by the concerned developer only. We also wish to highlight the fact that the parcel of land has remained the same in AYs.2005-06 to 2008-09 wherein the assessee has herself accepted the learned lower authorities action treating the developed area as the capital asset only giving rise to long term capital gains. We rather note that the assessee has claimed Section 54 deduction of Rs. 69,27,420/- AY.2008-09 as well. We thus hold that the assessee s divergent stand in treating herself as engaged in adventure in real estate development in AY.2005- 06 and capital gains in AY.2008-09 does not deserve to the concurred with. We therefore decline her argument that the plot of land purchased on 15-08-2004 followed by the development agreement within a very short span of time i.e., 19-10-2004 could give rise to huge profits in the nature of business income only. Reopening of assessment - It is an admitted fact that their lordship s decision herein nowhere dealt with an instance of double addition per se as is the assessee s case before us.We therefore restore the instant issue back to the Assessing Officer to frame his necessary computation afresh after ensuring that whatever the assessee s income has been assessed in preceding assessment year(s) would not be treated as her income escaping assessment pertaining to AY.2008-09.

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• 2021 (5) TMI 662
  Reopening of assessment u/s 147 - Addition u/s 68 - unexplained share capital - assessee not explaining the genuine share application money received from the Investor Companies - HELD THAT:- AO recorded wrong, incorrect and non-existing reasons in the reasons recorded for reopening of the assessment and has merely relied upon the report of Investigation Wing without any verification. The information received by the A.O. is vague and do not lead to formation of belief that any income chargeable to tax has escaped assessment. In these circumstances, it was the duty of the A.O. to verify the facts before coming into the conclusion that there is an escapement of income on account of credit entries received in the Bank A/c of the assessee. A.O. even did not verify the information received from the Investigation Wing and even did not verify the name of the assessee. Thus, the A.O. recorded incorrect and wrong reasons for reopening of the assessment and did not apply his mind to the facts of the case before recording reasons for reopening of the assessment. Even the Sanctioning Authority has not applied his mind to the conclusion drawn by the A.O. based on specific material on record which clearly reveal that reasons recorded by the A.O. are wrong, incorrect and based on no evidence. It is, therefore, clear case of non-application of mind by the A.O. at the time of recording reasons for reopening of the assessment. Addition u/s 68 - Non-production before the A.O. would not be a ground to make the addition against the assessee. Since the initial onus to prove genuine credits received by assessee from the Investor Companies have been duly discharged by the assessee and no material have been produced by the A.O. to rebut the documentary evidences filed by the assessee, therefore, there were no reason for the authorities below to make any addition against the assessee. Originally assessee company was incorporated on 27.02.2003 and the financial year ended on 31.03.2003 relevant to assessment year 2003-2004 under appeal. It is difficult to believe that during a period of about one month assessee would have earned such a huge unaccounted money. Since it is the first year of the business and Incorporation of the Assessee-Company and share application money is received at the end of the financial year after Incorporation of the Assessee-Company, therefore, there were no justification to held that assessee received unexplained share application money. Assessee produced sufficient documentary evidences before A.O. to prove ingredients of Section 68 of the I.T. Act, 1961. The Investors have directly confirmed making investment in assessee company in reply to the notice under section 133(6) of the I.T. Act, 1961 at the appellate stage. Therefore, the assessee has discharged its initial onus to prove the identity of the Investor Companies, their creditworthiness and genuineness of the transaction. No evidence have been brought on record by the A.O. if assessee paid any commission to any person of Rs. 1,96,000/-. Therefore, there is no justification to make both the additions against the assessee. In view of the above discussion, we set aside the Orders of the authorities below and delete the addition - Decided in favour of assessee.

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• 2021 (5) TMI 661
  Denial of registration u/s 12A(a) - proof of charitable activity u/s 2(15) - CIT(E) rejected the claim of the assessee is mainly that the purpose for which the society was formed is for the benefit of specific group of professionals and to carter their specific purpose, which do not come under the definition of section 2(15) - whether the ld.CIT(E) is correct in rejecting the application of the assessee-society seeking registration under section 12AA of the Income Tax Act, 1961 ? - HELD THAT:- While going through the contents of bye-laws of the society filed by the assessee, it interalia provide that the society was established for the welfare, construction and allotment of chambers in the District Court Complex, Barnala for the members District Bar Association, Barnala. It further provides that all the incomes, earnings whatsoever derived shall be solely utilized and applied towards the promotion of its aims and objectives only as set forth in the memorandum of association, and that the society will work on no profit and no loss basis. Bye-laws also provide social welfare activities such as growing of trees for environments, de-addiction drug campaign, welfare of girl child, and also provide legal awareness among the general public. The dominant purpose of assessee-society is to provide infrastructure facilities to its members, which are necessary to ensure quality service of lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the litigants. While considering the application of the assessee for grant of registration, it appears that the ld.CIT(E) has not appreciated these very vital objects. He simply carried by the assumption that since society was formed for construction of building for its members, benefits of which only restricted to the members, and not to the general public at large. It is settled proposition of law that for the purpose of registration u/s 12AA of the Act, the threshold condition i.e. genuineness of the activities is to be decided with the object clause of institution. Hon ble Apex Court in case of CIT vs. Andhra Chamber of Commerce [ 1964 (10) TMI 19 - SUPREME COURT] held that an object beneficial to a section of the public was an object of general public utility, as in the case of assessee, which is working to control, supervise and regulate a profession for the benefit of lawyers community at large. Thus it is clear that the primary or dominant purpose of an institution like the assessee society is in the form of advancement of the object of general public utility within the meaning of s. 2(15) of the Act, and as such the assessee society would be entitled to registration under section 12AA of the Act. We direct the ld.CIT(E) to grant registration to the assessee under section 12AA - Decided in favour of assessee.

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• 2021 (5) TMI 660
  Reopening of assessment u/s 147 - Addition u/s 68 - reassessment on basis of information received from REIC through Income Tax Officer, Ward 43(4), New Delhi - HELD THAT:- As relying on assessee s own case . [ 2021 (2) TMI 734 - ITAT DELHI] in absence of any contrary material brought to our notice, we hold that the Assessing Officer in the instant case has recorded incorrect/wrong and non-existing reasons in the reason for reopening of the assessment and has not applied his mind to the information received from REIC, Ward 43(4)(New Delhi). Therefore, the reopening of the assessment is illegal and bad in law and is liable to be quashed. Therefore, the additional grounds raised by the assessee are allowed.

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• 2021 (5) TMI 659
  Depreciation on Toll Road developed - @ 25% OR 10% - availability of depreciation to the assessee whether it is to be allowed keeping the right to collect toll fee as intangible assets or it to be treated as building or plant machinery - HELD THAT:- As relying on M/S. WEST GUJARAT EXPRESSWAY LTD. VERSUS ACIT -10(1), MUMBAI [ 2015 (5) TMI 305 - ITAT MUMBAI] and M/S. PROGRESSIVE CONSTRUCTION LTD. [ 2014 (11) TMI 401 - ITAT HYDERABAD] we hold that the assessee is eligible for depreciation @ 25% as claimed by the assessee. Thus, Ground of appeal No.1 raised by the assessee is allowed. Disallowance with regard to provision made for maintenance of the roads - HELD THAT:- We are of the considered view that the claim of provision as made by the assessee is in accordance with settled principal of law. Therefore, the authorities below were not justified in making the disallowance.

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• 2021 (5) TMI 658
  Addition of low Gross Profit - non rejection of books of accounts - HELD THAT:- AO has failed to point out any serious defect in maintenance of books of accounts except comparing Gross Profit Ratio of preceding years and making fall in GP ratio as main basis for rejection of books results. CIT(A) has also held that there was no change in method of accounting and it is settled law that AO cannot doubt the genuineness of books of accounts merely because there has been reduction in Gross Profit Ratio in comparison to earlier years. The Ld. CIT(A) has relied upon the decision of Hon`ble Gujarat High Court in the case of CIT Vs. Vikram Plastics Others [ 1998 (8) TMI 43 - GUJARAT HIGH COURT ] wherein it was held that if there was no discrepancy or defect pointed out in the books of accounts and if there is no material brought on record that purchases and expenses were inflated or sales suppressed then books of accounts cannot be rejected. The Ld. CIT(A) has also discussed that the product - service mix in A.Y.2012-13 was 42:58 which was 86:14 in A.Y.2014-15, obviously the GP ratio would be on lower side as compared to A.Y.2012-13. The Ld. CIT(A) has also held that the AO could not cite any comparable case from the same line of business to prove that assessee s profit margins is on lower side. Based on the facts narrated above, we note that ld CIT(A) has reached on right conclusion therefore we are constrained to agree with the findings of the ld CIT(A). Thus, this ground of appeal raised by the Revenue is dismissed. TDS u/s 195 - Disallowance u/s 40(a)(ia) - assessee company had purchased software called pacor clients software with hasp key note from Computer system and Networking (foreign supplier of the software) - HELD THAT:- CIT(A) held that impugned payment was not made for acquiring any copyright but copyrighted material and payment was for purchase of goods and not towards Royalty. Hence, the assessee was not having any liability to deduct tax u/s195 of the Act. Accordingly, ld CIT(A) deleted the addition correctly. - Decided against revenue.

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• 2021 (5) TMI 657
  Rejection of books of account - estimation of profit - AO, before estimating the profits @ 10% on the total turnover, observed that as per the provisions of Sec. 44AD, the profit and gains of eligible business have to be computed at 8% of total turnover or gross receipts, where the. total turnover or gross receipts in the previous year does not exceed Rs. 1 Cr. - HELD THAT:- In the instant case, since the turnover of the business was R$,13.91 Cr., the provisions of Sec.44AD cannot be applied. The assessee has shown a meager profit of 4.52% on a total turnover of Rs. 13.91Cr. Since the Act has envisaged a profit of 8% for small businesses, considering the facts and circumstances of the case and since the books of account have been rejected for the reasons discussed above, a profit @ 10% on total turnover is felt to be reasonable. The CIT(A) upheld the action of the AO. The assessee has earned more Gross Profit i.e. 56% as evident from the order of the CIT (A) at para No. 04. It was the primary duty of the assessee to produce the bills/vouchers as and when required for verification in support of the claim of expenses debited into the P L A/c during the course of assessment proceedings, but, the assessee has failed to do so. After considering the totality of the facts of the case and statements recorded of Sri A. Srinagaveer, we do not find any reason to interfere with the orders of revenue authorities and, therefore, approve the 10% estimation on total turnover of the assessee. According, this grounds raised on this issue are dismissed. Enhancement of the income of the assessee by CIT u/s 251(2) - HELD THAT:- CIT(A) rejecting the submissions of the assessee, enhanced the income of the assessee by using powers u/s 251(2) of the Act. As contended by the ld. AR of the assessee that once the books of account are rejected, it is trite law that no further additions can be made from the same books of account. We find substance in the submissions of the ld. AR and case law relied on by him. Therefore, we set aside the decision of the CIT(A) in enhancing the income of the assessee and uphold the order of the AO in estimating the income of the assessee @ 10% on the total turnover. CIT(A) has treated it as other income. The CIT(A) has co- terminus powers but once a pragmatic view has been formed by the AO, it should be changed as per the case law cited supra. Further, on perusal of the details of other income shown in the financial statement, this income is related to the primary business activity of the assessee. Accordingly, this ground of the assessee is allowed. Deduction u/s 80IB (11A) - assessee strongly submitted that the business of the assessee is eligible for deduction u/s 80IB(11A) because assessee is engaged in the business of corn processing packaging - HELD THAT:- The assessee is entitled for claim of deduction u/s 80IB(11A) on the profit estimated by the AO @ 10% on the revenue from operations as per Note No. O of the financial statements. Hence, we set aside the order of the CIT(A) in this regard and direct the AO to allow the assessee s claim of deduction u/s 80IB(11A). In the result, the ground raised by the assessee on this issue is allowed. The items mentioned in the table extracted by the CIT(A) in his order are not covered part of the turnover of the assessee. In this regard, the assessee has shown separately under two heads, one is from revenue from operations and from other income. The other income shown by the assessee are arising during the course of principal business activity of the assessee. Therefore, profit derived under these heads is also forms part of the main business of the assessee and therefore, the entire profit enhanced by the CIT(A) is not justified. In this regard, the AO has rejected the books of account of the assessee and applied 10% of the net profit on entire receipts of the assessee. In the result, the appeal of the assessee is allowed. We make it clear that the assessee will not get benefit of deduction u/s 80IB(11A) on the profits estimated @ 10% on the other income vide Note No. P of the financial statements.

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• 2021 (5) TMI 656
  Validity of assessment order - jurisdiction of Assessing Officer to pass the assessment order - contention of the assessee is that before changing jurisdiction of the Assessing Officer under section 127 of the Act, the same was not communicated to the assessee - HELD THAT:- As the transfer of jurisdiction of the assessing officer was either covered by the provisions of sub-section (1) or subsection (2) of section 127 of the Act. Thus, the said decisions does not provide any support to the contents of the assessee, being factually at variance. In the case of Advantage Strategic Consulting (P) Ltd [ 2017 (12) TMI 412 - MADRAS HIGH COURT] after considering various decisions (including the decisions relied by the assessee herein) held that where the jurisdiction of Assessing Officer is transferred within the same city, the assessee cannot pled for opportunity to be granted before an order of transfer, as there is no such statutory requirement under the Act, rather, the said procedure has been specifically excluded. Also the Co-ordinate Bench of Tribunal in assessee s own case in assessment years 2005-06, 2006-07 and 2008-09 (supra) has dismissed identical ground raised by the assessee challenging jurisdiction of Assessing Officer on same set of facts. We find no infirmity in the impugned order. The ground No.1 of appeal is without any merit, hence, the same is dismissed. Estimation of income - Bogus purchases - assessee is a trader in ferrous and non-ferrous metals - HELD THAT:- Undisputedly, during assessment proceedings, the Assessing Officer accepted the sales declared by the assessee. Without purchases there cannot be sales. The Hon ble Bombay High Court in the case PCIT vs. Paramshakhti Distributors Pvt. Ltd [ 2019 (7) TMI 838 - BOMBAY HIGH COURT] has held that it is only the profit embedded in such transactions that has to be disallowed. The entire alleged bogus purchases cannot be added. The G.P. in trading of ferrous and non-ferrous metals generally range between 5% to 8%. CIT(A) has estimated G.P. on bogus purchases at 12.5%. The estimation of G.P. by the CIT(A) in our considered opinion is on higher side. To meet the ends of justice, we restrict G.P. on bogus purchases to 6%. The findings of CIT(A) on this issue are modified to that extent. Disallowance u/s 14A - HELD THAT:- It is no more res-integra that disallowance under section 14A cannot exceed the exempt income earned. Therefore, we direct the Assessing Officer to restrict the disallowance under section 14A to the extent, exempt income earned by the assessee during the period relevant to assessment year 2011-12. Addition on account of deemed rent - HELD THAT:- We find that the issue of deemed rent is recurring. Similar addition was made by the Assessing Officer in AY 2008-09 and 2009-10 on same set of facts. After being unsuccessful before the CIT(A), the assessee carried the issue in appeal before the Tribunal. It would be relevant to mention here that the issue was agitated by the assessee in appeal for AY 2008-09 and 2009-10 before the Tribunal in proceeding arising from assessment made under section 143(3) of the Act. We have considered rival contentions and found that AO CIT(A) has recorded detailed finding to support ALV of house and shops so arrived at. Nothing was placed before us by learned AR to controvert the findings of lower authorities. Accordingly we do not find any reason to deviate from the findings recorded by lower authorities Since, no change in facts in the impugned assessment year has been brought before us, we find no reason to take a different view. Thus, the ground No.3 of the appeal is dismissed sans-merit.

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• 2021 (5) TMI 655
  Addition for sale of sarki khalli - as alleged assessee has not having any such stock - HELD THAT:- We on perusal of the records find that assessee purchased sarki khalli from Vishnu Oil Industries vide Bill No.26 dated 27.2.2010. Goods were received 10 days prior from 17.2.2010 by Poonam Road Lines. So the assessee had stock of sarki khalli as on 17.2.2010 but since the bill was entered on 27.2.2010 there was a negative stock appearing in the quantitative details. The negative stock appeared since the Accountant entered the stock on 28.2.2010. Has it been made on 27.2.2010 there would have been no negative stock. This fact is discernable from the paper book. Thus in our considered view this is not a discrepancy and no addition was called for on account of sales without stock in hand. Addition on account of quantity loss of soyabean oil - HELD THAT:- As we find that in the quantitative details the assessee has claimed loss of 26.85 quintal. Ld. A.O made addition for Rs. 1,20,825/- for the alleged loss of 26.85 quintal for the reason that the assessee had not given necessary reply. However on perusal of the Audit Report we find that this loss was very well reported in the Tax Audit Report which is placed at page-23 of the paper book at Annexure- III to the Audit Report. The details shows that the assessee had opening stock of soyabean oil at 796.8 quintal and purchase during the year is 49946.96 quintal and sale during the year is 49139.25 quintal. The loss of soyabean oil is merely 0.05% of the total soyabean oil sold during the year which is in consonance with the business activity consistently carried out by the assessee. In these given facts no addition was called for the quantity loss in soyabean oil . Thus Ground No.1,2 3 of the assessee s appeal are allowed. Addition for estimated Gross Profit by rejecting the book results - HELD THAT:- Since the additions made by the Ld. A.O for the alleged discrepancies noticed in the books of accounts have already been deleted by us there remains no basis for the Ld. A.O of rejecting the book results since there is no plausible reason left to reject the book results. Whatever discrepancies were noticed have already been dealt by us and the addition so made have been deleted and in the given facts and circumstances of the case where the assessee has maintained regular books of accounts with quantitative details, the action of rejecting the book results u/s 145(2) of the Act is held to be incorrect and thus no addition for estimated Gross Profit is called for. Thus Ground No.4,5,6 7of the assessee s appeal are allowed. Addition for household expenses - AO has estimated the household expenditure at Rs. 70,000/- per month totaling to Rs. 8,40,000/- for the family of the assessee consisting of 9 major members and 3 grand children - HELD THAT:- Looking to the facts and circumstances of the case and being fair to both the parties and in absence of complete household expenditure details which have not been filed by the assessee, are of the considered view that the household expenditure of Rs. 40,000/- per month totaling to Rs. 4,80,000/- would be sufficient to cover up the household expenses incurred by the assessee. As the assessee has shown household expenses of Rs. 2,21,000/- (which includes Rs. 72,000/- withdrawal shown by the assessee and the remaining by other family members) the shortfall would be Rs. 2,59,000/- which is directed to be added to the income of the assessee. Thus Ground No.8 is partly allowed and addition for household expenses is sustained at Rs. 2,59,000/-

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• 2021 (5) TMI 654
  Addition made u/s 68 - creditworthiness of loan creditors - HELD THAT:- Assessee failed to convince both the lower authorities with regard to the genuineness and creditworthiness of the creditors. Before us also it was submitted that the above stated amount of Rs. 2,85,000/- was received from Shri Arun Kumar Tiwari. Loan confirmation letter and bank statement have been filed. In the bank statement of Shri Arun Kumar Tiwari equal amount of cash was deposited a day before the issue of cheque to the assessee. No evidence to show the source of cash available with Shri Arun Kumar Tiwari and his financial strength has been filed. Submissions made by the Counsel for the assessee before us are not sufficient to explain the genuineness and creditworthiness of the transaction. We thus are of the considered view that assessee has miserably failed to succeed in the test laid down in the provisions of Section 68 of the Act and thus could not explain the source of credit of cheque of Rs. 1,65,000/- and creditworthiness and genuineness of amount received from Shri Arun Kumar Tiwari. We thus find no reason to interfere in the finding of Ld. CIT(A) and thus confirm the addition. Addition u/s 69A - unaccounted business receipt - no evidence of nexus between the cash withdrawals and redeposit in the bank account - HELD THAT:- We find that except certain withdrawals and deposits in round figures no other entries of day to day cash income/expenditure are appearing. It is not clear that the cash flow statement is only for the individual cash transactions or all the transactions carried out by the assessee during the year. Assessee has also failed to explain various entries appearing in the bank statement specially with regard to the amount withdrawn by Shri Surendra Saha and Shri Mukesh Sahu during the financial year 2009-10 which has been claimed as source of cash as opening balance We find that since the beginning of the assessment proceedings till now the explanation and submission made by the assessee lacks clarity and it is hard to reach a conclusion about the source of cash deposited. However we find that various submissions were filed by the assessee to explain the source but revenue authorities could not go deeper to bring the truth on record. Further Ld. A.O as well as Ld. CIT(A) have observed that it cannot not be denied that the alleged amount is an unaccounted business receipts. In our considered view and in the given facts and circumstances of the case and being fair to both the parties, we treat the alleged cash deposit as unaccounted business receipt and apply net profit rate of 8% on this amount and the same is added to the income of the assessee in place of Rs. 35,00,000/- for unexplained cash deposit. We thus delete the addition of Rs. 32,20,000/- and confirm the addition of Rs. 2,80,000/- and partly allow ground No. 3, 4 6 raised on merits.

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• 2021 (5) TMI 653
  Deemed dividend addition u/s 2(22)(e) - Assessee argued that the assessee company is neither a registered nor a beneficial owner of shares of the lender companies - whether the case of the assessee falls under any of the 3 limbs provided u/s 2(22)(e)? - HELD THAT:- As the assessee case falls under the second limb of Section 2(22)(e) of the Act as there is a common shareholders amongst all the four companies having substantial interest and voting power of more than 10%. In the three lender companies Shri Punyapal Surana is having share holding at 23.36%, 39.87% and 36.90% as mentioned in Para 7 of this order. The concern referred in Second limb of Section 2(22)(e) of the Act, in this case is the assessee company where Shri Punyapal Surana is having share holding of 23.36% . Since all the conditions necessary for treating the deemed dividend of the amount received in the hands of concern (which in this case is the assessee) from other companies (three lender companies) stands fulfilled, in our considered view Ld. A.O has rightly invoked the provisions of Section 2(22)(e) of the Act and made addition for deemed dividend. However the addition for deemed dividend should have been made at Rs. 2,19,74,818/- as against the addition of Rs. 2,20, 87,842/- made by the Ld. A.O as the addition for deemed dividend cannot exceed the accumulated profits of the lender company as appearing in the books before giving such loan and advance. We thus set aside the finding of Ld. CIT(A), confirm the addition u/s 2(22)(e) of the Act at Rs. 2,19,74,818/- and partly allow Revenue s Appeal Ground No.1.

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• 2021 (5) TMI 652
  Deemed dividend made u/s 2(22)(e) - transaction entered between the two concerns - HELD THAT:- Source and application of funds clearly spells out that the alleged sum received during instant year(s) under appeal were not for the benefit of the assessee share holder Mr. Sanjay Patidar. The alleged transactions are purely entered between the two concerns in the ordinary course of business as advance or loan for which interest was also paid by MLFS to VSPL for Assessment Year 2016-17. Thus the alleged transaction clearly falls in the exclusion (ii) to section 2(22)(e) of the Act and thus both the lower authorities have erred in treating the alleged sum as deemed dividend in the hands of the assessee for Assessment Years 2015-16 and 2016-17 respectively and therefore addition made is uncalled for. - Decided in favour of assessee. House Rent Allowance exemption u/s 10(13A) - HELD THAT:- Assessee is not entitled to exemption u/s 10(13A) of the Act if the residential accommodation occupied by the assessee is owned by him or the assessee has not actually incurred the expenditure for payment of rent. In the instant case no evidence has been brought on record to show that the assessee had paid House Rent during the year. Under the given facts and circumstances of the case, we find no reason to interfere in the finding of Ld. CIT(A) and confirm the finding of Ld. A.O. Thus Ground No.6 of appeal of the assessee is dismissed.

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• 2021 (5) TMI 651
  Addition based on survey proceeding - Unexplained stock of gold and silver jewellery - undisclosed cash found during the survey - unexplained expenditure - survey action was conducted at the business premises of the assessee firm - whether the statement given during the course of survey u/s. 133A of the Act is a statement on oath having any evidential value ? - HELD THAT:- The statement given during the course of survey is not a statement on oath as given u/s. 132(4) of the Act and therefore has no evidentiary value. Reliance should be placed upon the evidence/materials gathered during the course of survey operations while framing the assessment orders. Therefore this finding of Ld. CIT(A) that the assessee was required to honour income surrendered during the course of survey and offer it to tax finds no merit. See S. KHADAR KHAN SONS [ 2007 (7) TMI 182 - MADRAS HIGH COURT] Excess gold jewellery - Complete details of purchase of gold jewellery of 6388.66 grams is available. Complete quantitative details with invoice number and party name are available. Similarly for the sales 6962.74 grams details of sales have been filed. Since the assessee is registered under the Value Added Tax all these details of sales are filed before VAT authorities and the invoice up to the date of survey were examined by the survey team. Thus going through the above details of trading account for the period 01.04.2015 to 15.12.2015, we find that the quantity details filed by the assessee with regard to the opening stock purchase sales and closing stock are correct and are duly supported by material evidence and thus should be accepted in place of the oral statement given by the partner during the course of survey. Therefore the excess stock of gold jewellery at the time of survey was only at 108.732 grams and not the alleged figure of 5770.960 grams. Therefore no addition for excess gold jewellery was called for. Excess silver jewellery - As details of purchase and sales has not been confronted by the revenue authorities at any stage. Sales are subject to VAT, Invoices have been issued which were verified during survey and assessment proceedings. Under these facts in our considered view the Evidence needs to be given preference to the oral statement given by the partner of the firm. Therefore silver jewellery as per the books has rightly been computed at 207.585 gram and therefore the excess stock of silver jewellery is only 28.91 kg (Physical stock 236.500 kg less books stock 207.585 kg). Since the value of excess stock of silver jewellery has already been offered to tax in the return of income filed u/s. 139 of the Act no addition was called for unexplained silver jewellery at Rs. 20,46,965/- by the Ld. A.O. and the same is deleted. In the result addition for excess gold jewellery and silver jewellery Excess cash - On perusal of paper book relating to the inventory of cash found at the assessee s business premises the document shows that total cash found at the time of survey was Rs. 4,58,610/- only. This inventory of cash found is signed by the Officer present during the course of survey. Thus it remains undisputed that physical cash found at the time of survey was at Rs. 4,58,610/- only and the cash as per the books has also at Rs. 4,58,610/-. Ld. Departmental Representative could not controvert this fact by placing any contrary material. Since there is no excess cash as on the date of survey we hereby delete the addition made of excess cash of Rs. 3,75,510/- made by the Ld. A.O. Thus Ground No. 3 of the assessee s appeal is allowed. Unexplained expenditure - HELD THAT:- We observe that unexplained expenditure was part of the surrender made during the course of survey. Admittedly no incriminating material was found with regard to any unaccounted expenditure nor the Ld. A.O. has referred any such incriminating material in the assessment order. Ld. CIT(A) has also not referred to any such material found during the course of survey showing any proof of unaccounted expenditure not accounted for in the books. Under these given facts it is blatant that the alleged addition of Rs. 1,00,145/- for unexplained expenditure u/s. 69C is based merely on the statement made during the course of survey which has no evidentiary value and thus this addition could not stand for and the same is deleted. Thus Ground No. 4 of the assessee is allowed.

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• 2021 (5) TMI 650
  Revision u/s 263 - genuineness of LTCG - Whether assessment is both erroneous as well as prejudicial in interest of the Revenue simultaneously? - HELD THAT:- Assessing Officer had issued sec. 133(6) letter/notice to the M/s. SHCL during the course of scrutiny which stood adequately replied in assessee s favour. Coupled with this, all the relevant factual details in support of the assessee s share purchase document, contract notes, bank statement, already in the case records. Coupled with this, Learned CIT-DR fails to rebut the clinching fact that although the PCIT s detailed discussion extracted in the preceding paragraphs has sought to make out a case of artificial price rigging between the assessee, promoters entry operators of the entity in light of Ministry of Finance s letter dated 24.07.2015 figures, there is not even an iota of material quoted against the assessee to have been engaged in all the foregoing artificial price rigging. We are observing in view of all these facts that the Assessing Officer had rightly accepted the assessee s LTCG keeping in making the overwhelming evidence forming part of records. As in case GITESH TIKMANI, GIRISH TIKMANI [ 2019 (9) TMI 1177 - ITAT KOLKATA] , CIT vs. Ratan ITA No. 105/2016, M/s. Classic Growers Ltd. [ 2013 (2) TMI 825 - CALCUTTA HIGH COURT] , CIT vs. Lakshmangarh Estate Trading Co. Ltd. [ 2013 (10) TMI 1037 - CALCUTTA HIGH COURT] , CIT vs. Bhagwati Prasad Agarwal [ 2009 (4) TMI 138 - CALCUTTA HIGH COURT] have accepted genuineness of similar LTCG. Since the issue is covered by all the foregoing decisions of hon ble jurisdictional high court, we observe that the Assessing Officer had rightly treated the assessee s foregoing LTCG derived from sale of shares to be genuine. Thus we hold that PCIT s exercise of revision jurisdiction merely on suspicious circumstances by invoking in sec. 263 Explanation (supra) with effect from 01.06.2015 is not sustaining. We therefore reverse the PCIT s order under challenge and restore the impugned assessment framed by the Assessing Officer - Decided in favour of assessee.

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• Customs

• 2021 (5) TMI 642
  Condonation of delay in filing claims for fixation of brand rate - precluded from sanction of duty drawback on exports effected in four quarters between July 2017 and June 2018 - competent authority deprived the exporter of opportunity to rebut the grounds of refusal by not placing them on notice - HELD THAT:- Doubtlessly, several amendments were brought about in the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 vide notification no. 49/2010-Cus(NT) dated 17th June 2010 for liberalizing the procedure for fixation of brand rates in sanctioning drawback on exported goods. Particularly, the Commissioner of Customs approached the disposal of applications of the appellant with rigidity that is not in consonance with intent of reimbursement mechanism enshrined in the statute and is, effectively, a binding obligation upon the designated instrument of the State - Furthermore, the competent authority deprived the exporter of opportunity to rebut the grounds of refusal by not placing them on notice of such intent. The generality of the reasons adduced reflect failure to consider each of the claims for identification of the impediment that the elapse of time yoked the ascertainment of entitlement with. There is no justification for refusal to condone the delay in each application which must be returned for reconsideration of the claims from inception. The revised provisions provide for compartmentalization of authority to condone; the Commissioner of Customs is enabled to intervene only beyond the competence vested in the Assistant/Deputy Commissioner with corresponding fees prescribed in the said Rules - Appeal disposed off.

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• Law of Competition

• 2021 (5) TMI 648
  Approval of scheme of Arrangement - section 230-232 of Companies Act - HELD THAT:- From a perusal of the material brought on record, it appears that the Scheme of Arrangement is fair, reasonable and is not detrimental to the Members or Creditors or contrary to public policy. Further, as per the Petition, the Scheme in question will enable the Applicants to demerge the Export Division and Packaging Products Division into the Resulting Company. Such segregation will provide for separate, dedicated management of the Public Guidance System Division, which will lead to a more focused approached and will provide greater flexibility to the respective entities, to meet the needs for carrying out its operations, which would be in the best interests of the Demerged Company, its shareholders, creditors and all persons connected with the Resulting Company, etc. The procedure specified in sub-sections (1) and (2) of section 232 of the Companies Act, 2013 has been complied with, and hence the Scheme of Arrangement, as approved by the Boards of Demerged Company and the Resulting Company, is hereby sanctioned - Application allowed.

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• Corporate Laws

• 2021 (5) TMI 645
  Delay in causing paper publication the Applicant - Section 66 of Companies Act, 2013 - HELD THAT:- The delay of 128 days in causing paper publication is due to the reason that the mother of the Authorized Representative was diagnosed with Stage 4 cancer during the month of October 2019 and she died on 25.11.2019 and since the last rites was performed during the month of December 2019, the Authorized Representative has resumed office only with effect from 26.12.2019 and hence there was a delay in causing paper publication. The delay as stated by the Learned Authorized Representative for the Application seems to be plausible and reasonable and hence we hereby the delay of 128 days in causing paper publication is condoned. Reduction of share capital - section 66 of the Companies Act, 2013 - HELD THAT:- It is seen from the Application and the annexures filed therewith, the shareholders of the Applicant Company have approved the scheme of Reduction of Capital in the Extra ordinary General Meeting held on 01.03.2019 by way of Special Resolution, passed at this meeting - this Tribunal is of the view that it is just and proper to confirm the reduction of paid up share capital of the Applicant Company as resolved by the members of the Company by passing a special resolution and by way of the consents in the form of affidavit. While approving the Reduction of share capital, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law - Application disposed off.

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• 2021 (5) TMI 640
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The loan amount was duly disbursed to the Corporate Debtor and the documents of mortgage/guarantee/hypothecation were duly executed by the Corporate Debtor through their authorized representative. The requisites of an application under section 7 of IBC are available on record and duly proved. The date of default the account of the Corporate Debtor having been declared as NPA on 29th July 2017 is also proved, which is the date of default as per Annexure E at page 61 of the petition. A submission was made on the date of hearing (22.02.2021), that time be granted for filing a detailed reply. The IBC does not envisage two stages of reply. An opportunity was afforded to the Corporate Debtor to file a reply, and it has done so. This is a petition pertaining to the year 2019 and it cannot be kept pending. It a fit case for admitting the petition, and for initiation of Corporate Insolvency Resolution Process in respect of the Corporate Debtor - petition admitted - moratorium declared.

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• Insolvency & Bankruptcy

• 2021 (5) TMI 666
  Liquidation of Corporate Debtor - real grievance of the Appellant is that the Adjudicating Authority had failed to consider the efforts at resolving the debt of the Corporate Debtor in the teeth of the Insolvency and Bankruptcy Code, which provides for Liquidation in the event of failure of CIRP or non-receipt of any Resolution Plan within the specified period - HELD THAT:- The claim of the Resolution Applicant was rejected by 76.02% of voting share by the Financial Creditors , in the 23rd Committee of Creditors meeting that took place on 30.11.2020, of course, after taking into account of the feasibility and viability, etc., as mentioned in CIRP Regulations. Moreover, e-voting was held from 05.12.2020 to 07.12.2020. This Tribunal keeping in mind of a primordial fact that the decision of the Committee of Creditors takes a pivotal seat based on Commercial Wisdom , taking note of the fact that the Committee of Creditors Members with 76.02% voting share had voted against the Resolution Plan and in the teeth of ingredients of 33(2) of the Insolvency and Bankruptcy Code, 2016, comes to a irresistible conclusion that the impugned order of Liquidation in respect of the Corporate Debtor passed by the Adjudicating Authority is free from legal infirmities - Appeal dismissed.

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• 2021 (5) TMI 649
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The present proceedings relate to a petition filed under the IBC 2016 and, therefore, the findings shall be within and for the purpose of the Code only. All issues and disputes that can be agitated in other forums can be dealt with separately, for which there are sufficient clauses in the various agreements entered into between the parties. The debt claimed by the Petitioner, as arising from the refundable security deposit does not constitute an operational debt u/s. 5(21) of the Code. If the debt is arising from the nonpayment of installments or parting of assets as per the terms of a settlement, as incorporated in various agreements, the same will also not constitute operational debt as the same is not resulting from any operational activity. Also, a petition which is filed for breach of any settlement agreement treats this Tribunal as a recovery forum, which is not permissible. The Petitioner Aayas cannot be termed as the Operational Creditor, when the main creditor is Elbit India, later joined by Koyenco, in view of the peculiar circumstances narrated above, nor can Respondent MDPL be termed as the Operational debtor by itself, leaving out Minerva which acquires a significant role in development and after 22.07.2010 and for investment in the second stage. Lastly, without taking recourse to the detailed inbuilt dispute resolution mechanism and agitating the above complex matters straightaway before this Tribunal and under the Code, makes the Petition clearly premature. Petition dismissed as being premature and not maintainable.

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• 2021 (5) TMI 647
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Lease agreement - Arbitration Clause in the agreement - ex-parte award - whether the Petition is maintainable for execution of Award in question? - HELD THAT:- The basic facts with reference to leasing of premises, default arise out of Lease Agreement, not paying awarded amount, etc. are prima facie are not in dispute. The Award was passed out of rental dispute, and in the normal circumstances, such disputes have to be settled by approaching Rent controller Courts/Authorities constituted for said purpose. However, they have invoked Arbitration Clause available in their Agreement and got ex parte Award in question. Aggrieved by the said Award, the Respondent is stated to have filed an Appeal, which is stated to be pending before the Hon ble Delhi High Court. Both the Learned Counsels relying on the same judgement in support of their case, viz., K. KISHAN VERSUS M/S VIJAY NIRMAN COMPANY PVT. LTD. [ 2018 (9) TMI 1533 - SUPREME COURT] . By reading of this judgement, what we understand is that operational dispute in question cannot be called un-disputed as long as Arbitration Award is under challenged U/s 34 of Arbitration and Conciliation Act, 1996. Wherein it is inter alia held that the object of Code, in so far as Operational Creditors are concerned, to put the insolvency process against Corporate Debtor only in clear cases where a real dispute between the parties to debt owed does not exist.. Further filing of S. 34 of Act against an arbitral award shows that a pre-existing dispute which culminates at the first stage of proceedings in an award, continues even after the award at least till the final adjudicatory process U/s 34 37 of Act has taken place. Therefore, the operational debt in question deemed to be a dispute, as the Respondent stated to have filed Appeal against the Award in question. Filing of the instant Petition is filed on misconception of fact and law, and it is solely filed for recovery of amount awarded in Arbitration - Petition dismissed.

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• 2021 (5) TMI 646
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Though the dispute may not be pre-existing, in this case the liability is denied as no services are established to have been provided by the Petitioner for the period September 2018 to February 2019 for which the payments are demanded. From the submissions made by the Corporate Debtor, it is seen that it is a critical supplier to the Defence sector and Indian Space Programme, and is involved with several projects of strategic importance, and is the only private company in India having a licence from the Government of India for undertaking Missile Refurbishment and upgradation. It also exports sophisticated micro-electronic products to various countries. It has a Paid up Capital of Rs. 49.99 crores and revenues of Rs. 11.48 crores for the FY ending 31.03.2020 and has about 65 employees in the Company - it is not the intent behind the IBC to destabilise and subject to the rigours of CIRP, profit making viable going concerns engaged in tasks of national importance and push them into liquidation. It is therefore clear that the Petitioner seeks to use this Tribunal as a mere recovery forum, which is not acceptable, being against the spirit of the Code. It is a settled position of law that the provisions of Code cannot be invoked for recovery of outstanding amount but they can be invoked to initiate CIRP for justified reasons as per the Code. It is clear that a debt which has been denied, is not backed by any evidence, and the Petition is filed for the purpose of recovery against a solvent going concern contributing immensely to the country s economy the Petition deserves to be dismissed. It is certainly not a case where the Corporate Debtor is unable to repay its debts on account of its inability to pay that requires a resolution - Petition dismissed.

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• 2021 (5) TMI 644
  Application for withdrawal of CIRP initiated against Corporate Debtor - HELD THAT:- The Application as filed by the Applicant/IRP as well as the sole Operational Creditor who had constituted the CoC had given its approval seeking withdrawal of the CIRP initiated by this Tribunal, based on the Application filed by the Operational Creditor/1st Respondent in Form FA and also considering the Provisions of Section 12(A) and Regulations 30(A) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 as well this Application in relation to seeking for withdrawal of the CIRP is allowed. Let the reins of the Corporate Debtor with the IRP be handed over to the Board of Directors, whose powers stood suspended by virtue of initiation of the CIRP as against the Corporate Debtor.

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• 2021 (5) TMI 643
  Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - HELD THAT:- When the Respondent failed to clear outstanding dues for the service rendered by the Petitioner, it has terminated the Service Agreement in question, vide Notices dated 20.11.2019 and 20.12.2019 by demanding to pay outstanding amounts. When efforts made by the Petitioner could not succeed, the Petitioner got issued a Demand Notice dated 27.01.2020 to the Corporate Debtor in Form 3, through their Counsel, which was duly served on the Corporate Debtor on 30.01.2020. Despite receiving the Demand Notice, the Corporate Debtor has neither intimated the existence of any dispute within a period of ten (10) days from the date of receipt of notice (30.01.2020), nor made any payment to the Operational Creditor towards the same. Therefore, the debt and default in question are deemed to be admitted, and thus the Respondent committed default of debt. The Petitioner has substantiated the debt and debt in question by enclosing all relevant documents. Since the learned counsel for the Respondent conveyed the willingness of Respondent to settle the claim in question, we are inclined to give one more chance to settle the claim before initiating CIRP as prayed for. Therefore, it would be just and proper to grant time to the Respondent to settle the claim by disposing of the Petition, instead of keeping the case pending for settlement, which is not contemplated under the provisions of Code. Petition disposed off.

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• 2021 (5) TMI 641
  Liquidation of the Corporate Debtor - resolution plan submitted by the sole resolution applicant Select Products Private Limited was not approved through a vote exceeding 66% - Section 33 of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- Section 33(2) of the Code enjoins the Adjudicating Authority to pass an order for liquidation of the Corporate Debtor where the resolution professional, at any time during the CIRP but before confirmation of the resolution plan, intimates the Adjudicating authority of the decision of the CoC approved by not less than sixty-six percent of the voting share, to liquidate the Corporate Debtor. In the present case, the CoC has resolved by 99.99% voting share to liquidate the Corporate Debtor. The Corporate Debtor is ordered to be liquidated in terms of section 33(2) of the Code read with Sub-section (1) thereof - Application allowed.

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• Central Excise

• 2021 (5) TMI 675
  Seeking for special rate fixation on the ground of delay - HELD THAT:- The issue raised in this writ petition requires further hearing and accordingly let notice be issued. Mr. Keyal accepts notices on behalf of respondent Nos. 1 to 4. Mr. SS Roy accepts notice on behalf of respondent No. 1. Necessary extra copies be served on the learned counsel. The petitioner shall take steps on the rest of the respondents within a period of one week from today by way of registered post with A/D. Notices are made returnable after four weeks.

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• 2021 (5) TMI 671
  Principles of Natural Justice - non-speaking order - non-payment of demand - HELD THAT:- This Court is of the considered opinion that impugned demand notice reveals that the amount claimed pertains to the year 1997. However, the notice was issued in July 2004, after a lapse of about 7 years. Further, the order impugned is non-speaking and the details regarding the enquiry as well as the findings are not made available in the impugned order. Thus, the reason for arriving such a conclusion has not been elaborated in the impugned order. Such non-speaking orders, which was passed after considering the reply submitted by the petitioner cannot be appreciated by this Court. This being the Principles of Natural Justice to be complied with by the competent authority, more specifically, the Statutory authorities, this Court is of an opinion that the impugned order, which is non-speaking, cannot be sustained in the eye of law - this Court is inclined to consider the writ petition - Petition allowed.

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• 2021 (5) TMI 669
  Refund of Excise Duty - Area based exemption - Northeast Industrial Policy - N/N. 20/2008-Central Excise dated 27.03.2008 - HELD THAT:- As the Notification dated 27.03.2008 provides for a legal right to the assessee to claim for a special rate to be fixed in the event of there being any add-ons to the goods manufactured, without an appropriate decision being taken on such claim for special rate, it would be inappropriate for the department to proceed against the petitioners as per the rates provided in the Notification dated 27.03.2008. This petition stands disposed of by directing the Principal Commissioner of GST Dibrugarh to consider the aforesaid application of the petitioner dated 04.09.2012 claiming for a special rate to be fixed on the basis of the add-ons made to the goods manufactured. After arriving at the special rate, if any as per the order to be passed by the Principal Commissioner, GST further process against the petitioner as per law may be initiated.

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• 2021 (5) TMI 665
  100% EOU - DTA sales limit - concessional duties of Central excise - Allegation is that goods cleared in DTA, in excess of the permitted 90% of the FOB value of the exports, in contravention of Para 6.8[a] of the Foreign Trade Policy and condition [2] of the notification number 23/2003-CE dated 31-03-2003 - appellants have based their submissions mainly contending that the items manufactured, exported and cleared in DTA by them are similar; the department has misread the provisions of Policy in finding that DTA sales limit of 90% would apply to each product separately, whereas the word used is products. HELD THAT:- The appellants have based their submissions mainly contending that the items manufactured, exported and cleared in DTA by them are similar; the department has misread the provisions of Policy in finding that DTA sales limit of 90% would apply to each product separately, whereas the word used is products. EOUs are given a facility to clear the goods in DTA, as a reward for the exports made by them subject to the fulfilment of positive NFE. It may so happen that EOU unit manufacturing more than one product may not be able to export all the products in the same proportion; the overseas market may not have demand for all the products manufactured by them. Understandably, EOU cannot be expected to throw away or destroy the product or sell in DTA at a higher rate of duty resulting in financial loss - as the EOU scheme is based on value of clearances, once export obligation is fulfilled, the manufacturer cannot be constrained to clear particular products in DTA in proportion to the export of the specific product - the goods cleared in DTA are to be held to be similar to those exported and that the 90% entitlement should be seen from the value of exported specific products and not a single product. Time Limitation - HELD THAT:- Development Commissioner has given permission or has been regularly intimated about the DTA clearances; similar intimations and returns have also been submitted to the jurisdiction Custom/CE authorities. The clearances in DTA were going on from 2009 onwards. CERA audit of the unit has taken place and note was issued on 21.05.2013 - As the appellants were regularly submitting intimations to the Development Commissioner and Jurisdictional Central Excise authorities, it is not open to the department to invoke the extended period of limitation. Revenue sought to enforce the conditions of B-17 Bond. However, the Bond is given in respect of imports or duty free DTA procurements by the appellants. It would no way cover the duty liability if any on the DTA clearances. It is not the case of the department that the demand is of duty of Customs or duty of excise foregone on the raw material imported/procured by the appellants. It can be seen that in the instant case, DTA clearances of Bearing Housing Machined were 280035% of the FOB value. Even then Tribunal held that the clearances are in order in view of the provisions of FTP. In the instant case during the period 2009-10 to 2013-14 (up to December 2013), exports of twisted yarn were Rs. 66, 68,303/- and DTA clearances were of value Rs. 470, 37, 94,080/- thus DTA clearances were 70,205% of the same - the issue doesn t pertain to interpretation of a Notification but interpretation of Provisions of the Policy. In the instant case there is no allegation that export obligation has not been fulfilled and positive NFE was not achieved. A close look at the scheme of the EOU, gives an understanding that the scheme places on reliance of the value of exports and not the quantities. Therefore, positive NFE being achieved, the appellants are within their rights to avail the facility of DTA clearance in terms of Para 6.8 of FTP. Appeal allowed.

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• CST, VAT & Sales Tax

• 2021 (5) TMI 668
  Input tax credit - sale or not - user of spare parts and lubricants during the course of undertaking repair works to the two wheeler vehicles by the petitioner in his service centre - HELD THAT:- Section 2(10) defines the term Dealer which means a person who carries on the business of buying, selling, supplying or distributing goods or delivering goods on hire purchase or on any system of payment by instalments, or carries on or executes any works contract involving supply or use of material directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration - In the instant case, since the petitioner is selling two wheeler vehicles, spare parts and lubricants and also undertakes the works contract of servicing and repair of the two wheeler vehicles, he comes within the definition of Dealer . The main thrust of the argument of the petitioner is that since the said transaction is an outright sale, 100% ITC has to be admitted. This argument of the petitioner cannot be appreciated for the reason that even if the user of spare parts and lubricants in the works contract amounts to sale, still the statute restricts the ITC to 75%. Petition dismissed.

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• Indian Laws

• 2021 (5) TMI 673
  Grant of Bail - drug trafficking - narcotic drugs - rebuttal of presumption - offence punishable under Section 8 read with Section 22 and Section 29 of the Narcotic Drugs Psychotropic Substances Act, 1985 - HELD THAT:- It is apparent that applicant-Dheeraj was arrested on 7.12.2020 along with 20 grams of MDMA narcotic drugs (the commercial quantity of which is more than 10 grams) when he was sitting in an XUV along with co-accused Sohan @ Jojo, who was driving the vehicle. It is also found that so far as applicant-Adnan Khan is concerned, his name is mentioned by applicant Dheeraj in his memo prepared under Section 27 of the Evidence Act, and so far as applicant Abdul Hannan Khan is concerned, his name is mentioned by the applicant Adnan Khan in his memo prepared under Section 27 of the Evidence Act. The case diary also reveals that there have been a number of bank transactions between applicant-Adnan Khan and applicant-Abdul Hannan Khan and that is not all, from the account of applicant- Hannan Khan certain amounts have also been credited in the account of the applicant-Dheeraj. Apart from that, there is equally bulky Whatsapp chatting record of the applicants which prima facie indicates their nexus with in committing the offence under the NDPS Act - considering the fact that due to the fresh spread of COVID-19, since the trial courts have also stopped working and it appears that the said situation would last longer than expected, this Court finds it expedient at present to allow the present bail application for a temporary period of six months. Accordingly, the application is allowed partially and the applicants are released on bail for a period of six months from the date of their release. The bail applications stand partially allowed.

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