TMI Tax Updates - e-Newsletter
May 27, 2024

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

GST

• Intent to evade tax: GST assessment u/s 73 ignoring GSTR-9 return - HC remands the case back for fresh decision.

  The Calcutta High Court considered the rejection of an adjudication order concerning the intent to evade tax and the existence of mens rea. The appellant filed an annual return in GSTR-9 for the financial year 2017-18, which was within the extended period due to Covid-19 notifications. The court held that ignoring the GSTR-9 could prejudice the assessee's rights. The matter was remanded to the adjudicating authority to consider the submissions, provide a personal hearing, examine the GSTR-9, and make a fresh decision in accordance with the law. The appeal was allowed by way of remand.
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• HC: GST registration cannot be cancelled retrospectively without proper justification & valid reasons.

  The Delhi High Court addressed the issue of the cancellation of GST registration of the petitioner with retrospective effect. The court found that the show cause notice (SCN) lacked specific reasons for rejection, violating principles of natural justice. The court noted that the SCN and the impugned order did not provide any details or reasons for the retrospective cancellation. The court referred to Section 29(2) of the Act, stating that registration cannot be cancelled with retrospective effect mechanically, but only if the proper officer deems it fit to do so. The court modified the impugned order, stating that the registration shall be treated as cancelled with effect from the date when the petitioner filed an application seeking cancellation. As the petitioner no longer sought to carry on business or maintain the registration, the petition was disposed of.
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• HC: Lack of communication violated natural justice in a tax case. Petitioner to be granted opportunity to respond.

  The Delhi High Court examined the validity of an order issued u/s 73 of the Central Goods and Services Tax Act, 2017, concerning lack of communication of notice to the petitioner, leading to a violation of principles of natural justice. The impugned order indicated that the taxpayer did not respond or appear in person, resulting in an ex-parte demand being created. The court noted that despite providing opportunities for a reply and a personal hearing, the taxpayer remained silent. The court held that the petitioner should be given a chance to respond to the Show Cause Notice, and the matter should be re-adjudicated. The petition was disposed of accordingly.
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• HC: Appeal barred by time limitation u/s 107 of CGST Act, but delay condoned due to medical reasons.

  The case involved the validity of an adjudication order u/s 73 of CGST Act, 2017/WBGST Act, 2017 with an appeal that was time-barred. The petitioner explained the delay due to medical reasons, supported by a medical certificate. The Appellate Authority did not question the certificate but dismissed the appeal, citing no provision to accept an appeal after the prescribed period. The High Court held that the medical reasons presented were valid, and the delay should have been condoned. The Court found the Authority's decision arbitrary and unjustifiable, thus setting aside the order and restoring the appeal. The writ petition was disposed of accordingly.
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• Appeal dismissed under GST Act due to limitation issue. HC clarifies authority can condone delay beyond one month.

  The Calcutta High Court addressed the issue of condonation of delay in filing an appeal under Section 107 of the West Bengal Goods and Services Tax Act, 2017. The appeal was found to be barred by limitation and lacked an application under Section 5 of the Limitation Act, 1963. The Court referred to a previous case to determine the scope of Section 107 and the applicability of Section 5 of the Limitation Act. It was concluded that the Appellate Authority retains the power to condone delay beyond the prescribed period of limitation under Section 107(4) of the Act. Another case was cited to emphasize that the statute does not prohibit the Appellate Authority from exercising jurisdiction beyond the prescribed limitation period. The Court set aside the Appellate Authority's observation that condonation of delay is only possible within one month from the prescribed period. Ultimately, no relief was granted to the petitioner, and the petition was disposed of accordingly.
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• Government empowered to extend time limit due to force majeure. COVID-19 considered force majeure. Petition allowed for fresh assessment order.

  The Kerala High Court addressed a case involving the denial of Input Tax Credit (ITC) and a challenge to an assessment order on the grounds of being time-barred. The court held that an order under u/s 73 must be issued within three years from the due date for annual returns, beyond which it becomes time-barred. The government, u/s 168A, can extend the time limit in special circumstances like force majeure, such as the COVID-19 pandemic. The court found the government's extension of the time limit valid and dismissed the challenge to the notifications. The court directed the Assessing Authority to pass a fresh assessment order in line with Circular No. 183/15/2022-GST, granting the petitioner the benefit of the circular. The petition was allowed through remand for further assessment.
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Income Tax

• Cost Inflation Index: CII for FY 2024-25 set at 363 u/s 48 of IT Act. Effective from April 1, 2025.

  The Ministry of Finance (CBDT), u/s 48 of the Income-tax Act, 1961, has notified a Cost Inflation Index (CII) of 363 for the Financial Year 2024-25, amending Notification No. 44/2017. This amendment, under clause (v) of the Explanation to section 48, inserts a new serial number and entries in the Table. The notification, effective from April 1, 2025, applies to the assessment year 2025-26 onwards.
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• Notification: Exemption from specified income u/s 10(46) for Tamil Nadu Water Supply and Drainage Board, Chennai.

  The Ministry of Finance (CBDT), u/s 10(46) of the Income-tax Act, 1961, has issued Notification No. 43/2024, granting exemption to the 'Tamil Nadu Water Supply and Drainage Board, Chennai' from specified income. The Board, constituted u/s the Tamil Nadu Water Supply and Drainage Board Act, 1970, is exempted from income including water charges, centage charges, project report preparation charges, and interest on bank deposits. The exemption is subject to conditions such as non-engagement in commercial activities, maintaining unchanged activities and income nature, and filing income tax returns as per u/s 139(4C). The notification is effective for assessment years 2024-2029, relevant to financial years 2023-2028.
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• Delhi HC directs bank to remove Restraint Order from locker after verifying Revocation Order as confirmed by IT Department.

  The Delhi High Court issued a Restraint Order on a locker, which the bank objected to due to lack of the official Revocation Order from the Income Tax Department. The Court noted that the Revocation Order dated 17th October, 2012 was served on the bank manager, confirming its authenticity. As the Restraint Order on the locker was revoked by the Income Tax Department, the petitioners are directed to be granted access to their locker. The bank must remove the Restraint Order and allow the petitioners to access their lawful assets.
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• Pr. CIT dismissed a petition u/s 264 without procedural fairness. High Court directs rehearing.

  The High Court considered a revision u/s 264 where the Principal Commissioner of Income Tax (Pr. CIT) dismissed the application without proper procedural fairness. The petitioner claimed no prior notice or opportunity to respond was given. The Court found the order lacked fairness as the petitioner's representation was not considered, and no reason was given for denying an adjournment. The order did not explain the basis for upholding the Assessing Officer's decision. The Court emphasized the importance of adhering to natural justice principles. The impugned order was set aside, and a rehearing was directed with the petitioner required to appear before the Pr. CIT on a specified date.
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• Sale of shares: ITAT Delhi held that addition u/s 68 for income from undisclosed sources was not justified.

  The ITAT Delhi, in an assessment u/s 153A, addressed the addition u/s 68 concerning income from undisclosed sources. The appellant, a partner in M/s. RNB Leasing and Financial Services, had filed a return for the assessment year. Following search and seizure operations, a key to an Indian Overseas Bank locker was found in the names of Lalita Bajaj and the appellant. Despite no incriminating evidence found during the search of the locker, the AO made additions u/s 68 in a similar case involving share allotment. However, in the present case, the appellant did not receive share application money or premium but was involved in the sale of investments/shares to other entities. The Department did not dispute the investment in shares during the earlier period. The ITAT allowed the appellant's grounds on merits, distinguishing the case from previous rulings.
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• Additions as unexplained liabilities: ITAT Delhi ruled liabilities as loans/advances, not creditors. Further investigations needed.

  The ITAT Delhi addressed the taxability of certain creditors as unexplained liabilities. It was found that liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd. should be classified as loans/advances, not creditors. The liabilities of these parties require further investigation. The issue was remitted back to the AO for reconsideration. For other creditors, where no details or confirmation were provided, the addition was upheld. Disallowance of commission expenses u/s 40(a)(ia) and taxability of cash deposits were also addressed, with the findings of the CIT(A) upheld due to lack of contradicting evidence. The appeal of the assessee was partly allowed.
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• ITAT Mumbai ruled on TDS u/s 194A, 194H, or 194J for interest retained by NBFCs. No tax deduction required.

  The case involves TDS issues u/s 194A, 194H, and 194J concerning surplus interest retained by NBFCs. The assessee, a bank, purchased loans from NBFCs with a tripartite agreement allowing NBFCs to retain part interest. The tribunal held that the retained interest does not qualify as "interest" u/s 194A as the assessee did not borrow funds from NBFCs. Similarly, no TDS is required u/s 194H as NBFCs did not act on behalf of the assessee. Regarding u/s 194J, the consideration for loan assignment includes upfront payment and lower interest, not subject to TDS. Tax u/s 201(1) and interest u/s 201(1A) are not applicable as NBFCs already paid tax on interest earned. Decision favors the assessee.
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• ITAT: Unexplained cash credit u/s 68 - Bank passbook cannot be regarded as a book of the assessee - No addition warranted

  The ITAT Raipur, an Appellate Tribunal, considered an appeal regarding unexplained cash credit u/s. 68. The assessee failed to explain the nature and source of cash deposits in a jointly held bank account. The AR argued that the cash came from withdrawals/savings, not requiring an addition. The Tribunal held that since the cash deposits did not appear in the assessee's "books of account," u/s. 68 did not apply. Citing a jurisdictional defect, the Tribunal vacated the addition, following precedent from CIT v. Bhaichand H. Gandhi. Decision favored the assessee.
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• HC: Reassessment proceedings u/s 147 OR u/s 153C/153A - basis for reopening assessment must be material from search.

  The Rajasthan High Court examined the validity of reassessment proceedings u/s 147/148/148A OR u/s 153C/153A based on material/information collected during a search from another/third party. The Court held that reassessment must be conducted u/s 153C r.w.s. 153A, not u/s 148A/148. The basis for reopening the assessment was material from a search on another assessee, not new incriminating material. The petitioner argued that the assessment should have been reopened u/s 153C within the limitation period, not u/s 148/148A. The Court ruled in favor of the assessee, stating that reassessment based on search material must follow u/s 153C, not u/s 148.
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• ITAT Pune held that disallowance u/s 143(1)(a)(iv) not valid as gratuity payment not in Audit Report. Assessee's appeal allowed.

  The ITAT Pune held that disallowance u/s 143(1)(a)(iv) can only be made for expenditures indicated in the Audit Report but not considered in income computation. The gratuity payment, not indicated for disallowance, falls outside this provision. The ADIT's disallowance u/s 143(1)(a)(iv) was deemed beyond jurisdiction, leading to the assessee's appeal being allowed.
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• ITAT Delhi ruled on additional income from excess stock not included in trading account. Gross profit estimation upheld.

  The ITAT Delhi held that the additional income surrendered due to excess stock should be treated as unexplained investment taxable u/s 69 of the Act, not as business income. The assessee's explanation of reduced gross profit due to heavy competition lacked supporting evidence. The surrendered income was not included in the trading account but offered as other income. The AO rightly rejected the books u/s 145(3) and calculated differential gross profit based on the previous year's margin. The varying profit margins and behavior of the assessee justified the addition of Rs. 1,08,51,505. The CIT(A) confirmed this decision, dismissing the assessee's grounds.
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• ITAT Delhi held that CIT(A) correctly applied sec 44AD to reduce unexplained cash deposits. Peak credit method used.

  The ITAT Delhi held that the CIT(A) erred in presuming all cash deposits as business receipts u/s 44AD. The CIT(A) treated deposits as business receipts and applied 8% net profit rate. The assessee argued for peak credits to be considered as income due to both deposits and withdrawals. The CIT DR sought to treat all cash deposits as undisclosed income without offsetting withdrawals, which was rejected. It was established that peak credit should be considered for undisclosed income when both credit and debit entries exist. The AO's addition of entire cash deposits without considering debit entries was deemed unjustified. The CIT DR failed to challenge the CIT(A)'s findings supported by the Investigation Wing's report on the assessee's business activity. The Revenue's grounds lacked merit and were dismissed.
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• ITAT Raipur upheld admin expenditure disallowance. Cessation of liability addition not justified. TCS credit declined due to purchase timing.

  The ITAT Raipur held that no disallowance of interest expenditure was warranted u/s 14A as the assessee had sufficient self-owned funds. Citing the Bombay High Court and Supreme Court judgments, it was established that if the assessee had non-interest bearing funds larger than investments in tax-free securities, no disallowance was required. However, disallowance of administrative expenditure u/s 14A r.w.r. 8D(2)(iii) was upheld due to lack of plausible explanation. Regarding addition u/s 41(1) for cessation of liability, the ITAT found no justification for the addition of Rs. 10,00,000 and directed the AO to re-adjudicate the matter with an opportunity for the assessee to substantiate the claim. The decline of credit of TCS for the purchase of coal was deemed appropriate as the transaction occurred in the succeeding year, and the credit should be claimed in the subsequent year's return. The AO was directed to allow the credit of TCS in the next assessment year.
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• ITAT Surat held that LTCG not unexplained cash credit. Share sale legit, no manipulation. Exemption u/s 10(38) allowed.

  The ITAT Surat (Appellate Tribunal) considered an appeal regarding the addition u/s 68 for alleged bogus LTCG and unexplained cash credit. The appellant's claim for exemption u/s 10(38) in relation to surplus earned on the sale of shares held for the long term was rejected. The Tribunal held that the assessee conducted the share sale through BSE, paid security transaction tax, and there were no allegations against the share broker for price manipulation. Consequently, there was no justification for treating the LTCG as unexplained cash credit without cogent evidence. The decision favored the assessee.
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• Telangana High Court held that delay in submitting Form 10B by petitioner, with exemption u/s 12A, is condoned.

  The Telangana High Court considered the rejection of an application u/s 119(2)(b) due to delay in submitting Form 10B along with the Auditor's report by a petitioner with exemption u/s 12A. The petitioner had a history of compliance and faced delays for the Assessment Years 2018-19 and 2020-21. The CBDT authorized Commissioners of Income Tax to entertain such applications for condonation of delay up to 365 days in a liberal manner with a reasonable explanation. The court found the impugned order lacking discussion on the explanation provided by the petitioner, emphasizing the need for authorities to consider and give a specific finding on the explanation's sufficiency. Consequently, the court set aside the order, condoned the delay, and remitted the matter for the 1st respondent to pass appropriate orders on merits.
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• ITAT upheld assessee's argument of no underreporting or misreporting of income in penalty proceedings u/s 270A.

  The case involved penalty proceedings u/s 270A for under-reporting or misreporting of income. The appellant argued that there was no underreporting as the transaction was reflected in Form No. 26AS. The tribunal noted that penalty under sub-section (8) is separate from sub-section (7) and can be imposed even without underreported income. Referring to Hindustan Steel Ltd. case, the tribunal emphasized not imposing penalty for technical breaches or if based on genuine belief. Misrepresentation includes false assertions. Since the appellant's case didn't fall under specific provisions of u/s 270A(2), the benefit of sub-section (6) wasn't available. Noteworthy facts included tax deduction at source by the purchaser and appellant's genuine belief of no tax liability due to TDS. The tribunal found no misrepresentation or suppression of facts as the reported sale consideration matched Form No. 26AS, and taxes were withheld.
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• ITAT Delhi: No TP adjustment for Specified Domestic Transactions u/s 92BA after its omission.

  The ITAT Delhi held that u/s 92BA, TP adjustment for Specified Domestic Transactions is not applicable post omission of Clause (i) w.e.f. 1.4.2017. Citing Texport overseas case, it was established that the omitted section is deemed to have never existed. The request for a Special Bench due to conflicting judgments was denied. Consequently, no TP adjustment can be made for domestic transactions post omission of Clause (i) of section 92BA. The impugned order was deemed illegal and set aside in favor of the assessee.
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• HC: Classification of company for taxation - Appellant not a domestic company. Tax rates apply as "company other than domestic company." No conflict with DTAA.

  The case before the Calcutta High Court involved the classification of a company for taxation purposes. The court determined that the appellant company did not qualify as a domestic company but fell under the category of "a company other than a domestic company." The court relied on the definitions provided in the Income Tax Act, 1961 to make this classification. The court also addressed the issue of taxation rates, highlighting the distinction between domestic and foreign companies. The court found that the appellant was liable to be taxed at the rate applicable to a company other than a domestic company. Additionally, the court analyzed the relationship between the domestic tax laws and the Double Taxation Avoidance Agreement (DTAA) with the Netherlands. It concluded that there was no conflict between the Explanation to Section 90 of the Income Tax Act, 1961 and Article 24(2) of the DTAA.
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Customs

• Notification: Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold, and Silver updated.

  The Ministry of Finance, Department of Revenue, through Notification No. 37/2024-CUSTOMS (N.T.), has amended tariff values for various goods u/s 14 of the Customs Act, 1962. The notification substitutes Tables 1, 2, and 3 with revised tariff values for goods such as edible oils, brass scrap, areca nut, gold, and silver. The notification, effective from 22nd May 2024, maintains existing tariff values for items like Crude Palm Oil, RBD Palm Oil, Crude Palmolein, and others. It also specifies tariff values for Gold and Silver in different forms. This amendment aligns with the government's customs regulations and aims to regulate import duties accordingly.
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• Customs Brokers Licensing Management System (CBLMS) launches new features for stakeholders.

  The Office of the Principal Commissioner of Customs has issued a public notice regarding the launch of new functionalities on the Customs Brokers Licensing Management System (CBLMS). The CBLMS portal, operational since September 30, 2022, now offers features such as Application for Continuation of License after Death of Proprietor, an Offence Module for managing offense cases, and Applications for modification in present CB Profile. Additionally, enhancements include features like My Profile, NOC mechanism, Issue Document, Search CB, Status Update in QR Code, Notifications, and Account lockout for security. Detailed user manuals for these applications will be available in the "Knowledge Centre" Tab on the CBLMS portal.
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• Circular on Disposal of UAS/UAV/RPAS/Drones by GOI Ministry of Finance. Changes in Nodal Officers & Contact Details.

  The circular addresses the disposal of Unmanned Aircraft Systems (UAS), Unmanned Aerial Vehicles Systems (UAV), Remotely Piloted Aircraft Systems (RPAS), commonly known as Drones. The circular modifies certain provisions outlined in a previous circular. Notably, it specifies the process for communication of changes in Nodal Officers to the Commissioner (Investigation-Customs) at the Central Board of Indirect Taxes and Customs (CBIC). The Nodal Officers, preferably at the level of Director/Deputy Secretary, are designated from various organizations such as SPG, CRPF, NSG, NTRO, CISF, BSF, ITBP, DGI GS Branch, O/o JS (Navy and Def Staff), Department of Military Affairs, and Assam Rifles. Each Nodal Officer is identified with their respective organization, name, rank/designation, and contact details. The circular aims to streamline the handling of UAS/UAV/RPAS/Drones by establishing clear communication channels and designated personn
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• Release of imported consignments of 106 EEEs items listed in E-Waste (Management) Rules, 2022.

  The E-Waste (Management) Rules, 2022, regulate the release of imported consignments for 106 specified Electrical and Electronic Equipment (EEE) items, categorized as ITEW, CEEW, LSEEW, EETW, TLSEW, MDW, and LIW. These rules mandate compliance with specific guidelines for the import, handling, and disposal of e-waste to ensure environmental protection and proper waste management. The rules are detailed under the E-Waste (Management) Rules, 2022, and apply to producers, importers, and other stakeholders involved in the e-waste lifecycle.
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• Entities generating >100 metric tonnes of used oil/yr must register with CPCB u/s 26. Compliance ensures environmentally sound management.

  Entities generating over 100 metric tonnes of used oil annually must comply with the Hazardous and Other Wastes (Management and Transboundary Movement) Second Amendment Rules, 2023. Key terms include "business," "collection point," "collection agent," "energy recovery," and "environmentally sound management." Producers, collection agents, recyclers, and used oil importers must register with the Central Pollution Control Board (CPCB) on the portal. Extended Producer Responsibility (EPR) mandates recycling targets, with penalties for non-compliance. EPR certificates are issued to recyclers and can be traded. The CPCB oversees compliance, supported by state bodies and a Steering Committee. Environmental compensation and prosecution apply for violations.
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• Import of Goods: CRCL Module now mandatory for forwarding samples to labs. Automate paperwork, enhance efficiency, and ensure transparency.

  The Public Notice issued by the Principal Commissioner of Customs (General) introduces the CRCL Module for the electronic forwarding of samples to Central Revenues Control Laboratory (CRCL) and other Revenue Laboratories. The module aims to automate paperwork, streamline sample testing processes, and enhance transparency. Customs Officers can generate electronic Test Memos, track sample status, and receive test reports instantly. The module includes features such as sample acceptance verification, allocation to Chemical Examiners, and electronic test report entry. The use of the CRCL module is mandatory from 01.07.2021, with exceptions allowed only with prior approval in case of system issues. Stakeholders are advised to comply with the new electronic Test Memo process to ensure efficient and timely sample testing.
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• Applicants granted bail for possession of foreign gold. Bail allowed due to jail time served.

  The High Court granted bail to the applicants u/s 135(1)(a) & 135(1)(b) for possession of foreign origin gold without paying custom duty. The Court, without expressing opinion on merits, considered material on record, punishment under the Act, and period spent in jail. Bail application allowed with conditions. Prosecution can move bail cancellation application for breach of conditions.
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• CESTAT NEW DELHI grants restoration of appeal dismissed for want of prosecution due to adjournment issue.

  The CESTAT New Delhi, an Appellate Tribunal, considered a request for restoration of an appeal dismissed for want of prosecution. The appellant had submitted an adjournment request before the final order date, but it was not considered by the Bench. The verification report did not provide a satisfactory explanation for this oversight. Despite finding no irregularity in the final order, the Tribunal acknowledged the receipt of the adjournment application before the final order date. In the interest of justice, the Tribunal allowed the appeal restoration, directing it to be listed for final hearing without further opportunities. This decision emphasizes the importance of deciding cases on their merits rather than technicalities or procedural lapses.
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• CESTAT allowed the appeal in the absence of proof of Illegal exports of non-basmati rice to Nepal.

  The CESTAT Allahabad held that in a case involving illegal exports of non-basmati rice to Nepal, there was a lack of evidence to prove the illegal export. The tribunal noted that no evidence was presented to show that the goods were actually exported or that any preparations for export were made by the appellants. The case was based on Bill of Entries noted by the Enforcement Directorate during the investigation, but these entries did not refer to any documents issued by the appellants. Since no goods were recovered, seized, or confiscated, and no export documents were found, the tribunal concluded that the appellants could not be penalized u/s 114 of the Customs Act. Therefore, the appeals were allowed.
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• CESTAT grants refund claim under ISFTA. Benefit of Notification No.26/2000-Cus allowed. Importer eligible despite late claim.

  The case before CESTAT Bangalore involved a refund claim seeking the benefit of a Notification under the Indo-Sri Lanka Free Trade Agreement. The issue was whether the benefit of the Notification, not claimed earlier, was available to the appellant upon later claim after duty payment. The Tribunal held that since the goods were imported from Sri Lanka and the appellant provided the country-of-origin certificate, the benefit of the Notification should not be denied solely for not claiming it at the time of filing the Bill of Entry. The claim for reassessment/refund was filed within the prescribed time limit as per relevant Circular. Citing the decision in Hero Cycles vs. UOI, the Tribunal allowed the appeal, granting the benefit of the Notification and any consequential relief as per law.
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• CESTAT: Imported "I-MAS POs-Nickel Compound" is classifiable u/r CTH 38249900, not 28254000. No benefit under Notification 50/2017.

  CESTAT Chennai addressed misdeclaration of imported goods "I-MAS POs-Nickel Compound" and appropriate classification under CTH. Tribunal held goods are classifiable u/s 38249900, not u/s 28254000. Appellant's claim for Customs Notification benefits denied due to mismatch in product description. Advance Rulings are binding on applicant and field formation. Non-compliance with Pre-notice Consultation Regulations noted, but no prejudice caused to appellant. Confiscation, fine, and penalty set aside due to lack of malafide intent. Demand of duty confirmed, but penalties waived. Appeal partly allowed.
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• CESTAT HYDERABAD: Iron Ore fines vs lumps classification for export duty - Tribunal allows appeal, rejects demand.

  The case involved the classification of Iron Ore fines as Iron Ore lumps for export valuation and levy of export duty. The Tribunal held that the consignment, despite containing a certain percentage of Iron Ore lumps, should be treated as Iron Ore fines due to involuntary processes and the absence of deliberate mixing. The presence of Iron Ore lumps within the tolerance limit does not warrant separate classification for duty purposes. Additionally, the final invoice based on negotiated parameters at the buyer's port was accepted, and the transaction value was deemed appropriate, leading to the allowance of the appeals on both counts.
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DGFT

• Advance Authorizations: DGFT clarification: AA issued before 11.03.2024 not u/s 71/2023. No QCO exemption amendment available.

  Trade Notice No. 03/2024 addresses the applicability of Notification No. 71/2023 dated 11.03.2024 issued by the Directorate General of Foreign Trade. The notification clarifies that the provisions of Notification No. 71/2023 are not applicable retrospectively. Advance Authorizations (AA) issued before 11.03.2024 will be governed by the provisions in place at the time of their issuance. The notification also states that amendments to include QCO exemption on AA issued before 11.03.2024 are not allowed. Additionally, the clubbing of AA issued under Notification No. 71/2023 with those issued before that date is not permitted. This Trade Notice has been approved by the Competent Authority and signed by the Joint Director General of Foreign Trade.
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FEMA

• RBI allows issuance of partly paid units to non-residents by investment vehicles under FEM Non-debt Instruments Rules.

  The RBI circular dated May 21, 2024, addresses the issuance of partly paid units to non-residents by investment vehicles as per the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The rules were amended in 2024 to allow such issuances. Alternative Investment Funds that issued partly paid units to non-residents before the amendment can regularize the same through compounding under the Foreign Exchange Management Act, 1999. AD Category-I banks must ensure necessary administrative actions, reporting through FIRMS Portal, and issue conditional acknowledgments before seeking compounding from the RBI. The circular is issued u/s 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and does not affect compliance with other laws.
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Corporate Law

• Jharkhand HC: Workmen & secured creditor treated pari passu u/s 529-A. No statutory interest granted.

  The case involved the rejection of a claim for statutory interest under Rule 156 of the Companies (Court) Rules, 1959 in favor of the workmen. The court held that under Section 529 of the Companies Act, workmen are treated as secured creditors to ensure they are not deprived of their dues in case of liquidation. Section 529-A establishes that workmen's dues and debts due to secured creditors are to be treated equally. The court found that the workmen did not raise a claim for interest previously and payments made to them were in compliance with court orders. The court dismissed the appeals, emphasizing the wide powers of the appellate court to ensure justice between parties.
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Indian Laws

• HC: Accused acquitted in cheque dishonour case after compromise agreement.

  The Andhra Pradesh High Court allowed the application for compromise in a dishonour of cheque case. The terms of the compromise were read and admitted by the parties. Referring to a Supreme Court decision, it was noted that costs for compounding during proceedings should be deposited with the District Legal Services Authority. The court, satisfied with the compromise and settlement, set aside the judgment, acquitted the accused u/s 138 of N.I. Act, and disposed of the application.
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IBC

• Insolvency Professionals must upload judicial orders on their dashboard for transparency and stakeholder facilitation.

  The Insolvency and Bankruptcy Board of India (IBBI) has directed all Registered Insolvency Professionals to upload specific judicial orders related to insolvency proceedings on their dashboard. This includes orders from NCLT/NCLAT such as admission, resolution plan approval, closure, stay, liquidation, dissolution, and final orders. For Supreme Court and High Court orders, all relevant orders must be uploaded, especially those involving IBBI/Ministry of Corporate Affairs or significant Code-related issues. IPs must upload these orders after downloading from official judicial websites, exercising caution. The directive is issued u/s 196 of the Code to enhance stakeholder facilitation in the IBC ecosystem.
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• CIRP: Compulsorily Convertible Debentures without repayment obligation treated as equity, not debt under IBC.

  The case before the National Company Law Appellate Tribunal in Chennai involved the classification of Compulsorily Convertible Debentures (CCDs) that do not require repayment as either debt or equity for the purpose of admitting claims under the Insolvency and Bankruptcy Code (IBC). The Tribunal referred to the Supreme Court's decision in a similar case where CCDs were treated as equity. The Tribunal noted that CCDs without repayment obligations are akin to equity instruments. As per legal principles, if a debenture does not involve repayment of principal amount and leads to automatic conversion into equity, it is considered an equity instrument. Therefore, the Tribunal upheld the lower court's decision, dismissing the appeal and affirming that the CCDs in question should be treated as equity, following the precedent set by the Supreme Court.
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• CIRP: Admission of section 7 application - Corporate debtor has to blame himself for not appointing an Advocate to appear and make appropriate pleading before the Court.

  The National Company Law Appellate Tribunal, Principal Bench, New Delhi, addressed the validity of the admission of a section 7 application in a Corporate Insolvency Resolution Process (CIRP) case. The issue raised was the alleged violation of the principle of natural justice due to the denial of an opportunity for the corporate debtor to file a reply. The Tribunal found that the corporate debtor had not shown sufficient cause for not appearing despite being duly served notice. The Tribunal interpreted Rule 49(2) of the NCLT Rules, 2016, stating that it provides the Adjudicating Authority with the jurisdiction to proceed ex parte if the corporate debtor fails to appear. The financial creditor argued that the debt and default were not in question due to a consent decree passed by the DRT against the corporate debtor. The Tribunal noted that the appellant did not address the debt and default during oral submissions challenging the rejection under Rule 49(2).
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• NCLAT dismisses appeal on CIRP VAT/Sales Tax dues treatment. Claims classified as Unsecured debts.

  The National Company Law Appellate Tribunal, Principal Bench, New Delhi, addressed the issue of treatment of VAT/Sales Tax dues as secured or unsecured claims in a liquidation scenario. The Appellant's request to classify its claim as a secured creditor under Section 53 of the Insolvency and Bankruptcy Code was rejected. The Tribunal noted that claims arising from assessment orders during the moratorium period were rightly considered as unsecured operational debt. The Appellant's actions of attaching the corporate debtor's property during the moratorium were found to be in contravention of the Code. The Tribunal emphasized that the 330-day timeline in the Code is directory, not mandatory, and rejected the Appellant's contention that delays in resolution processes should be accepted. Referring to the Rainbow Paper case, the Tribunal highlighted that tax dues under the VAT Act had priority as a first charge, unlike under the Gujarat Sales Tax Act.
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SEBI

• New SEBI circular mandates Audiovisual (AV) presentations for public issue disclosures, enhancing investor awareness.

  The circular issued by SEBI mandates the creation of Audiovisual (AV) presentations for disclosures in Public Issue Offer Documents to enhance investor awareness and discourage reliance on unauthorized information. The AV must comply with SEBI regulations, be bilingual, factual, and cover key disclosures from the Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus (RHP). Issuers and Lead Managers are responsible for the content. The AV must be uploaded on relevant websites and social media platforms within specified timelines. The circular applies voluntarily from July 1, 2024, and becomes mandatory from October 1, 2024, as per SEBI's powers u/s 11 and 11A of the Securities and Exchange Board of India Act, 1992.
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• Industry Standards on verification of market rumors introduced by ISF with SEBI for top listed entities.

  The circular issued by SEBI on Industry Standards for verification of market rumors mandates top listed entities to comply with Regulation 30(11) of LODR Regulations. The Industry Standards Forum, comprising ASSOCHAM, CII, and FICCI, has formulated standards in consultation with SEBI. Top 100 listed entities must adhere to the standards from June 01, 2024, and the next top 150 from December 01, 2024. Stock Exchanges must ensure listed entities follow these standards. The circular is u/s 11(1) and 11A of SEBI Act, 1992, and u/r 101 of LODR Regulations.
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• New SEBI Circular on unaffected price for transactions post market rumour confirmation.

  The circular provides a framework for determining the unaffected price for transactions following confirmation of market rumors, as required by Regulation 30(11) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The unaffected price is to be considered for transactions subject to pricing norms, excluding the impact of the rumor and price movement. The calculation involves adjusting the volume weighted average price (VWAP) based on the daily price variations. The circular applies to top listed entities and is enforceable by stock exchanges. It is issued u/s 11(1) and 11A of the SEBI Act, 1992, and Regulation 101 of LODR Regulations. Compliance is mandatory for listed entities, with the circular effective from specified dates.
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• Review of KYC validation by KRAs under Risk Management Framework. Simplified provisions for ease of client transactions.

  SEBI issued a circular to intermediaries, stock exchanges, and industry associations regarding the review of validation of KYC records by KRAs under the Risk Management Framework. The circular simplifies the risk management framework by specifying attributes for verification by KRAs, including PAN, name, and address. Validated records are those where all attributes are verified with official databases and PAN-Aadhaar linkage is confirmed. Exchanges and intermediaries must update their systems by May 31, 2024. The circular is issued u/s 11(1) of the SEBI Act, 1992 and Regulation 17 of the SEBI{KYC Registration Agency}Regulations, 2011 to protect investor interests and regulate securities markets.
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• Certification required for key investment team of AIF managers. Ensure compliance for registration by May 9, 2025

  The circular mandates that the key investment team of an Alternative Investment Fund (AIF) manager must have at least one key personnel with a specified certification. The certification requirement, u/s Regulation 4(g)(i) of SEBI (AIF) Regulations, 2012, came into force on May 10, 2024. The key personnel must pass the NISM Series-XIX-C exam. Existing AIF schemes and pending scheme applications must comply by May 9, 2025. The trustee/sponsor must ensure compliance and include it in the Compliance Test Report. The circular is u/s Section 11(1) of SEBI Act, 1992, to safeguard investor interests and regulate the securities market.
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Service Tax

• CESTAT: Cenvat Credit on Set Top Boxes allowed as inputs for Broadcasting Services. Demand set aside.

  The CESTAT ALLAHABAD held that Set Top Boxes are classifiable as inputs for providing Broadcasting Services. The Appellant's interpretation of the law was deemed correct as the set top boxes satisfied the definition of inputs used for output services. The Tribunal emphasized strict construction of taxing statutes based on unambiguous literal interpretation. The Appellant's practice of taking credit at the time of receiving set top boxes as inputs was found to be valid. The argument that capitalized goods cannot be treated as inputs was dismissed. Consequently, the demand for interest was deemed meritless.
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Central Excise

• CESTAT: Tobacco supplied in retails pack to be classified under CTH 2401, not 2403. Extended period not applicable.

  In the case before CESTAT AHMEDABAD, the issue was the classification of tobacco supplied in retail packs under the Central Excise Tariff Act. The appellant claimed it should be classified under CTH 2401, while the Revenue argued for classification under 2403. The tribunal held that the product, unmanufactured tobacco in cut leaves form, remained the same even after repacking into retail packs. As it did not undergo manufacturing transformation, it was correctly classified under CTH 2401. The tribunal also found that there was no suppression of facts or misdeclaration by the appellant, so the demand under the extended period of limitation was not sustainable. The appeal was allowed, and the impugned order was set aside.
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VAT

• HC: Classification of Diagnostic Kits: Kits not considered drugs unless specified by Central Govt.

  The case involved the classification of Diagnostic Kits as "drugs" under the Drugs and Cosmetics Act, 1940. The court held that devices used for diagnosis fall under the definition of "drug" only if specified by the Central Government in the Official Gazette. Diagnostic Kits were deemed more akin to "devices" than "medicines" and would be considered as "drugs" under sub-section (iv) of Section 3 (b) if notified by the Central Government. The court noted the absence of evidence showing Diagnostic Kits are considered "medicines" or "drugs" by medical practitioners. If the Kits are notified as "drugs," they would be charged at 4% under Entry 48 of Schedule C; otherwise, they would fall under Entry 165 of Schedule D and be taxed at 12.5%. The court disposed of the petition accordingly.
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• J&K High Court clarifies PTO's power u/s 5 for escaped assessments. Monthly vs. Annual Assessments.

  The case involved the invocation of Section 5 by the Petrol Taxation Officer (PTO) regarding Escaped Assessments and the requirement of Monthly vs. Annual Assessments. The High Court held that Section 5 empowers the PTO to determine tax or penalty recoverability based on correctness of returns filed by dealers. Rule 15 mandates dealers to submit monthly returns, subject to PTO verification. The absence of provisions for escaped assessments under the Act of 2005 led the Court to affirm that PTO actions are limited to filed returns. The Court also ruled that final monthly assessments preclude subsequent reassessments after three years. The Tribunal's reference was affirmed and disposed of accordingly.
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• HC: Penalty determination. Each improper invoice constitutes separate default. Time duration not relevant.

  The case involved the determination of penalty u/s 69(1)(k) of the J&K Value Added Tax Act, 2005 for the issuance of 35 improper invoices on the same day. The High Court held that each tax invoice, if found to be in default, attracts a penalty of ten times the tax payable on that invoice or Rs. 10,000, whichever is higher. The court clarified that the penalty is meant to deter VAT dealers from under-assessing or evading tax liabilities. It emphasized that the penalty is to be applied to each individual tax invoice, not based on the total number of invoices generated in a day. The court rejected the notion of penalizing based on the accumulation of invoices for a specific day. Each default on a tax invoice is to be penalized independently as per the provisions of the VAT Act.
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Notifications

• Income Tax

• 44/2024 - dated 24-5-2024 - IT
  Cost Inflation Index (CII) for the Financial Year 2024-25 notified as 363 - Amends the Notification No. 44/2017

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Circulars / Instructions / Orders

• SEBI - SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/56 - dated 24-5-2024
  Norms for sharing of real time price data to third parties
• SEBI - SEBI/HO/MRD/TPD-1/P/CIR/2024/58 - dated 24-5-2024
  Enhancement of Dynamic Price Bands for scrips in the Derivatives segment

Case Laws:

• GST

• 2024 (5) TMI 1189
  Violation of principles of natural justice - excess claim of Input Tax Credit, without considering the reply filed by the Petitioner - HELD THAT:- On going through Form GSTR-2A, as available on the portal and from it prima facie appears that the same has not been carefully examined by the Proper Officer. In view thereof, the impugned order calls for a remittance of the case. The impugned order dated 15.03.2024 is set aside. Show Cause Notice is restored on the file of the Proper Officer, who shall re-adjudicate the Show Cause Notice in accordance with law after examining the reply filed by the Petitioner and after giving an opportunity of personal hearing to the Petitioner within the period prescribed under Section 75 (3) of the Act. Petition disposed off.

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• 2024 (5) TMI 1188
  Rejection of adjudication order - intent to evade tax - existence of mens rea or not - whether the annual return filed by the appellant in GSTR-9 for the financial year 2017-18 can altogether be ignored? - HELD THAT:- The appellant submitted representation but however, the adjudicating authority in the order dated 15th December, 2023 maintained the same stand. The two aspects have appealed to send back the matter to the adjudicating authority. First is with regard to the effect of GSTR-9. This being an annual return filed within the extended period of limitation viz. , upto 7th February, 2020 on account of various notifications issued by the Government due to the Covid pandemic. Therefore, if the GSTR-9, which was filed within time is not considered, the assessee s rights would be greatly prejudiced. The second aspect, which has persuaded is the contention of the assessee that the entire matter is revenue neutral. The matter remanded back to the adjudicating authority viz. , the Assistant Commissioner, State Tax, Taltala and New Market Charge to consider the submissions made by the assessee, afford an opportunity of personal hearing, examine the annual return filed in GSTR-9 and proceed to take a fresh decision on merits and in accordance with law. Appeal allowed by way of remand.

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• 2024 (5) TMI 1187
  Cancellation of GST registration of petitioner with retrospective effect - closure of business - SCN does not give any specific reasons for rejection - Violation of principles of natural justice - HELD THAT:- There is no material on record to show as to why the registration is sought to be cancelled retrospectively. It may be noted that in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand - the SCN and the impugned order are also bereft of any details. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Accordingly, the same cannot be sustained. In terms of Section 29 (2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so - it apposite to examine this aspect but assuming that the respondent s contention is required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The Petitioner does not seek to carry on business or continue the registration, the impugned order dated 30.11.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 25.04.2022 i.e., the date when petitioner filed an application seeking cancellation of GST registration. The petition is disposed off.

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• 2024 (5) TMI 1186
  Validity of order passed u/s 73 of the Central Goods and Services Tax Act, 2017 - lack of communication of the notice to the petitioner - Petitioner was unaware of the initiation of any such proceedings and accordingly could not respond to the same - violation of principles of natural justice - HELD THAT:- Perusal of the impugned order shows that the impugned order categorically records that the tax payer has not replied or appeared in person and a demand as ex-parte is created. It merely states that Further, another opportunity to submit reply and for the sake of natural justice opportunity for Personal Hearing, as per provision of Section 75 (4) DGST Act, was also provided to the taxpayer by issuing REMINDER through the GST portal. Now, since no reply/explanation has been received from the taxpayer despite sufficient and repeated opportunities, which indicate that the taxpayer has nothing to say in the matter. The undersigned is left with no other option to create demand ex-parte, in accordance with the provisions laid down in Section 73 (9) of the CGST / DGST Act, 2017, as per discrepancies already conveyed through SCN/DRC-01. The Proper Officer has opined that despite providing another opportunity, neither an online reply has been filed nor has the petitioner appeared in person or through an authorized representative. Since the only reason for passing the impugned order is that Petitioner had not filed any reply/explanation, Petitioner needs to be granted one opportunity to respond to the Show Cause Notice and thereafter, the Show Cause Notice to be re-adjudicated. Petition disposed off.

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• 2024 (5) TMI 1185
  Validity of adjudication order u/s 73 of CGST Act, 2017/WBGST Act, 2017 - appeal barred by time limitation - provision under Section 107 of the Act to accept the appeal after one month of prescribed period of limitation as provided under Section 107 (4) of Act or not - HELD THAT:- Admittedly, in this case the appeal preferred by the petitioner before the Appellate Authority was barred by limitation since, the same was filed beyond the time prescribed. The petitioner had, however, in response to the show cause notice had explained the delay in filing the appeal. It appears that condonation of delay was sought for on medical reasons. Although, the appellate authority did not disbelieve the medical certificate, however, had arrived at a conclusion since the petitioner could carry on business, there was no reason for the petitioner not to file the appeal within the prescribed period. Despite observing as such, the Appellate Authority, however, proceeded to dismiss the appeal by holding that there is no provision laid down under Section 107 of the said Act to accept an appeal after one month from the prescribed period of limitation. The Appellate Authority had chosen not to question the medical certificate produced by the petitioner. Once, the Appellate Authority had accepted the medical certificate, there was nothing on record for the Appellate Authority to conclude since the petitioner could carry on business despite illness by submission of GSTR-1 and GSTR-3B in due time, the illness could not be a reason for the petitioner not to file the appeal in time - Since, on the disclosure made by the petitioner it is apparent that the petitioner was prevented by medical reasons from filing the aforesaid appeal in time, the Appellate Authority ought to have, by taking the same into consideration condoned the delay. The discretion exercised by the Appellate Authority in refusing to accept the explanation does not appear to be justifiable, rather arbitrary. The discretion exercised by the Appellate Authority in refusing to accept the explanation does not appear to be justifiable, rather arbitrary. Having regard to the same, the delay in preferring the appeal should be and is accordingly condoned - the order passed in Form GST APL-02 dated 6th March, 2024 is set aside. The appeal is restored to its original file and number. The writ petition is disposed of.

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• 2024 (5) TMI 1184
  Condonation of delay in filing appeal - Dismissal of the appeal preferred under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - appeal was barred by limitation but not accompanied by an application under Section 5 of the Limitation Act, 1963 - HELD THAT:- An identical issue had fell for consideration before the Hon ble Division Bench of this Court in the case of S.K. CHAKRABORTY SONS VERSUS UNION OF INDIA ORS. [ 2023 (12) TMI 290 - CALCUTTA HIGH COURT] . The Division Bench of this Court, while considering the scope and ambit of Section 107 of the said Act and the applicability of Section 5 of the Limitation Act, 1963 on the basis of the provisions contained in Section 29(2) of the Limitation Act, and by placing reliance on the judgment delivered by the Hon ble Supreme Court in the case of SUPERINTENDING ENGINEER/ DEHAR POWER HOUSE CIRCLE BHAKRA BEAS MANAGEMENT BOARD (PW) SLAPPER ANOTHER VERSUS EXCISE AND TAXATION OFFICER, SUNDER NAGAR/ASSESSING AUTHORITY [ 2019 (11) TMI 6 - SUPREME COURT] , had concluded that in absence of non obstante clause rendering Section 29(2) of the Limitation Act, 1963, non applicable and in absence of specific exclusion of Section 5 of the Limitation Act, 1963, it would be improper to read implied exclusion thereof. Having regard to the above, the Appellate Authority is not denude of its power to condone the delay beyond one month from the prescribed period of limitation as provided for in Section 107(4) of the said Act. It also appears that another Hon ble Division Bench of this Court in the case of KAJAL DUTTA. VERSUS ASSISTANT COMMISSIONER OF STATE TAX, SURI CHARGE ORS. [ 2023 (1) TMI 1097 - CALCUTTA HIGH COURT] had while considering the provisions of Section 107(4) of the said Act, held that the statute does not state that beyond the prescribed period of limitation, the Appellate Authority cannot exercise jurisdiction. The observations made by the Appellate Authority that it can condone the delay, provided the same is presented within a period of one month from the prescribed period, cannot be sustained and the same is accordingly set aside - no relief can be granted in favour of the petitioner at this stage - Petition disposed off.

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• 2024 (5) TMI 1183
  Denial of Input Tax Credit (ITC) - challenge to assessment order on the ground that the same is barred by limitation - power to extend the time limit - HELD THAT:- The order under sub-section (9) of Section 73 is to be issued by the proper officer within a period of three years from the due date for furnishing the annual returns for the financial year. An order passed beyond the period of three years in respect of the financial year from the due date of filing the annual return would become time-barred and without jurisdiction. Section 168A empowers the Government to extend the time limit in special circumstances for actions which could not be completed due to force majeure. This power is overriding power, and sub-section (1) of Section 168A has a non-obstante clause. If there is force majeure as defined in Section 168A, the Government is empowered to extend the limitation period for taking actions which could not be completed or complied with due to force majeure. No one can deny that COVID-19 was a force majeure as it was a pandemic that caused large-scale human tragedy and suffering all over the world and paralyzed the world, including economic activities. Extension of time limit - HELD THAT:- How much time could have been extended considering the pandemic is the discretion of the Executive, which has been taken based on the recommendation of the GST Council. It is not found that the notifications impugned in the writ petition in Exts. P7 and P8 are ultra vires the provisions of Section 168A of the CGST/SGST Act. The Government is well within the power to extend the limitation for completing the proceedings and taking action under Section 73 of the Act by issuing notification under Section 168A of the GST Act if there is force majeure. COVID-19 was a force majeure, and taking into account the various factors, the time limit has been extended. Therefore, there are no substance in the challenge to the said notifications, and the writ petition is dismissed to that extent. As the Government itself has come out with Circular No. 183/15/2022-GST dated 27.12.2022 to deal with the difference in Input Tax Credit availed in Form GSTR-3B as compared to that detailed in Form GSTR-2A for the Financial Year 2017-18 and 2018-19, it is found that in the case of the petitioner also the benefit of the said Circular should be given and the assessment order to be passed afresh. The matter is remanded back to the Assessing Authority to pass a fresh Assessment Order giving the benefit of Circular No. 183/15/2022-GST dated 27.12.2022 - Petition allowed by way of remand.

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• 2024 (5) TMI 1182
  Violation of principles of natural justice - inadequate opportunity for hearing by appellate authority - denial of interim order - HELD THAT:- The appellate authority fixed the date of personal hearing on 29.05.2023 and admittedly the appellant did not attend the personal hearing and the order has been passed. Under normal circumstances, the court would have declined to interfere with the order - the appeal filed by the appellant was presented before the appellate authority on 25th May, 2022 and the appeal was taken up for hearing after one year and on the very first date, namely, 29.05.2023 the appeal has been disposed of. Since there has been a delay of one year in taking up the appeal, the appellate authority could have granted one more opportunity to the appellant by issuing a fresh notice of hearing. Furthermore, none of the grounds raised by the appellant in the appeal petition which is about 38 pages have been considered or dealt with. The appeal has to be heard out on merits and fresh orders have to be passed by the statutory appellate authority - The order passed by the appellate authority dated 29.05.2023 is set aside and the matter is remanded to the appellate authority for fresh consideration. Petition allowed by way of remand.

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• Income Tax

• 2024 (5) TMI 1181
  Provision for warranty in excess of 2.14 percent of sales - assessee had not made the provision on a scientific basis - As decided by HC 2023 (4) TMI 1053 - KARNATAKA HIGH COURT ] provisions made between A.Y. 2007-08 and 2017-18. Appellant is right in his submission that the total utilization for the corresponding A.Y.s 2008-09 to 2017-18 is 95.5% of the total provision. Therefore, as held in Rotork Case, 2009 (5) TMI 16 - Supreme Court the estimate made by assessee is reliable and robust and the orders passed by the AO and confirmed by CIT(A) and the Tribunal are unsustainable in law and these appeals by the assessee merit consideration HELD THAT:- There is a delay of 225 days in filing the special leave petition. We are not satisfied with the explanation offered seeking condonation of delay in filing the special leave petition. We also note that since identical matters have already been dismissed, we dismiss this special leave petition both on the ground of delay as well as on merits.

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• 2024 (5) TMI 1180
  Restraint Order on the Locker - Verification of Revocation Order - Prayer seeking direction to the respondent-bank to remove the Restraint Order from the locker of the petitioners and grant access to their lawful assets, kept in locker - it was the objection of the bank that the petitioners had never shown or provided the official/original Revocation Order of the Income Tax Department HELD THAT:- This Court notes that by order dated 07th October, 2022, statement of learned Standing Counsel for Income Tax has been recorded, wherein, the said Standing Counsel has stated, on instructions, that the Revocation Order dated 17th October, 2012 (wrongly recorded as 17th October, 2022 in the said order), was duly served on the Manager, Union Bank of India. The authenticity of the aforesaid Revocation Order dated 17th October, 2012, as issued by the Income Tax Department thereby revoking the Restraint Order on the locker No. 211 maintained with Union Bank of India, 14-15, F-Block, Connaught Place, New Delhi-110001 in the name of Sh. Pradeep Garg and Smt. Meenu Garg, i.e., the petitioners herein, has already been confirmed by the Income Tax Department. Considering the aforesaid, there is no reason or ground for continuation of the restraint over the said locker and not allowing the petitioners to operate the said locker. As Restraint Order with respect to the locker in question has already been revoked by the Income Tax Department, it is directed that the petitioners herein shall be granted access to the aforesaid locker.

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• 2024 (5) TMI 1179
  Revision u/s 264 - Pr. CIT dismissed the application - Manner of passing of impugned order by PCIT J K, Jammu - whether was in accordance with procedural fairness and rules of natural justice? - petitioner filed a petition u/s 264 as stated that no prior notice calling for information or attending hearing or notice of demand was ever received by him and put up an explanation with respect to the subject matter of said show cause notice - Principal Commissioner dismissed the petition on the grounds that the petitioner had nothing further to add beyond the petition. HELD THAT:- This Court is of the opinion that the manner of passing of the impugned order by the responded No. 2 fell short of fairness of procedure. Firstly, in absence of the representation from the petitioner's end, the petition came to be disposed of without citing reason as to why the petitioner's reason for adjournment was not granted for putting the petitioner on caveat that on account of refusal of adjournment, the case was to be taken up for hearing on merits on the next date. Even if the petitioner s presence was not to be of any purpose in the estimate of the respondent No. 2-Pr. CIT for enabling adjudication of the revision petition on its merits, we find that the order impugned does not contain any reason whatsoever as to on what basis the respondent No. 2- Pr. CIT came to uphold the validity of the order of the Assessing Officer questioned by the petitioner in the revision petition, more particularly when from the report submitted by Assessing Officer before the respondent No. 2, the enlisted notices issued to the petitioner were for and at the address with which the petitioner claims to have no relation. We find that even if on the merits of the case the petitioner may not succeed to evade the consequences as envisaged in terms of the communication dated 17.07.2017 of the Income Tax Officer ward 3(2), Srinagar, but still upon an opportunity of being heard in meeting the requirement of rules of natural justice would have stood well served taking the matter to its logical end. Thus, we set aside the impugned order of the respondent No. 2-Principal Commissioner Income Tax, J K Jammu and direct rehearing of the matter by the respondent No. 2-Principal Commissioner Income Tax, J K Jammu. We direct the petitioner to present himself before the respondent No. 2-Pr. CIT on 2nd of November 2023.

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• 2024 (5) TMI 1178
  Assessment u/s 153A - Addition u/s 68 - income from undisclosed sources - HELD THAT:- From examination of record in light of aforesaid rival contentions it is crystal clear that appellant / assessee Smt. Shrikanta Bajaj filed return for assessment year. Appellant / assessee is partner in M/s. RNB Leasing and Financial Services. Consequent to search and seizure operations on 20.4.2017 key of Indian Overseas Bank Locker No. 111 in the name of Lalita Bajaj and the assessee i.e. Smt. Shrikanta Bajaj was found. On search of locker No. 111 dated 12.5.2017, nothing incriminating was found as is evident from punchnama and assessment order. As decided in Lalita Bajaj and Namita Bajaj [ 2023 (10) TMI 557 - ITAT DELHI ] in these case issue was of alleging the allotment of Shares by assessee company against share application money and share premium and the AO made addition u/s 68 by holding that the identity and creditworthiness of investor and genuineness of transactions could not be established by the share application and premium recipient assessee company. But in the present case, the assessee has not received any share application money or premium from the investor but the impugned transaction in the present case pertains to sale of investment/shares by the assessee to the other entities and such transaction cannot be alleged as unexplained or bogus particularly when the Department has not disputed the investment in shares of RNB Infrastructure Pvt. Ltd. by the assessee during the earlier period of time i.e. in the A.Y. 2008-09 in the year of investment by the assessee. Therefore, benefit of case laws relied by CIT(A) having distinct and dissimilar facts and circumstances are not available for the Revenue in the present case - Ground of assessee on merits is allowed.

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• 2024 (5) TMI 1177
  Taxability of creditors as unexplained/cessation of liability - AO found that certain creditors were actually loans/advances and not creditors - HELD THAT:- The liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd. have to be disclosed in the balance sheet of the appellant/assessee as loan/advances. It cannot be ruled out that there may not be some error in the grouping of these liabilities under the head creditors instead of loans and advances as these liabilities are not appearing under the head loans and advances in the balance sheet of the appellant/ assessee. In view of the above, we are of the considered opinion that the liabilities of the above mentioned two parties; G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd., aggregating Rs. 95,00,000/- require further investigations/verifications. Therefore, in the interest of justice appellant/assessee deserves reasonable one more opportunity to make good the defects/shortcomings - we deem it appropriate set aside the issue of taxability of liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd.and remit the matter back to the file of the AO for de-nova consideration.' In respect of creditors other than those mentioned above in para 10, the appellant/assessee did not file any details or confirmation either before the AO or CIT(A). we therefore, have no option except to upheld the addition for this. Disallowance of commission expenses u/s 40(a)(ia) - Taxability of cash deposits in the bank account of the appellant/assessee - The appellant/assessee has failed to bring any material on the record to contradict the findings of the Ld. CIT(A) on these two issues. We, therefore, do not find fit to interfere in the findings of the CIT(A) in this regard. Appeal of assessee is partly allowed.

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• 2024 (5) TMI 1176
  TDS u/s 194A, 194H, or section 194J - surplus interest retained by Non-Banking Financial Companies (NBFCs] - Levy of tax u/s 201(1) and interest u/s 201(1A) - assessee opted for the first method, i.e. the premium in the form of consideration gets deferred as the assessee agreed to retain a lower rate of interest on its portion of the assigned loans and the balance of the contracted interest from the borrowers goes to the NBFCs - assessee is a bank established under the State Bank of India Act, 1955. - Whether interest retained by the NBFCs on the pool of assets allotted to the assessee falls within the category of interest for the purpose of section 194A or within the category of fees for professional/technical services for the purpose of 194J of the Act or within the category of commission/brokerage for the purpose of 194H ? - HELD THAT:- TDS u/s 194A - In the present case, it also cannot be disputed that the borrowers have taken the loans from the NBFCs, which were subsequently purchased by the assessee by way of Direct Assignment, and on these loans, the borrowers are paying interest, which is getting deposited in Collection and Payout Account , which is the Escrow Account operated by the Assignee Representative and ultimately this interest is distributed amongst the NBFC and the assessee as per the tripartite agreement. Therefore, from the aforesaid undisputed facts, it is sufficiently evident that the assessee has only purchased a part of the loan by making the upfront payment and allowing the originating NBFCs to retain part interest on such loan paid by the borrowers. In the present case, there is no material available on record to show that the assessee borrowed any funds or incurred any debt from the NBFC. Such being the facts of the present case, the question of payment or crediting of interest by the assessee in favour of NBFC does not arise. Therefore, in the absence of any funds borrowed or debt incurred by the assessee from the NBFC, we are of the considered view that the part interest allowed to be retained back with the originating NBFC cannot be said to be interest within the meaning of section 2(28A) of the Act. Further, it is pertinent to note that under section 194A of the Act, the payment must be in the nature of interest in order to make the payer responsible for deducting tax at the time of payment or credit of such income. Though the payment by the borrower of the loan, in the present case, is in the nature of interest, however, when the same is allowed to be retained with the originating NBFC by the assessee under the tripartite agreement, the nature of the same is converted to a consideration for the purchase of 90% of the pool of assets. The nature of income in the hands of the recipient and the nature of expenditure of said sum by that person may not always be the same. Therefore, it is not necessary that what is received as interest is also interest when paid, particularly in the absence of any money borrowed or debt incurred. Accordingly, we are of the considered view that there is no obligation on the assessee to deduct tax at source under section 194A. TDS u/s 194H - As per the aforesaid definition, for a payment to be considered as commission or brokerage , the same must be received by a person acting on behalf of another person for services rendered. In the present case, no material has been brought on record to show that the loans advanced by the NBFC to the borrowers were on behalf of the assessee. Further, from the perusal of the Deed of Assignment of Loans, it is sufficiently evident that the loans already granted to the borrowers by the NBFC were assigned to the assessee. Insofar as various services rendered by the NBFC to the assessee, both parties have separately entered into a tripartite service agreement, which provides for payment of separate service fees in lieu of such services. Thus, in the present case, neither the assessee nor the Revenue has claimed that the NBFC has acted on behalf of the assessee. Since the NBFC is not acting as an agent of the assessee in respect of the loans advanced to the borrowers, therefore, we are of the considered view that no question arises of deduction of tax at source under section 194H of the Act, and accordingly the findings of the learned CIT(A) in this regard are set aside. TDS u/s 194J - The principal amount of the loan given to the borrower is nothing but the direct cost to the NBFC, 90% of which was assigned to the assessee. Further, an independent commercial transaction between two independent parties cannot be on a cost-to-cost basis without any mark-up. Therefore, for selling the share of a loan, the consideration cannot be the same as the principal amount of the loan. Thus, we agree with the submissions of the assessee that in the present case, the assessee has opted to pay the consideration partially by way of an upfront payment equivalent to the principal amount of the loan assigned to it and partly by agreeing to earn a lower rate of interest on its portion of assigned loans and allowing the NBFC to retain the part interest received from the borrower. Accordingly, we find no merits in the findings of the learned CIT(A) that tax must be withheld under section 194J of the Act, and hence the same is set aside. Levy of tax u/s 201(1) and interest u/s 201(1A) - NBFCs have already offered to tax in its return of income the interest earned on loans sold to the assessee and requisite documents as per first proviso to section 201(1) of the Act were also furnished by the assessee before the learned CIT(A). Therefore, tax under section 201(1) of the Act is in any case not leviable on the assessee. Further, the levy of interest under section 201(1A) of the Act is also not sustainable in view of our aforesaid findings. Decided in favour of assessee.

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• 2024 (5) TMI 1175
  Unexplained cash credit u/s. 68 - assessee failed to explain nature and source of the cash deposits in the bank account - bank account statement treated as books of account - as submitted by AR that as it was a case of simplicitor cash deposits in the bank account that was jointly held by the assessee and her husband - as per assessee it has been sourced out of cash withdrawals/accumulated savings, therefore, no addition of any part of the said amount was called for in the hands of the assessee - HELD THAT:- As in the present case, the cash deposits are not in the nature of cash deposits appearing in the books of account of the assessee, therefore, we find substance in the claim of the Ld. AR that the addition of the said amount could not have been made u/s. 68 of the Act. As the very basis for making the impugned addition by the A.O suffers from a jurisdictional defect as had been looked into in the case of CIT Vs. Bhaichand H. Gandhi [ 1982 (2) TMI 28 - BOMBAY HIGH COURT] thus we vacate the disallowance - Decided in favour of assessee.

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• 2024 (5) TMI 1172
  Classification/Nature of company for taxation purposes - Classification and Tax Rates for Domestic and Foreign Companies - levy of income tax at the higher rate applicable to a foreign company or rate of tax applicable to a domestic company - DTAA between India Netherlands - Whether appellant is a domestic company? - HELD THAT:- The word domestic company has been defined in Section 2 (22A) of the Act, 1961 which has been reproduced above. As per definition, an Indian company or any other company fulfilling specified conditions, is a domestic company. The word company has been defined in Section 2 (17) of the Act, 1961 which means (i) an Indian Company, (ii) any body corporate incorporated by or under the laws of a country outside India. - Thus, the Appellant is a company falling under Clause (ii) of Section 2 (17) of the Act, 1961. As per the Act, 1961 there are two class of companies, namely Domestic Company defined u/s 2 (22A) and Company other than Domestic Company . It is admitted case of the appellant that it is not a Domestic Company rather it is a foreign company i.e. Company other than Domestic Company as defined in Section 2 (23A) of the Act 1961. Thus, the appellant company is not a domestic company but it is company other than a domestic company. Applicable rate of Income Tax And Classification of Companies for rate of Tax - The first category is domestic company . The second category is Company other than a domestic Company . Undisputedly the appellant s company is not a domestic company. Therefore, the appellant s company falls under the other class i.e. a company other than a domestic company as classified in paragraph E of the Finance Act. In ground no. (IV) of the Memorandum of Appeal (afore-quoted) the appellants have admitted themselves to be a foreign company i.e. company other than a domestic company . Thus, it is admitted case of the appellant that it is not a domestic company as it is neither an Indian Company nor any other Company as it has not made prescribed arrangement in respect of its income liable to income tax under the Income Tax Act for declaration and payment within India of the dividends including dividend on preference shares payable out of such income. The classification made in paragraph E of the First Part of the First Schedule to the Finance Act, has not been questioned by the appellants. The classification so made is a valid classification. In Amalgamated Tea Estates Co. Ltd. v. State of Kerala [ 1974 (4) TMI 32 - SUPREME COURT] Constitution Bench of the Hon ble Supreme Court considered the challenge to the validity of classification of a domestic company and of a foreign company for rate of tax under the Kerala Agricultural Income Tax Act and held that the classification of a domestic company and foreign company for rate of tax is valid. Interpretation of Taxing Statue and Treaty - It is admitted case of the appellant that it is not a Domestic Company but a Company other than a Domestic Company Paragraph E of Part I of the First Schedule of the Finance Act, in clear terms, provides for separate rate of tax for company other than a domestic company and separate rate of tax for domestic company, . Therefore, there being no ambiguity in classification and rates of tax, the appellant is liable to tax at the rates prescribed for a company other than a domestic company . It is not the case of the appellant that it fall within the phrase any other company used in Section 2 (22A) of the Act 1961 or in Clause (a) of Sub-section 12 of Section 2 of the Finance Act defining domestic company. Therefore, the appellant is liable to tax at the rate specified for a company other than a domestic company. Whether Explanation to Section 90 of the Act, 1961 is in conflict with Article 24 (2) of the DTAA? - Article 24 (2) of the DTAA prevents from less favourable levy between two enterprises falling under one and the same class and not between one falling under one class and the other falling under another class. The phrase shall not be less favourably levied used in Article 24 (2) of the DTAA simply means that taxation on a company falling under any other company under Section 2 (22A) of the Act, 1961 shall not be less favourably levied than an Indian company which both fall under one and the same class i.e. Domestic Company under Section 2 (22A) of the Act, 1961 read with Section 2 (1), Section 2 (12) (a) and Paragraph E' of Part I of the First Schedule of the Finance Act, which provisions existed even prior to the DTAA in question and the clarificatory retrospective insertion of the Explanation in Section 90 by the Finance Act, 2001. Thus, there is no conflict between the Explanation to Section 90 of the Act, 1961 and Article 24 (2) of the DTAA. The rate of tax has been provided by the Finance Act which also defines domestic company . It classified companies in two categories for rate of tax, namely (I) domestic company and (II) a company other than a domestic company. Thus even without explanation appended to Section 90 of the Act 1961, the appellant company is liable to tax as a company other than a domestic company at the rate prescribed in paragraph E of Part I of the First Schedule to the Finance Act. The Explanation has merely clarified the existing position of law. Thus explanation to Section 90 is not in conflict with the provision of DTAA and that there is no conflict between the provision of the DTAA and the Income Tax Act 1961 in regard to non-discrimination. Effect of circular number 333 dated 02.04.1982 issued by CBDT and the letter of the CBDT dated 21.11.1945 - The aforesaid circular of the CBDT deals with the situation where there is a specific provision in the DTAA then that provision will prevail over the general provisions contained in the Income Tax Act, 1961. We find that there is no specific provision in the DTAA providing for rate of tax applicable to a domestic company or a company other than domestic company as defined under the Act, 1961 and as prescribed in and paragraph E of the First Part of the First Schedule to the Finance Act read with Section 2 (1) and Section 2 (12) (a) of the Finance Act. The aforesaid circular states that the DTAA also provides that the laws in force in either country will continue to govern the assessment and taxation of income in the respective country except where provisions to the contrary have been made in the Agreement. We find that the DTAA in question including Article 24 (2) does not contain any provision contrary to the provisions of Section 2 (22A) and Section 4 of the Act 1961 and Section 2 (1), Section 2 (12) (a) of the Finance Act and rate of tax as provided in paragraph E of part one of the first schedule to the Finance Act. Therefore, circular no. 333 dated 02.04.1982 is of no help to the appellant. So far as the letter dated 21.11.1994 issued by Joint Secretary and addressed to Chief Commissioner of Income Tax II Kolkata is concerned, we find that it was written in response to a D.O. letter of the Chief Commissioner. The said letter is a D.O. letter. It is not a circular issued in exercise of power conferred under Section 119 of the Income Tax Act, 1961. That apart the said letter is in conflict with plain and unambiguous provisions of the Act 1961 and the Finance Act which we have discussed above. That apart the opinion expressed in the aforesaid letter was also changed even before the Explanation was inserted. We also find ourselves in agreement with the reasons recorded by the ITAT in paragraph 59 of the impugned order. Accordingly we hold that the said letter cannot override the plain and unambiguous provision of the Act, 1961 and the Finance Act. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed. Once, Parliament has legislated, the Court must first look at the legislation and construe the language employed in it. If the terms of the legislative enactment do not suffer from any ambiguity or lack of clarity they must be given effect to even if they do not carry out the treaty obligations. But the treaty or the Protocol or the convention becomes important if the meaning of the expressions used by the Parliament is not clear and can be construed in more than one way. Since the expressions used in the aforesaid provisions of the Act 1961 and the Finance Act are clear and capable of only one construction as discussed and there is no ambiguity or lack of clarity, therefore, the provision of the Act 1961 and the provision of the Finance Act, as discussed above, are bound to be given full effect. Accordingly it is held that the appellant is liable to tax at the rate applicable to a company other than a domestic company as provided in the Finance Act.

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• 2024 (5) TMI 1171
  Rejection of application u/s 119(2)(b) - delay on the part of the petitioner in furnishing the Form 10B along with the Auditor s report - Exemption u/s 12A - HELD THAT:- Admittedly the petitioner is an establishment which has got exemption under Section 12A of the Act. It is in operation for the last 25 years. There does not seem to be any default on the part of the petitioner for all these years for some reason for the Assessment Year 2018-19, Form 10B could not be submitted within the stipulated period and there was a delay of 161 days in filing of the same. Similarly, for the AY 2020-21 also, certain unavoidable circumstances, Form 10B could not be furnished within the stipulated period and there was a delay of 3 days in the submission of the same. For both the aforesaid years, the petitioner has submitted Form 10B and subsequently also moved an appropriate application under Section 119 (2)(b) of the Act seeking for condonation of the delay in the submission of the Form 10B. The plain reading of Clause 5 of the said Circular in very categorical terms reflects that this CBDT had conferred/authorized Commissioners of Income Tax for entertaining the application under Section 119 (2)(b) of the act seeking condonation of delay in filing Form 10B, if the delay was less than 365 days. The reading of the aforesaid clause 5 also gives a clear indication that the said power stands conferred/authorized upon the Commissioners of Income Tax with a specific purpose of entering the applications u/s 119 (2)(b) of the act in a more liberal and pragmatic manner, provided a reasonable clause and plausible explanation has been provided by the assessee. Keeping in view the aforesaid instructions of the CBDT, if now looking into the impugned order what is apparent is that the impugned order does not indicate anything in respect of the contents of the application u/s 119(2)(b) of the act filed by the petitioner seeking for condonation of delay. There is no discussion on the explanation so provided being provided in Column Nos. 14 and 15 of the said application u/s 119 (2)(b) of the act. Once when the assessee provides for an explanation, it is incumbent upon the authorities concerned to consider the explanation and give a specific finding whether the explanation so provided is satisfactory or whether the explanation provides reasonable cause which prevented the petitioner in filing Form 10B within the stipulated period of time. Thus the order to be set aside, the delay on the part of the petitioner in submitting Form 10B is ordered to be condoned and the matter stands remitted back to the 1st respondent, who in turn is directed to pass appropriate orders on merits.

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• 2024 (5) TMI 1170
  Validity of reassessment proceedings u/s 147/148/148A OR u/s 153C/153A - material/ information is collected during search from other/ third party - whether the basis for reopening the assessment was the information and material collected during the search conducted in the premises of another assessee or the same was based on any information and material collected after the search? - HELD THAT:- Reassessment has to be done only by taking recourse to the provisions contained in Section 153C r.w.s. 153A of the Act of 1961 and not under Section 148A/Section 148 of the Act of 1961. The legal position in this regard is well settled in view of the decision of Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT ] Basis for reopening the assessment - The entire basis for reopening the assessment is nothing but the material and information collected during search conducted in the premises of another assessee. Collection of details relating to search would not mean collection of new incriminating material and information, independent of the incriminating material and information collected during search proceedings. Petitioner is correct in submitting that in fact, search was carried out in the year 2016 and the respondents had the authority to reopen the assessment by invoking the powers u/s 153C and draw reassessment proceedings u/s 153A - That was not done within the period of limitation prescribed under Section 153B of the Act of 1961. The respondent-authority was fully aware of the fact that proceedings under Section 153C of the Act of 1961 would be barred by limitation, therefore, recourse was taken to the provisions contained in Section 148 and Section 148A of the Act of 1961 which has no application in the present cases. Thus legal position is that where the basis for reassessment is incriminating material and information collected during search, the only legally permissible course of action is the one provided under Section 153C and not under Section 148 - Decided in favour of assessee.

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• 2024 (5) TMI 1169
  TP adjustment under Specified Domestic Transactions after Omission of Clause (i) of Section 92BA: - HELD THAT:- As per ratio of judgment of Texport overseas (P) Ltd. s case [ 2019 (12) TMI 1312 - KARNATAKA HIGH COURT] it is well settled principle of law that once this section is omitted w.e.f. 1.4.2017 the resultant effect is that it had never been passed to be considered as a law and never been existed. The request/submission of learned departmental representative for reference to the President, ITAT to constitute Special Bench because ITAT Mumbai and Delhi Benches of equal strength have given conflicting judgments has been considered and not granted. Therefore the request of Learned departmental representative for reference to the President, ITAT is declined. Thus no transfer pricing adjustment can be made on account of domestic transaction which has been referred by the AO, after omission of Clause (i) of section 92BA of the Act by Finance Act 2017. Therefore, the impugned order is not legal and deserves to be set aside. Decided in favour of assessee.

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• 2024 (5) TMI 1168
  Penalty proceedings u/s 270A - misreporting of income/ under reported income - proof of misrepresentation or suppression of facts - Bonafide belief that no tax liability since TDS was deducted - misrepresentation or suppression of facts - Assessee argued that since the assessment was based on the return filed in response to the notice u/s 148, there was no underreporting or misreporting - as per assessee purchaser of property had deducted taxes at the time of purchase and the entire transaction was duly reflecting in Form No. 26AS on the portal of the Department. HELD THAT:- Section 270A provides for penalty for under-reporting of income [penalty at fifty per cent, of tax payable on such under-reported income, under sub Section (7)] and misreporting of income [under sub Section (8) and (9), penalty at two hundred per cent, of tax payable on such income]. Penalty under sub Section (8) is independent of levy of penalty under sub Section (7) even if there is no under reported income. Under sub Section (1), the AO, Commissioner, Principal Commissioner or the Appellate Commissioner may direct that any person who has under-reported his income to pay penalty on such under-reported income. In our view, the mere fact that there is a provision for automatic levy of penalty does not mean that penalty has to be imposed. The Supreme Court in the case of Hindustan Steel Ltd. [ 1969 (8) TMI 31 - SUPREME COURT ] held that a penalty should not be imposed merely because it is lawful to do so. Even if a minimum penalty is prescribed, the authority will be justified in not imposing penalty where the breach is merely technical or is based upon the bona fide belief that a particular provision has been complied with. The Supreme Court stressed the importance of not levying penalty where the assessee acts with honest and genuine belief . The word misrepresentation denotes not just written or spoken words but also any other conduct that amounts to a false assertion. The assertion so made, an assertion that does not accord with the facts is also termed false representation. The case of the assessee does not fall under any of the specific provision content in Section 270A(2) of the Act which deals with various circumstances relating to under reporting of income . Therefore, since the assessee s case does not fall under sub-Section (2) of Section 270A, then the benefit of sub-Section (6) to Section 270A is also not available to the assessee. In the instant facts, certain facts are noteworthy. The first fact is that the purchaser, at the time of sale of property, property taxes had been effectively deducted at source at approximately 50% of the amount of taxes payable on such sale consideration. Secondly, the assessee was, in the instant facts, under a bona fide believe that she was not liable to pay taxes on sale of property, when taxes had been withheld at source at the time of purchase by the purchaser of such property. Thirdly, the assessee was under the genuine belief that there is no misrepresentation or suppression of facts, since the purchaser of property had deducted taxes at the time of purchase and the entire transaction was duly reflecting in Form No. 26AS on the portal of the Department, which was within the knowledge of the Income Tax Department, therefore, there is no question as regards to any misrepresentation or suppression of facts, since the Department has not disputed the actual amount of sale consideration, which has been reported in Form No. 26AS. It would be a different matter if the Department would have alleged that there was a difference / mismatch between the sale consideration as reflecting in Form No. 26AS on which TDS has been deducted under Section 194-IA of the Act and the actual sale consideration which had been received by the assessee on such sale of land. That, in our view, it would have been a case of misrepresentation or suppression of facts. However, once the sale consideration is reported in Form No. 26AS on the Government website and the amount of sale consideration has not been challenged / disputed by the Department and taxes has been withheld on such sale consideration by the purchaser of property under Section 194-IA of the Act, then, in our view, this is not case of misrepresentation or suppression of facts. In the instant case, the assessee was under a bona fide believe that once the correct income flowing from sale of property is duly reflecting in Form No. 26AS on the Government website and taxes have been deducted at source by the purchaser of such property u/s 194-IA of the Act, the assessee was under no further obligation to file return of income disclosing sale of aforesaid property and pay any further taxes thereon. This is not a fit case for levy of penalty u/s 270A of the Act. Appeal of the assessee is allowed.

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• 2024 (5) TMI 1167
  Unexplained cash deposits - CIT(A) Reducing the addition by applying the provision of section 44AD - Whether CIT(A) grossly erred in presuming the cash deposits as business receipt of the assessee? - HELD THAT:- From the finding ofNCIT(A), it is clear that he treated the entire deposits in the bank account as business receipts and applied net profit @ 8% invoking the provisions of section 44AD of the Act. The assessee had prayed for peak credits be taken as income of the assessee since there were both deposits and withdrawals from bank accounts during the year. CIT DR urged for treating the entire cash deposits in the bank account as undisclosed income of the assessee without giving set off of cash withdrawal made during the year. We are unable to accept this submission of Ld.CIT DR. Law is well-settled that if there are both credit and debit entries in the bank account of the assessee, in that event peak credit may be taken as undisclosed income considering the facts of each case. But for making addition of entire cash deposits when the debit entries are also there, in our considered view such action by AO would not be justified. The assessee is not in appeal before us, nor any representation is made on his behalf. CIT DR could not controvert the finding of Ld.CIT(A) that the Investigation Wing had reported about the business activity carried out by the assessee. It is not the case where the Ld.CIT(A) had returned finding without having supporting material. The contention of DR that there was no business activity by the assessee is contrary to records. We therefore, do not see any reason for disturbing and/or reversing the finding of Ld.CIT(A). The grounds raised by the Revenue lacks merit hence, dismissed.

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• 2024 (5) TMI 1166
  Additional income surrendered on account of excess stock - GP Estimation - Treatment of additional income from excess stock - difference in gross profit margin disclosed by the assessee for the year under consideration - additional income offered by the assessee on account of excess stock surrendered by the assessee during the course of survey was not shown by the assessee in the trading account by including it in the closing stock and that same was offered to income tax only as other income. HELD THAT:- Though the assessee had stated that there was heavy competition prevailing in the last quarter of the financial year which led the assessee to sell the products at a much lesser rate when compared to other quarters which had evidently contributed to the reduction of gross profit during the last quarter, we find that the same is not supported with any documentary evidence by the assessee. It is pertinent to note that there was excess stock was found during the survey which was accepted by the assessee by way of a declaration. The same also stood offered by the assessee as income in the return of income which was never retracted by the assessee. Obviously the addition on account of excess stock could be made only as unexplained investment taxable u/s 69 of the Act which could never be business income of the assessee. Hence, the income of Rs. 1,75,98,542/- needs to be taxed separately as unexplained investment and accordingly same could not be included in the gross profit computation of the assessee. Hence, the action of the lower authorities in determining the gross profit @8.53% without considering the value of surrendered stock is correct. It is fact that gross profit for the year had declined by 1.39% when compared to that of the immediately preceding year. AO had made extensive verification and found that the gross profit was drastically varying as some of the items were sold at a margin of 10% and some of the items were sold with more than 11%, some on the profit less than 6.9%. It is further, pertinent to note that the assessee having additionally offered 5.18 crores during the survey on 21.01.2010 had ultimately resorted to disclose only 4.36 crores as the returned income. None of the deficiencies pointed out by the ld AO by rejecting the books of account were met by the assessee before us with cogent evidence by giving contrary material. Hence, we uphold the action of the lower authorities for rejecting the books of account u/s 145(3) of the Act and calculating the differential gross profit. In the instant case, the ld AO had not resorted to estimation of the gross profit rather he had retained the gross profit earned by the assessee in the immediately preceding year and made addition for the difference amount in the sum of Rs. 1,08,51,505/-. The behavior of the assessee, deficiencies in the gross profit margins by having varying percentages as explained supra, we hold that addition has been rightly made by the AO in the sum of Rs. 1,08,51,505/- and the same has been rightly confirmed by the CIT(A) and hence the same does not require any interference. Accordingly, grounds raised by the assessee are dismissed.

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• 2024 (5) TMI 1165
  Disallowance u/s. 143(1)(a)(iv) - Disallowance of gratuity payment u/s 43B r.w.s 36(1)(v) - HELD THAT:- The section 143(1)(a)(iv) allows the AO to consider the Disallowance of any Expenditure indicated in the Audit Report but not considered in the computation of Income. Thus, the relevant provision specifically allows AO to consider only that expenditure which has been indicated in the Audit Report for disallowance, but not actually disallowed in computation of Income. In this case, the expenditure for gratuity on payment basis was not indicated in the Audit Report for disallowance. This fact has not been rebutted by the Revenue. Once, the impugned expenditure was not indicated in the Audit report for disallowance, the said amount is outside the preview of Section 143(1)(a)(iv) of the Act. Therefore, ADIT(CPC) had no jurisdiction to make any disallowance u/s. 143(1)(a)(iv) of the Act. In this case the ADIT had made disallowance u/s. 143(1)(a)(iv) therefore, the disallowance is outside the scope of section 143(1)(a)(iv) - Appeal raised by the assessee is allowed.

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• 2024 (5) TMI 1164
  Addition u/s 68 - Bogus LTCG - unexplained cash credit - rejecting the claim of the appellant for exemption u/s 10(38) in relation to surplus earned on sale of shares held for long term - HELD THAT:- Assessee made sale of shares through BSE and paid security transaction tax and there is no allegation against the share broker through whom assessee has made sales that they were indulging any price manipulation. Therefore, no justification in treating the LTCG as unexplained cash credit in absence of any cogent evidence. Decided in favour of assessee.

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• 2024 (5) TMI 1163
  Disallowance u/s. 14A r.w.r. 8D - interest expenditure and administrative expenditure - as argued assessee had sufficient self owned funds, therefore, no disallowance of any part of the interest expenditure was warranted - HELD THAT:- The Hon ble High Court of Bombay in the case of CIT vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] had observed that no disallowance for interest could be made based on the reasoning that if the assessee has more interest free funds than the tax-free investments, then a presumption would arise that tax free investments would be out of the interest-free funds. In fact, the aforesaid view is further supported by the judgment of South Indian Bank Ltd.[ 2021 (9) TMI 566 - SUPREME COURT] wherein as held that if investment in exempt income yielding shares is made out of common funds and the assessee had available non-interest bearing funds larger than the investments made in tax-free securities then in such cases, no disallowance u/s. 14A would be called for. Thus considering the fact that he had sufficient self owned funds available with him to source the investment in the exempt income yielding investment in his capital account with M/s. Anoop Road Carriers, no disallowance of any part of the expenditure was called for in his case u/s. 14A of the Act. Disallowance of the administrative expenditure made by the A.O u/s. 14A r.w.r. 8D(2)(iii), as the Ld. AR had failed to come forth with any plausible explanation as to on what basis the same could not be sustained, therefore, we uphold the same to the said extent. Thus, the Ground of appeal No.1 raised by the assessee is partly allowed in terms of the aforesaid observations. Addition u/s. 41(1) - cessation of liability - outstanding liability had not been discharged till date, the A.O held the same as a liability that had ceased to exist - HELD THAT:- Mere fact that the liability is outstanding for the last many years in the books of account of the assessee and had been brought forward from the preceding years cannot on such standalone basis justify the addition u/s. 41(1) of the Act. Also, there is nothing available on record which would reveal that the same was in the nature of a trading liability which the assessee had claimed as deduction. Ostensibly, Section 41(1) of the Act, inter alia, contemplates where any deduction has been made in the assessment for any year in respect of the trading liability incurred by the assessee and subsequently during any previous year the assessee has obtained some benefit in respect of trading liability by way of remission or cessation thereof, then the amount of benefit accruing to him shall be deemed to be profits and gains of business or professions, which, accordingly, would be chargeable to income tax as his income of that previous year. As the A.O had failed to place on record any material which would justify the addition of the aforesaid amount of Rs. 10,00,000/- u/s. 41(1) of the Act, therefore, a strong conviction that the matter in all fairness requires to be revisited by him - we thus restore the matter to the file of the A.O with a direction to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his claim on the basis of fresh documentary evidence, if any. Thus, the Ground of appeal No.2 raised by the assessee is allowed for statistical purposes in terms of the aforesaid observations. Decline of credit of TCS - year of transaction of purchase of coal - Although the assessee had claimed the credit of the amount of TCS in his return of income, but as the coal was purchased in the immediately succeeding year, therefore, the A.O had declined to allow the credit of the aforesaid amount - HELD THAT:- Schedule of TDS/TCS in the income tax return provides column to fill in information of deductions for the previous year but credit for the same has to be claimed in the future year. As in a case where the assessee cannot claim for TDS pertaining to the income which is taxable in the succeeding year has to carry forward the credit of TDS to the subsequent year and claim the same in the later year in which the income is offered to tax, therefore, A.O had rightly observed that as the transactions of purchase/sale of coal had materialized in the succeeding year, therefore, the claim for credit of TCS ought to have been raised by the assessee in the next financial year and not during the year under consideration. Direct the A.O to allow the assessee s claim of credit of TCS in the next year i.e. A.Y. 2017-18, in which, transaction of purchase of coal had materialized.

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• 2024 (5) TMI 1162
  Revision u/s 263 - Disallowance u/s 14A r.w.r. 8D - disallowance of expenses incurred on earning tax-exempt income - change in method of calculation - suo-moto disallowance made by assessee - HELD THAT:- Section 14A would be applicable on the dividend income, earned by the assessee which is exempted u/s 10(38) of the Act. The assessee supplied the list of expenses for calculating the expenses related u/s 14A of the Act. The assessee itself had calculated amount and offered for tax during filing of return. The ld. AO is not expected to raise more queries, if the ld. AO is satisfied about the admissibility of claim on the basis of the material and the details supplied. So, assessment order cannot be called erroneous and the application of Section 263 is not justified. The respectful reliance is placed Moil Ltd ( 2017 (5) TMI 258 - BOMBAY HIGH COURT] - PCIT has calculated the amount of Rs. 67,12,410/- u/s 14A. The assessee had declared the amount of Rs. 14,85,815/-. So, balance amount of Rs. 52,26,505/- is escaped income which is caused the assessment order erroneous and prejudicial to the interest of the revenue. When the ld. AO adopted one of the possible views, his order does not suffer from any error. Therefore, in view of the aforestated essence of precedents on the issue of revision under s. 263, the twin conditions - the order is erroneous and prejudicial to the interest of Revenue, do not co-exist in this case.The same view was taken by the Coordinate Bench at Jodhpur in the case of Chhita Singh Shekhawat [ 2015 (10) TMI 305 - ITAT JODHPUR] - PCIT has not rejected the method of calculation of 14A of assessee which is accepted by the ld. AO. Mere change in method of calculation the Section 263 cannot be invoked. We dismiss the impugned revisional order passed u/s 263 of the Act. The ground of the assessee is succeeded.

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• Benami Property

• 2024 (5) TMI 1161
  Benami Transaction - provisional attachment - beneficial owner of the Benami properties - SCN issued by Initiating Officer u/s 24 (1) of the Prohibition of Benami Property Transactions Act - The allegation is that there has been routing of funds from unknown sources through various companies and layering in this regard which have ultimately found a channel to the petitioners-companies through M/s Siddhi Vinayak Infra Zone. HELD THAT:- As per statement of the concerned Directors/Partners/other Officials recorded and mentioned in the show cause notice, the original sale-deeds were not found in the office of these companies who in fact had common addresses, mostly so, nor the Director/Partners had any inkling as to the activities and source of funds of these companies of which they were Directors/Partners and they had mentioned the names of certain persons who have been mentioned as interested persons in the show cause notice who have links with other companies and LLPs. Based on the aforesaid material, the Initiating Officer has recorded his reasons to believe that the properties are result of benami transactions. At the stage of consideration of admission and interim relief application looking into the facts and material on record, and that which we have perused, it is difficult to hold at this stage that none of the material was relevant or that it did not have a rationale connection with the transactions which are being referred as benami, however, again we do not record any conclusive opinion in this regard, as, all these issues need to be thrashed out finally. No doubt, the argument of learned counsel for the petitioners that the transactions are based on legal documents and are permissible in law is very attractive, but, the stand of the Revenue is that these are all colourable transactions and, therefore, the opinion formed by the Initiating Officer at the stage of Section 24(1) is an opinion formed on the basis of material and it has rationale nexus with the object sought to be achieved which does not require any interference. It is trite that merely because some legal documents have been prepared and agreements have been entered into that may lead to an initial presumption about the validity of such transactions, but, then this is rebuttable and the Revenue is entitled to inquire, if there are grounds for it, as are being claimed, as to whether transactions are colourable and benami in terms of the Act 1988. How far the transactions at hand based on material in possession of the Initiating Officer at the stage of Section 24 (1) would bring the transactions within the meaning of Section 2(9)(A) and (B) is also required to be considered, as, the jurisdictional facts envisaged in Section 24(1) have to be preexist and are prerequisites on the satisfaction of which alone the Initiating Officer has the jurisdiction to proceed in the matter. On a perusal of records which have been produced separately before us in sealed cover, we find that the reasons and materials contained therein have been substantially discussed in the show cause notice and prima facie it is not as if the reasons and materials discussed in the impugned show cause notice and those available in these records are absolutely unrelated or alien to each other. This aspect, however, is also open for consideration at the time of final hearing as to whether the records contain relevant reason or material which is not mentioned in the show cause notice thereby rendering it defective and prejudicial. Order of provisional attachment - Taking into consideration these facts, especially regarding sale of some of the lands/flats by Tilicho Ventures LLP which is part of the same consortium but, intriguingly has not challenged the notices before us, and, in spite of sufficient opportunities, the counsel for the petitioners did not deny this fact even orally during argument, although Mr. Parihar, learned Senior Counsel along with Ms. Radhika Singh, etc. appeared for all the seven petitioners-companies and Jitendera Prasad Verma is a Director in Tilocho Infra Developers Private Limited and also a partner in Tilocho Ventures Private LLP., whereas, Satish Kumar who has filed the affidavits in two of the petitions on behalf of the other companies is also a Director in the Tilicho Infradevelopers Private Limited, therefore, we are not inclined to stay the order of provisional attachment. In our opinion, the following orders would serve the ends of justice at this stage:- (I) Subject to final disposal of writ petitions and without prejudice to the rights of the petitioners herein, the proceedings under the Act 1988 may go on and the Initiating Officer shall take a considered decision under Section 24 (4) of the Act 1988 in accordance with law, accordingly. (II) In the event the Initiating Officer revokes the provisional attachment of the property with the prior approval of the Approving Authority, then, of course, the matter would end and no further adjudication would be required before the Adjudicating Authority. (III) However, if the Initiating Officer passes an order continuing the provisional attachment of the property with prior approval of the Approving Authority and refers the matter to the Adjudicating Authority under Section 24(5), the Adjudicating Authority may go ahead with the proceedings however, he shall not pass any final order under Section 26(3) of the Act 1988 till disposal of these writ petitions. (IV) In the event the opposite parties herein want to withdraw the impugned show cause notices and issue them afresh in accordance with law providing the noticees with the material in the possession of the Initiating Officer, then, the pendency of these proceedings shall not come in their way. We make it clear that this is not a direction which we have issued, but, only a liberty which we have granted to the opposite parties in case they are of the opinion that this would be a better course of action, unless, of course, this is impermissible in law. The opposite parties shall file their counter affidavit within four weeks. Two weeks thereafter shall be available to the petitioners for filing rejoinder affidavit. Considering the important issues involved herein, all these petitions shall come up for hearing in the 3rd week of July, 2024.

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• Customs

• 2024 (5) TMI 1160
  Seeking to grant Bail u/s 135(1)(a) 135(1)(b) - possession of foreign origin gold without paying custom duty - HELD THAT:- Considering the material on record, the punishment under the said Act, the period applicants remained in jail and without expressing any opinion on the merits of the case, the Court is of the view that the applicants have made out a case for bail. The bail application is allowed. In case of breach of any of the any bail conditions, the prosecution shall be at liberty to move bail cancellation application before this Court.

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• 2024 (5) TMI 1159
  Seeking restoration of appeal dismissed for want of prosecution due to failure to consider written request for adjournment - HELD THAT:- From the present application, it has come on record that prior the date of impugned final order, the appellant had already moved an application seeking an adjournment on 1st September, 2023, The said application is mentioned to have been received in the registry on 24th August, 2023 itself. As already quoted, the final order has no mention of such application making it clear that the said application was not placed before the Bench on 1st September, 2023. To get verified the actual facts that the inquiry was marked to Registrar, CESTAT in this respect. From Persual of the report, it is clear that there is no satisfactory explanation in the verification report about as to why the adjournment application was not placed on record. Hence, we hold that there is no irregularity or the error in the final order dated 01.09.2023. However, since there is no denial on part of the concerned section of the registry for having received the application seeking adjournment on 24th August, 2023 i.e. prior the date of final order, we hold it to be a fit circumstance to allow appellant-applicant an opportunity to make his submissions on the merits of the case. The interest of justice otherwise requires that lis preferably shall/be decided on merits instead being disposed of on account of technicalities or mere procedural lapses. Accordingly, we hereby allow the said application and order restoration of the present appeal to its original number. Registry is directed to list the appeal on July 02, 2024 for final hearing. It is clarified that no further opportunity shall be given for the purpose.

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• 2024 (5) TMI 1158
  Illegal exports - Export of non-basmati rice to Nepal - Penalty - lack of evidence for illegal export - HELD THAT:- In the present case we do not find any evidence which has been adduced in the course of proceedings before any Authority which shows that the goods sold/ cleared by the Appellant 1 have been exported or any preparation for the export of the said non-basmati rice has been made by any of the appellant by taking the goods to the border/port. In fact no evidence in the form of any shipping bill or any document required for exportation has been produced at any time. The entire case is based upon certain Bill of Entries which have been noted by the Enforcement Directorate during the course of investigation which have been filed with Nepal Customs. None of these Bill of Entries refer to any documents issued by any of the appellant. Further how can it be that goods were being illegally exported through unidentified routes be subject matter of the Bill of Entries filed with Nepal Customs. We are at loss to understand how the Bill of Entries could have been filed without any export documents from the exporter from India. As there is no evidence to establish that even a single gram of the goods allegedly to be exported illegally have been recovered/ seized/ confiscated or any document to that effect found we do not find that the appellants could have been proceeded against under the provisions of Section 114 of the Customs Act. The entire case made against the appellants for imposing penalty u/s 114 cannot be upheld even on merits. Appeals are allowed.

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• 2024 (5) TMI 1157
  Refund claim - benefit of Notification under Indo-Srilanka Free Trade Agreement (ISFTA) - Whether the benefit of the Notification No.26/2000-Cus, which was not claimed earlier was eligible to the appellant when claimed at a later date after payment of duty - HELD THAT:- There is no dispute that the goods have been imported from Srilanka and the appellant has placed on record the country-of-origin certificate and since the above imported goods are eligible for the benefit of the Notification, the denial of the benefit of the Notification only because they have not claimed at the time of filing the Bill of Entry cannot be a ground for denying the benefit as long as the conditions of the Notification are satisfied. The goods were cleared on 15.4.2009 and the claim for reassessment / refund was filed on 24.04.2009 well within the stipulated time as per the Board s Circular for amendment or reassessment. The learned counsel has rightly relied upon the decision of Hon ble High Court of Bombay in Hero Cycles vs. UOI [ 2009 (6) TMI 4 - BOMBAY HIGH COURT] . Thus, we do not find any reason to deny the benefit of the Notification No.26/2000-Cus. dated 01.03.2000. Accordingly, the appeal is allowed with consequential relief, if any, as per law.

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• 2024 (5) TMI 1156
  Imports product as I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide) - Misdeclaration of foods - Demand - Confiscation - interest - Penalty - benefits of Customs Notification No. 50/2017 - Applicability of Advance Rulings - Non-compliance to the Pre-notice Consultation Regulations before issuance of the Show Cause Notice - What is the appropriate classification of the imported goods declared as I-MAS Pos-Nickel Compound (Compound of Nickel Hydroxide) whether under CTH 28254000 as declared by the appellant or under CTH 38249900 as classified by the Revenue? Classification - HELD THAT:- The product that is imported I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide) is predominantly consisting of Nickel Hydroxide which is a separate chemically defined compound, but also containing Cobalt Hydroxide which is also a separate compound and also Graphite an element / metal. It has been admitted that these were added to enhance the conductivity of the Nickel Hydroxide Compound which is meant to be used for manufacture of Nickel Cadmium batteries. Cobalt Hydroxide Compound is neither a solvent nor a stabiliser or anti-dusting agent or colouring substance and is not introduced for any safety or transport or as permissible additive in terms of the relevant Chapter Notes 1 to Chapter 28. The aim of addition of Graphite which is a separate chemical / element / metal to the Nickel Hydroxide is said to be for flowability and also to enhance the conductivity of the compound. The appellant has submitted that Graphite is used as an anti-caking agent in the imported goods. In these facts of the case, it appears that the addition of these two substances make the Nickel Hydroxide Compound so obtained more suitable for Nickel Cadmium battery manufacture. Thus, these are added to make the imported product more suitable for Nickel Cadmium cells and thus the general use of Nickel Hydroxide compound is restricted or the product imported is made more suitable for Nickel Cadmium battery manufacturing. Thus, we are of the considered opinion that appropriate classification of the imported product is not under CTH 28254000 as classified by the appellant. After going through the provisions of the Customs Tariff Act and after considering the nature and composition of imported product I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide) we hold that it is more appropriately classifiable under CTH 38249900 and not under CTH 28254000 as adopted by the appellant. Since the imported item contains other natural materials such as Graphite and Cobalt. The Customs Notification has to be interpreted in a plain and simple manner and the technical literature available in public domain is to be taken into account for determining the eligibility of exemption and on application of the above analogy, the appeal fails on two counts that neither the description of the product imported matches with the description of the product as notified in the Notification nor the CTH as mentioned in Column (2) of the Notification matches. As such, the appellant is not eligible for the benefit of Notification No. 50/2017- Customs dated 30.06.2017. Applicability of Advance Rulings - HELD THAT:- Any Advance Ruling is mandatorily applicable to the applicant and the concerned field formation and will have only persuasive value in respect of third parties. The provisions of the Customs Tariff Act and the correct interpretation of applicable GIRs, Section and Chapter Notes as applicable to the facts of the case are essential requirements for determination of any classification of any imported product under the Customs law. Non-compliance to the Pre-notice Consultation Regulations - We have gone through the provisions of the Customs Act, 1962 and Pre-notice Consultation Regulations, 2018. The Department has incorporated alternative dispute resolution mechanism by way of Pre-consultation process to reduce the litigation. Such pre-consultation facilitates resolution of disputes obviating the necessity of issuance of the Show Cause Notice and for speedy settlement of the dispute between the Department and the tax-payer. The Adjudicating Authority should have scrupulously followed the administrative directions in the Board s Circular and also the provisions of the Pre-notice Consultation Regulations, 2018. It is noticed that the appellant has been continuously contesting the classification of the imported product all along leading to issuance of the Show Cause Notice and its adjudication. As such, we are of the opinion that no prejudice is caused to the appellant due to omission on the part of the Adjudicating Authority in not complying with the Pre-notice consultation process. Had the appellant accepted the classification adopted by the Revenue, he would have opted to pay the differential duty along with interest for settling the issue. Imposition of fine and penalties could be avoided. However, as even now the appellant is contesting the classification of the imported product, we are of the considered view that there is no justification for setting aside the adjudication proceedings already completed as strict observance of the principle of natural justice have been complied with by according an opportunity of personal hearing and by considering the submissions made by the appellant before passing the impugned order dated 31.03.2022 by the Commissioner of Customs. Confiscation - fine and penalty - Considering the facts that the appellant is a regular importer of the product which is used in the manufacture of Nickel Cadmium batteries and also considering that the supplier is reportedly adopting the above classification globally, we are of the opinion that attributing any malafide intention or motive for adopting such classification or claiming exemption benefit of the Notification is not justified in the facts of this case. Further, appreciating the ratio decidendi in the Hon ble Supreme Court s decision of Northern Plastic Ltd. Vs. Collector of Customs Central Excise [ 1998 (7) TMI 91 - SUPREME COURT] , we hold that the imposition of fine and penalty is not justified and so ordered to be set aside. Consequently, the appellant is not eligible for the benefit of the Notification No. 50/2017-Cus. and demand of duty along with interest is confirmed. However, the fine and penalties imposed are set aside. Classification is rejected but in respect of confiscability of the goods and imposition of fine and penalty is set aside. Thus, the appeal is partly allowed on the above terms.

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• 2024 (5) TMI 1155
  Classification of Iron Ore fines as Iron Ore lumps - Export - Valuations - Levy of export duty - Whether on reclassification of small quantity of Iron Ore fines as Iron Ore lumps on the ground that the export consignments contained certain Iron Ore particles of size 10 mm and above to the extent of 16.29% and more than 5%, would attract a different rate of duty as Iron Ore fines or otherwise - HELD THAT:- In this case, going by the evidence on record, it is obvious that the consignment exported is for Iron Ore fines and in fact, there is penal clause for having any Iron Ore lump in the mixture. Therefore, it is not a case where the Iron Ore lump has been deliberately exported rather it is part of the Iron Ore fines due to certain involuntary processes undertaken in which such particles size also are shipped in. It is not the case of deliberate mixing of Iron Ore fines and Iron Ore lumps. In fact, if one considers BIS Standard there is already a tolerance limit provided for Iron Ore lump up to 5%, meaning that there could be inevitable Iron Ore lumps present even if the consignment is of Iron Ore fines. Therefore, the entire consignment of mixture having certain percentage of Iron Ore lumps has to be treated as Iron Ore fines only and cannot be artificially segregated into Iron Ore fines and lumps for the purpose of levying of export duty. Therefore, the demand confirmed and upheld by the Commissioner (Appeals) is not sustainable on this ground. Value Determination Issue - It is an admitted position that the price negotiated is based on certain parameters like moisture content, Fe content, etc., at the end of buyer s port and therefore, the final invoice may be higher or lower as compared to the provisional invoice. Based on the confirmed parameter verified at the receiver s port, final invoice has been raised for the consignments in question and the same amount has been realized as confirmed by BRC and accordingly, the transaction value has to be accepted in the instant case. Therefore, on this count also, there is no ground for rejecting the transaction value as also for demanding additional duty on this account. Therefore, on both counts, appeals are allowed.

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• Corporate Laws

• 2024 (5) TMI 1154
  Rejection of drant of statutory interest in accordance with Rule 156 of the Companies (Court) Rules, 1959 in favour of the workmen - workmen and the secured creditor have been treated to be pari passu, in view of the provision of Section 529 of the Companies Act - Interpretation of Rule 156 of the Companies (Court) Rules, 1959. Effect of Section 529 of the Act 1956 - HELD THAT:- The effect of Sections 529 and 529-A is that the workmen of the company become secured creditors by operation of law to the extent of the workmen's dues provided there exists secured creditor by contract. If there is no secured creditor then the workmen of the company become unsecured preferential creditors under Section 529-A to the extent of the workmen's dues - The purpose of Section 529-A is to ensure that the workmen should not be deprived of their legitimate claims in the event of the liquidation of the company and the assets of the company would remain charged for the payment of the workers' dues and such charge will be pari passu with the charge of the secured creditors. Further, there is no other statutory provision overriding the claim of the secured creditors except Section 529-A. This section overrides preferential claims under Section 530 also. Under Section 529-A, the dues of the workers and debts due to the secured creditors are to be treated pari passu and have to be treated as prior to all other dues - it appears that the arrears of amount have been paid in favour of the workmen. But, the amount has been paid in favour of the workmen only with respect to the arrears of salary. After the subsequent time having been elapsed, one interlocutory application being I.A. No.7469 of 2016 has been filed seeking therein the statutory interest which is to be paid in favour of the workmen also on the ground that the secured creditor and the workmen are to be treated as pari passu. Whether the workmen claim parity with respect to the payment of interest on the basis of principle of pari passu, will be said to be acceptable? - HELD THAT:- In the light of the definition of the vested right , it is evident that right accrues to person or persons attached to an institution or building or anything whatsoever, meaning thereby, if an incumbent is claiming a vested right, he is to substantiate before the court of law that the right has been created in his favour by an order passed by the competent authority in accordance with law. It is evident that in the instant case, the workmen never raised the claim of interest and no such claim of interest was ever adjudicated upon. The payments have been made to the workmen in priority against sale proceeds of unsecured assets of the company in compliance of the order dated 12th August 2016. It has been accepted by the parties and has attained finality - Moreover, at the time of making claim before the Company Court for arrear of the salary, there was no claim for making payment of the interest upon the said arrear which also suggests that the workmen are well aware with the fact that they are not entitled for the interest, otherwise, the issue of interest would have been raised at the very inception by raising the said issue in the interlocutory application which has been filed for arrears of the salary. Further, it is evident that the section 483 of the Act 1956, confers power of the widest amplitude on the appellate court so as to do complete justice between the parties and such power is unfettered by consideration of facts like who has filed the appeal and whether the appeal is being dismissed, allowed or disposed of by modifying the judgment appealed against. The object sought to be achieved by conferment of such power on the appellate court is to avoid inconsistency, inequity, inequality in reliefs granted to the parties concern. The instant Company appeals are hereby dismissed.

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• Insolvency & Bankruptcy

• 2024 (5) TMI 1153
  Debt or Equity - Compulsorily Convertible Debentures which do not carry any obligation to repay - to be treated as debt or as equity, while admitting the claim under IBC - Waterfall mechanism. Whether the Compulsorily Convertible Debentures which do not carry any obligation to repay should be treated as debt or as equity, while admitting the claim under IBC? - HELD THAT:- he Hon ble Supreme Court in the said judgment of IFCI [ 2023 (12) TMI 129 - SUPREME COURT ], upheld the decision of NCLT and NCLAT for treatment of CCD as equity - The Hon ble Supreme Court noted that the very substratum of the submissions of the Appellant is that it has been left high and dry. If it s investment is to be treated as equity, under the waterfall principle nothing will come its way. Thus, while other creditors benefit, the Appellant will not get anything. The salient clauses of the DSA have been reproduced earlier. An examination of the DSA shows that the debentures issued to the Appellant were compulsorily convertible into equity and the only option to the Appellant was to get it converted to shares even prior to the stipulated period of 10 years, failing which the CCDs were to automatically convert into equity shares at the end of 10 years. There was no liability or obligation to repay the debt. A convertible debenture can be regarded as debt or equity based on the test of liability for repayment. If the terms of convertible debentures provide for repayment of borrower s principal amount at any time, it can be treated as a debt instrument but if it does not contemplate repayment of the principal amount at any time, that is, if it compulsorily leads to conversion into equity shares, it is nothing but an equity instrument. Respectfully following the judgment of the Hon ble Supreme Court in the case of M/s IFCI Limited vs. Sutanu Sinha Ors., [ 2023 (12) TMI 129 - SUPREME COURT ], it is held that the compulsorily convertible debentures held by the Appellant are equity instrument and accordingly, we do not find any reason or justification to interfere in the impugned order of the Adjudicating Authority. Appeal dismissed.

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• 2024 (5) TMI 1152
  CIRP - Validity of admission of section 7 application - Violation of principle of natural justice - Denial of opportunity of the corporate debtor to file reply - error in misinterpreting the scope of Rule 49(2) Denial of opportunity of the corporate debtor to file reply - HELD THAT:- Present is not a case where it can be said that the corporate debtor was prevented by any sufficient cause from appearing. Notice has been issued which was duly served. No cause is being showed by the appellant that they were prevented from appearing. Counsel appearing before the Adjudicating Authority and saying that he has recently engaged and has not filed the vakalatnama cannot be said that the corporate debtor was prevented by any sufficient cause from appearing. Corporate debtor has to blame himself for not appointing an Advocate to appear and make appropriate pleading before the Court. It is not a case advocate who appeared submitted that he shall file vakalatnama during the course of the day. Interpretation and Application of Rule 49(2) of the NCLT Rules, 2016 - HELD THAT:- Rule 49 gives ample jurisdiction to the Adjudicating Authority to proceed for ex parte as corporate debtor does not appear. Appearance as contemplated under Rule 49(1) is appearance by the corporate debtor or by an authorised representative. The financial creditor has also submitted that present is a case where debt and default is not even questioned since there is a consent decree passed by the DRT against the corporate debtor, hence, the appellant in this appeal is not making any submission on merits of the appeal although time was taken by the appellant on 31.01.2024 to file an additional affidavit so as to address the appeal on merits. It is noticed that during the oral submissions challenging the order rejecting the application under Rule 49(2), no submission has been advanced by the appellant on debt and default. In the facts of the present case and submission of the counsel for the parties, the present is not a case where this Tribunal may interfere with the impugned order in exercise of our appellate jurisdiction. There is no merit in the appeal. The appeal is dismissed.

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• 2024 (5) TMI 1151
  CIRP - VAT / Sales Tax dues - Treatment of claims as Secured claims vis-a -vis Unsecured claims - Rejection of application of appellant to treat its claim as Secured Creditor during the liquidation under waterfall arrangement as stipulated in Section 53 of IBC - HELD THAT:- The Appellant during the moratorium period could determine the tax, interest, fine or any penalty which is due, however, the Appellant could not enforce his claims for recovery or levy of interest on the tax due during the period of Moratorium. It has been brought out that the Claims of Assessment Orders passed during the moratorium under Section 14 33(5) of the Code, have been rightly considered and admitted as 'Unsecured' Operational Debt. It is significate to take into consideration that the Appellant vide its own letter dated 23.06.2023 acknowledged the fact that for A.Y. 2014-15, 2015-16 2016-17, the assessments were carried on during moratorium. It has been brought to notice that the Appellant passed attachment orders on the property of the Corporate Debtor i.e., 16.10.2018 in alleged and contravention of Section 14 of the Code Regulation therein, even after order dated 15.06.2023 passed by Adjudicating Authority whereby, the Appellant was directed to lift the attachment within ten days of receipt of such intimation from the Respondent, however, till date, the Appellant continues illegally and unlawfully attachment on the subject property of the Corporate Debtor. The time period of 330 days prescribed in the Code is indicative and directory in nature and not mandatory. In fact, large number of cases, due is several reasons, are not able to be resolved within such stipulated period and if the contentions of the Appellant is accepted then the Resolution Process of the Corporate Debtor, in most of the cases, may not take off at all. Thus, the pleadings of the Appellant on this grand, stand rejected. The Rainbow Paper [ 2022 (9) TMI 317 - SUPREME COURT] held that tax dues covered under section 48 of the VAT Act which clearly stipulate the Appellant s right over the assets of the Corporate Debtor as first charge. This similar provisions, however, was not available in Gujarat Sales Tax Act and therefore, the tax claims were not treated as Secured Creditors. To the credit of the Appellant, he fairly concluded that this period was not covered in the ratio of Rainbow Paper. Hence the Respondent classified remaining admissible outstanding dues as Unsecured debts. The Adjudicating Authority, therefore, also passed the Impugned Order accordingly based on Resolution Plan put up for approval by CoC through the Respondent - there are no infirmity in the Impugned Order on this account. Appeal dismissed.

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• Service Tax

• 2024 (5) TMI 1150
  Cenvat Credit - Use of Set top boxes for providing Broadcasting Services - Demand and recovery of interest u/r 14 of the CENVAT Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 - Imposition of penalty - Classification of Set Top Boxes as inputs or capital goods - Applicability of extended period of limitation - HELD THAT:- Set top boxes classifiable under Chapter 85 do not find any mention in the exclusion category. That being so, we do not find any reason why these goods could not have been treated as input for provision of the output services by the Appellant. It is a well settled principle in the law that the taxing statute needs to be construed strictly according to the words phrases used in the statute; there can be no other interpretation when literal interpretation is unambiguous. These set top boxes satisfy the definition of inputs as they are goods used by the output service provider for the provision of the output services. There cannot be any fallacy in the stands taken by the Appellant in taking the entire credit at the time of receipt of these set top boxes as inputs. Admissibility under capital goods for any inputs and that too on the basis of accountancy practices followed by the Appellant. We do not find any merits in the argument that just because these goods have been capitalized in the books of accounts, they could not have been treated as input. Thus, we do not find any merits in the demand of interest made.

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• 2024 (5) TMI 1149
  Demand of service tax - Whether the appellant provided export of service under the provisions of the Export Rules, 2005 - services delivered and used outside India and the commission income is received in convertible foreign exchange from its group companies - HELD THAT:- In the present case, as noticed, in terms of the agreement between the appellant and group companies situated outside India which did not have any permanent establishment in India, the appellant solicited orders for supply of the products of the group companies for which the appellant received commission in convertible foreign exchange. The Commissioner, in view of the decision of the larger bench of the Tribunal in Arcelor Mittal[ 2023 (8) TMI 107 - CESTAT MUMBAI-LB] , was not justified in holding that since the services were used and provided in India, the same would not constitute export of service . The order dated 26.03.2013 passed by the Commissioner, therefore, cannot be sustained and is set aside. The appeal is, accordingly, allowed.

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• Central Excise

• 2024 (5) TMI 1174
  CENVAT Credit - capital goods/inputs - various steel items namely, M.S. Rods, M.S. Channels, Beams, M.S. Plates, Bars, Joints, Beams, Angles, Flats and Flanges falling under Chapter 72 of the Central Excise Tariff Act, 1985 - invocation of extended period of limitation - HELD THAT:- The appellant has been able to show the usage of the said items in fabrication of their capital goods, without which no manufacturing activity can take place. The same is supported by the certificate issued by a Chartered Engineer - during the impugned period, the issue was in dispute as to whether an assessee is entitled to take CENVAT Credit on the above said steel items as inputs or capital goods - the extended period of limitation is not invokable in the facts and circumstances of the present case. As the appellant has been able to establish that the items in question have been used in the fabrication of their capital goods, in these circumstances, the appellant has correctly availed the CENVAT Credit. The impugned order is set aside - appeal allowed.

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• 2024 (5) TMI 1148
  Quashment of Notification No. 21/2017 CE dated 18.07.2017 vide which Notification No. 1/2010 CE was rescinded - fixation of special rate of actual value addition in respect of goods manufactured and cleared during the period April 2017 to 07.07.2017 - HELD THAT:- The order passed by the Commissioner Central Excise/Central Goods Services Tax Commissionerate, Jammu (J K) is appealable, as admitted in the Writ Petition by the petitioner itself, before the CESTAT in terms of Section 35B of the Central Excise Act, 1944 - the remedy prescribed under the Act for any aggrieved person of the order of Commissioner, is an appeal before the CESTAT and without availing such remedy, the petitioner ought not to have rushed to this court with a writ petition. In yet another case titled CCT., ORISSA AND OTHERS VERSUS INDIAN EXPLOSIVES LTD. [ 2008 (2) TMI 607 - SUPREME COURT ] the Supreme Court took notice of the quashing of show cause notice by the High Court issued against the respondent under the Orissa Sales Tax Act and observed that the High Court had completely ignored the parameters laid down by this Court in a large number of cases relating to exhaustion of alternative remedy. The submission of learned counsel for the petitioner that the petitioner is not entering into the merits of the case vis- -vis challenge to the impugned order is belied by the averments of the writ petition itself which unambiguously enter into the merits of the case by highlighting the legal lacunae s in the order impugned. The writ petition is held to be not maintainable against the order impugned having been filed without availing the efficacious alternate remedy provided by the Act - the writ petition is dismissed.

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• 2024 (5) TMI 1147
  Classification of goods - Tobacco supplied in retails pack - classifiable under CTH 2401 as claimed by the appellant or 2403 as claimed by the Revenue - invocation of extended period of limitation. Classification of goods - HELD THAT:- From the comparison of test report in respect of raw material as well as the final product of the appellant, the nature of product remain exactly same except the packing in as much as the packing of raw material is in bulk and packing of final product is in retail pack. Therefore, the nature of raw material i.e. unmanufactured tobacco in cut leaves form remained as such even after repacking into retail pack - Since the product of the appellant remained unmanufactured tobacco right from the raw material stage up to the finished stage it remains under Chapter heading 2401 and by any stretch of imagination cannot be called as manufactured tobacco. Therefore, since the tobacco has not been converted into manufactured tobacco, taking the same into CTH 2403 is without authority of law. Consequently, the unmanufactured tobacco even though it is consumed as a chewing tobacco since same remained as unmanufactured tobacco cannot be classified under 2403 9910. Even by application of Note 3 of Chapter 24 the activity amount to manufacture, the impugned good falls under Chapter heading 2401. Therefore, by virtue of chapter Note, the activity though amount to manufacture as per the Central Excise. Hence, the appellant have rightly paid the duty as manufacture goods but since the goods is correctly classified under CTH 2401, the demand of basic Excise duty and NCCD is not sustainable as the same is correctly classified under 2401 and not under 2403 as contemplated by the Revenue. Therefore, on merit itself the demand is not sustainable. Extended period of limitation - HELD THAT:- The entire activity of re-packings of cut leaves tobacco from bulk to retail pack and classification thereof under Heading 2401 of Central Excise Tariff Act, 1985, was very much in the knowledge of the department. Therefore, there is absolutely no suppression of fact, fraud, mis-declaration, etc. on the part of the appellant therefore, there are no hesitation in holding that the demand of duty adjudged in the impugned order under the extended period is not sustainable also on limitation. The impugned order is not sustainable. Hence, the same is set aside - Appeal allowed.

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• 2024 (5) TMI 1146
  CENVAT Credit - inputs/capital goods - various steel items used in manufacturing sponge iron - HELD THAT:- As the assessee is able to prove that all the items in question have been used in fabrication of structures for installation of capital goods which were ultimately used in the manufacture of their final product, in the circumstances, as per the decision of the Hon ble Chhattisgarh High Court in the case of M/s. Vandana Global Ltd. v. Commissioner of C.Ex. Cus., Raipur [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] CENVAT Credit to the assessee is allowed. The appeal filed by the Revenue is dismissed.

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• CST, VAT & Sales Tax

• 2024 (5) TMI 1173
  Time Limitation - submission of annual returns after the expiry of the prescribed time-limit - Validity of self-assessment u/s 35 of the Assam VAT Act, 2003 - Legality of re-assessment proceedings u/s 40 of the Assam VAT Act, 2003. Timeliness of Submission of Tax Returns and Annual Returns - HELD THAT:- The monthly returns for the annual year 2009-2010 was not submitted within the 21st day of the succeeding month, in other words, it was not submitted within the time prescribed under 17 (1) of the said Rules, 2005, which is within next 21 days of the succeeding months. It is evident that the return for the month of April 2009 was submitted on 12.06.2009 which is after the expiry of the prescribed time. Similarly, in respect of other months for the year 2009-2010, the monthly returns were submitted after the expiry of the prescribed time - The revised returns were filed on 13.04.2011 i.e. after expiry of two months prescribed in Rule 17 (5) (a) of the said Rules, 2005 and as such the said revised returns were also not submitted within the prescribed time and therefore, no self-assessment can be deemed to have been completed under Section 35 of the said Act. Pertinent to mention that in the affidavit-in-opposition filed by the assessing authorities, there is no denial to the aforesaid statements made in paragraphs 4 and 5 of the writ petition. It is well settled that averments if not denied would amount to an admission of the facts. The assessing authorities did not deny these facts, which are thus deemed admitted. Validity of self-assessment u/s 35 of the Assam VAT Act, 2003 - Legality of re-assessment proceedings u/s 40 of the Assam VAT Act, 2003 - HELD THAT:- The assessment was initiated under Section 40 of the Act without completion of assessment under Sections 34, 35, 36 or 37 of the Act, 2003. Section 40 of the Act, 2003 dealing with turnover escaping assessment provides that for invoking the powers under Section 40 of the Act, a dealer must have been assessed under Section 34, 35, 36 or 37 of the Act, 2003 for any year or part thereof - Since in the facts of the instant case, no self assessment can be deemed under Section 35 of the Act, 2003 re-assessment under Section 40 of the said Act, 2003 could not have been made under the provisions of the said Act. In order to re-assess under Section 40 of the Act, 2003, there has to be firstly an assessment in law. It is only after an assessment is made, the assessing authorities has jurisdiction to exercise powers of reassessment subject off course to the fulfillment of the other two conditions stipulated therein. The existence of assessment is a condition precedent for making a reassessment under Section 40 of the Act, 2003 and if such condition precedent exist, the assessing authorities had no jurisdiction to make the reassessment. As such, without assessment under section 34, 35, 36 or 37 of the Act, 2003, the respondent authorities could not have resorted to the provisions of the reassessment stipulated under Section 40 of the said Act. In the present case, there was no assessment under section 35 of the Act, 2003, made during the prescribed period. Therefore, no assessment can be deemed to have been made in law - the said order of re-assessment having been completed without any assessment made under section 35 of the Act, 2003, the order of reassessment dated 17.03.2018 is absolutely illegal and without jurisdiction - the very initiation of proceedings under section 40 of the Act, 2003 is absolutely illegal, without jurisdiction and not tenable in law. The impugned Order of re-assessment dated 17.03.2018 and the Notice of Demand dated 17.03.2018 are set aside and quashed - Petition allowed.

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• 2024 (5) TMI 1145
  Invocation of Section 5 by Petrol Taxation Officer (PTO) - Provisions for Escaped Assessments - Requirement of Monthly vs. Annual Assessments. Whether on the facts and circumstances of the case, the tribunal is right in law in holding that provisions of section 5 of the act can only be invoked by petrol taxation officer when he is not satisfied with the correctness and completeness of the return filed by Dealer pursuant to rule 15? - HELD THAT:- The provisions of the Act / Rules have to be applied strictly taking into account the intention of the legislature. Section 5 power to determine certain questions clearly states that any question as to whether a tax or penalty is recoverable under this Act, the person from whom it is due and the amount recoverable shall be determined by the PTO for the area where the sale takes place. Rule 15 of the Act of 2005, states that every dealer shall deposit the amount of tax due and to furnish monthly returns of sales in the prescribed forms within the specified period. Rule 15(d) states that on receipt of the return, the PTO may examine the account books and other records of the dealer and such other enquiries, as he may consider necessary for the purpose of satisfaction that the return is correct and complete and the amount of tax and any other sum payable under the act has been paid, if the officer is satisfied in respect of the correctness and return and the dealer having paid the amount of tax on any other sum payable under the Act, he shall issue a certificate in form P-7. The conjoint reading of Section 5 and Rule 15 of the Act of 2005 clearly specifies that section 5 will be made applicable only if the return filed by an assessee before the PTO is held not to be complete and correct. PTO can exercise his powers under section 5, read with rule 15-D. Section 5 will not be invoked in cases where complete and correct return is filed and P-7 is issued pursuant to Rule 15. This question has been answered in affirmation. Whether the act and the rules do not contain any specific provision for taking action by the Petrol Taxation Officer in the cases of escaped assessments? - HELD THAT:- Admittedly, there is no specific provision for taking action by PTO in cases of Escaped assessments, whereas under section 7 (11) of the GST, there is a clear provision for reassessment, if the assessing authority has reasons to believe that by reasons of omission or failure on the part of a dealer to make a return under sub section (1) or sub section (3) for any year, to the Assessing Authority or to disclose fully and truly all material facts necessary for his assessment - There is no provision of escaped assessment in the Act of 2005. In the instant case PTO, upon perusal of the assessment record has invoked the power vested in him under section 5 of the Act of 2005 after the report was made by the internal audit party that too after a gap of three years. After receiving the return from the dealer, the PTO had already assessed the completeness and correctness of the return and had issued a certificate. PTO had not taken any action in terms of section 7 (11) of the GST - In absence of any specific provision with respect to escaped assessments, the tribunal was right in law in holding that the act and rules do not contain any specific provision for taking action by the PTO in cases of escaped assessments. this question has also been answered in affirmation. Whether on facts and circumstances of the case tribunal is right in law holding that the act and the rules provide only for filing of monthly returns and therefore assessment are only required to be made month wise and any annual assessment made shall not be deemed to be an assessment under the act/rules? - HELD THAT:- Once the final assessments were made by the competent authority on monthly assessments as per the Act and Rules applicable, it was not open to the PTO to reassess after three years of filing the return. This question is also answered in affirmative. The Reference made by the Tribunal is answered in affirmation and disposed of accordingly.

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• 2024 (5) TMI 1144
  Determination of penalty under section 69(1)(k) of the J K Value Added Tax Act, 2005 - issuance of 35 improper invoices on the same day constitutes a single default or not - justification of levy of penalty of 10 times of the tax payable on the invoices or Rs. 10,000/-, whichever is higher - HELD THAT:- Tax invoice means a particular sale transaction made by the VAT dealer or a casual trader to a consumer. It is a tax invoice which generates default and if that default is proved then it invites penalty, against a defaulting person, equal to ten times of the tax payable on such default or Rs. 10,000/- whichever is higher. A questionable tax invoice, be it sham, false, forged or fake, has no relation with the day on which it is or was generated. If on any given day, a VAT dealer or a casual trader has generated any number of objectionable tax invoices each representing a respective sale transaction, then each invoice will constitute default as envisaged by clause (k) of sub-section 1 of section 69. When section 69 itself does not hint to any angle of time duration, SSTAT was in error in pressing the time duration into play and reckon that the default envisaged under clause (k) of sub-section 1 of section 69 was referable to the time duration and not to the tax invoice - The penalty envisaged under section 69 (1) (xi), relatable to the default identified in clause (k) of sub-section 1 of section 69 was meant to be a deterrent so that any VAT dealer or a casual trader would not venture and resort to acts of omission or commission which would have the effect of under assessment or evasion of the tax liability resting upon the said VAT dealer or a casual trader. Clause (xi) of sub-section 1 of section 69 itself decodes that a particular tax invoice may have a tax liability which multiplied by ten times may still fall short of a deterrent effect to a VAT duty evading trader and, therefore, even a penalty of ten times the tax payable may be on a lesser side and, therefore, the other option of penalizing a given defaulting VAT trader on a higher side has been provided for. Therefore, there was no reason to read that the default as envisaged under clause (k) of sub-section 1 of section 69 relatable to time duration of a given day and not to the tax invoice in itself. Thus, each tax invoice, if afflicted with the default as envisaged under clause (k) of sub-section 1 of section 69, is to bear the penalty in reference to it and not in reference to the accumulation of tax invoices and that it has nothing to do with the collection of tax invoices for a particular day. Each default vis- -vis each particular tax invoice is to earn the liability as envisaged under section 69 of sub-section 1 of clause (xi) of the VAT Act, 2005. The reference is returned.

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• 2024 (5) TMI 1143
  Classification of Diagnostic Kits - to be considered as drugs which are covered by Entry 48 of Schedule C to SRO 167 or under Entry 87 of Schedule D or Entry 165 of Schedule D - whether these Kits are used for diagnosis, and hence have to be treated as drugs within the meaning of Section 3 (b) (i) of the Drugs and Cosmetics Act, 1940? - HELD THAT:- In the definition of drug under Section 3 (b) of the Act, as quoted above, it is clearly mentioned under Section 3 (b) (iv) that drug includes such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human being or animals. While sub-section (i) of Section 3 (b) brings within the ambit of drug , medicines used for diagnosis, sub-section (iv) of Section 3 (b) brings devices used for diagnosis within the ambit of drug . However, every such device cannot be deemed to be a drug within the meaning of Section 3 (b) (iv) unless such device is specified as drug by the Central Government by notification in the Official Gazette. Thus, if such device used for diagnostic purpose is not specified by the Central Government in the Official Gazette, such device cannot be treated to be a drug within the meaning of Section 3 (b) (iv) of the Act. Can a Diagnostic Kit be treated as medicine to fall within the definition of drug under sub-section (i) of Section 3 (b) as contended by the petitioners or can it considered to be a device to bring within the meaning of drug under sub-section (iv) of Section 3 (b) of the Act? - HELD THAT:- In the present context, Diagnostic Kits bears more resemblance with devices rather than medicines . Thus, seen from this perspective, Diagnostic Kits cannot be considered to be medicine and can be considered to be device . In such an event, the Diagnostic Kit will not come under the definition clause of sub-section (i) of Section 3 (b) but would come under sub-section (iv) of Section 3 (b) of the Drugs and Cosmetics Act, 1940 - Diagnostic kit which is a composite device, is a medicinal device, but it cannot be considered or understood to be a medicine . Consequently, if Diagnostic kit which is undoubtedly a medicinal device is to qualify to be a drug within the meaning of sub-section (iv) of Section (3)(b) of the Act, the same will be required to be notified as such by the Central Government in the Official Gazette. The Diagnostic Kits in issue in the present case cannot be considered to be drugs within the meaning of Section 3 (b) (iv) of the Drugs and Cosmetics Act till these are so specified by the Central Government by notification. What is notable is that the petitioners have not brought to the notice of this Court any material to show that Diagnostic Kits are considered to be medicines or drug by the medical practitioners, pathologists, patients and in medical literature - That these Diagnostic Kits are manufactured under the Drug License issued by the Drug Controller, does not necessarily make the Diagnostic Kits to be drugs within the ambit of VAT Act, unless these are notified by the Central Government to that effect under Section 3 (b) (iv) of the Act. If these Diagnostic Kits are notified as drugs within the meaning of Section 3 (b) (iv) of the Drugs and Cosmetics Act, 1940 by the Central Government by issuing notifications in the Official Gazette in consultation with the Drugs Technical Advisory Board, these Diagnostic Kits would be liable to be charged only @ 4% as these would then be covered within Entry 48 of Schedule C of SRO 167 of 16th June, 2005. If the devices namely, (i) Hepatitis HBS Ag Device Card, (ii) HIV Device Card, (iii) Pregnancy Device Card and (iv) VDLR Device Card have been notified by the Central Government in the Official Gazette after consultation with the Drugs Technical Advisory Board as drugs within the meaning of Section 3 (b) (iv) of the Drugs and Cosmetics Act, 1940. If it is found to be so, the above mentioned four Diagnostic Kits have to be treated as drugs falling within Entry 48 of Schedule C of SRO 167 dated 16th June, 2005 and charged VAT accordingly @ 4% with prospective effect from the date such notification is issued. Otherwise, being not drugs , the aforesaid Diagnostic Kits would fall under the residuary Entry 165 of Schedule D of SRO 167 of 16th June 2005 and attract VAT at the rate of 12.5%. Petition disposed off.

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• Indian Laws

• 2024 (5) TMI 1142
  Dishonour of Cheque - compromise agreement between the accused and the complainant - HELD THAT:- The terms and conditions of compromise mentioned in the affidavit are read over to the parties and they are admitted as true and correct. In a decision reported in - DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], the Hon‟ble Apex Court held in case of compounding during the pendency of proceedings before a Magistrate's Court or a Court of Session, such costs should be deposited with the District Legal Services Authority. On being satisfied with the terms and conditions of compromise and in view of the amicable settlement made by both parties, application is allowed and consequently the Criminal Revision Case is disposed of by setting aside the judgment. The petitioner/accused is acquitted for the offence punishable under Section 138 of N.I. Act - Application disposed off.

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