TMI Tax Updates - e-Newsletter
June 15, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Indian Laws
Highlights / Catch Notes
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GST:
Detention/seizure of vehicle alongwith the goods - the provisions of Section 129 (3) require the proper officer detaining or seizing the goods to issue a notice specifying the penalty payable and thereafter pass an order within 7 days from the date of service of the notice in relation to the detention/seizure effected - In the present case, admittedly, no such notice has been issued till date though the seizure has been effected as early as on 30.05.2022 - In the aforesaid circumstances, the act of the respondent in insisting that the petitioner retain the vehicle at the present location is in gross contravention of the statutory provisions. - HC
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GST:
Recovery of Government dues - alleged dues towards Central Goods and Services Tax without giving the benefit of Input Tax Credit, admissible to the Petitioner - Upon deposit of 10% of the disputed tax amount during pendency of two appeals preferred by the petitioner, recovery of any remaining balance is deemed to have to been stayed - The impugned Garnishee proceeding therefore, cannot be given effect to and in fact has become infructuous. Any fresh demand arising out of the decision of the Appellate Authority can be realized by issuance of GST APL-04. As such, there is no purpose in keeping the writ petition pending. - HC
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GST:
Seeking release of vehicle alongwith the goods - Section 129(1) of the CGST Act - trading of copper and copper scrap - Genuinness of transaction was under doubt - It is not in dispute that when the conveyance was intercepted along with the goods, the driver of the conveyance did produce necessary documents which are required under the Act as well as the Rules like invoice, E-way bill, Lorry receipts. - Goods ordered to be released subject to conditions. - HC
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GST:
Provisional attachment of Bank Accounts - time limitation - In the instant case, provisional attachment was ordered on 09.02.2021. Thus, the period of one year has expired. Though a statement has been made in the counter affidavit that the provisional attachment was reviewed by the Commissioner on 11.03.2022 whereafter such attachment for further period was approved, no such order has been placed on record. In any case, Sub-Section (2) of Section 83 of the CGST Act is very clear. - Order set aside and quashed - HC
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Income Tax:
Section 120(1) (2) and (5) of the Income-Tax Act, 1961 - Jurisdiction of Income tax Authorities - Jurisdiction to exercise of power of Assessing officer (AO) - Jurisdiction to conduct of Faceless Assessment proceedings - Notification
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Income Tax:
Income from house property - Deemed rental income - vacant property - The word receivable refers to the payment not being realised. The use of word “receivable” in Section 23(1)(c) of the Act, indicates that there should be, not mere possibility of receiving the rent, but rent can become payable in all the probability, as the property is available for being given on rent. - When there is some legal disability or physical impossibility in creating a tenancy and due to which the property is left vacant, in any part or whole of the year, then there is no possibility of rent being realized and so the rent cannot be said to be “receivable” and accordingly on basis of notional rent no tax liability can be created. - AT
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Income Tax:
Unexplained/undisclosed income - Addition based on finding are based on the statements of erstwhile teachers who have been terminated from service - - The prosecution has failed to prove the allegations made in the complaint that the complainant and other witnesses have paid money to the Assessee for appointment of teacher/caretaker/ staff. The Ld. Magistrate after conducting the due Trial has acquitted the Assessee from all the charges levelled against him. Further Assessee was also subject to the enquiry conducted by the Anti Corruption bureau, wherein the Assessee has been found not guilty of the allegations of corruption made against him. - No additions - AT
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Income Tax:
Addition on account of low withdrawals (drawings) - There is noting on record to suggest that the assessee has purchased any movable or immovable properties, incurred any expenditure for marriage, or any other function or is leading a lavish lifestyle. Since the addition is based purely on presumption and surmises therefore, without bringing any material on record, such an addition cannot be sustained - AT
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Income Tax:
Addition u/s 69A being cash deposit in the Bank A/c during the demonetization period - cash deposit out of the sale proceeds effected prior to the ban of currency notes - the cash sales made by the assessee during every month is substantial. Similarly, the cash deposit made by the assessee in the Bank A/c from April, 2015 to Nov.2015 and thereafter is also commensurate with the regular trend. It is not a case where the assessee in this particular period has made substantial cash deposits in the Bank A/c. Therefore, the lower authorities, in my opinion, have erred in disbelieving the submissions made by the assessee, - AT
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Income Tax:
Revision u/s 263 by CIT - substantial increase in the capital account - In the present case the Ld. Pr. CIT on the one hand mentioned that the assessee did not provide details of substantial increase in capital in a year, on the other hand, she mentioned that the reply was furnished by the assessee relating to addition in capital account which was reproduced in para 6 of the impugned order. In the present case, it cannot be said that the AO did not make inquiries / verification relating to increase in capital account of the assessee as alleged by the Ld. Pr. CIT. - it cannot be said that the order passed by the AO was erroneous or prejudicial to the interest of the Revenue - AT
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Income Tax:
Penalty u/s. 271D - Loan accepted in cash in contravention of section 269SS - it is clear beyond doubt that the transactions entered on the page are pertaining to the agricultural land of the assessee situated and the department has not raised any doubt about the adequacy of the land and the amount related to the said land received by the assessee. Thus, this indirect admission of the department strength the argument of the assessee. - No penalty - AT
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Customs:
Classification of goods - composition of the imported yaravita zintrac (zinc oxide suspension concentrate) - The classification adopted by the original authority, and impugned before the first appellate authority, has its roots in the quantum of ‘nitrogen’ without ascertainment of conformity with ‘products of a kind used as fertilisers’ in note 6 of chapter 31 of First Schedule to Customs Tariff Act, 1975 with its emphasis on use before dovetailing it with the proposition of Learned Authorized Representative supra of the essentiality of ‘nitrogen’ to the imported product. - Matter restored back to appellate authority - AT
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State GST:
GST fraud - Identification and prevention of bill traders in the newly applied cases - bill traders after getting registrations, issue invoices without supply of goods or services for huge amount within a short span of time. The Department comes to know about the bill trading activities only when he files return on the 20th day of the subsequent month, by which time he disappears from the declared place or non-existent even from the date of registration - Safeguard measures specified.
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Indian Laws:
Corporate Debtor includes a corporate guarantor even if Principal Borrower being an individual/sole proprietorship. - Notes
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Indian Laws:
Dishonor of Cheque - rejection of prayer of the petitioner/appellant to lead additional evidence under section 391 of the Code of Criminal Procedure, 1973 - section 138 of the Negotiable Instruments Act, 1881 - In the case at hand, if the petitioner is allowed to lead the evidence, as proposed, it has the propensity to reopen the entire trial, partaking the character, the aspect of the date on which the subject cheque was payable. - HC
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IBC:
Limitation Act and the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC),2016. - Notes
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IBC:
Power of NCLT/NCLAT vis-à-vis writ jurisdiction of the high court. - whether NCLT/NCLAT could enquire into allegations of fraud. - Notes
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PMLA:
Money Laundering - proceeds of crime - validity of simultaneous proceedings under different statutes - In the instant case, the FIR was filed for offences under Indian Penal Code, 1860 (IPC) and here, in the instant case, the complaint is filed under Sections 3 and 4 of the Act. Both are distinct offences. The acts are also different. They are not the same offence. Therefore, apparently the provisions of Article 20(2) of the Constitution of India are not attracted in the instant case. Instant complaint case is not a second trial. - Merely because the petitioners have already deposited the money, it does not absolve the petitioners of any liability under the Act. Section 3(ii) of the Act, does not bar the prosecution. - HC
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Service Tax:
Exemption from Service Tax - allied educational activities or not - The services rendered by the petitioner Universities by way of affiliation and allied activities including the conduct of examinations, awarding of degrees, diplomas etc., and also the income they derived from rent paid by the third parties like Postal Department, Banks etc., and also to run Canteen for the purpose of Students and Staff, were considered to be allied services attached with the educational activities undertaken by the Universities and therefore they are also exempted. - HC
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Service Tax:
CENVAT Credit - input services - services used for activities related to its corporate social responsibility [CSR] - there could be services which are used by the provider of output services who provide output services and there could be services used not for providing output service for some other business purpose. In our considered view the corporate social responsibility falls under the second category. It has no nexus to providing any input services. - Several services which are not directly input services for providing of output services or which are not used for manufacturing final product have been included in the inclusion part of the definition under rule 2(l) - It is not open for this Tribunal to modify or enlarge the scope of this Rule which is a legislative or quasi-legislative function. - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (6) TMI 605
Detention/seizure of vehicle alongwith the goods - it is alleged that the goods were being re-routed without proper e-way bill - Section 129 of CGST Act - HELD THAT:- In law and on the clear language of Section 129 of the Central Goods and Services Tax Act, 2017 (Act), the impugned retention of the vehicle is clearly invalid. The provisions of Section 129 provide for the detention and seizure of the vehicle and contents upon condition that an order of detention/seizure shall be passed at the time of detention/seizure, and duly served upon the person transporting the goods.
In the present case, Mr.Prasanth, on instructions, confirms that no such order of detention has been issued and consequently the question of service upon the petitioner does not arise. That apart, the provisions of Section 129 (3) require the proper officer detaining or seizing the goods to issue a notice specifying the penalty payable and thereafter pass an order within 7 days from the date of service of the notice in relation to the detention/seizure effected - In the present case, admittedly, no such notice has been issued till date though the seizure has been effected as early as on 30.05.2022 - In the aforesaid circumstances, the act of the respondent in insisting that the petitioner retain the vehicle at the present location is in gross contravention of the statutory provisions.
Writ petition is allowed.
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2022 (6) TMI 604
Recovery of Government dues - alleged dues towards Central Goods and Services Tax without giving the benefit of Input Tax Credit, admissible to the Petitioner - Section 79 of the CGST Act - HELD THAT:- The original cause of action raised by the writ petitioner and also the subsequent development brought on record through the supplementary affidavit filed on 08.06.2022, has been noted. Upon deposit of 10% of the disputed tax amount during pendency of two appeals preferred by the petitioner, recovery of any remaining balance is deemed to have to been stayed in view of Section 107 Sub-section (6) and (7) of CGST Act, 2017. The impugned Garnishee proceeding therefore, cannot be given effect to and in fact has become infructuous. Any fresh demand arising out of the decision of the Appellate Authority can be realized by issuance of GST APL-04. As such, there is no purpose in keeping the writ petition pending.
Application disposed off.
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2022 (6) TMI 603
Seeking release of vehicle alongwith the goods - Section 129(1) of the CGST Act - trading of copper and copper scrap - Genuinness of transaction was under doubt - HELD THAT:- It is not in dispute that when the conveyance was intercepted along with the goods, the driver of the conveyance did produce necessary documents which are required under the Act as well as the Rules like invoice, E-way bill, Lorry receipts.
On depositing an the amount of Rs. 17 lacs and furnishing the bond of Rs. 65 lacs with the respondent-Authority, without prejudice to the rights and contentions to be raised before the adjudicating authority in the pending proceedings by the petitioner, the respondent-authority shall release the vehicle and goods in question. The inquiry with respect to Form GST MOV-10 shall proceed further in accordance with law.
Petition allowed in part.
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2022 (6) TMI 602
Provisional attachment of Bank Accounts - time limitation - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Section 83 of the CGST Act provides for provisional attachment to protect revenue in certain cases - As per Sub-Section (2) of Section 83 of the CGST Act, every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under Sub-Section (1) of Section 83 of the CGST Act.
In the instant case, provisional attachment was ordered on 09.02.2021. Thus, the period of one year has expired. Though a statement has been made in the counter affidavit that the provisional attachment was reviewed by the Commissioner on 11.03.2022 whereafter such attachment for further period was approved, no such order has been placed on record. In any case, Sub-Section (2) of Section 83 of the CGST Act is very clear. Every provisional attachment made under Sub-Section (1) of Section 83 of the CGST Act shall cease to have effect after expiry of a period of one year from the date of the order made under Sub-Section (1) of Section 83 of the CGST Act.
Continuance of the impugned order of provisional attachment dated 09.02.2021 cannot be sustained. The same is accordingly set aside and quashed - Petition disposed off.
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Income Tax
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2022 (6) TMI 600
Addition u/s 68 - Assessee failure to identity and creditworthiness of the person from whom credit is shown to have been received and also to establish genuineness of the transaction - HELD THAT:- The assessee in its books of accounts has shown receipt of ₹2.00 crores from M/s Innovative Spinning and Knitting Private Limited. Further the assessee has shown this amount as transferred in the name of another two entities. All these three entities were not found at the addresses provided by the assessee, during verification by the Assessing Officer invoking section 133(6) of the Act.
On being asked, the assessee also failed to produce the director of M/s innovative spinning and knitting Private Limited. Even during appellate proceedings, the assessee failed to produce him before the lower authorities. In our opinion, by way of merely stating that said person was absconding and therefore he could not be produced before the AO is not sufficient to discharge onus under section 68 of the Act. It is the onus on the assessee to explain the identity and creditworthiness of the person from whom credit is shown to have been received and also to establish genuineness of the transaction. In the facts and circumstances of the case, the assessee has failed to substantiate with evidences to explain all the three ingredients of section 68 therefore the CIT(A) is not justified in deleting the addition. Accordingly, we set aside the order of the Ld. CIT(A) on the issue in dispute and uphold the order of the Ld. Assessing Officer - Decided in favour of revenue.
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2022 (6) TMI 599
Unexplained/undisclosed income - Addition based on finding are based on the statements of erstwhile teachers who have been terminated from service - Assessee is a pensioner retired from Police Department. After retirement he is stated to be Director in school named Jayanti Jyoti Muk Badhir Nivasi School run for deaf and dumb children - Tax Evasion Petition (TEP) received against the Assessee from some staffs of the said School stating that, in the capacity of Secretary of the school, the Assessee has received certain amounts from them for their appointment as teacher/ caretaker / staff - HELD THAT:- As per the Assessing Officer, the assessee is in capacity of Secretary of the School of Jayant iJyoti Muk Badhir Nivasi School, has received certain amounts during the Financial Years under consideration for appointment of teacher/caretaker/staff. Based on the statement reordered u/s 131 of the Act from the persons who claimed to have paid the amount to the Assessee, the statement made before Police Authority and based on the statement of one complainant recorded before the Court.
AO has treated the alleged money given to the Assessee in lieu of the job as unexplained/undisclosed income and added to the total income of the assesse.
By mere reading of the assessment order, the Ld. AO has not provided any opportunity to the Assessee to dispute or contradict the statement made by the persons who claimed to have paid the amount to the Assessee. Admittedly all the persons who gave given the statements against the Assessee have been dismissed from the service and after dismissal from the service the Tax Evasion Petitions have been filed and thereafter recorded the statements u/s. 131 of the Act have been recorded. Therefore the said statements cannot be believed in the facts and circumstances of the case more so when those statements were not subject to any cross examination by the Assessee.
AO has relied on statements made before the Police Authority and also the statement recorded before the Court by the complainant and the witnesses in the Criminal Trial. It is found that, based on the complaint given by one Sh. Mahadeorao Kokate a criminal prosecution has been launched for the offence punishable u/s 420 of IPC against the Assessee. The prosecution has failed to prove the allegations made in the complaint that the complainant and other witnesses have paid money to the Assessee for appointment of teacher/caretaker/ staff. The Ld. Magistrate after conducting the due Trial has acquitted the Assessee from all the charges levelled against him. Further Assessee was also subject to the enquiry conducted by the Anti Corruption bureau, wherein the Assessee has been found not guilty of the allegations of corruption made against him.
We are of the considered opinion that the addition made by the Ld. AO which has been upheld by the Ld. CIT(A) is not sustainable under law and the same is deserves to the set aside. Therefore, we allow the grounds of appeal by setting aside the orders passed by the lower authorities by allowing the appeals.
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2022 (6) TMI 598
Addition u/s 69A being cash deposit in the Bank A/c during the demonetization period - as argued by assessee that the deposit of old currency notes in the Bank A/c is out of the sale proceeds effected prior to the ban of currency notes i.e. from the midnight of 8/11/2016 and a perusal of the month-wise cash deposits made by the assessee during the financial year 2015-16 and 2016-17 would show that such cash deposits made in the Bank A/c is commensurate with the sales made by the assessee in every month both during the preceding year and subsequent year - HELD THAT:- We find sufficient force in above arguments made by the learned Counsel for the assessee. The month-wise cash sales and cash deposits made by the assessee in the Bank A/c are already reproduced in the preceding paragraphs. A perusal of the same shows that the cash sales made by the assessee during every month is substantial. Similarly, the cash deposit made by the assessee in the Bank A/c from April, 2015 to Nov.2015 and thereafter is also commensurate with the regular trend. It is not a case where the assessee in this particular period has made substantial cash deposits in the Bank A/c. Therefore, the lower authorities, in my opinion, have erred in disbelieving the submissions made by the assessee,
An identical issue came in the case of Pr. CIT vs. Agson Global (P) Ltd [2022 (1) TMI 848 - DELHI HIGH COURT] wherein Tribunal deleted the additions sustained by the CIT (A) of Rs.73.13 crores in respect of cash deposits made with the Bank during demonetization period.
Thus NFAC was not justified in sustaining the addition of Rs.30.00 lakhs made by the Assessing Officer in the Bank A/c during the demonetization period in old currency notes of Rs.1000. Accordingly, the order of the NFAC on this issue is set aside and the grounds raised on this issue are allowed.
Addition on account of low withdrawals - Addition made by the Assessing Officer and sustained by the NFAC is concerned, the same, in my opinion, is purely based on presumptions and surmises without bringing any material on record to suggest that the assessee has incurred more expenditure than what has been shown in the capital a/c towards withdrawals. There is noting on record to suggest that the assessee has purchased any movable or immovable properties, incurred any expenditure for marriage, or any other function or is leading a lavish lifestyle. Since the addition is based purely on presumption and surmises therefore, without bringing any material on record, such an addition, in my opinion, cannot be sustained. We therefore, set aside the order of the NFAC on this issue and direct the Assessing Officer to delete the addition. Assessee appeal allowed.
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2022 (6) TMI 579
Late payment of PF & ESI when the same was paid within time allowed u/s 139(1) of the Act - Scope of amendment - HELD THAT:- We find that the issue is covered in favour of the assessee as the assessment year involved is AY 2019-20 and the Explanation-5 inserted by Finance Act, 2021 to section 43B w.e.f. 01.04.2021 is not applicable to the assessment year under consideration. The relevant portion of the Coordinate Bench decision of the Tribunal in the case of Harendra Nath Biswas vs. DCIT 2021 (7) TMI 942 - ITAT KOLKATA] wherein do not accept the Ld. CIT(A)’s stand denying the claim of assessee since assessee delayed the employees contribution of EPF & ESI fund and as per the binding decision of the Hon’ble High Court in Vijayshree Ltd [2011 (4) TMI 63 - ITAT KOLKATA]. u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee.
Credit of TDS - HELD THAT:- As there is no material available on record. Therefore, ends of justice, this issue is remand back to the file of AO for deciding the same by way of speaking order. We also directed the assessee to remain vigilant in receiving notices of hearing from AO and should not request for any adjournment unless otherwise required for reasonable cause and should file all necessary documents so as to facilitate the AO for passing speaking order. Needless to mention that the assessee should be given proper opportunity of being heard.
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2022 (6) TMI 578
Rejection of books of accounts - estimating gross profit @ 3% against gross profit of 0.81% shown by the assessee - HELD THAT:- So far as estimation of profit by assessing officer we find that the assessee has not filed any document or evidence that the estimation by ld CIT(A) is not justify or the profit margin in the line of business of assessee is not more than the profit shown by the assessee. The assessee has not file a single document to substantiate his working of profit or comparable instances in the region cum industry. The assessee claimed that fire took place in the factory of the assessee, not a single piece of evidence in the form of report from fire department or from Police station was filed. Thus, in absence of any evidence to substantiate the books profit, we do not find any reason to disturb the estimation of profit estimated by assessing officer. in the result the assessee gets part relief as we affirm the estimation of profit estimated by assessing officer. In the result, ground No. 2 &3 are partly allowed.
Jurisdiction of AO - We find that the ITO, Ward-1, Vapi/Assessing Officer assumed the jurisdiction on the basis of valid transfer order issued by the CCIT, Surat dated 23/07/2012 passed under section 127 of Income Tax Act.
Notice issued u/s 143(2) by the ACIT, Vapi Circle for initiating the assessment in the present case - In Jindal SteeHRI SATISH KUMAR SINHA VERSUS INCOME TAX OFFICER, WARD 4 (1) HYDERABAD [2021 (9) TMI 174 - ITAT HYDERABAD] there was no order from Commissioner of Income Tax for conferring power on JCIT to exercise jurisdiction and no order for transferring the case from one assessing officer to other officer. In ITO Vs NVS Builder [2018 (4) TMI 381 - ITAT DELHI] first notice under section 143(2) was issued by ITO Faridabad on 23.10.2007, who was not the assessing officer having no jurisdiction of assessee in that case. The assessee informed the assessing officer that he has filed return of income at Delhi, then ITO ward- 10(1) New Delhi issued notice under section 143(2) on 23.07.2008 which was beyond the statutory period. In Cosmat Trader Pvt Ltd Vs ITO [2021 (4) TMI 1020 - ITAT KOLKATA] the jurisdiction over the assessee was of ITO-ward -7(1) Kolkata and notice under section 143(2) was issued by ITO-ward-6(1) Kolkata, who has no jurisdiction over the assessee. Finally, in Harvinder Singh Jaggi [2016 (3) TMI 114 - ITAT DELHI] no order under section 127 was passed by CIT for transferring case to assessing officer/ Add CIT. Thus, facts of all the case laws cited by ld AR for the assessee is not help full to him. Therefore, additional ground of appeal being ground no. 9 to 11 is also dismissed.
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2022 (6) TMI 601
Reopening of assessment u/s 147 - scope of new section 148A - Whether impugned notice under unamended section 148 is bad in law in view of amendment carried out by the Finance Act, 2021 bringing into force Section 148A which requires a preliminary enquiry before initiating reassessment proceedings - HELD THAT:- As all such notices under unamended section 148 of Income Tax Act issued by the Revenue after 01.04.2021 which were the subject matter of more than nine thousand writ petitions before the various High Courts would be deemed to be notices issued under amended section 148-A of Income Tax Act. The Apex Court while dispensing with the inquiry contemplated under section 148-A(a) of the Act with prior approval of the specified authority as a onetime measure, allowed the Assessees to take all defences including those available under section 149 of the Act and all rights and contentions which may be available to the concerned Assessees and Revenue under the Finance Act, 2021.
Since the impugned notices in the present writ petitions are dated 31.03.2021 and there is nothing on record to show that they were issued after 31.03.2021 and on the contrary, the assessment order as also the impugned notices themselves shows that they were signed and issued on 31.03.2021, such a plea could not come to the aid of the petitioner. Since the assessment order has already been passed, petitioner should avail the remedy of appeal under the Income Tax Act, 1961.
Having heard learned counsel for the parties on the plea raised herein and in view of the assessment proceedings having been concluded pursuant to the notice dated 31.03.2021 issued upon the petitioner, we are of the considered view that the petitioner should avail the alternative remedy of appeal. Petitioner is at liberty to raise the instant plea as well before the Appellate Authority.
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2022 (6) TMI 577
Addition u/s 69B - Undisclosed investment in the construction of the commercial building - reference to DVO - parameters adopted by the DVO in the estimating the cost of construction - HELD THAT:- As valuation has been made by the competent wing of the department who are the engineers capable to estimate the investment made in the building. The said officers have not considered the various contentions raised by the assessee which ought to have been considered looking the analysis of the report. In the first appeal, instead ld. CIT(A) asking for a comment of the Assessing Officer or DVO made his own findings and analysis on the report of the export and sustained an addition.
AR objected and submitted that even the ld. CIT(A) not being technical person has erred in sustaining the balance addition and all the contentions raised by the assessee has not been dealt with. Thus, even the action of the ld. CIT(A) is not satisfactory since the contentions raised before the Assessing Officer or the DVO has not been considered even by the CIT(A) fully. The objections of the assessee that the findings of the ld. CIT(A) on the technical issue is also not correct.
Therefore, looking to the peculiar facts figures and contentions raised in respect of the DVO’s report. It is in the fair interest of the justice to restored the matter back to the file of the Assessing Officer to give a fair chance to the assessee to raise their contentions in respect of the estimation made by the DVO. The Assessing Officer make this exercise in time bound manner from the DVO and decide this issues in accordance with the law after affording opportunity to the assessee with this direction, the appeal of the assessee is allowed for statistical purposes.
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2022 (6) TMI 597
Addition u/s 14A r.w.r.8D - CIT(A) was only restricted to disallowance of interest under Rule 8D(2)(ii) of the Rule and no relief has been given on the basis that the assessee did not earn any tax free income - HELD THAT:- We are of the view that the assessee had enough surplus funds and borrowed funds were not used for the purpose of making investments that would yield tax free income. In this scenario, we find that in the light of the principles laid down in the case of CIT Vs. Micro Labs Ltds. [2016 (4) TMI 219 - KARNATAKA HIGH COURT] wherein it was held that when investments are made out of common pool of funds and when the non-interest bearing funds or interest free funds that were available with the assessee were more than the investments that would yield exempt income, the presumption is that investments that would yield exempt income were made out of own funds that are interest free and hence there cannot be any disallowance of interest expenditure under section 14A of the Act r.w.r. 8D(2)(ii) of the Rules. We are of the view that the CIT(A) has rightly come to the conclusion that the disallowance under section 14A of the Act r.w.r. 8D(2)(ii) of the Rules deserves to be deleted. We find no infirmity in the order of the CIT(A) and accordingly dismiss ground No. 3 raised by the Revenue.
Disallowance of interest and depreciation expenses confirmed
Addition of aircraft maintenance expenses - As in the absence of details, disallowance was required to be made but that had to be based on bifurcation of fixed costs of running the aircraft, which cannot be disallowed because fixed costs have to be incurred irrespective of the usage of the aircraft. As far as variable cost is concerned, a proportion of usage of aircraft for non-business purpose can be disallowed. The disallowance of Rs. 45 lacs which is roughly about 10% of the aircraft expenses in our view was just and fair. We find no ground to interfere in the order of the CIT(A) and accordingly dismiss ground No. 4 preferred by the Revenue.
Addition u/s 40A(2)(a) - HELD THAT:- We are of the view that the AO gave no basis for disallowing the entire expense of Rs. 1.92 Crores claimed by the assessee as payment of management fee. As per the provisions of section 40A(2) of the Act, only payments which are excessive and unreasonable has to be disallowed. It is not disputed that services were rendered by the VHPL. In the circumstances, we are of the view that the approach adopted by the CIT(A) in allowing a sum of Rs. 60 lakhs as deduction on the ground that the services rendered by VHPL were one and the same even after the merger of the assessee with ATHPL is justified and calls for no interference. Accordingly, ground No. 5 raised by the Revenue is also dismissed.
Disallowance u/s 14A of interest expenditure cannot be disallowed as interest paid on borrowings on the security on fixed deposit receipts were not used for the purpose of making investments that would yield tax free income because of availability of surplus interest free funds with the assessee. The aforesaid finding would equally apply to the disallowance under section 36(1)(iii) of the Act also and therefore on the same reasoning, the disallowance deserves to be deleted and was rightly deleted by the CIT(A). We find no ground to interfere in the order of the CIT(A). Accordingly, ground No. 6 raised by the Revenue is also dismissed.
Reopening of assessment u/s 147 - HELD THAT:- Hon'ble Karnataka High Court in the case of Dell India Pvt. Ltd [2021 (2) TMI 37 - KARNATAKA HIGH COURT] reiterated the law laid down by the Hon'ble Supreme Court in the case of Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT] - The law is thus very clear that an assessment completed under section 143(3) of the Act can be reopened only on the basis of existence of tangible material coming into income possession of the AO after conclusion of such assessment proceedings. On the basis of the very same material available at the time of conclusion of the proceedings under section 143(3) of the Act, the AO cannot be allowed to review his own order.
We are of the view that there is no merit in grounds 2 to 4 raised by the Revenue in the appeal. Consequently, the said grounds are dismissed. In view of the conclusion, the reassessment proceedings were not validly initiated and the consequent quashing of the order under section 147 of the Act, we are of the view that the other issues raised by the assessee as well as Revenue in various grounds of appeal does not require any adjudication. In this regard, we find that the CIT(A), as a matter of abundant caution, has besides quashing the assessment under section 147 of the Act, has proceeded to decide the issue on merits also. As we have already stated, we do not wish to adopt such a course in view of our conclusion that the order of reassessment deserves to be quashed and annulled. Accordingly, appeal of the Revenue as well as the assessee are dismissed.
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2022 (6) TMI 596
Rejection of revised return - CIT(A) directing the Assessing Officer to consider the revised return - Whether AO has erred in law in not accepting the said revised return only on the ground the effect of such a wrong credit of income is not given in the Profit and Loss Account and further that once the accounts have been closed and balance sheet drawn, no variation in the accounts can be allowed? - HELD THAT:- We are not disputing the legal position put forth by the counsel for the assessee that once revised return has been validly filed, the original return gets substituted by the revised return. However, in the instant facts we note that the genuineness of claim put forth by the assessee has not been examined at all by the Revenue.
Neither the AO examined the factual aspect regarding the claim of the assessee and neither were the facts examined during the course of appellate proceedings. While, in principle we are in agreement that a validly filed revised return substitutes the original return, but at the same time, in the instant set of facts, the Revenue did not analyse the veracity of the facts/figures on the basis of which the return was revised by the assessee. Therefore, in the instant facts, in the interests of justice, we are setting aside the matter to the file of AO to examine the facts in detail and verify the claim of the assessee in the revised return. Accordingly, the matter is being set aside to the Assessing Officer with the above directions. Appeal of the Revenue is allowed for statistical purposes
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2022 (6) TMI 595
TDS u/s 194J - disallowing purchase expenses treating that as royalty payments and accordingly non-deduction of TDS - Addition u/s 40(a)(ia) - assessee only argued that in view of proviso added by way of amendment in section 40(a)(ia) and insertion of second proviso which provides that in case the recipient has included the receipts in their income, no disallowance u/s. 40(a)(ia) - HELD THAT:- As assessee made statement at bar that the recipient has included the receipts in their return of income in regard to these expenses on which assessee has not deducted TDS, in term of second proviso to section 40(a)(ia) we remit the matter back to the file of AO, who will consider the claim of assessee after taking relevant evidences.
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2022 (6) TMI 576
Unexplained cash deposits u/s 69A - Assessee deposited cash in the bank accounts - Denial of Natural justice - as argued AO did not allow the assessee for cross-verification related to the statements of the parties. HELD THAT:- CIT(A) took cognizance of the remand report without allowing the Assessee for cross-examining the four statement whose statement are contradictory with the Assessee's submission. Further, we accepted the additional evidence.
Accordingly, the cash-flow statement should be verified by the Revenue authorities. Prima facie, it is accepted that, maintaining of cattle and generation of the milk and also selling the same for earning is primarily accepted. There is no question about the existence of the business. The only issue is the cash generation for depositing in the bank account. It is to be directed that the issue should be further re-examined by the learned CIT(A) taking cognizance of the documents filed by the Assessee and a reasonable opportunity be allowed for cross-examinations related to the four parties. Thus, we direct to set aside the matter before the learned CIT(A) de novo for further consideration of the issue. Furthermore, a reasonable opportunity should be given to the Assessee for his contention. Appeal of the Assessee allowed for statistical purposes.
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2022 (6) TMI 575
Delay in deposit of employees contribution to Provident Fund and ESIC u/s. 2(24)(x) r.w.s. 36(1)(va) - sum paid before the due date of filing the return of income u/s. 139(1) - Scope of amendment - HELD THAT:- As relying on M/S BI WORLDWIDE INDIA PVT. LTD [2022 (1) TMI 417 - ITAT BANGALORE] and SATISH KUMAR SINHA VERSUS INCOME TAX OFFICER, WARD 4 (1) HYDERABAD [2021 (9) TMI 174 - ITAT HYDERABAD] we find that the amendment was brought in Finance Act, 2021 w.e.f 01.04.2021. The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee cannot be implemented retrospectively. We considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to Assessment Year 2019-2020. The assessee has deposited the employees contribution of provident fund before the due date u/s. 139(1) of the Act. Accordingly, we set-aside the order of the Ld.CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal in favour of the assessee.
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2022 (6) TMI 594
Revision u/s 263 by CIT - substantial increase in the capital account - as per CIT collector rate of the land in the year of conversion i.e; F.Y. 200607 was Rs. 9,50,000/- per acre and accordingly the fair market value of the land now sold as stock in trade should have been worked out for the F.Y. 2006-07 which would be much less than what had been claimed by the assessee in the computation of income, the difference has to be taxed as business income but the AO made no inquiry on this aspect - CIT also mentioned that the investment made in residential property under section 54F was less than net consideration in respect of capital asset transferred, therefore, the proportionate deduction in terms of provision of section 54F of the Act was to be allowed but the capital gain under section 54F of the Act had been wrongly calculated by the assessee as the capital gain already claimed exempt under section 54B on account of purchase of agriculture land had not been deducted -
HELD THAT:- As increase in capital as well as deduction claimed under the head capital gain were the issues identified for limited scrutiny for examination. The AO again directed the assessee to furnish the information during the course of assessment proceedings vide letter dt. 09/02/2017, copy of which is placed at page no. 195 and 196 of the assessee’s compilation, in the said letter, at Sl.No. 8 the AO asked the information relating to large deduction claimed under section 54B, 54C, 54D, 54G and 54GA of the Act and at Sl. No. 11 the AO asked the details of substantial increase in capital in a year. The assessee furnished all the requisite details which we have already mentioned in the former part of this order, so it cannot be said that the AO did not make the inquiries relating to the increase in capital account or did not examine the issues. In the present case the Ld. Pr. CIT on the one hand mentioned that the assessee did not provide details of substantial increase in capital in a year, on the other hand, she mentioned that the reply was furnished by the assessee relating to addition in capital account which was reproduced in para 6 of the impugned order. In the present case, it cannot be said that the AO did not make inquiries / verification relating to increase in capital account of the assessee as alleged by the Ld. Pr. CIT.
As regards to the certain entries which the Ld. Pr. CIT pointed as there was mismatch - when the case of the assessee was selected for scrutiny for a specific issue relating to increase in capital account and the AO asked the information and details for the said issue, the assessee furnished the relevant details which were examined by the AO who did not find any adversity or default in those details, so it cannot be said that the order passed by the AO was erroneous or prejudicial to the interest of the Revenue on the issue relating to the increase in capital account of the assessee.
Deductions claimed under section 54B and 54F - Since the facts for the year under consideration are identical to the facts involved for the A.Y. 2013-14 2021 (7) TMI 568 - ITAT CHANDIGARH] wherein in similar circumstances the order of the Ld. Pr. CIT under section 263 of the Act was quashed. We, therefore, are of the view that the Ld. Pr. CIT was not justified in holding that the assessment order passed by the AO for the year under consideration was erroneous and prejudicial to the interest of the Revenue on the issue relating to the deduction under section 54B and 54F of the Act. In that view of the matter and by considering the totality of the facts as discussed hereinabove, we are of the view that the Ld. Pr. CIT was not justified in holding that the assessment order dt. 29/12/2017 passed by the AO was erroneous in so far as it was prejudicial to the interest of the Revenue, accordingly the impugned order of the Ld. Pr. CIT is quashed.
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2022 (6) TMI 593
Penalty u/s. 271D - Loan accepted in cash in contravention of section 269SS - assessee had taken/accepted loans/deposits more than rupees twenty thousand in cash or otherwise than by account payee cheque/account payee draft from few person/party during the F.Y. 2014-15 relevant to A.Y. 2015-16 in contravention of the provisions of section 269SS - HELD THAT:- Here it is not disputed by both the parties that the assessee is having sufficient agricultural land on its disposal as joint owner. It is also evident that on the seized material related to the land ownership document on the back side of that paper the assessee has written the date, amount and the name of the person from the money has been received. On the top of the seized material below the details of money received it is also mentioned that [“Ramgadh Jamin ke pete” mean on account of Ramgadh land]. There is no contrary finding that the version stated in the above seized documents are not correct and even the assessee has accepted the facts mentioned in that seized documents.
The details are perfectly mentioned in that seized documents and the money so received is against the sale of agricultural land for which sale document or agreement to sale is not made on account prevailing dispute between the family members. Accordingly, the amount so received is the advance received against the sale of agricultural land owned by the assessee. During the course of the assessment proceeding the assessee contended that as regards the details of all six persons from whom such advance against sale of agricultural land was received, it is submitted that such advances were received through broker(s) in open market, which is a normal and prevailing practice. All the transactions have been entered through broker. The names of all theses persons have been given by the broker(s).
At present, the brokers are not in touch with the assessee. This written submission of the assessee is in accordance with the seized material found during the course of search and assessee has accepted the facts stated in that paper and once the assessing officer has considered the holding of the land, details of the amount received as advance for the sale of agricultural land all the details and facts arising out of the seized documents support the contention raised by assessee and on the contrary department has not challenged this basic arguments of the assessee that he has received the money as on account of sale of agricultural land. Till the date of transaction of advance received by the assessee the money so received is also not coming under the purview of specified sum and the same has been introduced in the Act w.e.f. 01-06-2015. Thus, the said amendment does not affect the transaction of the year under consideration. It is submitted by the AR of the assessee that once the cash receipt on account of sale of agricultural land was not prohibited under the law the advance so received by the assessee can not be considered as cash loan once the nature of credit is evidently clear that the money so received is for sale of agricultural land on face of the document seized. Thus, we have gone through the submission of the assessee and material available on the records and on abutted reading of page 71A along with the page 71, it is clear beyond doubt that the transactions entered on the page are pertaining to the agricultural land of the assessee situated and the department has not raised any doubt about the adequacy of the land and the amount related to the said land received by the assessee. Thus, this indirect admission of the department strength the argument of the assessee.
Addl. CIT while passing the order of levying penalty u/s. 271D has relied upon the finding of the order of the assessing officer in the quantum proceeding for A. Y. 2015-16 where in six issues has been pointed out the assessing officer in relation to the page under consideration, while levying the penalty order, except that point there is no separate finding or satisfaction of the Ld. Addl. CIT in this matter. The Ld. AR of the assessee has already filed the explanation stating that why the said finding of the AO is not correct and is also discussed in above paras. Thus, the order of levying penalty has no separate finding or observation as to why the penalty should sustain. Thus, the said order is considered in the light of the submission made by the Ld. AR of the assessee.
We are of the view that while levying the penalty the Ld. Addl. CIT has not dealt so as to why and how the penalty is leviable considering the present set of facts available on record. Looking to the facts, evidences and written arguments placed before us we concur the finding given by the Ld. CIT(A) and thus, based on this finding the appeal of the department is dismissed as the impugned transaction listed on the back side of page 71 is the amount received on the proposed sale transaction of the agricultural land and thus the considering that aspect the assessee has not violated the provisions of section 269SS of the act and in turn he is not liable for the penalty u/s. 271D - Decided against revenue.
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2022 (6) TMI 574
Income from house property - Deemed rental income - vacant property - Addition on account of rent which was never earned and realized by the assessee - Addition on the basis of assumption that the property in question was rented out whereas the same property was self occupied during the year under appeal , therefore the action of the authorities below is wrong, illegal, misconceived, unjustified and bad at law therefore it should be quashed - HELD THAT:- The Bench is of considered opinion that an affidavit along with verification appended when stands corroborated with any piece of evidence, like in the present case the copies of minutes of meeting, then the same cannot be said to be a self-serving affidavit of a fact. As these facts are verifiable facts and not merely facts stated on belief. The Tax Authorities had their means to have gone further into the inquiry with regard to facts stated in the affidavit. Rather and strangely the Tax authorities observed that this on oath statement is not substantiated by evidence, so disbelieved the affidavit. At the same time, once the affidavit was admitted by way of additional evidence and the remand report on its factual aspects was called it cannot be brushed aside by calling it a self-serving document unless the same was factually controverted by evidence or on oath statement on the part of revenue.
Thus, the bench is of the considered opinion that there was sufficient material before the ld. Tax Authorities which established that there was a genuine dispute in the locality where the commercial building of assessee was situated and that dispute was of such nature that no prudent person could be expected to have taken the disputed building on rent. The fact that this meeting was called on 28.11.2011 where a consensus was reached between the authorities and owners of building indicate that during the relevant financial year the property was actually not available in the hands of assessee to be let out. Admittedly it was let out in next FY.
Reliance on judgment of Vivek Jain [2011 (1) TMI 897 - ANDHRA PRADESH HIGH COURT]is not justified as that was a case where residential flat free of any sort of dispute was available in the hands of assessee to be let out. However, in the case in hand the property of the assessee cannot be said to be one actually available with him to be let out. The claim of assessee is not merely that in spite of his efforts he could not let out a property which was otherwise rentable. His claim rests on the fact that the property was actually not rentable for the reasons of issues with regard to demolition drive and sealing in the area making it not worthy of being taken on rent for any commercial purpose.
This Bench is of considered opinion that the legal disability created by the action of municipal authorities or under course of law, restricting the rights of the property holder to let out the property is a case where provision of Section 23(1)(c) would not be applicable.
The word receivable refers to the payment not being realised. The use of word “receivable” in Section 23(1)(c) of the Act, indicates that there should be, not mere possibility of receiving the rent, but rent can become payable in all the probability, as the property is available for being given on rent. Then it can be considered to be “receivable”. Therefore the correct interpretation is that in case the property is vacant then the notional rent can be taxed if it can be considered as “receivable” as mentioned in Section 23(1)(a) of the Act. When there is some legal disability or physical impossibility in creating a tenancy and due to which the property is left vacant, in any part or whole of the year, then there is no possibility of rent being realized and so the rent cannot be said to be “receivable” and accordingly on basis of notional rent no tax liability can be created. The tax authorities below have thus fallen in error in taxing the assessee on basis of notional rent. Thus, the bench is inclined to decide the grounds raised in favour of the assessee.
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Customs
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2022 (6) TMI 592
Classification of goods - composition of the imported yaravita zintrac (zinc oxide suspension concentrate) - classifiable under tariff item 3105 9090 of the First Schedule to Customs Tariff Act, 1975 or not - HELD THAT:- The appellant had imported the impugned goods with necessary permissions under the Fertilizer (Control) Order, 1985; the goods are, in essence, fertilizers and there is no reason, except in extraordinary circumstances of non-fitment within any of the headings therein, to seek an alternative classification. The schema of chapter 31 of First Schedule to Customs Tariff Act, 1975 is critical to this; there are two principal types: fertilizers of animal or plant origin and mineral and chemical fertilizers. Taking into account the essentiality of ‘macronutrients, the latter, constituting the bulk of the headings, are grouped again as nitrogenous, phosphatic and potassic corresponding to the trio: nitrogen, phosphorus and potassium as well as in all the permutations and combinations of the three.
The classification adopted by the original authority, and impugned before the first appellate authority, has its roots in the quantum of ‘nitrogen’ without ascertainment of conformity with ‘products of a kind used as fertilisers’ in note 6 of chapter 31 of First Schedule to Customs Tariff Act, 1975 with its emphasis on use before dovetailing it with the proposition of Learned Authorized Representative supra of the essentiality of ‘nitrogen’ to the imported product.
The jettisoning of the permission for import by the competent authority makes that deficiency in the order of the original authority obvious. With the impugned order departing from the framework of appellate resolution, the merging of the order of the original authority within it is not a proposition that is tenable; setting aside the order of the first appellate authority may not, of itself, impact the order of the original authority.
Our appellate competence is limited to the propriety and legality of the order impugned before us which, in the peculiar circumstance of the decision of the first appellate authority, does not encompass the order of the original authority within it. As the two appeals, thus far, have been of the appellant herein, it would hardly do for the appellant to be placed in this tenuous position. A finality to the dispute is called for.
The appeal of the importer before the first appellate authority is restored for a fresh decision on the correctness of the order of the original authority - Appeal disposed off by way of remand.
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Corporate Laws
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2022 (6) TMI 591
Maintainability of petition - Seeking to de-register the approved DIR-12 - seeking restoration of name of the Petitioner as Director in the MCA 21 Portal maintained by the Respondent as if his name was not removed - Section 169 of the Companies Act, 2013 read with Rule 11 & 79 of the NCLT Rules, 2016 - HELD THAT:- Upon perusal of Section 169 (4)(b) of Companies Act, 2013 it is unambiguous that any action under the said provision shall be carried against the Company concerned or any other director involved however in the instant matter the Company concerned is not a party to the proceedings - In the instant matter the presence of necessary parties is obviously required for this Tribunal to adjudicate and pass an effective and complete order granting relief as provided under the provision. In the absence of necessary parties, the Tribunal shall not be able to pass an effective Order. This Tribunal is of the view that the concept of non-joinder of parties is that the burden of providing relief should rest upon the Respondent concerned. However, in the instant matter the Petitioner has arrayed the Registrar of Companies, Chennai as respondent leaving out the Company Concerned and other directors involved.
This Tribunal, upon perusal of the typed set of papers filed, is of the view that the petition lacks documentary evidences. While taking a closer look on the prayer sought it is observed that the prayer ousts the powers vested with this Tribunal.
The Petition stands dismissed for non-joinder of necessary parties and for want of evidence.
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Insolvency & Bankruptcy
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2022 (6) TMI 590
Imposition of travel ban on the petitioner - violation of Article 21 of the Constitution - contention of the petitioner was that as the entire loan amount was covered under the resolution plan, the petitioner was in no manner connected with the company - HELD THAT:- As per the Office Memorandum dt. 12.10.2018, the conspectus of the issuance of the LOC was broadened to include the economic offenders hampering the interests of India and as such, a lookout circular can be issued in larger public interest. As the respondent Bank initiated recovery proceedings against the petitioner and if lookout circular is lifted and if the petitioner disappears, the recovery proceedings would be brought to standstill and recovery of crores of public money would become impossible. Hence, it is considered fit to dismiss the petition.
Writ petition dismissed.
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2022 (6) TMI 589
Seeking release of attachment made on scheduled mentioned property - seeking restriction from taking any further act of recovery proceedings against the Schedule mentioned Property purchased by the Applicant - seeking restraint from causing any hurdle for the functioning of the factory at the schedule mentioned property - seeking direction to 1st respondent to handover the Schedule mentioned property encumbrance free to the Applicant - HELD THAT:- It can be seen from the letters dated 24.12.2020 and 10.02.2021, exchanged between the 5th and 6th Respondents in IA/1005/2021, that the claim raised in the de facto attachment was occurred in the period between July 2011 and March 2014. Whereas, the Corporate Debtor was admitted into CIRP on 01.09.2017, in furtherance to that Liquidation was ordered on 16.07.2018, the paper publication regarding Liquidation of the Corporate Debtor was published on 18.07.2018, it is pertinent to note that no claim has been submitted by the Respondents 2 to 5 in IA/1005/2021, before the Resolution Professional or the Liquidator during the CIRP and the Liquidation process.
This Adjudicating Authority is of the considered opinion that the Sub Registrar of Uthumalai's demand of No Objection Certificate from the Tahsildar, Veerakeralampudur for registering the sale deed dated 12.02.2021 entered into between Sri Gomathi Energy (P) Ltd. and the Liquidator of the Corporate Debtor, reasoning alleged de facto attachment made on the Property is unjustifiable at this stage of Liquidation. Moreover, the Property sold to the Sri Gomathi Energy (P) Ltd. was in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.
The Sub Registrar, Uthumalai is directed to register the sale deed dated 12.02.2021 entered between Sri Gomathi Energy (P) Ltd. and the Liquidator of the Corporate Debtor - the liability in respect of the Property is not extinguished - Application disposed off.
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2022 (6) TMI 588
Dissolution of Committee of Creditors consisting of the Respondent No. 1, who is a related party - Validity of initiated CIRP proceedings - removal of Respondent No. 2 from the position of RP - imposition of cost for fraudulent and malicious on Respondent No. 1 and Respondent No. 2 as per the provisions of Section 65 and 70(2) - whether 1st Respondent is a related party to the Corporate Debtor? - HELD THAT:- The 1st Respondent, sole member of the CoC of the Corporate Debtor and Ms. Deepthi Vinod Bansal, who is 49% shareholder of the Corporate Debtor were uncle and niece. Thus, 1st Respondent and sole member of the CoC of the Corporate Debtor fall under the expression of 'related party of the corporate debtor' in 1st proviso of Section 21(2) and the 1st Respondent herein is prevented to be a part of the CoC.
Whether the Resolution Professional has done his due diligence in constituting the CoC? - HELD THAT:- It is the duty of the Resolution Professional to collect and peruse the information regarding Corporate Debtor and claimants before constituting CoC - Clause 6 and 7 of the declaration part of the form clearly require the declaration from the Financial Creditor who submitted the claim before RP that it is not covered under section 5(24) and it is the due diligence of the RP to confirm the said declaration.
The CoC is constituted with the Financial Creditor who is a related party to the Corporate Debtor and the survival of the said CoC is restricted by the express provision of the code. In addition, it appears that there is negligence on the part of Resolution Professional in identifying the related party in the CoC.
The 2nd Respondent, Resolution Professional of the Corporate Debtor is hereby directed to remove the 1st Respondent herein from the Committee of Creditors (CoC) of the Corporate Debtor viz. Mega Foods Products Madras Pvt. Ltd. as the 1st Respondent is related party to the Corporate Debtor - Application allowed in part.
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PMLA
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2022 (6) TMI 587
Seeking grant of Bail - Money Laundering - collection of huge amount of money from general public - Sections 3 and 4 of Prevention of Money Laundering Act, 2002 - HELD THAT:- Since the petitioner is a resident of Delhi and there is likelihood of flight risk and misuse of the liberty of bail and the trial is likely to suffer, the present case does not inspire the confidence of this Court to use the judicial discretion to grant bail in favour of the petitioner.
Considering the nature and gravity of the accusation, character of evidence appearing against the petitioner, the stringent punishment prescribed and that there are reasonable grounds to believe that the petitioner has no role in the offence alleged or not likely to commit any such offence, which is not possible to record in this case. The prayer for bail is devoid of any merit - Bail application dismissed.
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2022 (6) TMI 586
Money Laundering - proceeds of crime - validity of simultaneous proceedings under different statutes - obtaining bank form loan with the help of forged documents - offences punishable under Sections 511, 109, 34, 120-B, 406, 409, 420, 405, 417 and 426 IPC - HELD THAT:- It is a petition under Section 482 of the Code. The jurisdiction is too wide to ensure the ends of justice. It is guided by the principles of law, as laid down by the Hon’ble Supreme Court in a catena of decisions - In the case of INDIAN OIL CORPORATION VERSUS NEPC INDIA LTD & ORS [2006 (7) TMI 575 - SUPREME COURT], it was held that As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not.
In the instant case, complaint has been filed by a public servant in discharge of his official duties. Therefore, apparently there is no need to examine the complainant and the witnesses under Sections 200 and 202 of the Code before issuance of the process.
A bare perusal of Section 3 of the Act, makes it abundantly clear that it provides for punishment for involvement in any process or activity connected with the proceeds of crime - What is the allegation in the instant case is that the petitioners prepared forged documents, used them as genuine and untainted.
In the instant case, the FIR was filed for offences under Indian Penal Code, 1860 (IPC) and here, in the instant case, the complaint is filed under Sections 3 and 4 of the Act. Both are distinct offences. The acts are also different. They are not the same offence. Therefore, apparently the provisions of Article 20(2) of the Constitution of India are not attracted in the instant case. Instant complaint case is not a second trial. The petitioners have never been tried before - In so far as Section 300 of the Code is concerned, it is also not applicable, it deals with the situation when the person once convicted or acquitted is tried for the same offence again. This Section bars such trial. Instant complaint case is not a second trial. The petitioners have never been tried out.
This act is not an offence under the IPC, under which FIR was filed and charge-sheet has been submitted, of which the trial is pending. This is distinct offence, defined under the Act. Therefore, mere pendency of criminal trial for the offences based on FIR lodged against the petitioners on 23.07.2009, it cannot be said that the complaint may not proceed further.
In the instant case, it is the allegation against the petitioner that he used Proceeds of Crime, he concealed it by layering, by integrating it. Merely because the petitioners have already deposited the money, it does not absolve the petitioners of any liability under the Act. Section 3(ii) of the Act, does not bar the prosecution.
Petition dismissed.
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2022 (6) TMI 585
Seeking enlargement on Bail - Money Laundering - siphoning of funds - diversion of money which was drawn from the consortium of banks, for unintended usage - two conditions prescribed under Section 45 of the Act have been fulfilled or not - HELD THAT:- As seen from the investigation done so far by the respondent/Directorate, the consortium of banks has advanced money to SIPL for which the petitioner is the Managing Director and it is alleged that the funds to the tune of Rs.395 crores advanced by the consortium of banks were diverted wrongfully by the petitioner. The report of DDI LLP, which was got done by lenders, also shows that SIPL has shown false transactions and siphoned the funds and issued letter of credits in the name of the companies and the persons belonging to the petitioner, who, in turn, have again diverted the funds in favour of the petitioner. The petitioner and his family members stated to have purchased some assets in the name of benamis and with malafide intention has approached BIFR for declaring the company as sick company - Considering the material collected so far by the respondent/Directorate, it cannot be said that there is no prima facie material to show that the funds borrowed by the petitioner for SIPL has been siphoned for wrongful gain.
This Court is not inclined to record that there are no grounds to believe that the petitioner is not found guilty of the offence alleged against him. In fact, it is the trial Court, which, after full-fledged trial, only will undertake to record such kind of observation. Since the petitioner has failed to fulfill the two conditions prescribed under Section 45 of the Act, this Court is not inclined to grant the relief sought for by him - Criminal petition dismissed.
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Service Tax
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2022 (6) TMI 583
Valuation of services - Cleaning activities in respect of non-commercial building or premises - non-inclusion of value of the materials supplied to the service receivers - the appellant’s submission in the defence is that department has gravely erred in not allowing exemption and deduction claimed while arriving at final taxable value - HELD THAT:- Cleaning activities in respect of non-commercial building or premises is not taxable. The Government in its Departmental Instruction vide TRUs letter F.No. B1/6/2005-TRU dated 20.07.2005 has clarified that “cleaning service in respect of non-commercial building and premises thereof would not be covered within the purview of service tax under this category.” Further Notification No. 9/2009-ST dated 03.03.2009, exempts the taxable services specified in clause (105) of Section 65 of the Finance Act, which are provided in relation to the authorized operations in a Special Economic Zone, and received by a developer or units of a Special Economic Zone, whether or not the said taxable services are provided inside the Special Economic Zone, from the whole of the Service tax leviable thereon under section 66 of the Finance Act - The demand of Service tax on material value supplied to the client during the impugned period was not justifiable. Service tax cannot be leviable on value of material supplied to the client. Notification No. 12/2003-ST dated 20.06.2009 provides exemption. They made declaration under VCES after considering the exemption and deductions.
The appeal is allowed by way of remand to the adjudicating authority to pass a de novo order after considering all the exemptions and documents /records to be submitted by the appellant before him.
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2022 (6) TMI 582
CENVAT Credit - input services - services used for activities related to its corporate social responsibility [CSR] - non compliance of section 135 read with section 134 of the Companies Act - extended period of limitation - penalty - HELD THAT:- Undisputedly, the output services rendered by the appellant were “banking and other financial services”. These services can be rendered and were rendered using various input services. After rendering these services the appellant earns some profit or meets other criteria laid down under section 135 of the Companies Act 2013. This results in a legal obligation on the appellant to spend some amount on the activities of corporate social responsibility. Of course, not fulfilling this responsibility attracts penalties under the Companies Act. Similarly, the company will also have other responsibilities towards their stakeholders such as payment of bonus, productivity linked incentives, etc.
A provider of output service may utilise several services in its business and may pay service tax on them. If the legislative intent was to allow a provider of output service to avail Cenvat Credit on all such services, the rule would have read as “any service used by the provider of output services”. However, it does not read so. It qualifies the definition by “for providing output services”. Therefore, there could be services which are used by the provider of output services who provide output services and there could be services used not for providing output service for some other business purpose. In our considered view the corporate social responsibility falls under the second category. It has no nexus to providing any input services.
Several services which are not directly input services for providing of output services or which are not used for manufacturing final product have been included in the inclusion part of the definition under rule 2(l) - It is not open for this Tribunal to modify or enlarge the scope of this Rule which is a legislative or quasi-legislative function.
Extended period of limitation - imposition of penalties - HELD THAT:- There is no evidence of fraud or collusion or wilful statement or suppression of the facts in the matter. Accordingly the demand can only be raised within the normal period of limitation.
The denial of Cenvat Credit on the expenses incurred on corporate social responsibility within the normal period of limitation is upheld. The demand for extended period on limitation and the penalties are set aside. The matter is remanded to the original authority for limited purpose of calculating the amount of Cenvat Credit to be denied - Appeal allowed by way of remand.
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2022 (6) TMI 573
Recovery of Refund Claim - HELD THAT:- The impugned show-cause notice has been triggered on account of the order passed by the Appellate Authority i.e., the Commissioner, Central Tax, Appeals-II, New Delhi. The Appellate Authority has remanded the matter to the adjudicatory authority for carrying out fresh examination of the matter concerning the petitioner’s refund claim.
A remand order of the kind, captured in the order of the Appellate Authority, cannot trigger a recovery at this stage - Mr Singla will return with instructions on the next date of hearing - List the matter on 02.06.2022.
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2022 (6) TMI 584
Exemption from Service Tax - Allied educational activities or not - affiliating Universities under which several institutions get affiliated and the students admitted in the affiliated institutions are being tested by conducting examinations - HELD THAT:- The issue raised in these writ petitions is no more res integra, at least for the present, in view of the judgment made in MADURAI KAMARAJ UNIVERSITY VERSUS JOINT COMMISSIONER, OFFICE OF THE COMMISSIONER OF GST AND CENTRAL EXCISE, MADURAI [2021 (9) TMI 516 - MADRAS HIGH COURT], where it was held that the university cannot be assessed for demanding any service tax for the services of education provided by them, which includes affiliation or other services provided for the students, faculty as well as the staff of the university.
The services rendered by the petitioner Universities by way of affiliation and allied activities including the conduct of examinations, awarding of degrees, diplomas etc., and also the income they derived from rent paid by the third parties like Postal Department, Banks etc., and also to run Canteen for the purpose of Students and Staff, were considered to be allied services attached with the educational activities undertaken by the Universities and therefore they are also exempted.
Since that view had been taken in the Madurai Kamaraj University case, there are no hesitation to hold that the issue raised in entirety in these two writ petitions is covered by the decision of this Court - petition allowed.
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Indian Laws
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2022 (6) TMI 581
Dishonor of Cheque - rejection of prayer of the petitioner/appellant to lead additional evidence under section 391 of the Code of Criminal Procedure, 1973 - section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- In order to appraise the correctness of the exercise of discretion by the appellate court, in the light of the averments in the application, it becomes evident that the sole ground sought to be put-forth by the petitioner-accused is of chancing upon a photostat copy of the cheque in the month of June 2017, post pronouncement of the judgment by the trial court. Interestingly, in paragraph 4 of the application, what the petitioner asserts is that the photostat copy of the cheque was found while dealing with the case documents. The petitioner neither asserts that she was not in possession of the document nor was she unaware of the existence of the said document. Moreover, it is not the case of the petitioner that the photostat copy of the cheque was allegedly found while perusing some other record. In contrast, the petitioner asserts that the photostat copy of the cheque was indeed found while dealing with the case documents. Meaning thereby, while perusing the documents pertaining to the subject prosecution.
Secondly, the nature of the documents sought to be adduced by way of additional evidence also assumes importance. A photostat copy by its very nature is vulnerable to allegations of manipulation. Different considerations come into play when a copying process in itself ensures correctness of copy's contents qua the original. In the absence of any contemporaneous material in the nature of acknowledgment or otherwise, a plea that a photostat copy of the instrument in question was found after about 9 years of its execution to bolster up the defence that when the original instrument was delivered, it was in a state, which the photostat suggests, cannot be readily acceded to.
In the case at hand, if the petitioner is allowed to lead the evidence, as proposed, it has the propensity to reopen the entire trial, partaking the character, the aspect of the date on which the subject cheque was payable.
The learned Additional Sessions Judge committed no error in disallowing the applicant to lead additional evidence. In any event, the exercise of discretion by the learned Additional Sessions Judge is not vitiated by such elements of perversity or unreasonableness as would warrant exercise of extraordinary writ jurisdiction - Petition dismissed.
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2022 (6) TMI 580
Refund claim - burden of the draw charges had been passed on to a third party or the ultimate consumer or not - HELD THAT:- The Court came to a view that it would not be correct to decide the issues raised in writ jurisdiction. Neither the Organising States nor the distributor/selling agents were made parties. The claim for refund was being made by the sole stockist of the distributor/selling agents. The sole stockist of the distributor/selling agents would have, under the scheme of the Act and Rules, no hand in the pricing structure of the cost of the lottery tickets. The learned Court was also of the view that refund of this nature cannot be granted if the burden of the draw charges had been passed on to a third party or the ultimate consumer.
In an intra-Court Mandamus appeal, interference is usually warranted only when palpable infirmities or perversities are noticed on a plain reading of the impugned judgment and order. In the facts of the instant case, on a plain reading of the impugned judgment and order, this Court does not notice any such palpable infirmity or perversity. That apart and in any event, the impugned judgment and order is supported with cogent and justifiable reasons.
Appeal dismissed.
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