TMI Tax Updates - e-Newsletter
April 16, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Highlights / Catch Notes
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GST:
Eligibility for Composition scheme - ice-cream - limited grievance of the petitioners is that the ‘Ice Cream’ has been placed on par with Pan Masala and Tobacco - The High Court scrutinized the decision of the GST Council and found it lacking in adequate reasoning. It emphasized the importance of reasonable classification in taxation laws, citing constitutional principles and judicial precedents. Ice Cream, being a widely consumed item, cannot be arbitrarily placed in the same category as luxury goods without proper justification. Consequently, the High Court directed the GST Council to reconsider its decision regarding the exclusion of Small-Scale Ice Cream Manufacturers from the composition scheme. The Court expected the Council to make this decision within a reasonable timeframe, preferably three months.
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GST:
Territorial Jurisdiction - seeking transfer of place of investigation - The petitioner cited inconvenience due to the distance between their headquarters in Thiruvananthapuram and the location of the investigation in Kasaragod. However, the court found no compelling reason to grant the transfer, noting that Kasaragod is within the boundaries of Kerala. Consequently, the court dismissed this plea. - On the matter of expediting the advance ruling application, the court noted that the application was relatively recent, filed in January 2024. Therefore, the court declined to intervene and compel the advance ruling authority to expedite the decision.
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GST:
Seeking grant of bail - Evasion of GST - The High Court identified several deficiencies in the prosecution's case. Firstly, the absence of prior sanction from the Commissioner for prosecuting GST offenses undermined the validity of the charges. Additionally, discrepancies in the applicant's signature on official documents raised suspicions of forgery, casting doubt on the prosecution's claims. Furthermore, the inadequacy of evidence presented during the trial, highlighted by admissions from a prosecution witness, further weakened the case against the applicant. Consequently, the High Court allowed the applicant's bail application, emphasizing the lack of concrete evidence and procedural lapses in the prosecution's case.
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GST:
Levy of penalty - The appellant was accused of failing to produce proper invoices or delivery challans during the transportation of goods, which led to a penalty being imposed. Despite the appellant's claim that the transportation was covered by valid documents, a discrepancy was found between the documents presented and the actual transportation vehicle. The High Court upheld the penalty.
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Income Tax:
Deductions u/s 80IC - audit report in Form 10 CCB, due to inadvertence, had not been uploaded online on time - Power of CBDT to condone delay us 119 - Rectification u/s 154 - The High Court observed that the tax authority's failure to act on the rectification request for nearly six years constituted an unreasonable refusal to exercise its statutory powers, thereby violating its duty. Errors made by the petitioner’s Chartered Accountants should not prejudice the petitioner's entitlement to statutory deductions, echoing the principle that the objective of the law is not to penalize taxpayers for inadvertent errors. The court rejected a narrow interpretation of 'genuine hardship' that would only consider severe financial crises, highlighting that the loss of statutory benefits itself constitutes a genuine hardship.
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Income Tax:
Profits in lieu of salary u/s 17(3)(i) - payment received by the assessee as lump sum amount after his termination from service and sum received for the purchase of new car - The Tribunal noted the argument of the assessee that these payments were voluntary and not conditioned by any legal duty or obligation. Relying on legal precedents, including a decision from the Delhi High Court, the Tribunal concluded that voluntary payments made by the employer, not arising from a legal duty, are not to be treated as profits in lieu of salary under Section 17(3)(i). Therefore, the Tribunal upheld the decision of the CIT(A) to delete the addition of these amounts to the assessee's income.
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Income Tax:
Penalty u/s 271(1)(c) - An order in the name of dead person - The Appellate Tribunal acknowledged that the penalty order was indeed issued in the name of a deceased assessee. Despite being informed about the death of the assessee, the CIT(A) failed to consider this fact and passed the order in the name of the deceased person. Citing relevant legal precedents, the Tribunal concluded that penalty orders cannot be passed on deceased individuals and that notices should be issued to their legal heirs. Therefore, the Tribunal quashed the penalty order issued by the CIT(A).
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Income Tax:
Validity of assessment order passed u/s 144C - The ITAT held that the order issued by the AO was a final assessment order disguised as a draft, violating section 144C of the Act. This section mandates that a draft order must be issued first, allowing the assessee to file objections with the Dispute Resolution Panel (DRP) before finalizing the assessment. The inclusion of penalty notices and demand under section 156 alongside the draft/final order further supported the Tribunal's conclusion that the order was final. The Tribunal concluded that the appeal by the assessee was to be allowed and the orders by the lower authorities were declared non est (non-existent for legal purposes).
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Income Tax:
Exemption u/s 11 - assessee is a Charitable Trust registered u/s. 12A - The Tribunal found that the trust, despite being primarily focused on its members, was engaged in activities aimed at the advancement of the Fragrance and Flavor Industry, which could be considered beneficial to the public. - The Tribunal highlighted that the trust's activities, such as holding seminars, workshops, and conferences, were incidental to its main objective of promoting the Fragrance and Flavor Industry. It emphasized that the trust's surplus income was utilized for furthering its charitable objectives and not distributed among its members. - The Tribunal's decision affirms the charitable nature of the trust's activities and its eligibility for tax exemption under section 11 of the Act.
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Income Tax:
LTCG - deduction u/s 54F - Ownership of more than one residential house at the time of sale of an original asset - The tribunal sided with the interpretation that joint ownership of property does not equate to full ownership, and hence does not disqualify the assessee from availing the deduction under section 54F of the Income Tax Act, following the reasoning of the Madras High Court over that of the Karnataka High Court.
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Income Tax:
Assessment u/s 153A - addition made in respect of completed assessment in absence of any incriminating material - The tribunal found that the additions made to the taxpayer’s income for these years were not backed by any incriminating evidence obtained during the search. Citing several precedents, including a Supreme Court ruling, the Tribunal noted that additions cannot be made for completed assessment years in the absence of incriminating material. Similar to the earlier years, the Tribunal observed that the additions were based solely on statements made under distress without any corroborating material evidence.
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Customs:
Authority under the Customs Act to proceed against the property of a third party - Prohibition of Benami Property Transactions - The High Court emphasizes that respondent No. 2 cannot question the petitioner’s ownership of the flat, even if it was purchased by her husband. Referring to Section 3 of the Prohibition of Benami Property Transactions Act, 1988, the court states that only the husband could question the petitioner’s ownership, and any such dispute should be resolved in a civil court. - The High Court finds that respondent No. 2 lacked jurisdiction to issue the communication under the Customs Act. There is no provision allowing customs officials to attach the property of a third party, such as the petitioner, who is not connected to any recovery under the Customs Act.
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Customs:
Seeking provisional release of the goods - Second hand Highly Specialised Equipment digital Multifunction Print, Copying & Scanning Machines - The High Court analyzed the foreign trade policy and related orders, finding that the imported MFDs fell within the restricted category. However, it acknowledged exemptions for highly specialized equipment. - The High Court noted the pending applications for provisional release of the goods and emphasized the need for authorities to take appropriate decisions in accordance with regulations. It directed the authorities to consider the applications and issued conditions for provisional release.
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IBC:
Initiation of CIRP based on a corporate guarantee provided to a consortium of lenders- Validity of deed of Guarantee - The tribunal noted that the guarantee exceeded the statutory limits under Section 186 but highlighted that the corporate debtor and principal borrower were closely linked family businesses. This closeness implied a level of awareness and consent to the risks involved, undermining the appellant's argument for invalidity based on statutory non-compliance. It was established that the deed of guarantee was executed in favor of the trusteeship managing the consortium’s interest, thus granting the lenders, including the respondent bank, the right to enforce the guarantee. The tribunal dismissed the appellant's claim of lack of privity of contract.
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IBC:
Fixation of remuneration of liquidator - The Appellate Tribunal recognized the efforts made by the liquidator in attempting to manage the corporate debtor's affairs under challenging circumstances, including legal efforts to vacate asset attachments and manage stakeholder relations. However, it ultimately held that the liquidator’s remuneration could not be dissociated from the actual realization of assets, as prescribed by the IBBI regulations. - The appeal was dismissed on these grounds, reinforcing the principle that liquidator fees should be strictly tied to the effective realization of assets, not merely the efforts or time spent managing the debtor’s affairs without corresponding financial results.
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IBC:
Maintainability of petition seeking initiation of CIRP against Personal Guarantor/Respondent - invocation of Bank guarantee and time limitation - The case involved an application u/s 95 of the IBC by a Financial Creditor against a Personal Guarantor for recovery of outstanding debt. The Tribunal examined the validity of guarantees, notice of demand, limitation period, and the effect of CIRP against the Principal Borrower. It upheld the validity of guarantees, affirmed the notice of demand, and ruled the Company Petition as rejected due to being filed beyond the limitation period. The Tribunal also confirmed the constitutional validity of relevant IBC sections.
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IBC:
Scope of the Report of IRP - IRP was appointed on application under Section 94(1) - After appointing an Interim Resolution Professional (IRP) and receiving a report recommending acceptance of the petition, various applications were filed by the Financial Creditor challenging the application's legitimacy. The Debtor contested these objections, asserting the validity of the IRP's report. The Tribunal scrutinized the facts and found potential bias in the IRP's conclusions, ultimately concluding that the application seemed to be a strategic move by the Debtor to benefit from the moratorium and delay recovery proceedings. As a result, the Tribunal rejected the application and accompanying report, along with dismissing other related applications.
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PMLA:
Seeking release on ground of arrest of petitioner being illegal and in violation of principles laid down by the Hon’ble Supreme Court - The Court found that the arrest of Kejriwal by the Directorate of Enforcement was procedurally sound and legally justified under the provisions of the Prevention of Money Laundering Act (PMLA). It rejected the argument that the arrest was mala fide or timed to disrupt democratic processes, such as elections.
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Service Tax:
Reverse Charge (RCM) - Commissions paid to a foreign service provider - benefit of exemption under notification no. 18/2009-ST - non-discloser of detailed in the Shipping Bill - The CESTAT noted that the appellant's compliance with the procedural aspects of the notification, albeit delayed, was recognized. - The appellant successfully argued for the benefit of an exemption notification, although initially failing to meet some procedural requirements. The Tribunal's decision pivoted on the finding that there was no deliberate suppression of facts by the appellant, which is a necessary condition for extending the limitation period for tax demands.
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Service Tax:
Scope of SCN - The appellant challenged the demand primarily on the grounds of a deficient show cause notice, which failed to specify the category of services subjected to taxation. They argued that this omission hindered their ability to mount a proper defense. The Tribunal agreed with the appellant, noting that the absence of crucial details in the notice and order rendered the proceedings defective. Consequently, the Tribunal set aside the impugned order, granting relief to the appellant.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (4) TMI 555
Eligibility for Composition scheme - ice-cream - limited grievance of the petitioners is that the ‘Ice Cream’ has been placed on par with Pan Masala and Tobacco - proper reason assigned by the Council for the inclusion of Ice Cream Manufacturers in the negative list - HELD THAT:- From a perusal of the resolution passed by the GST Council, it is evident that the goods and services have been divided into 05 Tax slabs for collection of the tax, that is (i) 0%, (ii) 5%, (iii) 12%, (iv) 18% and (v) 28%. It was discussed in the meeting that the Small Scale Ice Cream Industries have been put out of the composition scheme and the Manufacturers have been put under the category of 18% of the GST Scheme. It was also discussed that except for the big brands of Ice Cream Industries, 80-90% of Ice Cream Industries fall under the Small Scale Industries and are low in their turnover and transaction business. The Council after discussion, put Pasta, Macaroni, Cakes, Malt, Mineral Water, Tobacco, Pan Masala etc. under the category of 18% GST and at the same time, kept the rate of tax for Human Hair (dressed, Thinned, and Bleached), Agarbatti at nil. The Council kept the rate of tax for certain items at 5% or 12%, though those were the Luxurious items.
In the matter of Ayurveda Pharmacy [1989 (3) TMI 187 - SUPREME COURT] while dealing with the levy of sales tax on Ayurvedic drugs and medicines, the Hon'ble Supreme Court held that the Legislature is authorized to select different rates of tax for different commodities, but for the same class or category, there must be a rational basis for discrimination - From a perusal of the decision taken by the Council in the meeting, it appears that no reason has been assigned by the Council to exclude the Ice Cream Manufacturers from the benefit of Section 10(1) of the GST Act. The Council ought to have taken into consideration the socio-political effect while putting the Ice Cream within the tax regime of 18%.
The taxation law should pass the test of Article 14 of the Constitution of India and there should be reasonable classification. Admittedly, Ice Cream is being widely consumed by the people of India. It cannot be termed a luxurious item as all kinds of people use to taste Ice Cream. The Council ought to have taken into consideration the socio-economic effect as mentioned in the Constitution.
This petition is disposed of with a direction to respondent No. 2/GST Council to reconsider the exclusion of Small-Scale Manufacturers of Ice Cream from the benefit of Section 10(1) of the GST Act.
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2024 (4) TMI 554
Seeking time to file reply - HELD THAT:- The respondents, accepts notice on behalf of the respondents and seeks time to file reply - Copy of this petition be supplied to learned counsel for respondent during the course of the day.
Adjourned to 30.07.2024.
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2024 (4) TMI 553
Territorial Jurisdiction - seeking transfer of place of investigation - Inconvenience of traveling 550 km - seeking advance ruling as well - HELD THAT:- Kasaragod is not a place which is situated beyond the boundaries of State of Kerala and this Court finds no reason to transfer the investigation from Kasaragod to Thiruvananthapuram. In view thereof, the petitioner's prayer for transferring the investigation from Kasaragod to Thiruvananthapuram is rejected.
Insofar as the application in Ext.P6 for advance ruling is concerned, the said application has been filed only on 17.1.2024 and, therefore, this Court does not find any ground to direct the advance ruling authority to expedite the decision on the said application, as prayed for by the petitioner.
This Court finds no substance in the present writ petition, which is hereby dismissed.
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2024 (4) TMI 552
Seeking grant of bail - Evasion of GST - Petitioner claimed that his signature were forged - absence of prior sanction from the Commissioner for prosecuting offenses u/s 132(1) - Non compliance of Section 132 (6) of the Central Goods and Services Act, 2017 - On the basis of fake documents and papers, amount claimed by the concerned persons towards return of the amount of GST paid - HELD THAT:- Admittedly, there is no previous sanction of the Commissioner and, therefore, there is no question of the applicant being prosecuted for breach of Section 132 (1) (e) (f) (l) (ii) (iv) of the G.S.T Act. Though Assistant GST Commissioner – Balaji Narhare is the original complainant, he has not been shown as a witness.
The trial has already commenced and the evidence of P.W.1 – Dhondiram Hariba Bembade has been recorded by the Metropolitan Magistrate 34th Court, Vikroli, Mumbai. This witness, during his cross-examination, gave vital admissions indicating that the investigation was conducted by Balaji Narhare. He does not know anything more than that - prima facie, incarceration of the applicant appears to be without any concrete material against him. It is submitted that the applicant has been in custody for more than two years.
The applicant – Sagar More is released on bail on furnishing a P.R. bond in the sum of Rs.20,000/- with one surety in the like amount to the satisfaction of the trial Court in Crime No.327 of 2020 registered with Tilak Nagar Police Station - Application allowed.
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2024 (4) TMI 551
Order of penalty issued by the respondents pursuant to the adjudication of a SCN - violation of the procedural requirements with regard to transportation of goods under the Goods and Services Tax Act - penalty imposed on the ground that electronic copy of the e-way bill that was produced by the appellant to establish that the consignment was covered by valid transporting documents shows a vehicle number, which was different from that contained in the e way bill.
HELD THAT:- Although it is the submission of the learned counsel for the appellant Smt.Latha that the details of the goods were shown in the parent e-way bills that were generated in respect of the entire consignment, a part of which alone was being transported at the time of interception, we find ourselves unable to accept the said explanation since the statutory requirement under the GST Act and Rules has necessarily to be complied with. It is trite that when the statute prescribes the manner in which a thing has to be done, then it can be done in that manner, and no other. This is more so in relation to taxing statutes where the procedures prescribed are designed to check evasion of tax. There are no reason to interfere with the judgment of the learned Single Judge impugned in this Writ Appeal.
The Writ Appeal fails and is accordingly dismissed.
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Income Tax
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2024 (4) TMI 548
Profits in lieu of salary u/s 17(3)(i) - payment received by the assessee as lump sum amount after his termination from service and sum received for the purchase of new car - assessee has argued that he received the aforesaid amount as lump sum amount as a settlement out of court with the employer (INX Media) of the assessee and voluntary settled the case as the reputation of the assessee was diminished due to extreme harassment and ill treatment caused by the employer
HELD THAT:- Hon’ble Madras High Court in C.N.Badami [1997 (10) TMI 17 - MADRAS HIGH COURT] has held that the amount received for encashment of leave salary would be a profit in lieu of salary and taxable under “voluntary Separation Programme”.
The Hon’ble Madras High Court in P. Arunachalam [1998 (2) TMI 42 - MADRAS HIGH COURT] also followed the dictum of Badami (supra). However the perusal of the aforesaid citation shows that the Hon’ble Madras High Court held as above as there was an existing agreement, whereas there was no such agreement between assessee and his employer in the facts of the present appeal, hence, the facts of the present case are easily distinguishable.
CIT(A) has rightly held that the receipt of the aforesaid amount, being on account of out of court settlement and on account of the value of perquisite, deserved to be deleted and were so rightly deleted.
As the payment of ex-gratia compensation was voluntary in nature without there being any obligation on the part of employer to pay further amount to assessee in terms of any service rule. it would not amount to compensation in terms of section 17(3)(i) of the Act. The impugned addition was rightly deleted by the Ld. CIT(A). Decided against revenue.
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2024 (4) TMI 549
Deductions u/s 80IC - audit report in Form 10 CCB, due to inadvertence, had not been uploaded online on time - Power of CBDT to condone delay us 119 - Rectification u/s 154 - as argued inadvertence/ oversight in uploading Form No. 10 CCB by the auditor/ the Chartered Accountants of petitioner were circumstances beyond the control of petitioner and would constitute a reasonable cause for not uploading Form No. 10 CCB along with the return of income - Petitioner submitted hat refusal to exercise of powers u/s 119 of the Act by respondent no. 2 on a pedantic and narrow interpretation of the expression 'genuine hardship' to mean only a case of 'severe financial crises' is unwarranted.
HELD THAT:- We would agree with Petitioner that no assessee would stand to benefit by lodging its claim late. Moreso, in case of the nature at hand, where assessee would get tax advantage/benefit by way of deductions u/s 80IC of the Act. Of course, there cannot be a straight jacket formula to determine what is ‘genuine hardship’. In our view, certainly the fact that an assessee feels that he would be paying more tax if he does not get the advantage of deduction under Section 80IC of the Act, that will be certainly a ‘genuine hardship’.
The Court in K. S. Bilawala & Ors. [2024 (1) TMI 950 - BOMBAY HIGH COURT] has held that the phrase ‘genuine hardship’ used in Section 119(2)(b) of the Act should be considered liberally. CBDT should keep in mind, while considering an application of this nature, that the power to condone the delay has been conferred is to enable the authorities to do substantial justice to the parties by disposing the matters on merits and while considering these aspects, the authorities are expected to bear in mind that no applicant would stand to benefit by lodging delayed returns.
The court also held that refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when the delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.
Legislature has conferred power on respondent no. 3 to condone the delay to enable the authorities to do substantive justice to the parties by disposing the matter on merits. Routinely passing the order without appreciating the reasons why the provisions for condonation of delay has been provided in the act, defeats the cause of justice. In the circumstances, we hereby quash and set aside the impugned order.
Application filed by petitioner for rectification of the intimation rejected - We have to note our disappointment with the conduct of respondent no. 1 in not even replying to petitioner. Respondent no. 1 was duty bound to pass orders on the application which has been pending for almost 6 years, instead of making such baseless statements in the affidavit in reply. Perhaps, respondent no. 1 thinks that he or she is not accountable to any citizen of this country. Copy of this order shall be placed before the PCCIT to take disciplinary action against respondent no. 1 for dereliction of duty.
In view of the above, respondent no. 1 shall on or before 31st May 2024, dispose the pending application under Section 154 of the Act on merits and before passing any order shall give a personal hearing to petitioner, notice whereof shall be communicated at-least five working days in advance.
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2024 (4) TMI 547
Penalty u/s 271(1)(c) - An order in the name of dead person - appeal was filed by the legal heir of the assessee and legal heir of the assessee had intimated to the ld. CIT(A) that assessee had died inspite of this, the ld. CIT(A) passed the order in the name of dead person - HELD THAT:- We note that the information about the death of the assessee was available before the ld CIT(A), despite of this, the ld CIT(A) issued the notices for hearings, during the appellate proceedings in the name of dead person, and also passed the order in the name of dead person, which is not tenable in the law. That is, ld CIT(A) should have issued the notices, on the legal heirs of the assessee and the order should have been passed in the name of legal heirs of the assessee, which the ld CIT(A) has failed to do so.
Therefore, order passed by the ld CIT(A) needs to be quashed and for that reliance is placed in the case of Savita Kapila [2020 (7) TMI 441 - DELHI HIGH COURT] wherein it was held that in absence of a statutory provision, a duty cannot be cast upon legal representatives to intimate factum of death of assessee under section 148 of the Act, after his death and, in such a case, it could not have been validity served upon assessee, said notice being invalid, was to be quashed.
As decided in the case of PCIT vs. Maruti Suzuki India Ltd [2019 (7) TMI 1449 - SUPREME COURT] held that where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity, would be without jurisdiction and was to be set aside.
In the present case of assessee, the information about the death of the assessee was available before the ld CIT(A), despite of this, CIT(A) issued the notices for hearings, during the appellate proceedings in the name of dead person, and also passed the order in the name of dead person, which is not tenable in the law, hence we quash the order passed by ld CIT(A). Assessee appeal allowed.
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2024 (4) TMI 550
Benefit of Section 10(38) - Assessee to file revised returns if he omitted to make a claim - denial of an opportunity to cross examine the entry providers - as decided by HC ITAT was justified in accepting the plea of the Assessee that the failure to adhere the principles of natural justice went to the root of the matter. Also, the CBDT circular that permitted to the Assessee to file revised returns if he omitted to make a claim was also not noticed by the AO, thus correctly dismissing the Revenue’s appeal
HELD THAT:- No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is, accordingly, dismissed.
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2024 (4) TMI 546
Validity of assessment order passed u/s 144C - instead of forwarding the draft assessment order, the Assessing Officer has passed a final order, thereby not following the mandatory provisions of section 144C(1) - penalty notice u/s 274 read with section 270A and 274 r/w sec 271AAC (1) of the Act and the notice of demand under section 156 of the Act - HELD THAT:- A perusal of Section 144C of the Act shows that the AO shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the AO shall proceed by framing the final assessment order and if the objections are raised before the DRP, then, upon receipt of directions issued by the DRP, the AO shall complete the assessment. We find that while framing the said draft assessment order, the AO not only issued and served demand notice, but has also initiated the penalty proceedings.
The question whether demand notice is an integral part of the assessment order has been answered in the case of CIT Vs. Purshottam Das T Patel [1993 (8) TMI 21 - GUJARAT HIGH COURT] wherein as reliying on the decision of Kalyan Kumar Ray [1991 (8) TMI 291 - SUPREME COURT] section 153 requires is that the assessment should be completed within the prescribed time-limit. The words "order of assessment" cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time.
After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Assessing Officer that he approved the said calculation when the papers were put before him for signing the demand notice, and that he signed the same, the fact remains that that step was taken by him after the prescribed period was over. The Tribunal was, therefore, right in holding that the assessment in this respect was time-barred. We, therefore, answer the question in the affirmative, i.e., against the Revenue and in favour of the assessee.
Whether by by-passing mandatory provisions of the Act can assessment survive? - As relying on Dipak Babaria [2015 (8) TMI 775 - SUPREME COURT] held if the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute - we are of the considered opinion that by issuing the demand notice on 31.03.2022 itself the AO has bypassed all the mandatory sub-sections of section 144C of the Act.
Though the ld. DR time and again has stated that the conclusion of the Assessing Officer speaks for the order as a draft assessment order and there should not be any confusion on that point. In our considered view, the impugned order by the Assessing Officer has bypassed the relevant sub-section i.e. sub-section (3) and (13) to section 144C of the Act.
Procedure laid down u/s 144C of the Act by issuing penalty notice under section 274 read with section 270A and 274 read with section 271AAC (1) - Proceedings culminated on 31.03.2022 when the demand notice was issued and served upon the assessee along with penalty notice u/s 274 of the Act and, therefore, all the subsequent proceedings and orders become non est.
Before closing, on the strength of the decision of the co-ordinate bench in the case of Himalaya Drug Company [2020 (11) TMI 811 - ITAT BANGALORE] DR vehemently stated that since there are contradictory/conflicting decisions, the matter should be referred to the larger/special bench for adjudication of the quarrel. We failed to persuade ourselves to accept this contention of the ld. DR for the simple reason that the decision of the co-ordinate benchn has already been overturned by its jurisdictional High Court of Karnataka in the case of Ciscom Systems [2023 (3) TMI 416 - KARNATAKA HIGH COURT]. Accordingly, Ground Nos. 1, 2 and 3 are allowed.
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2024 (4) TMI 545
Exemption u/s 11 - assessee is a Charitable Trust registered u/s. 12A - disallowed assessee’s claim of exemption on the pretext that the activities of the assessee are restricted to its members - assessee is predominantly a mutual association - HELD THAT:- Co-ordinate Bench in Assessment Year 2011-12 [2018 (4) TMI 1293 - ITAT MUMBAI] holding of the seminar at Bangalore by the assessee was in furtherance of the dominant object of the assessee, viz. empowerment, betterment and creating awareness amongst the industrialists of the Fragrance and Flavours industry, and display of the products of the sponsors can safely be concluded to be for furtherance of and in the interest of the members of the trade. We are unable to persuade ourselves to be in agreement with the view of the A.O that as the products of the sponsors were displayed at the seminar held at Bangalore, therefore, on the said stand alone basis the assessee was to be held to have carried on commercial activities. We are of the considered view that on a close analysis of the aforesaid activities of the assessee trust ,which if viewed in a broader perspective and pitted against the dominant object of the assessee to hold a seminar for furtherance of and in the interest of the members of the industry, cannot be characterised as a commercial activity.
We are unable to persuade ourselves to be in agreement with the view of the lower authorities that the assessee was involved in carrying of commercial activities. We thus being of the view that as the assessee is carrying on its charitable activities, which are in the nature of advancement of the object of general public utility and is not carrying on any commercial activity, therefore, uphold the entitlement of the assessee towards claim of exemption under Sec. 11
The Co-ordinate Bench threadbare examined activities of the assessee from all facets including the issue of rendering services to members. In light of aforesaid decisions by Co-ordinate Bench we find no infirmity in the impugned order. Thus, the order of CIT(A) is upheld and appeal of Revenue is dismissed.
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2024 (4) TMI 544
LTCG - deduction u/s 54F - joint ownership of more than one residential house - HELD THAT:- We find that the Hon’ble Madras High Court in Dr. Smt. P.K.Vasanthi Rangarajan (2012 (7) TMI 563 - MADRAS HIGH COURT] held that merely because the assessee jointly owned another property on the date of transfer of the asset, its claim for deduction under section 54F of the Act could not be rejected in respect of capital gains earned from transfer of original asset. Also see MUKESH ARVINDLAL VAKHARIA, C/O ARVIND SILK MILLS [2023 (10) TMI 185 - ITAT SURAT]
In the present case also, not even a single decision of the Hon’ble jurisdictional High Court, which is contrary to the claim of the assessee, has been placed on record/referred by the Revenue. Therefore, we are of the considered view that the joint ownership in two residential properties at the time of sale of the original asset does not disentitle the assessee to claim of deduction u/s 54F of the Act. Decided in favour of assessee.
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2024 (4) TMI 543
Assessment u/s 153A - addition made in respect of completed assessment in absence of any incriminating material - HELD THAT:- Hon’ble Gujarat High Court in the very recent judgement in the case of Kaushik Devjibhai Patel [2023 (5) TMI 1318 - GUJARAT HIGH COURT] and after considering Hon’ble Supreme Court judgement in the case of Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] as held no addition can be made in respect of completed assessment in absence of any incriminating material will not permit making of addition by the AO and that the AO has no jurisdiction to reopen the completed assessment. Decided in favour of assessee.
Reopening of assessment - additions made are the accounts writing charges and FD interest income belonging to assessee’s wife were added as the income of the husband/assessee, denying the ITR filed by the assessee’s wife - HELD THAT:- The above additions are based only on the statement recorded u/s. 132[4] of the Act and without taking note of the Retraction Affidavit filed by the assessee with relevant evidences. This issue is already dealt by us in paragraph nos.7 to 7.5 of this order, which is squarely applicable to the facts of the present case also. Therefore, the reassessment order passed by the AO is without jurisdiction and bad-in-law, consequently the same is hereby quashed. In the result, the appeal filed by the assessee is hereby allowed.
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2024 (4) TMI 542
Receipt of rental income from first floor - assessee has not rented the property on the ground floor and observed that the lease deed mentioned property let out in respect of basement and first floor - assessee submitted that there is no first floor constructed on the subject mentioned property at all as it contains only basement, ground floor and open terrace as basement and ground floor had been duly given on rent to the aforesaid tenant and rental income derived thereon had been duly offered to tax, assessee also placed evidence of the schedule of property from the sale deed to prove the aforesaid contention - AO did not agree to the aforesaid contentions and proceeded to add the alleged rental income for the first floor portion and made an addition in the assessment.
HELD THAT:- Assessee submitted the photographs of the building on record. The assessee also submitted the confirmation from the tenant stating that lease deed had wrongly mentioned the fact of first floor being leased out by way of typographical error. Physical inspection was sought to be carried out by the Inspector of Income Tax on the subject mentioned property who also categorically confirmed that there is no first floor at all in the property. The mezzanine floor was constructed in AY 2012-13 by the assessee which fact is evident from pages D to Q containing the details of amounts spent at construction together with the bills thereon.
Assessee also has filed an affidavit before us confirming all the aforesaid facts. When these documents are staring on us, we hold that there cannot be any addition that can be made on account of alleged rental income for first floor when factually there was no first floor at all in the subject mentioned building. Hence, the addition made on account alleged rental income for the first floor which was not in existence is hereby directed to be deleted. Accordingly, ground 1(i) raised by the assessee is allowed.
Unexplained cash credit u/s 68 - assessee has shown a receipt from a concern/company but assessee has neither supplied any goods nor rendered any services to the said party and no confirmation was filed from the said party proving the nature and source of credit thereon - HELD THAT:- Assessee had duly offered the receipt as its business income for AY 2014-15. We find however that a sum is found credited in the books of the assessee during the year under consideration. It is a fact that no satisfactory explanation has been given by the assessee before the lower authorities and before us also. Hence, the said receipt of money credited of Rs. 1,90,000/- which is found credited in the books of the assessee is to be added as unexplained credit u/s 68 for the year under consideration. However, in order to avoid double taxation, we hereby direct the ld AO to delete the very sum for AY 2014-15 which has been voluntarily offered to tax by the assessee in the return of income for AY 2014-15. Accordingly, ground No. 1(ii) raised by the assessee is disposed of in the above mentioned terms.
Disallowance made u/s 40(a)(ia) - assessee paid processing charges and closure charges without deduction of TDS - assessee submitted that the payees have duly included the receipts in their respective hands and paid due taxes and certificate from their Chartered Accountants to this effect were placed on record - CIT(A) had directed the ld AO to verify the aforesaid claim of the assessee in respect of all the payments and if the payees have shown the amount in their income tax returns and paid requisite tax, then the same should not be subject matter of disallowance - HELD THAT:- We find that the direction given by the ld CIT(A) is in consonance with 2nd proviso to section 40(a)(ia) of the Act which had got retrospective effect and accordingly we hold that if the payees have included the subject mentioned receipt in their respective returns and paid taxes, then no disallowances should be made in the hands of the assessee u/s 40(a)(ia) of the Act. Accordingly, the ground No. 1(iii) raised by the assessee is allowed for statistical purposes.
Addition made in respect of transactions with sister concern of the assessee - HELD THAT:- We find that despite the fact that the transaction has been carried out by the assessee with sister concern with a malafide intention of claiming refund of custom duty, the ld CIT(A) had been magnanimous enough to grant deduction of purchase value and disallow only the loss arising out of total purchase and sales transaction with sister concern. Once, the element of malafide intention or fraud is proved beyond doubt, then no further concession need to be given to the assessee. In the instant case, the assessee had already obtained more than eligible relief from the ld CIT(A). Hence, the ground No. 2 raised by the assessee is hereby dismissed.
Disallowance of salary u/s 40A(3) - salary paid to employee in cash - addition made as employee is related to the assessee stationed in Delhi and no business exigency of incurrence of the expenditure in cash has been demonstrated by the assessee - HELD THAT:- In the instant case, the identity of the payee is established and transaction with employee/Gaurav Babbar is hereby held to be genuine. But in order to make the assessee’s case fall under the exception provided in the proviso to section 40A(3) of the Act, the assessee is duty bound to explain that the place where the payee is stationed does not have bank facilities and the assessee had pressing emergency to make the said payment in cash out of business exigencies.
In the instant case, it is not in dispute that Gaurav Babbar (payee) is stationed in Delhi where bank facilities are available in every nook and corner of Delhi as rightly observed by the ld CIT(A). Further, the assessee was not able to demonstrate the business exigencies which warranted him to make payment of salary in cash. Hence, the assessee’s case does not fall under the ambit of exception provided in proviso to section 40A(3) - assessee’s case does not fall under any of the exceptions provided under Rule 6DD of the Income Tax Rules. Hence, the disallowances made u/s 40A(3) of the Act is hereby confirmed. Accordingly, ground No. 3 raised by the assessee is dismissed.
Disallowance of 20% of travelling expenditure, telephone expenditure, vehicle and maintenance expenditure, interest and depreciation - HELD THAT:- The entire travelling expenses are to be allowed as business expenditure and no disallowance should be made thereon.
With regard to disallowance of expenditure on account of telephone and vehicle related expenditure including interest on car loan and depreciation, in our considered opinion, the disallowance should be restricted to 10% as against 20% made by the ld CIT(A) on account of personal element. Partly in favour of assessee.
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Customs
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2024 (4) TMI 541
Authority under the Customs Act to proceed against the property of a third party - Prohibition of Benami Property Transactions - petition under Article 226 of the Constitution assails a communication issued by respondent No. 2/Deputy Commissioner of Customs (Preventive), M&P Wing, Mumbai, to the Secretary, Pushpa Niketan Co-op. Housing Society informing the society not to permit the petitioner to transfer the flat owned by her without prior ‘No Objection’ (NOC) from the office of respondent No. 2. as respondent No. 2 had initiated certain investigation against the petitioner’s husband
Whether respondent No. 2 would have any authority under the Customs Act to proceed against the property of a third party namely of the wife of a person who is being investigated?
Whether de hors the Customs Act, there is any provision in law permitting respondent No. 2 to issue such communication?
HELD THAT:- Both the questions are required to be answered in the negative. We have not been pointed out any provision which can be resorted by the Customs officials to attach the property of a third party like the petitioner who cannot be connected to any recovery under the Customs Act, much less to issue the impugned communication. Even the provisions of Section 142 of the Customs Act which provides for recovery of sum due to Government could not have been resorted by respondent No. 2 to issue the impugned communication. Thus, respondent No. 2 has acted in patent lack of jurisdiction.
Even assuming that a statement is stated to be made by the petitioner's husband in relation to the flat in question being purchased by him or actually being his property and ostensibly owned by the petitioner, however, considering the clear provision of Section 3 of the Prohibition of Benami Property Transactions Act, 1988, respondent No. 2 cannot have any jurisdiction to question the petitioner’s ownership of the flat. The only person who can question the petitioner’s ownership, would be the husband of the petitioner.
Thus, in issuing communication of the nature as impugned, the respondent had, in fact, taken upon himself an obligation of concluding that the flat belongs to the husband of the petitioner, when in law such declaration can only be granted by a Civil Court. For such reason, even otherwise, respondent No. 2 would not have any jurisdiction to issue the impugned communication.
As respondent No. 2 did not wield any authority to issue the impugned communication. It was issued in patent lack of jurisdiction. The petition, accordingly, needs to succeed.
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2024 (4) TMI 540
Seeking provisional release of the goods - release of various models of second hand Highly Specialised Equipment digital Multifunction Print, Copying & Scanning Machines, imported by the petitioner - authorization for importing multi-functional device - HELD THAT:- Keeping in view of the foreign trade policy of the Government, the Order of 2012 which stood replaced by the Order of 2021 and subsequent amendments brought to Order 2021 by inserting clauses 6, 7 and 8, what is apparently evident is that in Order, 2012 the product multi-functional device was not a notified item. What was notified so far the writ petitions are concerned was only printers and plotters and the Order, 2012 was also preceded by a decision of the Government exempting highly specialized equipment from the coverage of Order, 2012. The Order, 2012 stood preceded by subsequent Order, 2021 which was issued and brought into force w.e.f 18.03.2021 and the schedule attached to Order, 2021 stood modified to the extent that in addition to printers and plotters the Government also notified multi-functional devices as an item so far as the foreign trade policy is concerned. This change in Order, 2021 so far as adding multi-functional devices in the schedule makes it amply clear that prior to Order, 2021 MFDs were not a notified item and since 18.03.2021 when the Order, 2021 was notified, MFDs became restricted goods under the foreign trade policy.
Though the learned Senior Standing Counsel for CBIC tried to give various interpretations to this clause, but on its plain reading, has its literal meaning and with the literal interpretation of the contents of clause 8, there does not seem to be any restrictions put by the Government so far as the classifications of highly specialized equipment is concerned. There also does not seem to be any mention of the said exemption not being applicable upon a second hand product as is envisaged under clause 2.31 of the foreign trade policy.
Thus, we are in agreement to the submissions made by the learned counsel for the petitioner so far as the import made by the petitioner of MFDs being a highly specialized equipment and the same being one which falls within the purview of an exempted category as per clause 8 of Order, 2021. Thus, we are of the considered opinion that it is a fit case where the petitioner can be permitted for provisional release of the goods seized by the respondent authorities.
Thus, it is ordered that let the respondent authorities pass an order on the application filed by the petitioners for provisional release of the goods subject to the conditions.
In addition, the petitioners are also directed to provide a bank guarantee worth 10 percent of the total price of the goods imported by them. Further, it is also ordered that in the event if the petitioners upon release of the goods provisionally make and sell the supply to their customers, details of the customers that of relevant price and details of the respective transactions shall be maintained and made available to the respondent authorities from time to time.
The present writ petitions accordingly stands allowed.
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Insolvency & Bankruptcy
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2024 (4) TMI 539
Initiation of CIRP based on a corporate guarantee provided to a consortium of lenders- Validity of deed of Guarantee - existence of privity of the contract with the Corporate Debtor in relation to the deed of guarantee, or not - authority given by the trusteeship to the Respondents for initiating section 7 application or not - Deed of Guarantee was void under Section 186 of the Companies Act, 2013 or not.
Deed of Guarantee - HELD THAT:- The deed of guarantee dated 10.06.2016 to be treated void in view of Section 186 of the Companies Act, 2013 - it is clearly established that both the principal borrower and the Corporate Debtor are family owned group companies which are owned and controlled by the same set of family member - it will be travesty of justice to even consider the arguments of the Appellant to treat the deed of guarantee as void just in order to avoid the financial obligations towards the consortium of lenders. In any case we also observe that at the best the Corporate Debtor was liable for punishment under Section 186 (13) of the Companies Act, 2013 and the Corporate Debtor is not entitled for any illegal enrichment for its own illegal and malafide acting.
Lack of privity of contract between the Respondent No. 1 and the Corporate Debtor - HELD THAT:- Clause F of the deed of guarantee specifically provides that "the Security Trustee acting for the benefit of the IDBI Consortium has called upon the Guarantor to execute this Guarantee in favour of the Security Trustee in favour of the Banks." This makes it clear that security trustee was to act for the benefit of IDBI Consortium consisting of all four lenders - when the trust is created for the benefit of the beneficiary parties party, such parties are no more strangers to the contract and can step in shoes, to pursue their legal remedies on their own rights - the corporate guarantor is liable to meet its financial obligations.
Initiation of application u/s 7 by guarantor or lender - HELD THAT:- The deed of guarantee and security trust agreement goes hand in hand which primarily provide financial security to the lenders for the credit facilities given to the principal borrower - Thus the lender is entitled to initiate and file application under Section 7 of the Code despite they have been engaged trusteeship.
The allegation of the Appellant regarding want of support of other three bankers to the Respondent No. 1 are also found baseless as the proposed intervenors for three other lenders supported the CIRP proceedings of the Corporate Debtor and confirm the same during hearing before us and the same has been mentioned in their intervention applications filed in the present appeal. Thus, the contention of the Appellant on this ground stand rejected.
Thus, it become clear that the principal borrower and the Corporate Debtor are group companies which are owned and controlled by the same set of close family members and relatives and the corporate guarantee of Rs. 181.29 Cores was duly given by the Corporate Debtor.
Appeal dismissed.
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2024 (4) TMI 538
Fixation of remuneration of liquidator - whether any remuneration is to be paid to the liquidator for the services being rendered by him, when the assets of the corporate debtor are under attachment and cannot be auctioned? - HELD THAT:- From perusal of the regulations as they existed on the date of liquidation order, it appears that the fees of the liquidator was to be either the fees decided by the CoC under Regulation 39D of IBBI (CIRP) Regulations, 2016 or a percentage of fee on the amount that is realised/ distributed during the liquidation process. The Regulations, as it existed at the time on the date of the liquidation order, do not envisage payment of any fees or remuneration to the liquidator on a monthly basis, if such fee is not fixed by the CoC under Regulation 39D of IBBI (CIRP) Regulations, 2016.
Considering the regulations as they existed at the time when liquidation order was issued in this case, and that no fees was fixed by the CoC, it is opined that fees to be paid to the Liquidator in this case shall be as per the percentage prescribed in Regulation 4(2)(b) of IBBI (Liquidation Process) Regulations, 2016 on realization and distribution of proceeds from auction of assets. There are no reason to interfere in the order of the Adjudicating Authority.
Appeal dismissed.
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2024 (4) TMI 537
Maintainability of petition seeking initiation of CIRP against Personal Guarantor/Respondent - invocation of Bank guarantee and time limitation - HELD THAT:- The contentions raised by Personal Guarantor are devoid of merit. There is no bar in IBC (Insolvency & Bankruptcy Code, 2016) to proceed against each separate Personal Guarantor for same debt. Moreover, pendency of CIRP (Corporate Insolvency Resolution Process) against the Principal Borrower does not debar lender from proceeding against Personal Guarantor. Additionally, pendency of Resolution Plan approval also cannot be a ground for dismissal of proceedings against the Personal Guarantor.
The Financial Creditor issued notice on 12.12.2017 under section 13(2) of the SARFAESI Act,2002 invoking the guarantee and calling upon the Guarantor to pay the said amount within 60 days - The Financial Creditor issued another demand notice on 31.10.2020 addressed to the Principal Borrower and Personal Guarantor and is relying on this notice for limitation.
This bench holds that the guarantee was invoked on 12.12.2017 and the limitation began on that day and any subsequent notice of demand cannot be considered for the purpose of limitation. Since the invocation of guarantee was on 12.12.2017 and the present Company Petition was filed on 21.12.2021, it is beyond the limitation period and hence the Company Petition deserves to be rejected.
Petition dismissed.
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2024 (4) TMI 536
Scope of the Report of IRP - IRP was appointed on application under Section 94(1) - Proceedings against the Personal Guarantors to Corporate Debtor - Benefit of moratorium as contemplated under Section 96 of the IBC, 2016 - HELD THAT:- It is clearly established that the present application was filed by the debtor herein to thwart the recovery proceedings initiated by the sole Secured Financial Creditor who has obtained physical possession of the secured assets (coowned by the debtor herein) and to frustrate other proceedings under SARFAESI Act, the debtor came running and filed this application.
It appears that the sole intention of the debtor herein is to enjoy the moratorium as contemplated under Section 96 of the IBC, 2016 which commences from the date the application is declared defect-free by the Registry of this Tribunal. The second reason which comes to mind at this stage is the order under Section 94(1) of the IBC, 2016 was issued by this Tribunal on 30.05.2022.
Nearly one and half years have passed in further proceedings in the matter due to the stay by Hon’ble Supreme Court in the matter of DILIP B JIWRAJKA VERSUS UNION OF INDIA & ORS. [2024 (1) TMI 33 - SUPREME COURT] and in case the debtor was inclined towards any settlement of his debt with the Secured Financial Creditor, he had enough time to pay by way of restructuring plans, or otherwise, if any. No document has been placed before us by the debtor herein to show that he has taken any effective steps for settling the dues of the Secured Financial Creditor.
Application allowed.
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PMLA
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2024 (4) TMI 535
Seeking release on ground of arrest of petitioner being illegal and in violation of principles laid down by the Hon’ble Supreme Court in case of Pankaj Bansal v. Union of India [2023 (10) TMI 175 - SUPREME COURT] - In case of Pankaj Bansal, the Hon’ble Supreme Court has inter alia held that the grounds of arrest must be communicated in writing to the person being so arrested through exercise of powers under Section 19 of PMLA, and failure to do so would render the arrest illegal.
Challenge to arrest of the petitioner by Directorate of Enforcement on the ground that the arrest was in violation of Section 19 of Prevention of Money Laundering Act, 2002 - Article 226 and 227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973 - challenge to order by which petitioner was remanded to custody of Directorate of Enforcement.
MATERIAL AGAINST THE PETITIONER COLLECTED BY THE DIRECTORATE OF ENFORCEMENT - HELD THAT:- Once there is prima-facie material regarding laundering of the kickbacks on Goa Elections and the money being already spent for the said purpose in the year 2022 itself, the recovery in the year 2024 or non-recovery of any remaining amount will become clear only once prosecution complaint is filed. The Courts in all criminal cases wait for the chargesheet/prosecution complaints to be filed and the entire evidence being placed before it against an accused before giving a finding on a prima-facie case for the purpose of cognizance, charge or final acquittal at the appropriate stages of trial and not when the investigation against an accused has begun and chargesheet/prosecution complaint is yet to be filed. A different criteria cannot be adopted in the present case for the said purpose.
The material which has been encapsulated here reveals that Sh. Arvind Kejriwal had allegedly conspired with other persons and was involved in the formulation of Delhi Excise Policy 2021-22, in the process of demanding kickbacks from the South Group, as well as in generation, use and concealment of proceeds of crime. He is allegedly involved in the offence of money laundering in two capacities. Firstly, in his personal capacity as he was involved in formulation of the Excise Policy and in demanding kickbacks. Secondly, in his capacity as the National Convenor of Aam Aadmi Party as per Section 70(1) of PMLA, for use of proceeds of crime of Rs. 45 crores in the election campaign of Aam Aadmi Party in Goa Elections 2022, which are prima facie apparent from the material relied upon by the respondent in this regard as well as the statement recorded on 08.03.2024 of one of the candidates of Aam Aadmi Party in Goa Elections 2022.
ARGUMENT REGARDING STATEMENTS OF WITNESSES AND APPROVERS BEING UNRELIABLE AND UNTRUSTWORTHY - HELD THAT:- The petitioner herein wants this Court to conduct a mini trial and give a conclusive finding regarding validity and authenticity of statement of witnesses, test the evidentiary value and intent behind statements of the approvers, which is not permissible in law - In any case, this Court has not examined and relied solely on the statements of these approvers to examine the legality of arrest of the petitioner on the anvil of Section 19 of PMLA as there is other material collected by the investigating agency also which has been placed before this Court and discussed in preceding paragraphs which reveals the role of the present petitioner in the alleged Delhi Excise Policy scam.
This Court is further of the opinion that merely because the approver has chosen to reveal some new facts at a later stage, only after initially concealing them including the role of Sh. Kejriwal, the same cannot be a ground to disregard their statements completely. This is because an accused may realise his or her mistake at a later stage and may offer to state the true facts in exchange for securing pardon as per the law - individuals may evolve in their understanding of their actions and the legal consequences thereof, and these developments even otherwise are covered within the framework of the judicial process and the law of the country.
WHETHER THE ARREST OF THE PETITIONER IS IN VIOLATION OF DIRECTIONS OF HON’BLE SUPREME COURT IN CASE OF PANKAJ BANSAL VS. UNION OF INDIA? - HELD THAT:- The cumulative effect of the material collected so far by the Directorate of Enforcement regarding the role of the petitioner, both in his personal capacity in formulation of Delhi Excise Policy 2021-22 and demanding kickbacks from the South Group, and in his capacity as National Convenor of Aam Aadmi Party in utilisation of proceeds of crime during Goa Elections 2022, reflecting the ‘reasons to believe’ that the petitioner was ‘guilty of offence of money laundering’ in terms of Section 19 of PMLA, and the need to interrogate the petitioner and confront him with the statements of witnesses, and other material as well as digital evidence, coupled with the conduct of petitioner of not joining investigation pursuant to service of nine summons for a period of six months, necessitated the arrest of petitioner Sh. Arvind Kejriwal.
Therefore, prima facie, the mandatory provisions of Section 19 of PMLA have been satisfied by the Directorate of Enforcement while arresting the petitioner Sh. Kejriwal, in compliance of judgment of Pankaj Bansal, and there is material at this stage which points out towards the guilt of the petitioner for commission of offence of money laundering.
WHETHER THE REMAND ORDER DATED 22.03.2024 HAS BEEN PASSED IN MECHANICAL AND ROUTINE MANNER? - HELD THAT:- This Court observes that the contention regarding remand order having been passed in mechanical and routine manner is without any merit, considering the observations made by the learned Special Court including ensuring due compliance of Section 19 of PMLA, taking note of material available against the petitioner and the need for his custodial interrogation - Though not argued before this Court on behalf of the petitioner, this Court still deems it crucial to note that though the present petition was filed challenging the first remand order dated 22.03.2024 passed by the learned Special Court, however, the remand of petitioner Sh. Kejriwal had thereafter been extended vide order dated 28.03.2024 wherein the petitioner himself had submitted before the learned Special Court that he was ready and willing to cooperate with the investigating agency and he had no objection if the custody remand was extended further.
Moreover, at this point of time, the petitioner is not in the custody remand of Directorate of Enforcement, rather is in judicial custody by virtue of order dated 01.04.2024 which has neither been challenged till date, nor any application has been filed seeking bail in the present case. The learned Senior counsel for the petitioner had not raised any objection to the judicial remand of the petitioner when he was remanded to judicial custody on 01.04.2024 by the learned Special Court.
TIMING OF ARREST VIS-A-VIS THE CONDUCT OF PETITIONER OF NOT JOINING INVESTIGATION FOR SIX MONTHS DESPITE SERVICE OF 09 SUMMONS - HELD THAT:- The petitioner himself was aware about the case, as many of his co-accused persons were in judicial custody in the same ECIR, and he had knowledge about the statements recorded in the ECIR. Therefore, to say that he did not attend those summons since he did not know why he was being summoned has no merit.
This Court holds that this Court would not lay down two different categories of laws, one for common citizens, and the other granting special privilege to be extended by investigating agency to a Chief Minister or any other person in power only on the basis of being in that public office since that public office is enjoyed by that public figure due to the mandate of the public.
This Court is of the opinion that to hold that the timing was chosen by the investigating agency will be accepting a misplaced argument. It was the petitioner himself who had delayed the investigation to the point of time of his arrest, when the Courts had refused to grant him relief from arrest, or from joining investigation. Therefore, there is nothing before this Court to reach a conclusion that the timing of arrest was deliberate by the Directorate of Enforcement, and that conduct of Sh. Kejriwal was not responsible for a situation in which there was no other option other than to arrest to make him join the investigation.
This Court holds that the issue of arrest has to be adjudicated as to whether it was illegal or not within the parameters of law, by application of law and not by political rhetoric.
Was there any Necessity to Arrest the Petitioner? - HELD THAT:- The observations of the Hon’ble Apex Court in case of Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT] were reiterated in case of V. Senthil Balaji [2023 (8) TMI 410 - SUPREME COURT], and Pankaj Bansal and it was observed that it is necessary for the officer concerned to record reasons for his belief that a person is guilty of an offence under PMLA and needs to be arrested.
The conduct of the petitioner Sh. Kejriwal of not joining investigation left little option with the Directorate of Enforcement other than his arrest for the purpose of investigation of a pending case, in which other co-accused are in judicial custody, and the investigating agency is also running against time in view of the order of the Hon’ble Supreme Court vide which it was ordered that the trial in this case should proceed expeditiously.
Considering the fact that the Directorate of Enforcement was in possession of material on the basis of which it had reasons to believe that the petitioner was guilty of offence of money laundering, it would have had no recourse available but to arrest the petitioner and to seek his remand so as to confront him with the statements of witnesses and approvers and other incriminating material collected during the course of investigation.
In the case at hand, it is important to clarify that the matter before this Court is not a conflict between the Central Government and the petitioner Sh. Arvind Kejriwal. Instead, it is a case between the petitioner Sh. Arvind Kejriwal and the Directorate of Enforcement.
This Court is only following its constitutional duty of following the Constitution and the judicial precedents mandated by the Hon’ble Supreme Court. This Court will therefore decide the case following this constitutional duty and will concentrate on the allegations and material collected by the Directorate of Enforcement placed before it and apply law, which is the only domain in which this Court can tread.
This Court is of the opinion that the arrest of petitioner Sh. Arvind Kejriwal was not in contravention with the law laid down by the Hon’ble Apex Court in case of Pankaj Bansal in respect of Section 19 of PMLA. Similarly, the impugned remand order dated 22.03.2024 passed by the learned Special Court does not suffer from any infirmity or illegality - since the arrest of the petitioner and the impugned remand order dated 22.03.2024 are held valid, the prayer seeking release of petitioner is also liable to be rejected.
The present petition stands dismissed along with pending applications.
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Service Tax
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2024 (4) TMI 534
Seeking permission to withdraw these Civil Appeals with liberty to seek remedies in accordance with law - Levy of service tax - Business Auxiliary service or not - commission paid by the appellants to the commission agents - reverse charge mechanism - Revenue neutrality - HELD THAT:- The Civil Appeals are dismissed as withdrawn.
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2024 (4) TMI 533
Recovery of service tax with interest and penalties - Reverse Charge Mechanism (RCM) - Commissions paid to a foreign service provider - non-discloser of detailed in the Shipping Bill - benefit of exemption under notification no. 18/2009-ST - suppression of facts or not - Extended period of limitation - HELD THAT:- The appellant had filed the requisite details in the manner prescribed by the Notification with the jurisdictional authorities. Just for the reason that the same was not produced before the auditors at the time of audit cannot be ground for stating that these Forms were not filed. This fact could have been verified with jurisdictional officers. When all the details including the details of the shipping bill export invoices etc., were filed by the appellants in the manner as prescribed, revenue should have before issuance of the show cause notice demanding the duty, should have verified and replied to the audit.
Admittedly the fact about commission paid by the appellant to the foreign service provider was not indicated by the appellant in the Shipping Bill as required under the said notification. However all the details as required under the notifications were made available by way of Form-EXP2 filed by the appellant.
Extended period of limitation - Suppression of facts or not - appellant had not produced the copy of agreement with the foreign service provider and the relevant documents to audit at the time of audit - HELD THAT:- Though these documents were in existence and were made available to revenue authorities even before the issuance of show cause notice. As all the information which was necessary to determine eligibility under Notification No.18/2009-ST was available with the Revenue and the prescribed Return/Form was filed by the appellant they could not have suppressed any fact from the Department for which extended period of limitation could have been invoked. Where merely a procedural violation in respect of complying with a condition of Notification cannot be said to be an act of suppression for invoking extended period of limitation. No justification for invoking extended period of limitation is forthcoming from the show cause notice, order in original or the impugned order.
As the demand not sustainable on the ground of limitation, the issue on merits not discussed.
Appeal allowed.
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2024 (4) TMI 532
Scope of SCN - SCN does not mention the category of service under which the demand is raised - Violation of principles of natural justice - HELD THAT:- On perusal of the SCN as well as the order-in-original, it is noted that the category of service has not been mentioned at all. It is merely stated that from the statements recorded from persons of M/s Neyveli Lignite Corporation, various services in the nature of “Management, Maintenance or Repair Services, Manpower supply Agency Services and Commercial or Industrial Construction Services” have been provided by the appellant. On perusal of the annexure to the show cause notice, it is seen that there is nothing mentioned as to the category of service. The annexure merely states the description of work done in the invoices. The adjudicating authority, while confirming the demand, has not made any discussion as to what is the amount that would fall under each category of service or whether the entire amount falls within one category of service.
The Hon’ble Supreme Court in the case of Commissioner of Central Excise, Vs. M/S Brindavan Beverages (P) Ltd. [2007 (6) TMI 4 - SUPREME COURT] has observed that the show cause notice, being the foundation of litigation, has to contain the necessary details so as inform the assessee to defend the allegations. In the case of CCE & ST Pondicherry Vs. A.M. Manickam [2017 (6) TMI 57 - CESTAT CHENNAI], the Tribunal had occasion to consider the demand of service tax on show cause notices issued to various persons who had provided services to M/s Neyveli Lignite Corporation. The Tribunal observed that these show cause notices did not contain any mention of the category of service and therefore the demand was set aside.
Since the department has not mentioned the category of service in the show cause notice as well as the order-in-original much prejudice has been caused to the appellant. The proceedings are therefore vitiated and the demand cannot sustain.
The impugned order is set aside - Appeal allowed.
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Central Excise
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2024 (4) TMI 531
Valuation - inclusion of incentive/industrial subsidy of 75% of Sales Tax/VAT/CST paid on the sale of goods, received from the Government of Madhya Pradesh under the Industrial Promotion Policy, 2010 in the transaction value under section 4 of the Central Excise Act, 1944 or not - it was held by CESTAT that the contention of the learned counsel for the appellant that incentive/capital subsidy received from the State Government cannot be included in the transaction value has to be accepted - HELD THAT:- There are no merit in this appeal.
The civil appeal stands dismissed.
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