TMI Tax Updates - e-Newsletter
July 20, 2022
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Validity of show cause notice - demand of GST with interest - Violation of principles of natural justice - petitioner submits that in the instant case no pre show cause notice in form of Form GST DRC 01 A was issued - Since the inspection report does not fulfill the ingredients of a proper show cause notice it amount to violation of principles of natural justice. The challenge is therefore maintainable in exercise of writ jurisdiction of this Court and the instant writ application deserves to be allowed - HC
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GST:
Refund claim - time limitation - Ministry of Finance has clarified that the limitation shall be two years from the date of payment of tax. Admittedly, tax has been paid in January 30, 2020. In our considered view, refund application is in time. Though the learned Standing Counsel for the revenue is right in his submission that there is appeal remedy, since petitioner has paid tax twice relegating petitioner to the Appellate authority would not be just and appropriate. - HC
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GST:
Seeking Bail - Evasion of GST - Compoundable Offences under Section 138 of the GST Act, 2017 - No ground of parity is available to applicant as his case stands on different footing. However, keeping in view the seriousness of allegations leveled against the applicant in an economic offence,the court is not inclined to grant concession of bail to the applicant. - DSC
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Income Tax:
Exemption u/s 11 - proof of hostel facilities as object of educational activities performed by the society - charitable activity u/s 2(15) - providing of hostel facilities and transport facilities to the student and staff member of the educational Institute cannot be considered as business activity but as subservient to the object of educational activities performed by the society. - HC
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Income Tax:
Prosecution u/s 276CC and 276C (1) - The absence of assessee in India or the communication gap between herself and her representative cannot be a ground to quash the prosecution. Further compounding offence under IT Act is not an absolute right vested in the assessee. The compounding of cases based on facts and merits of each case where the assessee disclose the true and actual income but file it belatedly cannot be equated to the case where the assessee undisclosed the true and actual income also files the returns belatedly. - HC
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Income Tax:
Inter departmental dispute - cases between the Union of India and the companies fully owned by the Government of India - litigation between the Public Sector Undertakings, which are fully owned by the Government of India and regulated by the Ministries like, HAL, ISRO, etc., is not desirable. It would be in the interest of all the concerned to ensure that there is no litigation at all or as minimum litigation as most essential. - HC
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Income Tax:
Levy of penalty u/s 271(1)(c) - defective notice - non specification of charge - Assessing Officer has issued a vague and defective notice under section 274 r.w.s. 271(1)(c) dated 28/12/2011 resultantly making the penalty proceedings in all the impugned assessment years vitiated and hence, all penalty orders are liable to be quashed. - AT
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Income Tax:
TP Adjustment - ALP determination qua domestic transactions entered into by the assessee with its partner u/s 92BA(i) of the Act - no addition on account of TP Adjustment is sustainable because it has been categorically held that omission of a provision would mean that it was never on the statue book - It has to be deemed that it was not in existence in A.Y. 2014-15 and if there was no such provision for recommending the transactions u/s 40A(2)(b) for determination of ALP, there cannot be any adjustment in the income of the assessee on the ground of TP adjustment. Accordingly these grounds of the assessee are allowed. - AT
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Income Tax:
Taxability of sale of FPS - Focus Product Scheme (FPS) was first introduced with the objective to incentivize export of such products which have high export intensity/employment potential, so as to offset infrastructure inefficiencies and other associated costs involved in marketing of these products. The scheme was launched in 2006 and subsequently, several amendments were made to the scheme by adding more products eligible for export incentives under the scheme and giving different rate of duty credit scrip concessions. - Focus Products Incentive in the nature of capital receipt not liable to tax under the provisions of the Income Tax Act, 1961. - AT
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Income Tax:
Revision u/s 263 - Lack of enquiry or no enquiry - the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue - the AO after collection of certain evidences should embark upon further investigation so as to ascertain the true colours of the transactions, because, what is apparent is not real. However, the AO simply called for certain details on the issue of buyback of shares, but did not reach to a logical conclusion on the issue, even though, there is a scope for application of provisions of Sec.2(22)(a) / 2(22)(d) of the Act. Therefore, we are of the considered view that there is no error in reasons given by the ld. CIT to exercise his jurisdiction. - AT
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Income Tax:
Income accrued in India - Fee for Technical/Included Services - whether the amount received by the assessee for various services, commonly known as centralized services, will fall within the ambit of FIS under Article 12(4)(a) of the Treaty? - the fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the IndiaUS Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable. - AT
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Direct Taxes:
Benami Transactions - Notice and attachment of property involved in benami transaction - No error in the orders passed by the first respondent, under section 24(4) of the Act, as an interim measure, in order to protect the interest of the Revenue. The learned Judge has also rightly affirmed the same and directed the respondent authorities to proceed further in accordance with law. - HC
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IBC:
Maintainability of appeal - time limitation - crystalline stand of the Respondent/Liquidator is that the Appellant / Applicant was not assiduous / meticulous in projecting its claims all through the Liquidation period and furnished its claims lately at the fag end of Liquidation period - Appeal failes - AT
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Service Tax:
Refund claim - time limitation - Denial of refund of certain amount deposited through GAR challan - The said deposit has never been adjusted against any tax liability in any subsequent return filed by appellant. In this circumstances, it is found that the amount deposited has never attained character of tax or duty. - Refund allowed - AT
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Central Excise:
Default in payment of Central Excise Duty - By making the demand as above nearly one year later, for the clearances made without payment of duty revenue was not only soft pedaling the issue but was permitting the clearance without payment of duty. The natural consequence of the clearances made without payment of duty was to seize and confiscate all the goods that were cleared by the appellant without payment of duty. Might be revenue mulled over the issue during the intervening period as to what would be correct course of action. After permitting the clearances contrary to provisions of Rule 8 (3A) revenue authorities cannot subsequently turn back and make demand by invoking the provisions of Section 11A. - AT
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VAT:
Benefit of decision of SC in another case - The Petitioner did not choose to join the Petitioners who had challenged the vires of the OET Act or even the requirement thereunder of having to pay entry tax on the goods purchased from outside the State - The decision of this Court was applicable to those who had approached it. Even, the interim order passed by the Supreme Court was confined to those parties who had approached the Court. The Petitioner could not have taken advantage of it. Therefore, the Petitioner had no reasonable cause to withhold payment of entry tax when it fell due. - HC
Articles
Notifications
GST - States-
48/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 31/GST-2, dated 08.03.2019 under the HGST Act, 2017
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47/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 29/GST-2, dated 08.03.2019 under the HGST Act, 2017
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46/GST-2 - dated
18-7-2022
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Haryana SGST
Notification to rescind notification no. 125/ST-2, dated 14.11.2017 under the HGST Act, 2017
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45 /GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 12/GST-2, dated 31.03.2022 under the HGST Act, 2017
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44/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 39/ST-2, dated 30.06.2017 under the HGST Act, 2017
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43/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 37/ST-2, dated 30.06.2017 under the HGST Act, 2017
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42/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 36/ST-2, dated 30.06.2017 under the HGST Act, 2017
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41/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 35/ST-2, dated 30.06.2017 under the HGST Act, 2017
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40/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 48/ST-2, dated 30.06.2017 under the HGST Act, 2017
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39/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 47/ST-2, dated 30.06.2017 under the HGST Act, 2017
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38/GST-2 - dated
18-7-2022
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Haryana SGST
Amendment of notification no. 46/ST-2, dated 30.06.2017 under the HGST Act, 2017
Income Tax-
03/2022 - dated
16-7-2022
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IT
Electronic furnishing of Forms, Returns, Statements, Reports, orders - Annual Compliance Report on Advance Pricing Agreement - to be furnished electronically under sub-rule (1) and sub-rule (2) of Rule 131 of the Income-tax Rules, 1962.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (7) TMI 806
Seeking writ of Mandamus to command the respondent to set aside the order of demand of tax and penalty - right to appeal - HELD THAT:- Section 107 of the WBGST 2017 Act provides that any person aggrieved by any decision or order passed under this Act by an Adjudicating Authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which such decision or order is communicated to such person - The order being No.509 dated March 9, 2022 passed by the respondent no.2 is an appealable order under the WBGST 2017 Act. Though the time limit prescribed for preferring appeal has expired in the meantime, it is not in dispute that this writ petition was filed on March 22, 2022, that is, well within the prescribed time limit for preferring such appeal. The appeal is preferred by the petitioners the appellate authority shall dispose of the same as expeditiously as possible, but positively within a period of fortnight from the date of filing of such appeal after giving an opportunity of hearing to the petitioner or his authorized representative - Petition disposed off.
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2022 (7) TMI 805
Violation of principles of natural justice - petitioner submits that in the instant case no pre show cause notice in form of Form GST DRC 01 A was issued intimating him of the liability of tax, interest applicable and/or penalty which if not paid would lead to initiation of adjudication process - procedure prescribed for initiation of proceeding under Section 73 (1) of the JGST Act has not been followed - HELD THAT:- It appears that the respondents have unsuccessfully tried to defend their action, inasmuch as, in para 7 of their supplementary counter affidavit quoted herein above mentioned that the concluding paras of the said inspection report dated 11.01.2020, were treated as notice under Section 73 upon the petitioner The above statements show that the petitioner has been only informed that if he fails to appear before the prescribed authority on prescribed date, the proceeding under Section s 73, 50(1) and 125 will be initiated. The respondents have failed to establish that the petitioner has ever ignored the directions given in the inspection report rather it appears from the entire order sheet (Annexure 3 series) that the petitioner has not only appeared on the date as prescribed in the inspection report but also on various dates a s required by the adjudicating officer. At no point of time, the adjudicating officer has mentioned in the order sheet that the petitioner has failed to appear. Since the inspection report does not fulfill the ingredients of a proper show cause notice it amount to violation of principles of natural justice. The challenge is therefore maintainable in exercise of writ jurisdiction of this Court and the instant writ application deserves to be allowed - Application allowed.
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2022 (7) TMI 804
Refund claim - time limitation - constitutional validity of section 54 of the CGST Act - relevant date in cases of refunds under section 19(1) of the IGST Act - date on which the supply on which IGST was erroneously paid was held to be an intrastate supply amenable to CGST/IGST or the date of payment of tax under the correct head - HELD THAT:- Undisputed facts of the case are, GST (Goods and Service Tax) has been paid for the Assessment year 2017-18 on January 30, 2020 and refund application has been filed on July 07, 2020. In Para 4.2 of the Circular dated September 25, 2021, Ministry of Finance has clarified that the limitation shall be two years from the date of payment of tax. Admittedly, tax has been paid in January 30, 2020. In our considered view, refund application is in time. Though the learned Standing Counsel for the revenue is right in his submission that there is appeal remedy, since petitioner has paid tax twice relegating petitioner to the Appellate authority would not be just and appropriate. Petition allowed.
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2022 (7) TMI 803
Seeking Bail - Evasion of GST - Compoundable Offences under Section 138 of the GST Act, 2017 - reasons to believe - grounds of arrest - HELD THAT:- The allegations against the applicant are that he being the incharge of over all affair of M/s. Saba Chemicals Wood Products was one of the major recipient manufacturer unit, which was procuring agriculture grade urea from Shri Manoj Kumar in cash and further using the same to manufacture and clear taxable goods without payment of GST, thereby evading GST of Rs. 22,30,51,232/-. The said evasion is above Rs. 5 crores thus alleged offence committed is non-bailable. It is question of evidence whether M/s. Saba Chemicals Wood Products evaded that much tax or not and what was the value of urea procured by it from Shri Manoj Kumar. At this stage of the case, the court cannot indulge in mini trial. The allegations leveled against applicant are grave in nature. By the act and conduct of the applicant allegedly loss to the tune of Rs.22,30,51,232/- has been caused to State Exchequer. The said fact cannot be taken lightly. The bail to other accused namely Manoj Kumar was granted by the court of Ms. Nidhi Bansal, in another complaint was on account of the fact that he caused loss to State Exchequer for the value less than Rs. 5 crores which was bailable in nature. No ground of parity is available to applicant as his case stands on different footing. However, keeping in view the seriousness of allegations leveled against the applicant in an economic offence,the court is not inclined to grant concession of bail to the applicant. Bail application is dismissed.
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Income Tax
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2022 (7) TMI 813
Penalty u/s 271(1)(c) - disallowance of claim for deduction u/s 36(1)(viia) - As per DR assessee bank made wrong claim deliberately knowing that it was not entitled for deduction u/s 36(1)(viia) for the assessment year prior to A.Y. 2007-08 making assessee clearly guilty of furnishing of inaccurate particulars of income - HELD THAT:- On perusal of the assessment order, it would reveal that the claim made for deduction u/s 36(1)(viia) was disallowed by the AO on the ground that co-operative banks were entitled to claim deduction only from assessment year 2007-08 and not for years prior to assessment year 2007-08. Thus, it is a case of mere disallowance of claim under particular section of the Act, there is no finding by the AO, as to what particulars filed by the assessee and found to be inaccurate. It is settled position of law that mere disallowance of claim on legal ground does not entail levy of penalty under the provisions of section 271(1)(c) of the Act as laid down by the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproduct (P) Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee.
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2022 (7) TMI 812
Addition u/s 69B - investment not fully disclosed as per loose sheets impounded from the residence of the assessee - survey proceedings u/s 133A - excel statement which was in the process of preparation on a Cut, Copy, Past mode, taken as a print out from the computer of the Assessee in survey proceedings relied - HELD THAT:- Admittedly, the ld. CIT(A) has not given any cognizance over the impounded materials from the residence of the assessee, which was the base for assessing the purchase consideration at ₹.1,15,29,000/- by the Assessing Officer by adopting per acre cost at ₹.5.40 lakhs. It is also an admitted fact that the Assessing Officer has failed to summon the seller under section 133(6) of the Act to verify the actual sale consideration received by him or verified seller s return of income or recorded any statement of the seller. On perusal of the orders of authorities below, the assessee has purchased for himself 16.075 acres of land and arranged four of his friends to purchase a large extent of 354.185 acres for a sale consideration of ₹.5.40 lakhs per acre, we are of the opinion that there is every possibility of getting much lesser price for assessee s portion even book value. In the absence of any verification from the seller under section 133(6) of the Act as well as seller s return of income and ignorance of impounded materials from the residence of the assessee by the ld. CIT(A) and also absence of referring to DVO for determining the FMV, we direct the Assessing Officer to adopt stamp duty value of the SRO as actual purchase consideration per acre. Thus, the ground raised by the assessee is allowed.
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2022 (7) TMI 811
Disallowance u/s 14A r.w.r 8D - Whether interest bearing funds was not invested by assessee ? - HELD THAT:- In case of Gujarat Fluoro chemicals Ltd.[ 2020 (10) TMI 252 - GUJARAT HIGH COURT] reiterated that where interest free funds available with assessee were far more than gross investment, it could safely be harboured that interest bearing funds was not invested by assessee and, thus, no disallowance under section 14A to be made. In view of the consistent position taken by the Gujarat High Court, as applied to the facts instant case, in our considered view, no disallowance is called for in respect of interest expenses under section 14A of the Act, when the assessee is having sufficient interest-free funds at its disposal in excess of investment made in instruments yielding exempt income. So far as administrative expenses it is not acceptable to simply state that no administrative expenditure was incurred to earn the above exempt income. The disallowance of administrative expenditure under section 14A of the Act was again affirmed by the Mumbai ITAT in the case of Zee Entertainment Enterprises Ltd.[ 2017 (5) TMI 719 - ITAT MUMBAI] . The Ahmedabad in the case of Sun Pharmaceutical Industries Ltd. [ 2017 (6) TMI 1323 - ITAT AHMEDABAD] directed the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D. Thus we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in confirming disallowance in respect of administrative expenses as per the formula given under Rule 8D. - Assessee appeal is partly allowed.
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2022 (7) TMI 810
Best judgment assessment u/s 144 - HELD THAT:- We find that the authorities below have given sufficient opportunities to the assessee. The assessee failed to comply with the directions given by the assessing authority from time to time. Therefore, in the absence of compliance of such directions and not furnishing the evidences, the AO was justified in proceeding and passing best judgment order u/s 144 of the Act. Ground nos. 1 2 are, therefore, rejected. GP estimation - disallowance on account of proportionate interest expenditure and depreciation - HELD THAT:- We find that no evidence has been placed on record by the assessee to substantiate its claim of expenses and depreciation as claimed before the AO. It was incumbent upon the assessee to substantiate its claim by filing evidences. No explanation had been offered regarding reliability of the accounts. Assessing Officer categorically recorded finding regarding unreliability of accounts on account of the fact that the auditors refused to put their signatures on the audit report. The assessee failed to justify its stand. In the absence of relevant evidences, we do not see any reason to interfere in the findings of the authorities below. We, therefore, uphold the orders of authorities below and reject the grounds raised by the assessee.
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2022 (7) TMI 809
Rectification of mistake u/s 254 - Income from house property - AO rejected the annual letable value of a flat of assessee - Bench had taken into consideration the fact of unauthorized possession and concluded that therefore ALV can be considered on basis of municipal taxes - Assessee submits that it had filed a civil suit against the unauthorized occupants on 02.08.2013 for their eviction and necessary documentary evidences in this regard were placed but Bench has not taken this in consideration - HELD THAT:- This Bench is of the considered opinion that there is no substance in the present application for rectification. In Para no. 6, the submission of asssessee have been reproduced while in para no. 9, the Bench had given a finding based upon appreciation of matter on record that assessee could not prove the fact that any legal action has been taken by the assessee against alleged unauthorized possession. Assessee s own case is that the civil suit was filed by the assessee company on 02.08.2013 after the Ld. CIT(A) decision in the case of assessee for Assessment Years 2006-07 2007-08. Even otherwise the alleged error cannot be considered to be one apparent on record which can be rectified within the powers of Section 254(2) of the Act as such the power is only for rectification and not review. The Bench is of considered opinion that averment of applicant that the Bench has made contradictory findings or failed to appreciate relevant evidence in correct perspective, is not an apparent error on record which can be rectified but it may amount to review which is not permissible under 254(2). Honourable Supreme Court in the case of Reliance Telecom Limited [ 2021 (12) TMI 211 - SUPREME COURT ] held Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Consequently the applications in hand are dismissed.
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2022 (7) TMI 808
Disallowance of Excess cane price - Disallowance of sale of sugar at concessional rate - HELD THAT:- In view of the statement made by both the sides that the facts in the present appeal is identical, the issue relating to excess sugarcane price paid by the assessee is restored to the file of Assessing Officer with similar directions as above in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. [ 2019 (3) TMI 906 - ITAT PUNE] - AO shall decide the issue after affording reasonable opportunity of hearing to the assessee, in accordance with law. Appeal of the assessee is allowed for statistical purpose.
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2022 (7) TMI 807
Income from House Property - ALV estimation - Fair Market rent determination - assessee contended that the earlier ALV cannot be Fair Rental Value as the tenant at that time was a Corporate Entity and Municipal Corporation has estimated rent - HELD THAT:- It is an undisputed fact that for F.Y. 2012-13 relevant to A.Y. 2013-14, the same property of the assessee fetched a rent of Rs.22 lakhs per annum with the actual rent received of Rs.11 lakhs for Six Months from Volkswagon India Pvt. Ltd. We find that same property was let out to the Daughter of the assessee in F.Y. 2013-14 relevant to the present Assessment Year under consideration for a meagre amount of Rs.5,500/- per annum as rent. The assessee was neither able to explain such disproportionate amount in rent received neither before the Sub-ordinate Authorities, nor before this Tribunal. Assessee was repeatedly saying that it is for the AO to prove why there has been such discrepancy in the rent amount. The legal scenario is very clear that once such a discrepancy has been demonstrated and examined by the Department, the onus is on the assessee to establish the reasons for such disparity in rental income. AO has not considered any outside property comparable rents nor has taken into consideration any other extraneous circumstances, but has only considered the disparity of rent in assessee s own property, on one hand what he had received during the A.Y. 2013-14 and on the other, what he has received in A.Y. 2014-15. It is the duty of the assessee to explain this disparity with possible reasons and materials on record, otherwise, the tax levied on such income is definitely justified. Subordinate Authorities have well examined that because of the relationship factor between the assessee and his Daughter out of natural love and affection, the value of rent was determined at such a lesser amount of Rs.5,500/- per annum, whereas the same property was rented out to a third party in just the preceding A.Y. 2013-14 for a much more higher value, therefore, it is nothing but the relationship aspect which has reduced the rent of the property and it has been well explained in the respective orders of the Subordinate Authorities. Dis-proportionate rental income received on one hand from a third party and on the other from his own Daughter were examined by the AO in relation to the same property of the assessee and therefore the order of the AO has been upheld by the ld.CIT(A). Therefore, no reason to interfere with the findings of the ld.CIT(A) which is upheld. The grounds of appeal of the assessee are dismissed.
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2022 (7) TMI 802
Deductions u/s 35(2AB) - expenditure incurred by the Petitioner in Form 3CL - HELD THAT:- Having heard learned counsel for the parties, this Court is of the view that DSIR is statutorily bound to issue the Form 3CL within 120 days in accordance with Rule 6(7A)(ba) - no restrained DSIR from issuing Form 3CL for any other assessment year. Consequently, the present writ petitions are allowed with a direction to the DSIR to issue reports on the expenditure incurred by the Petitioner for the Assessment Years 2017-18, 2018-19 and 2020-21 in Form 3CL within six weeks. With the above direction, present writ petitions stand disposed of.
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2022 (7) TMI 801
Exemption u/s 11 - proof of hostel facilities as object of educational activities performed by the society - charitable activity u/s 2(15) - hostel being run by the respondent-assessee, cannot be treated as charitable activity and it is not necessary for functionality of the educational institution - HELD THAT:- Tribunal has recorded specific finding that in the absence of any evidence to show that the hostel facilities were provided to anybody other than students and staff of the trust, the hostel facilities provided by the educational institution shall be construed to be the intrinsic part of the 'educational activities' of the assessee and they cannot be considered different than activities of the society of 'education. It has been further observed that undisputedly the assessee is carrying out educational activity and running various colleges, especially Medical Colleges and Charitable Hostels and thus income from charitable activities was nil. The assessee is also running hostels for the students as per the UGC Guidelines which is an ancillary activity. The Tribunal has relied upon judgment in the case of Krishna Chatirtable Society [ 2017 (9) TMI 1030 - ITAT DELHI] wherein it has been observed that providing of hostel facilities and transport facilities to the student and staff member of the educational Institute cannot be considered as business activity but as subservient to the object of educational activities performed by the society. - Decided in favour of assessee.
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2022 (7) TMI 800
Reopening of assessment u/s 147 OR assessment u/s 153C - HELD THAT:- In IBC Knowledge Park [ 2016 (5) TMI 372 - KARNATAKA HIGH COURT] this Court has held in Section 153C is pari materia with Section 158BD considered in Manish Maheshwari. AO in his order dated 24.12.2010 for assessment year 2005-06 has held that reasons formed to reopen the assessment on the basis of assessee's voluntary depositions and seized materials are in order and further that assessee's objection on that aspect has been rejected by his order dated June 7, 2010. Admittedly no proceedings were initiated u/s 153C of the Act. Thus, there is patent non-application of mind. It is relevant to note that the author of the diary Smt. Soumya Shetty had passed away prior to the date of search. It was argued on behalf of the Revenue that Shri. Ashok Kumar Chowta had offered tax on lump-sum income. AO has not recorded his satisfaction with regard to escapement of income. On the other hand, he has based Revenue's case entirely on the statement of assessee. Assessee has placed reliance on Pullangode Rubber Produce Co.Ltd.Vs. State of Kerala ( 1971 (9) TMI 64 - SUPREME COURT] and rightly urged that assessee's admission cannot be a conclusive evidence. Therefore, these two questions merit consideration and require to be answered in favour of the assessee and against the Revenue. Addition u/s 69B of the Act as unexplained investment - CIT (Appeals) has held that it was travesty of justice that the relevant entry has not been used in Shri. Ashok Chowta's case but it has been used in assessee's case who is a third party to the proceedings. ITAT while reversing the finding of CIT (Appeals) has relied upon the signature of assessee in the seized diary. Admittedly, the author of the diary had passed away. The addition has been made in the case of assessee based on the entries in the diary but the said entries have not been used in the case of Shri. Chowta. As recorded hereinabove, the Hon'ble Supreme Court in the case of Pullengode Rubber Produce Co.Ltd.'s case has held that admission is an important piece of evidence but it cannot be said to be conclusive. Shri. Chadrashekar also placed reliance on Commissioner of Income-tax vs. S.Khader Khan son ( 2007 (7) TMI 182 - MADRAS HIGH COURT] and contended that a statement recorded under Section 133A of the Act is not given any evidentiary value because the officer is not authorised to administer oath and to take any sworn statement. Therefore, in view of the fact that the author of the diary had passed away and relevant entry has not been used in the case of Shri. Chowta himself, reversing the findings of the CIT (A) by the ITAT is not sustainable. Hence, this question is also answered in favour of the Assessee and against the Revenue.
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2022 (7) TMI 799
Prosecution u/s 276CC and 276C (1) - criminal prosecution on alleged evasion of Tax - right to get offence compounded - difference between the income declared by the assessee and the assessment made by the Department for each Financial Years - HELD THAT:- The self assessment tax on declared income was paid only after initiation of enquiry proceedings that too concealing substantial part of the income. In such circumstances, several lakh of rupees had been evaded with willful intention. This Court is of the view that there is enough materials to proceed against the petitioner for non-filing of Return in time which is punishable u/s 276CC and for filing the Return belatedly with suppressed income, which is punishable under Section 276C(1). Since Section 278E gives a presumption to lay prosecution in case of non-filing of Return within the time limit and suppression of income in the Return filed is with malafide intention to evade Tax, the Court cannot by exercising its power under Section 482 of Cr.P.C., quash the proceedings presuming the contrary. The malafide projected in these petitions does not carry any merit, since the Department has caused notice to the assessee and the representative of the petitioner and participated and given an explanation which is found not satisfactory leading to launching the prosecution. The absence of assessee in India or the communication gap between herself and her representative cannot be a ground to quash the prosecution. Further compounding offence under IT Act is not an absolute right vested in the assessee. The compounding of cases based on facts and merits of each case where the assessee disclose the true and actual income but file it belatedly cannot be equated to the case where the assessee undisclosed the true and actual income also files the returns belatedly. Hence this court holds no merit in these petitions, in view of the presumption clause. Therefore, these Criminal Original Petitions are dismissed.
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2022 (7) TMI 798
Recovery proceedings - attachment order - petitioner brought the properties of the borrower to public auction. The third respondent was the highest bidder - The petitioner presented the Sale Certificate before the second respondent for registration. Citing the attachment made by the Income Tax Department, the second respondent refused to register the same. Questioning the stand of the second respondent, this writ petition came to be filed. HELD THAT:- It is well settled that the rights of the secured creditor will prevail over crown debt. The legal position has been clarified in more than one decision. In this case, the mortgage was created in favour of the Bank on 07.12.2015. Attachment by Income Tax Department was on 14.12.2018. Since the mortgage was created earlier, the attachment made by the Income Tax Department subsequently will have to give way. The impugned proceeding is quashed. The writ petition is allowed. The second respondent is directed to register the petition mentioned Sale Certificate subject to fulfilment of the usual formalities. Consequently, connected miscellaneous petition is closed.
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2022 (7) TMI 797
Disallowance u/s 14A - inter departmental dispute - cases between the Union of India and the companies fully owned by the Government of India - Tribunal held that the provisions of Rule 8D should not have been applied without appreciating that the provisions of section 14A introduced by the Finance Act, 2001 is applicable with retrospective effect from 01.04.1962 - whether Tribunal was correct in holding that the only company from which dividend is received shall be considered for the purpose of Rule 8D? - HELD THAT:- AO has recorded that accounts had revealed that there were certain heads of expenditure which could have been incurred towards the management. Thus, the Assessing Officer has made his own assessment and not recorded the satisfaction based on the record. In that view of the matter, the solitary ground urged by Shri Sanmathi is untenable. The Tribunal has rightly followed the decision of this Court in [ 2020 (12) TMI 679 - KARNATAKA HIGH COURT ] Hence, this question of law raised by the Revenue is answered in favour of the Assessee. Resultantly, this appeal does not merit any consideration. Before parting with the case, we had requested the learned advocates on both sides and also Shri A.Shankar, learned Senior Advocate as amicus curie to assist this Court with regard to the cases pending between the Union of India and the companies fully owned by the Government of India. In the instant case, the Assessee is Hindustan Aeronautics Ltd. The appellant is the Government of India represented by the Ministry of Finance. As adverted to Section 48 of Reserve Bank of India Act, 1934 and submitted that RBI is exempted from income tax and Super tax. We see force in his contention and we are of the considered view that litigation between the Public Sector Undertakings, which are fully owned by the Government of India and regulated by the Ministries like, HAL, ISRO, etc., is not desirable. It would be in the interest of all the concerned to ensure that there is no litigation at all or as minimum litigation as most essential. We take this opportunity to convey our concern and to ensure that these directions reach the appropriate forum, we direct the learned advocate for the appellant to implead Ministry of Law and Justice and Ministry of Finance as respondents No.2 and 3. Impleadment shall be carried out forthwith. Shri Shanthibhushan, ASG is directed to take notice. We direct respondents No.2 and 3 to examine in detail and issue appropriate directions to the concerned Public Sector/Undertakings to avoid or to minimise the inter-departmental litigation. A copy of this order shall be sent to the Secretary, Ministry of Finance and also Ministry of Law and Justice for their consideration. So far as question of law is concerned, this appeal stands dismissed with the observations recorded hereinabove.
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2022 (7) TMI 796
Levy of penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT:- Assessing Officer should have specified the particular limb on which the penalty has been initiated for each addition, in order to give an opportunity to the assessee to defend himself for penalty against each of the additions made. Having specified that the Assessing Officer has failed to do so and has, rather, proceeded on issuing a common show cause notice for all the impugned years without striking off the irrelevant portion in the show cause notice, in the light of the decisions relied upon by the Ld.AR in the case of Mohd. Farhan A. Shaikh vs DCIT ( 2021 (3) TMI 608 - BOMBAY HIGH COURT] and Dilip N Shroff [ 2007 (5) TMI 198 - SUPREME COURT] both, the jurisdictional High Court as well as the Hon ble Apex Court treats omnibus show-cause notices as betraying non application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. In a plethora of judgements pertaining to this issue various courts have consistently reiterated the principle that the assessee must be informed of the grounds on which penalty proceedings are initiated, where statutory notice is a mandatory requirement. Failure to do so will vitiate penalty proceedings in toto. The judgement of the Hon ble jurisdictional Bombay High Court in Mohd. Farhan S. Shaikh (supra) has specified that even a penal provision with civil consequences must be construed strictly and any ambiguity in this must be decided in favour of the assessee. Assessing Officer has issued a vague and defective notice under section 274 r.w.s. 271(1)(c) dated 28/12/2011 resultantly making the penalty proceedings in all the impugned assessment years vitiated and hence, all penalty orders are liable to be quashed. We, therefore, set aside the orders of the authorities below and delete the penalty levied under section 271(1)(c) of the Act, in all the assessment years under consideration. Assessee appeal allowed.
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2022 (7) TMI 795
Addition u/s 68 - None appeared on behalf of the assessee - HELD THAT:- None has been appearing also for the past six posting for hearing. In this view of the matter, we are disposing of the appeal by hearing the Ld. DR and perusing the records. We find that the facts and circumstances narrate in the order of the authorities below clearly indicate that it is classic case of circuitatious rotation of unaccounted money. The lender has no identity in as much it is nonexistent its sources of credits itself is share premium. So there is no creditworthiness of the lender company. It is a clear cut case of circuitatious rotation of unaccounted money and being such rotation of unaccounted money is absolutely not a genuine loan transaction. The authorities have duly dealt with the issues. In this view of the matter, we do not find any infirmity in the orders of the Revenue authorities below - Decided against assessee.
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2022 (7) TMI 794
Addition of unconfirmed creditors - disallowance of job work expenses - One of the contentions before Ld. CIT(A) was that the AO in the case of Noble Craft has made double addition as the AO has disallowed job work, and also made an addition in respect of the creditors of Noble Craft - HELD THAT: - We find that the Ld.CIT(A) has not adverted this contention. From the submissions made before the Authorities below, it is quite evident that this amount was considered twice. Therefore, a sum of addition in respect of the creditors of Noble Craft , deleted and rest of the addition is sustained as the assessee has not brought any supporting evidences before this Tribunal. Thus, grounds raised by the assessee are partly allowed.
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2022 (7) TMI 793
Addition u/s 69A - Unexplained cash deposits - money received on sale of land - AO treated the cash credits as unexplained money in terms of provisions of section 69A and accordingly proposed to assessee the same U/s. 115BBE - HELD THAT:- Admitted facts are that the assessee being a Non-Resident Indian sold along with his daughter agricultural lands during the AY 2017-18 for a recorded consideration of Rs. 92,47,500/-. The contention of the Ld. AR that it was only 50% of the sale consideration and the remaining 50% of the sale consideration was received by way of cash could not be properly substantiated by the Ld. AR. Even though the buyer has disclosed lower sale consideration for the purpose of saving stamp duty, it could not be believed that the sale consideration flows from April 2016 onwards whereas the registration of the sale deed was executed on 20/09/2016 for the agricultural land held by the assessee and on February 2017 for the agricultural land held by the assessee s daughter Smt Sudevera Sindura. The reliance placed by the Ld. AR in the case of Intezar Ali ( 2013 (8) TMI 704 - ALLAHABAD HIGH COURT] is distinguishable because the witnesses to the sale deed have deposed before the AO and Bank Manager of the assessee has confirmed that the cash was received by him against the sale made by the assessee. Since the Ld. AR could not provide any cogent evidences with respect to receipt of on money the same cannot be accepted. The argument of the Ld. DR that the purchaser has denied any payment of cash confirms that no on money was paid for the sale of agricultural land. In view of the above discussions, we find that the Ld. AO has rightly disallowed the same and we uphold the order of the Ld.AO on this ground. With reference to the cash deposits during the demonetization period - It is observed from the order of the Ld.AO that the AO has admitted that the cash has been withdrawn by the assessee from his own bank account and deposited the same into the same bank accounts. In such situation it can be said that the fact of withdrawals of cash was not disputed by the Revenue. Only what has to be considered is the purpose of withdrawal. The assessee from the assessment until its appeal before us has been consistently claiming that the amount was withdrawn for purchasing of some land and consequent to announcement of demonetization the amount was again redeposited in the bank account by the assessee. But no documentary evidences were produced by the assessee to substantiate the same. AO as well as the Ld. DR speak about the human probabilities of holding such huge cash. We also observe from the assessment order that the Ld. AO has observed that the accumulated cash must have been used for some other specified purpose and would have exhausted. The reliance placed by the ld. AR and the Ld. DR on the decision of Shashi Garg ( 2019 (7) TMI 410 - SC ORDER] is distinguishable on the fact that assessee had habitually withdrawn and deposited and it is not during demonetization period and hence the ratio of the Hon ble Supreme Court cannot be applied in the instant case. Further, the assessee being an NRI, these cash withdrawals and deposits were made by the relatives of the assessee. The Ld. AR has also not clearly demonstrated with evidences that the withdrawals by assessee is for buying of agricultural lands. The Ld. AR also failed to furnish any explanation of withdrawals of Rs. 25 lakhs on 20/09/2016 Rs. 50 lakhs on 17/10/2016 when already the assessee/relatives of the assessee are holding Rs. 95 lakhs cash on 1/9/2016. In view of the above, we are of the considered opinion that, in the absence of any cogent evidences, establishing the purpose of withdrawals, we allow a sum of Rs. 25 lakhs deposited on 16/11/2016 being the first deposit by the assessee consequent to demonetization. Revenue appeal is partly allowed.
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2022 (7) TMI 792
Exemption u/s 11 denied - assessee not giving its 12AA Registration Certificate Number in the return of income filed for the year under consideration - order passed under Section 143(1) - HELD THAT:- As bonafide mistake committed by the assessee in not giving its 12AA Registration Certificate Number in the return of income filed for the year under consideration; and, when its claim for exemption under Section 11 was disallowed by the CPC Bangalore for want of the said number vide an order dated 29.01.2016 passed under Section 143(1) of the Act, rectification application was filed by the assessee on 20.05.2016 pointing out the said mistake. The said application was duly allowed by the CPC, Bangalore vide an order dated 06.10.2016 and the claim of the assessee for exemption under Section 11 of the Act was allowed. In the written submission filed before the learned CIT(A) on-line, this development was brought to the notice of the learned CIT(A) by the assessee. As a result of this development, which had taken place after the filing of appeal by the assessee before the learned CIT(A), the grievance of the assessee was duly addressed by the CPC, Bangalore as per the rectification order passed on 06.10.2016 and since the order dated 29.01.2016 passed under Section 143(1) of the Act had already merged with the rectification order passed by the CPC, Bangalore on 06.10.2016 whereby the relief claimed by the assessee by way of exemption under Section 11 of the Act was already allowed, the appeal filed by the assessee against the order passed under Section 143(1) of the Act had become infructuous as agreed by the learned representatives of both the sides - Appeal of assessee allowed.
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2022 (7) TMI 791
Estimation of income - Bogus purchases - HELD THAT:- In this case the assessee has filed the order of learned CIT(A) in assessee s own case for A.Y. 2007-08 wherein learned CIT(A) has held that AO has analyzed the transaction through assessment order and established that there was no genuine purchase of the diamond and estimated profit @12.5 % in the case of the Hon ble Gujarat High Court in the case of Smith P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT ] Since, above order has been filed by the AR in support of his argument, therefore, we direct the AO to estimate the profit @12.5% amounting to Rs.5,18,803/- which was treated as bogus purchase on the basis of plethora of judgments. It has been held only profit can be added to the income of the assessee. In view of the above, appeal of the assessee is partly allowed.
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2022 (7) TMI 790
TP Adjustment - ALP determination qua domestic transactions entered into by the assessee with its partner u/s 92BA(i) of the Act - TP Adjustment of transactions falling u/s 40A(2)(b) - HELD THAT:- We find that though all these arguments have been duly considered by the ITAT in the orders for the earlier years, particularly in the case of M/s. Raipur Steel Casting India (P) Ltd. [ 2020 (6) TMI 629 - ITAT KOLKATA] but after taking note the issue was decided in favour of the assessee. In the case of M/s. DVC Emta Coal Mines Ltd. ( 2019 (5) TMI 1709 - ITAT KOLKATA] ITAT Kolkata as reproduced the finding of the ITAT Bangalore and thereafter held that effect of Finance Act, 2017 for omission of sub-clause to Section 92BA is that it would be deemed that such clause was never been on the statute book and, therefore, no Transfer Pricing adjustment can be examined with regard to the transactions falling u/s 40A(2)(b). We are of the view that the transactions of the assessee referred to the TPO for determination of ALP could not be made subject to TP adjustment after the Finance Act, 2017, as discussed above. Consequently, no addition on account of TP Adjustment is sustainable because it has been categorically held that omission of a provision would mean that it was never on the statue book - It has to be deemed that it was not in existence in A.Y. 2014-15 and if there was no such provision for recommending the transactions u/s 40A(2)(b) for determination of ALP, there cannot be any adjustment in the income of the assessee on the ground of TP adjustment. Accordingly these grounds of the assessee are allowed. The additions made in the income of the assessee on account of TP adjustment in the domestic transaction are deleted. TDS credit denied - as contended by the assessee that the Assessing Officer has erred in treating the TDS credit of Rs.30,48,824/- only in the assessment order instead of additional claim of TDS credit of Rs.1,22,317/- on mobilization advance claimed by the assessee during the course of assessment proceedings - HELD THAT:- CIT(A) has relegated this issue to the file of the Assessing Officer with a direction to grant TDS credit. Since the ld. CIT(A) has already issued direction to the Assessing Officer, we need not issued directions separately. Rather we concur with the ld. CIT(A) on this issue. With the above observation, this ground is disposed off.
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2022 (7) TMI 789
Disallowance u/s.36(i)(iii) - Addition of interest expenses as well as other expenses inspite of the admission of the fact that certain investments made out of borrowed funds - AO enquired from the assessee as to why disallowance should not be done under section 14A and without prejudice to the above, justify the interest payment u/s 36(1)(iii) - AO rejected the assessee s plea that share application money does not quantify for disallowance u/s 14A. He also rejected assessee s submission that investment made as strategic investment in subsidiary can help the case of the assessee. He also rejected the plea that no dividend income has been earned so disallowance u/s 14A cannot be done. HELD THAT:- We note that assessee has made elaborate submissions and relied upon several case laws before ld. CIT (A). Ld. CIT(A) did not deal with them and has passed rather laconic order. It is settled law that even administrative order has to be considered with rule of natural justice. The factual details also need verification. Hence, in the interest of justice, we remit the issue to the file of ld. CIT(A). Ld. CIT (A) is directed to pass a detailed order considering all facts of assessee s argument and case laws referred. Needless to add, assessee should be granted adequate opportunity of being heard - Appeal of the assessee is allowed for statistical purposes.
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2022 (7) TMI 788
Rejection of books of accounts u/ 145 - estimating the net profit @7% of the total turnover - CIT-A estimated net profits by applying the rate of 0.22% to the total turnover of the assessee as opposed to 7% applied by the AO - HELD THAT:- As relying on ITAT Rajkot bench decision in assessee s own case for assessment year 2010-11 [ 2022 (4) TMI 1425 - ITAT RAJKOT] we find no infirmity in the order of Ld. CIT(Appeals), who after considering the facts of the instant case upheld the action of the Ld. Assessing Officer in rejecting the assessee s book u/s 145 of the Act, but also gave substantial relief to the assessee by estimating the net profit @ 0.22% in the instant set of facts. In the result, the appeal of the assessee is dismissed.
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2022 (7) TMI 787
Levy of late fees u/s 234E - intimation u/s 200A - delay in filing the submission of the Quarterly Statement of TDS - HELD THAT:- It is only w.e.f. 01.06.2015 an amendment was made u/s 200A of the Act providing that fee u/s 234E could be computed at the time of processing of the return of income and intimation could be issued specifying the same payable by the dedutor as fee u/s 234E of the Act. The Hon ble Karnataka High Court in the case of Fatheraj Singhvi [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] held that the provisions of section 234E of the Act are substantive in nature and the mechanism for computing the late fee was provided by the Parliament only w.e.f. 01.06.2015. Therefore, late fees u/s 234E of the Act can be levied only prospectively w.e.f. 01.06.2015. The decision rendered by the Hon ble Bombay High Court in the case of Rashmikant Kundalia and Others [ 2015 (2) TMI 412 - BOMBAY HIGH COURT] does not come to the rescue of the Revenue, inasmuch as, the Hon ble High Court had only upheld the constitutional validity of the provisions of section 234E of the Act. The Hon ble High Court had not gone into the issue of retrospective operation of provisions of section 234E of the Act. In the circumstances, we direct the ACIT, CPC (TDS), Ghaziabad to delete the late fee being levied u/s 234E of the Act. - Decided in favour of assessee.
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2022 (7) TMI 786
Exemption u/s 11 - entitlement to mutuality benefit - Whether the assessee is charitable trust? - HELD THAT:- As decided in [ 2020 (9) TMI 199 - ITAT PUNE ] own case exhibition by the assessee trust is only furtherance of the charitable activity of the trust wherein, the healthy environment is provided for businessmen so that all the stake holders i.e. businessmen and customers are benefited and they also make aware of various activities like pollution control, city development, legal assistance etc which are in the nature of charitable activities and these certainly reached out to the greater number of people of the society. It is not disputed that clause (vii) in the Memorandum of Objects is one of the pertinent object of the assessee trust and fulfillment of such object benefited the public at large by holding the exhibition and therefore, is a part of charitable activity conducted by the assessee trust. Merely having surplus in one year does not change the character of the trust to a business or profit making entity which is otherwise a charitable trust advancing work of general public utility and certainly not hit by the first proviso to Section 2(15) of the Act. Since the Assessing Officer has denied the benefit of sections 11 and 12 which has been upheld by the Ld. CIT(Appeals) also on the ground that the assessee did not fall within the scope of charitable purposes defined in section 2(15) of the Act because of carrying on or rendering of any services in business, trade and commerce and this in our considered opinion is not a correct interpretation of the provision. We, therefore, set aside the order of the Ld. CIT(Appeal) and direct the Assessing Officer to grant benefit of exemption u/s. 11 and 12 of the Act to the assessee. It is therefore, clear that there is hardly any need for us to proceed any further so far as both the parties' respective substantive grounds pleaded in the instant set of two cross appeals each are concerned. We adopt judicial consistency therefor and restore the instant issue of assessee's section 11 exemption back to the Assessing Officer to be decided in light of co-ordinate foregoing detailed discussion. CIT(A)'s identical lower appellate order(s) under challenge herein in all these four cross appeals holding the assessee as eligible/partly eligible for mutuality benefit (supra) are reversed once it has been held entitled for section 11 exemption benefit in principle. Appeal allowed for statistical purposes.
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2022 (7) TMI 784
Deduction u/s 10AA - assessee has arranged its business transaction with its associate concern so that more than ordinary profit could be shown to claim higher deduction - HELD THAT:- CIT(A) has given finding of an admitted fact of close connection between the assessee company and its associate enterprises - transaction between the assessee and its associate have been arranged in such a manner that the transactions have produced the assessee more than ordinary profits which might be expected to arise in such eligible business. On these two assumed admitted facts the Ld. CIT(A) has upheld the order of Ld. AO. Tribunal is of the considered opinion that there can be no assumption of an arrangement as an admitted fact. It is a matter of fact and initial burden is on the Revenue to indicate from some reliable evidence that the course of business has been arranged so as to inflate profits with intent to abuse tax concession u/s. 10A of the Act. Section 80IA(10) of the Act concluding phrase makes it mandatory that the Assessing officer on his part has to do some exercise of ascertaining what amount of profits may have been actually derived from the alleged arrangement. However, here is a case where based on assessee's own Report in Form 3CEB, whatever amount of Rs. 70,38,693/- was found received in excess of price determined at Arm's Length was considered to be undue benefit. The following observations of Tribunal in M/s. Honeywell Automation India Limited Case [ 2015 (3) TMI 494 - ITAT PUNE] are relevant to understand as to what is expected from Assessing officer to give finding of an abusive arrangement held that Even if it is accepted that the difference between the operating margins of the assessee and the comparables show existence of more than the ordinary profits in the hands of the assessee, so however, it was still imperative for the AO to establish on the basis of substantive evidence and corroborative material that qua section 10A r.w.s. 80-IA(10) of the Act, the course of business between the assessee and the associated enterprises is so arranged that the business transacted between them produces to the assessee more than the ordinary profits with the intent of abusing tax concession. Quite clearly, in the entire assessment order, there is no whisper of any material or evidence in this regard. Similar are the circumstances here when CIT(A) has proceeded to uphold the findings of Ld. AO on the basis of alleged admitted fact of arrangement, which had no foundation except the opinions of Ld. Tax Authorities below. Consequently these grounds are sustained. Interest on deposits from revenue generated by export sales consideration to be income from other sources and it should have been included as part of eligible profits for the purpose of Section 10A - As observed that Ld. CIT(A) order has observed that the assessee has failed to establish by evidence that the interest income has been earned out of funds which are part of total export proceeds received in convertible foreign exchange. The Bench is of considered opinion that when there is no dispute to the fact that assessee is a hundred percent export oriented unit registered as special economic zone unit then the entire turnover from international transactions must have been in convertible foreign exchange only. The incidental activity of parking surplus funds with any institution earning interest is an integral part of the export business activity and such incidental income cannot be delinked from profit and gains derived by the undertaking. Reliance in this regard can be placed on M/s. Hewlett Packard Global Soft Pvt. Ltd. [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT ] Thus these issues are also decided in favour of the assessee.
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2022 (7) TMI 783
Revision u/s 263 - Lack of enquiry or no enquiry - scope for application of provisions of Sec.2(22)(a) / 2(22)(d) - specific arguments the assessee that the AO has caused detailed enquiry on the issue of buyback of shares during the course of assessment proceedings by calling for various details, for which, the assessee has filed necessary details and merely, for the reason that the issue does not find mention in the assessment order, it does not mean that the same has not been examined by the AO - HELD THAT:- Once the AO, as per his wisdom has enquired into certain aspects of assessment which he considers relevant and thereafter, the CIT cannot interfere, is wholly untenable. If this argument is taken to its logical conclusion, then it would mean that the provisions of Sec.263 would be redundant. No doubt, if the AO has conducted necessary enquires and has taken a possible view, then there is no scope for the CIT to invoke his jurisdictional powers. However, if the enquiries conducted by the AO are inadequate or it can be said that there is no enquiry at all, then the CIT can very well invoke his powers u/s.263 of the Act, and revise the assessment order. The crux of the matter is that the AO should conduct enquiry to satisfy himself about the genuineness of transaction. The scope of the term enquiry can be different in different cases. There cannot be any hard and past rule to carry out a particular enquiry. Such enquiry would be subject to satisfaction of AO. If the enquiry conducted by the AO is an objective satisfaction, then, even though, the AO has called for necessary materials during the course of assessment proceedings, it will lead to an inference that he has not conducted enquiries he ought to have been conducted. In other words, mere obtaining and placing documents on records cannot be equated into conducting enquiry. In this case, on perusal of facts available on record, there is a prima facie indication that there are few abnormalities on the issue of buyback of shares. In such case, the AO after collection of certain evidences should embark upon further investigation so as to ascertain the true colours of the transactions, because, what is apparent is not real. However, the AO simply called for certain details on the issue of buyback of shares, but did not reach to a logical conclusion on the issue, even though, there is a scope for application of provisions of Sec.2(22)(a) / 2(22)(d) of the Act. Therefore, we are of the considered view that there is no error in reasons given by the ld. CIT to exercise his jurisdiction. We find that although, it appears that the AO has conducted enquiries on the issue of buyback of shares, but in principle, the enquiries conducted by the AO is a case of lack of enquiry or no enquiry at all. Because, even though, there is a scope for AO to test the buyback of shares and consideration paid by the assessee in light of provisions of Sec.2(22)(a) / 2(22)(d) of the Act, but, the AO restricted the scope of enquiry in light of provisions of Sec.46A of the Act, relevant provisions of Companies Act, 1956, and tax treaty between India and Mauritius without going into the aspect of distribution of accumulation of profits of the company in the grab of buyback of shares. No doubt, where the law enables the taxpayer to choose one out of various available options, it is the prerogative of the taxpayer to choose the option that leave the taxpayer with less tax burden, but such option should not be a tool for avoidance of legitimate tax payable to the exchequer. In this case, as per options available to the assessee, the assessee can either go for buyback of shares or distribution of dividend. But, such option cannot be an arrangement to give a colour of legitimate tax planning within the four corners of law. The enquiry conducted by the AO in this case can t be construed as a proper enquiry and further, inadequate inquiry conducted by the AO in the given circumstances is as good as no enquiry and as such, the CIT was empowered to revise the assessment order. The order of the CIT is not based on irrelevant considerations and further in the present circumstances, he was not obliged to positively indicate the deficiencies in the assessment order on merits on the question of consideration paid for buy back of shares. AO in the given circumstances can t be said to have taken a possible view as the revision is sought to be done on the premise that the AO did not make enquiry thereby rendering the assessment order erroneous and prejudicial to the interest of the revenue on that score itself. Therefore, for all these reasons, we hold that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue and thus, the CIT has rightly exercised his jurisdictional powers and set aside the assessment order passed by the AO u/s.143(3) dated 31/12/2016. Hence, we are inclined to uphold the order of the ld.CIT and dismiss the appeal filed by the assessee.
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2022 (7) TMI 782
Disallowance u/s 14A r.w.r.8D - disallowance of interest - assessee submitted that, in respect of the disallowance of interest is concerned, the investment in shares and mutual funds were made by the assessee out of its own fund. There is no increase in investment yielding tax free income. There is no increasing investment rather there was a huge decrees - HELD THAT:- We find that, when the assessee had huge reservation and surplus fund which is non interest bearing fund, there cannot be disallowance of interest under Rule 8D(2). The similar issue has come up for consideration by the Tribunal in assessee s own case and the same have been decided in favour of the assessee for the AY 2012-13 [ 2020 (2) TMI 1647 - ITAT DELHI] wherein as held that invocation o f sub-Section (2) of Section 14A is conspicuously absent and hence re-computation of the disallowance is not legally valid. And considering the investments in mutual funds and in shares are through PMS, hardly any expense is incurred. As such the estimated disallowance made by assessee suo-moto is reasonable as it meets the expenses on account of STT as well as in direct expenses. Hence, we hereby hold that no additional disallowance is called for by invoking Rule 8D - Decided in favour of assessee.
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2022 (7) TMI 781
Income accrued in India - whether the amount received by the assessee for various services, commonly known as centralized services, will fall within the ambit of FIS under Article 12(4)(a) of the Treaty? - HELD THAT:- As Tribunal has examined the applicability of Article 12(4)(a) of the Treaty qua the payment received but has categorically held that it cannot be treated as FIS under Article 12(4)(a) of the Treaty. Undisputedly, the aforesaid observations of the Coordinate Bench have been upheld in case of DIT Vs. Sheraton International Inc [ 2009 (1) TMI 27 - DELHI HIGH COURT] In view of the aforesaid, the observations of learned Commissioner (Appeals) that the applicability of Article 12(4)(a) was never examined has to be rejected at the threshold. In fact, we are constrained to observe, Commissioner (Appeals), being conscious of the fact that the centralized service fee received by the assessee cannot be treated as FIS under Article 12(4)(b) due to failure of make available condition, has made an unsuccessful attempt to bring it within the ambit of Article 12(4)(a) of the Treaty and in the processes has misrepresented certain facts. As in assessee s own case as well as in case of group company, viz, Sheraton International Inc. we have no hesitation in holding that the fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the India US Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable. For the sake of completeness, we must observe, in course of hearing, learned Departmental Representative has relied upon some judicial precedents to drive home the point that the payment received towards centralized services fee is in the nature of FIS under Article 12(4)(a) of the Treaty. In this context, we must observe, after carefully examining the decisions of the Coordinate Bench in case of Marriott Hotel [ 2015 (1) TMI 659 - ITAT MUMBAI] we are of the view that it is clearly distinguishable on facts. On a reading of the decision, it is very much clear that after examining the agreements entered into with the Indian hotels, the Bench has recorded a finding of fact that the agreements are interrelated/interlinked in essence that they refer to each other. Further, the Bench has observed that for all practical purposes, the clients (Indian hotels) have construed all the agreements as a single agreement for the purpose to promote brand. Thus, in this factual context, the Bench has concluded that the assessee has split up the royalty received into different segments. However, in the appeals before us, there are no such findings by the departmental authorities which can demonstrate that for all practical purposes the License Fee Agreement and Centralized Services Agreement are to be construed as one agreement and has been so understood by the Indian clients. The case of JC Bamford Excavators Ltd. [ 2019 (12) TMI 769 - ITAT DELHI] is also factually distinguishable. Therefore, in our considered opinion, the decisions cited by learned Departmental Representative would be of no help to advance the case of the Revenue. - Decided in favour of assessee. Royalty/license fee for license to use the brand name - departmental authorities have treated it as FIS under Article 12(4)(a) of the India US Tax Treaty - HELD THAT:- Merely because the grant of license to use brand name and provision of centralized services are contained in a single agreement, it cannot be said that centralized services, which includes marketing, promotion, reservation and other allied services flow out of grant of license to make them ancillary and subsidiary to grant of license. Even, the quantum of service fee received if compared to the royalty income, would not make it ancillary and subsidiary so as to make it FIS under article 12(4(a) of the treaty. In our view, service fee received by the assessees would clearly fit in to the illustration given in example 2 of MoU to India-USA DTAA. Therefore, after in depth analysis of the relevant facts arising in these appeals, the agreement between the assessees and the Indian hotels and other materials on record, we are of the view that our reasoning given in case of Starwood Hotels Resorts Worldwide Inc.(above) in the earlier part of the order, would equally apply to these appeals, as well, as it cannot be said that the payment received towards centralized service fee is ancillary and subsidiary to the license fee. Accordingly, we delete the additions. - Decided in favour of assessee.
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2022 (7) TMI 780
Late payment of employees contribution towards ESIC - HELD THAT:- The impugned issue has been covered against the assessee by the order of the Hon ble Gujarat High court in case of CIT vs. Gujarat State Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] held that the learned tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Ac t - Thus we confirm the addition made by the AO in this regard. Accordingly the ground of appeal raised by the Assessee is hereby dismissed. TP Adjustment - Addition on account of interest free loan advances provided to its AE - assessee before the AO/TPO contended that there cannot be any adjustment of the notional interest under the provisions of section 92C read with rule 10B of the Income Tax Rules - HELD THAT:- As decided in own case [ 2021 (4) TMI 682 - ITAT AHMEDABAD] we hold that no adjustment under the transfer pricing provisions is required to be made with respect to the interest free loans and advances by the assessee to its associated enterprises in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed and the ground of appeal of the revenue is dismissed. Upward adjustment of corporate guarantee provided by the assessee - HELD THAT:- We find that the assessee has claimed the reimbursement of the actual charges incurred by it in providing the corporate guarantee from the associated enterprise. As such, no fee was charged by the assessee on account of corporate guarantee provided by the assessee. Thus the ITAT has directed to make the upward adjustment being 5% of the cost incurred by the assessee in providing the corporate guarantee to the associated enterprise. However, in the case on hand, there is no clarity arising from the order of the authorities below whether the assessee has claimed reimbursement of the actual expenses incurred by it in providing the corporate guarantee from the associated enterprises. If nothing has been charged by the assessee by way of reimbursement from the associated enterprises, then addition that needs to be sustained is actual cost incurred by the assessee in providing the corporate guarantee +5% markup of such charges in the light of the ITAT finding as given above otherwise only 5% has to be added. With this observation, the ground of appeal of the assessee is partly allowed and the ground of appeal of the Revenue is hereby is also partly allowed subject to the above direction.
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Benami Property
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2022 (7) TMI 779
Benami Transactions - Notice and attachment of property involved in benami transaction - applicability of the principles of natural justice and fair play - HELD THAT:- Sub section (3) to section 24 states that the Initiating Officer, who is of the opinion that the person in possession of the property held benami, may alienate the property during the period specified in the notice, may, with the previous approval of the Approving Authority, by order in writing, attach the property provisionally, for a period of 90 days from the last day of the month in which the notice under section 24(1) is issued. According to section 24(4)(a)(i), the Initiating Officer, after conducting enquiry and calling for reports / evidence and taking into account all the relevant materials, shall pass an order continuing the provisional attachment of the property till the passing of the order by the Adjudicating Authority under sub section (3) of section 26. Under section 24(4)(a)(ii), the Initiating Officer may revoke the provisional attachment of the property with the prior approval of the Approving Authority. Section 24(5) requires the Initiating Officer, who passes an order continuing the provisional attachment of the property under section 24(4)(a)(i), to draw up a statement of the case and refer it to the Adjudicating Authority, within fifteen days from the date of the attachment. As noticed earlier, the appellants in the writ proceedings, questioned the action of the first respondent under section 24(4)(a)(i) of the Act, in ordering continuance of the attachment made under section 24(3) till the final order under section 26(3) is passed by the Adjudicating Authority. Upon considering the rival submissions and the decisions relied on by the parties, the learned Judge has dismissed the writ petitions filed by the appellants, along with other connected cases, by the common order dated 25.10.2021. As grievance of the appellants is that the first respondent did not furnish the entire documents relied on by them, nor provided any opportunity to the appellants to cross examine the persons whose statements have been referred to in the impugned proceedings and as such, the orders passed under section 24(4) of the Act, which were impugned in the writ petitions, are arbitrary, illegal and violative of the principles of natural justice. Whereas, it is the specific stand of the respondents that they have supplied the required documents to the appellants and that, there is no provision for providing an opportunity to cross examine the witnesses from whom they have collected the information regarding benami properties, at the preliminary stage and therefore, the question of violation of the principles of natural justice does not arise herein. Concededly, in the notices dated 01.11.2019 issued under section 24(1) of the Act, the first respondent has set out the reasons for forming an opinion that the appellants are benamidars in respect of the properties in question; and they were called upon to show cause as to why the properties should not be treated as benami properties, on or before 18.11.2019. Though the appellants raised their objections to the same, failed to produce the documents called for by the first respondent, to show that the alleged transactions were reversed subsequently, but they complained that there is no fair play on the part of the respondent authorities, while passing orders under section 24(4) of the Act. As we are of the opinion that in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities, to the appellants at the stage of section 24 proceedings, the plea raised by the appellants in this regard, cannot be countenanced. No error in the orders passed by the first respondent, under section 24(4) of the Act, as an interim measure, in order to protect the interest of the Revenue. The learned Judge has also rightly affirmed the same and directed the respondent authorities to proceed further in accordance with law. Thus, the appellants have not made out any case to interfere with the order impugned herein as well as the orders impunged in the writ petitions at this stage.
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Customs
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2022 (7) TMI 778
Validity of remanding the case, when jurisdictional High Court Judgments are available, upholding the competency of the DRI to issue show cause notice - Whether Tribunal is empowered to remand the case without deciding the issues raised therein on the ground that jurisdiction of the officer to issue show cause notice is under dispute? - HELD THAT:- Reliance placed in the case of THE COMMISSIONER OF CUSTOMS VERSUS SHRI SANKET PRAFUL TOLIA [ 2021 (6) TMI 432 - MADRAS HIGH COURT] where it was held that appeals are restored to the file of the Tribunal with a direction to keep the appeals pending and await the decision of the Honourable Supreme Court. Following the latest decision in Sanket Praful Tolia 's case, which is squarely covered by the issues involved herein, all these Civil Miscellaneous Appeals are allowed by setting aside the orders impugned herein and the matters are remanded to the Tribunal with a direction to keep the same pending and await the decision of the Hon'ble Supreme Court in the appeals filed against the decision in Mangali Impex [ 2016 (8) TMI 1181 - SC ORDER ]. However, it is made clear that the appellants shall not initiate any coercive action against the respondent(s)/assessee(s) and await the final decision in the appeals, which have been restored to the file of the Tribunal.
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2022 (7) TMI 777
Seeking anticipatory bail - misuse of Duty Exemption Pass Book (DEPB) and Duty Exemption Entitlement Certificate (DEEC) Scheme by using forged Shipping Bills - Section 120B read with 420, 467, 468, 471 I.P.C. - HELD THAT:- It is evident that the present F.I.R. has been lodged for cheating, using forged documents as genuine, forging documents and gaining undue monetary benefits thereby causing loss to the State Exchequer to the tune of about Rs. 17 Crores. The matter was investigated thoroughly and charge sheet has been submitted, on which cognizance has been taken by the concerned court. The applicant in spite of knowing of filing of charge sheet and order of cognizance and summoning and non-bailable warrants issued against him, is avoiding appearance before the trial court. The matter falls within the category of economic offence. In the present matter, charge sheet has been submitted on which cognizance has been taken and the applicant has been summoned to face trial. The present anticipatory bail application under Section 438 Cr.P.C. is rejected.
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2022 (7) TMI 776
Seeking direction to the second respondent to release the imported goods - defatted coconut - desiccated coconut or not - HELD THAT:- Since Sri Jeevan J Neeralgi is categorical in his submissions that if an application was filed during the pendency of the original proceedings under Section 110A of the Customs Act, 1962, the adjudicating authority could have considered provisional release of the goods subject to the terms as regards security for the price of the imported goods, the question of granting liberty as now requested is considered. If the petitioner could have availed such remedy during the pendency of the original proceedings, if there is a second appeal by the authorities and if it is not contested and that there is no interim order in such appeal by the authority, this Court is of the considered view that the petitioner must be at liberty to file an application for provisional release of the imported goods and there must be an expedited decision on such application - The petition is disposed of with liberty to the petitioner to file an application under Section 110A of the Customs Act, 1962 before the adjudicating authority, even without waiting for a certified copy of this order.
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Corporate Laws
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2022 (7) TMI 775
Seeking production of original documents - Whether the Respondents can be directed to produce the documents as prayed? - HELD THAT:- It may be stated that the 1st Respondent herein earlier filed IA 40/2022 for leave to file certain documents mentioned in the index of the said petition and this Tribunal after hearing both parties on 08.06.2022 allowed the same and accordingly received the documents. During the course of the hearing of the said IA, Ld. Senior Counsel for the Respondents in IA No. 40/2022 Shri M.S. Prasad who is also the Counsel representing the Applicant herein, submitted that in order to verify whether the documents described as originals in the index are the original documents or not, the opportunity to verify the same may be given. Pursuant therefore, the Tribunal allowed verification of the said documents in the presence of the Ld. Counsel for the Petitioner and to file a memo confirming the verification of these documents. Later, the Ld. Counsels representing both sides have orally informed that the documents were verified and a memo confirming verification will be filed during the course of the day. However, no such memo was filed. Subsequently, a memo is filed by 1st Respondent on 01.07.2022. The present application is filed for a direction to the 1st Respondent to produce the originals of the documents - since the 1st Respondent had reiterated vide memo dated 01.07.2022 that the documents at Sl. No. 1 to 4 which were produced under IA No. 41/2022 are original documents no direction to produce the originals of documents at Sl. No. 1 to 4 by the 1st Respondent can be given. However, since the Applicant herein contends that the documents at Sl. No. 1 to 4 as produced are not originals, it is left open for the Applicant to establish that these documents are not original documents. In so far as other documents mentioned in the application are concerned, the 1st Respondent had stated that these documents are not presently traceable and that these documents being more than 8 years old, the 1st Respondent has no legal obligation to keep the records, besides that the relief sought for production of these documents is barred by limitation. Application disposed off.
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Securities / SEBI
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2022 (7) TMI 774
SEBI Offence - summons issued under Section 11-C(3), (5) (6) of the Securities and Exchange Board of India Act, 1992 before the learned single Judge - scope of amendment - HELD THAT:- As investigation can be conducted after the Board has reasonable ground to believe that any person associated with the securities market has violated any of the provisions of the Act, rules or regulations. Since Section 11-C was inserted with effect from 29.10.2002, investigation under Section 11-C can be continued for the transactions occurred prior to 29.10.2002 as well, because the investigation is only a process to find facts, collect evidence materials of a suspected offence/contravention, therefore, the same being procedural in nature, it is retrospective in nature also. When the Board sought for information from the appellants who were found to have played a role in the matter of Sai Television, the appellants are duty bound to furnish information as sought for by the Board. Apex Court also in SEBI v. Ajay Agarwal, ( 2010 (2) TMI 600 - SUPREME COURT] has held that Section 11-B is procedural in nature that prima facie applies to all actions, pending as well as future. When a provision that provides for imposition of directions which is in the nature of punishment itself is held to be retrospective, Section 11-C can very well be held to be retrospective in operation A cursory perusal of the above observations clearly tells us that Section 11-C is retrospective in nature only. Whether Section 11-C(3) covers past transactions also, a clear reading of Section 11-C(1) shows that there are two sub-clauses, namely, Section 11-C(1)(a) and Section 11-C(1)(b), while the former uses the expression are being meaning its application to the present transactions, the latter uses the expression has violated which clearly means the past transactions as well - As these two clauses are to be read disjunctively and not conjunctively, because even for past transactions the Section 11-C(1)(b) applies. Moreover, the writ petitions are not even maintainable, for the simple reason that when disputed questions have arisen as to whether the appellants/writ petitioners are individual investors or not, it is for them to prove that they are individual investors and that they have not violated any provisions before the Board. Now investigation has been ordered. The appellants have to furnish details/information regarding the transactions done by them during the particular period. On receipt of report from the investigating authority, the Board shall pass an order strictly in accordance with law. If the Board, for the reasons best known to them, comes to the conclusion that the appellants are individual investors and they do not fall within any of the categories of persons mentioned under Section 11-C of the Act, the matter ends therein. If for any reason, the Board comes to the conclusion that the appellants are persons associated with the securities market, they have to work out their remedy by filing appeal before the appellate authority. Therefore, when the appellants have got an effective statutory alternative appellate remedy, this Court finds that the writ petitions are not maintainable. Therefore, in our considered opinion, the findings and conclusions reached by the learned single Judge dismissing the writ petitions do not call for any interference.
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Insolvency & Bankruptcy
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2022 (7) TMI 773
Maintainability of appeal - time limitation - adoption of Swiss Challenge Method - maximisation of value - HELD THAT:- This Tribunal without traversing upon the merits of the matter not delving deep into the same and also not expressing any opinion, one way or the other, simplicter, on the aspect of Limitation comes to a clear cut conclusion that the Instant Company Appeal preferred by the Appellant before the Office of the Registry on 10.06.2022 is clearly barred by limitation. The invocation of the Hon ble Supreme Court Suo Motu Writ Petition (C) NO. 3 OF 2020 dated 10.01.2022 [ 2022 (1) TMI 385 - SC ORDER ] will not be of any assistance to the Appellant, as opined by this Tribunal. Appeal dismissed.
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2022 (7) TMI 772
Maintainability of appeal - time limitation - crystalline stand of the Respondent/Liquidator is that the Appellant / Applicant was not assiduous / meticulous in projecting its claims all through the Liquidation period and furnished its claims lately at the fag end of Liquidation period, especially it had not filed its claim prior to 14.07.2018 - HELD THAT:- In the instant case, the Respondent/Liquidator had issued the paper publication inviting the claim from the Stakeholders on 18.06.2018 and the last date for submission of such claim was 14.07.2018. Admittedly, the Appellant/Applicant before the Adjudicating Authority (National Company Law Tribunal), Chennai Bench, had prayed for condonation of delay of 936 days in claiming the EPF and MP Act, 1952, dues. The Form F, filed by the Appellant s side, after the beginning of the Liquidation on 20.09.2019 was not accepted by the Respondent/Liquidator. No wonder, the Form G was filed by the Appellant on 02.02.2021. Aspect of delay - HELD THAT:- An unpardonable lackadaisical approach / attitude of the Party in pursuing a matter before the Competent Authority/ Tribunal is not to be accepted. The Law of Limitation being harsh, will affect a Litigant, but it has to be pressed into service with all its vigour and rigour in the considered opinion of this Tribunal - In Law, a Tribunal/ a Court of Law has no power to find out a device in granting Relief to a Party who may appeared to have been hard done by. To put is precisely, an Application for condonation of delay undoubtedly create a jurisdictional fetter against consideration of tangible / substantive matter on merits. A Tribunal cannot determine the sufficiency of cause, apart from the facts pleaded and made out in a given case. Just because the Appellant is a Statutory Organisation, no indulgence or latitude can be shown, since the Law applies to one and all in a level playing field. Appeal against Liquidator s Decision - HELD THAT:- Section 42 of the I B Code, 2016, enjoins that as against the decision of the Liquidator either accepting or rejecting the claims, a Creditor may prefer an Appeal before the Adjudicating Authority and it cannot be gainsaid that the process of Liquidation is to be completed, within the prescribed time and conclusion of proceedings in this regard, is to be made within one year as enunciated under I B Code, 2016. Aim of I B Code - HELD THAT:- Speed is the essence of I B Code, 2016. Time Wasted/Lost cannot be revisited/regained. The process of Liquidation is time bound, to be completed within one year in the teeth of the I B Code, 2016. Undoubtedly, the Code is an inbuilt and self-contained one and the object of the I B Code, 2016, is that, a time barred Debt cannot be resurrected or given a fresh tenure of life, as opined by this Tribunal. This Tribunal keeping in mind the present facts and circumstances of the instant case, in a conspectus fashion and also considering the submissions of the Appellant side and the stand taken on behalf of the Respondent/Liquidator, comes to a consequent conclusion that the view arrived at by the Adjudicating Authority, (National Company Law Tribunal), Division Bench, Court I, in dismissing the IA/442/CHE/2021 (in condoning the delay of 936 days in claiming the EPF MP Act dues) in TCP/413/IB/CB/2017, through its impugned order dated 17.12.2021 is free from legal infirmities. Resultantly, the Appeal fails. Appeal dismissed.
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2022 (7) TMI 771
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is seen from the records that the Company Petition 2430/2018 was disposed of as withdrawn vide Order dated 30.04.2019 in view of the settlement terms as entered between the parties. The said Order also granted liberty to the Operational Creditor to mention the said CP in case of breach of the settlement terms. Further the Operational Creditor had sent demand notice dated 25.05.2018 under section 8 of the Code for unpaid amount of Rs. 32,72,03,256/-. The Corporate Debtor further in its written submissions dated 24.03.2022 have raised an issue that rental dues or dues under a leave and license agreement cannot be considered as an operational debt. In view of the above facts and circumstances and breach of the settlement agreement by the Corporate Debtor further the existence of debt and default has been proved by the Operational Creditor and at the very outset the Corporate Debtor has accepted it s liability in view of its Settlement Agreement thereby acknowledging its liability which is due and payable against the facilities extended by the Operational Creditor - Further the Corporate Debtor has also nothing stated on the merits of the case nor has denied the liability accrued with regards to the facilities extended. Hence it is clear that the liability to repay falls on the Corporate Debtor. The Company Petition is liable to be admitted - Moratorium declared.
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2022 (7) TMI 770
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantor to Corporate Debtor - time limitation - existence of debt and dispute or not - HELD THAT:- The Resolution Professional has stated that the application filed by the Financial Creditor is within limitation as Hon'ble Supreme Court (in suo moto writ petition 3/2020) vide order dated 10.01.2022 has excluded the period from 15.03.2020 till 28.02.2022 for the purposes of limitation - Contention of the Guarantor that the sum of Principal Amount claimed by the applicant is incorrect, since the Bank Statement of the loan account attached at Annexure P-32 Page 372 of the petition deputes about Rs. 45.67 crores, whereas the amount mentioned in the Part-III (page 24 of the petition) claims Principal amount is about Rs. 52.05 crores. The contention of the Guarantor is incorrect as the amount mentioned in the Bank Statement is calculated upto 03.03.2018, whereas the amount mentioned in the Part-III of the petition is calculated as on 10.09.2021. The application is hereby admitted under Section 100 of the IB Code, 2016 - The Insolvency Resolution Process is initiated against the Respondent/Guarantor and the moratorium is declared, which begins with the date of admission of the application and shall cease to have effect at the end of the period of the 180 days.
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2022 (7) TMI 769
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- There is ample evidence on record to show that prior to the demand notice under Section 8 of the IBC, 2016, both parties have made correspondence putting forth their perspective about the hire charges, mobilization charges and demobilization charges of the Rig. Perusal of those correspondences show that there is a serious dispute already pending in between them about the hire charges and other charges of the Rig - the dispute had cropped up in between the parties prior to demand notice under Section 8 of the IBC, 2016 about the amount claimed in this application. This dispute cannot be decided and resolved by this Adjudicating Authority within its limited jurisdiction. The parties are free to approach the appropriate forum for the same. Thus, there is a pre-existing dispute pending in between the Operational Creditor and the Corporate Debtor relating to the claim of Operational Debt herein. Whether the Operational Creditor tried to initiate the CIRP of the Corporate Debtor fraudulently? - HELD THAT:- The documents on which Corporate Debtor relying on may be relevant to establish its defence of a pre-existing dispute but only because Operational Creditor did not produce that letter is not a sufficient ground to hold that the Operational Creditor initiated CIRP fraudulently. In order to hold that the CIRP is fraudulently initiated there requires substantial evidence to establish that the Operational Creditor had filed out and out false claim against the Corporate Debtor. Such facts are not available on record in this case. Hence, it is held that it was not fraudulently initiation of CIRP by the Operational Creditor - the application filed by the Corporate Debtor is rejected. Application dismissed.
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Service Tax
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2022 (7) TMI 768
Evasion of Service tax - Presumption with regards to documents and records - collection of Service tax from their customers but the documents like debit notes which are so called supplied by the recipients is not authenticated - whether the appellant can submit additional documents / records and additional evidences before the appellate tribunal in their support? - HELD THAT:- This Tribunal being a final fact finding authority can very well admit fresh evidence and argument. This issue has been considered by the Hon ble Supreme Court (Three Judges Bench), in the case of NATIONAL THERMAL POWER COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1996 (12) TMI 7 - SUPREME COURT ], which is to the effect that the Tribunal has jurisdiction to examine the question of law which arises on facts, as found by the authorities below, and having bearing on tax liability of assessee, even though said question was neither raised before the lower authorities nor in appeal memorandum before the Tribunal, but sought to be added later as an additional ground by a separate letter. In view of Section 36A of Central Excise Act, 1944 it is only when such document is tendered in evidence against the person who produced the same or from whose custody or control it was seized that the presumption under Section 36A is available - In the present case admittedly none of the alleged documents was produced by the Appellant or seized from the Appellant s premises or control. In view of the above, when the presumption under Section 36A is not available, the burden of proof is squarely on the Department to prove that the source documents related to the Appellants and that any taxable services under the source documents were actually provided by the Appellant. This burden has not been discharged by the revenue in the present case. In terms of Rule 2(1)(d) of Service tax Rules, 1994 and Circular No. 96/7/2007-ST dtd. 23.08.2007 and in terms of Circular No. 96/7/2007 -ST dtd. 23.08.2007 the service tax was liable to be paid by the Service recipient. Therefore, on the said activity of Appellant demand of service tax is not sustainable. The demand of service tax (except the amount of service tax payable as per the appellant, admitted by the appellant and deposited as stated in the appellant s submission) interest and penalty is not sustainable and the same is accordingly set aside - appeal allowed.
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2022 (7) TMI 767
Refund claim - time limitation - Denial of refund of certain amount deposited through GAR challan - HELD THAT:- It is seen that the appellant deposited a certain amount through GAR challan. The appellant has thereafter, in three days informed the revenue that the said deposit is in the nature of a deposit under Rule 6 (1A) of Service Tax Rules. The said deposit has never been adjusted against any tax liability in any subsequent return filed by appellant. In this circumstances, it is found that the amount deposited has never attained character of tax or duty. Appeal allowed.
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Central Excise
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2022 (7) TMI 766
Validity of SCN - Respondent No.2 has not considered the orders passed by the Additional Commissioner of Central Excise and Commissioner of Central Excise where they have taken a contrary view - adjudication has been made more than 20 years after the show cause notices were issued and therefore, as held by various courts, these are stale notices - HELD THAT:- In this case, Respondent No.2 has conveniently failed and neglected to even refer to the orders passed by its superior officers where contrary view has been taken. Respondent No.2 has also conveniently not dealt with the submissions of petitioner that delayed adjudication defeats very purpose of issuing the show cause notices. We would be justified for taking a view that Respondent No.2 chose to not deal with these submissions of petitioner because it was inconvenient to Respondent No.2 and he could not have taken a view otherwise. It makes no sense in making a party to pursue an appeal against order passed disposing show cause notices that were issued 20 years ago. Petition disposed off.
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2022 (7) TMI 765
Default in payment of Central Excise Duty - contravention of Rule 8(3A) of Central Excise Rules, 2002 or not - Whether the payment of Rs 5,00,000/- by the appellants on 26.03.2013, from their CENVAT account, can be considered as payment of the defaulted duty for the month of February, 2013 as per Rule 8 of the Central Excise Rules, 2002? - Whether the rigors of Rule 8 (3A) shall apply to the clearances made by the appellant after that date and demand of Rs 4,13,14,846/- for the clearance made during the period 26.03.2013 to 28.02.2014 could have been made by the revenue by invoking provisions of Section 11A of the Central Excise Act, 1944? - HELD THAT:- In view of the clarification vide Circular No.962/05/2012-CX, dated the 28th March, 2012 issued by the Board there seem to be no requirement, that the arrears that have arisen under Rule 8 were required to be paid in cash only, utilization of the CENVAT Credit for payment of the said arrears is permissible, subject to the condition that the balance was available in the account of the appellant. In view of the decision of Hon ble Gujarat High Court in ADVANCE SURFACTANTS INDIA LTD VERSUS UNION OF INDIA [ 2017 (8) TMI 594 - GUJARAT HIGH COURT] where it was held that proviso to Sub-Rule (4) of Rule 3 of the Cenvat Credit Rules, which disentitles the manufacturer utlization of Cenvat Credit availed in a particular month for the goods manufactured in the preceding month can be said to be contrary to the law laid down by the Hon ble Supreme Court in the aforesaid decisions as well as contrary to the CENVAT Credit Scheme, and therefore, the same is invalid and unconstitutional and the clarification issued by the Board there seem to be nothing wrong in the appellants discharging the defaulted duty liability as per Rule 8 from their CENVAT account. It is quite evident that the revenue authorities took nearly one year to give consent to the appellant to operate as an LTU. In the meantime as per the show cause notice certain defaults in term of Rule 8, were noticed in the payment of Central Excise duty by the due date for the Month of February 2013 - Rule 12 A (4) of the CENVAT Credit Rules permitted the transfer of CENVAT Credit from unit of the person operating under the LTU scheme to the other unit of the same person. Appellant Plant-IX, was having sufficient credit balance of Rs in their CENVAT Account at the close of the February 2013. If they the appellant request to operate under the LTU scheme was allowed during any month prior to the month in which default occurred, they would have transferred this balance to their Plant -VII and would have utilized the same for payment of the duty. Thus, there are no justification in holding that the payment of amount of Rs 5,00,000/- from their CENVAT account (subject to verification of the transfer made on 26.03.2013) was not enough to discharge the duty arrears for the month of February-2013 in terms of Rule 8 of the Central Excise Rules, 2013. Plain reading of Rule 8 (3A) as it was then would clearly show that it is not amenable to Section 11A of the Central Excise Act, 1944. Rule itself declares that in cases where the rule apply, the clearances are to be made on payment of duty in cash and on consignment basis. In case of default from the same the goods will be treated to be cleared without payment of duty and consequences as per law will follow. By making the demand as above nearly one year later, for the clearances made without payment of duty revenue was not only soft pedaling the issue but was permitting the clearance without payment of duty. The natural consequence of the clearances made without payment of duty was to seize and confiscate all the goods that were cleared by the appellant without payment of duty. Might be revenue mulled over the issue during the intervening period as to what would be correct course of action. After permitting the clearances contrary to provisions of Rule 8 (3A) revenue authorities cannot subsequently turn back and make demand by invoking the provisions of Section 11A. Undisputedly appellants have paid the defaulted duty for the month of February 2013, by making a debit entry in the CENVAT Account on 26.03.2013. Even if this debit was to be considered as not a valid payment of duty, then also the Appellant could not have been proceeded against for the clearances made after 26.03.2013, in terms of Rule 8 (3A) - In the present case admittedly during the period of default appellants have acted as per the provisions of Rule 8 (3A) and have discharged duty consignment wise without utilizing the CENVAT Credit available with them. The matter is remanded to the original authority for very limited purpose verification of the fact of transfer of CENVAT Credit amount of Rs 43,26,000/- from Plant IX to Plant VII in terms of Rule 12A (4) of the CENVAT Credit Rules, 2004. Except for this limited purpose for which matter is remanded back appeal is allowed on all other accounts - appeal allowed in part - part matter on remand.
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CST, VAT & Sales Tax
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2022 (7) TMI 764
Taxability - work executed as per the work order issued by MCL - absence of transfer of property in goods - Section 2(g) of the Orissa Sales Tax Act - HELD THAT:- The Court finds that neither in the order of the STO nor in the order of the ACST, is it stated that there was actually any sale of goods or any transfer of property in goods during execution of the work by the Assessee. On the other hand, Mr. Sahoo, learned Senior Counsel has pointed out that in the order of the ACST, it has been noticed that the Petitioner had received Rs.1,05,000/- from local people towards hiring charges of machinery and it is possible that the sales tax collected pertained to that amount. In any event, merely because a sum of Rs.12,672/- has been shown having been collected as sales tax will not automatically imply that the use of the mechanical excavators for digging of overburden and removing it through tippers and transporting to a dump yard, involved any transfer of property in goods from the Petitioner to the MCL. In absence of any specific finding in that regard by the STO, it could not have been simply presumed that 20% of that work is attributable to sale of goods thereby limiting the deduction only to 80%. In other words, the disallowance of 20% of the hiring charges has to be based on some material which was available to the STO or to the ACST. The question framed is answered in the affirmative i.e. in favour of the Assessee and against the Department and it is held that the entire sum received by the Petitioner from MCL for performing the work order was not exigible to sales tax and the amount of TDS deducted by the MCL was refundable to the Petitioner - revision petition disposed off.
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2022 (7) TMI 763
Benefit of decision of SC in another case - Levy of penalty u/s 10 of the OET Act - dispute with regard to Levy of Tax on the goods in question is pending before the Apex Court? - HELD THAT:- That can be no doubt that the levy of penalty does not have to be automatic. It is contingent on the STO being satisfied that the escapement of tax was without any reasonable cause . In the present case, the justification put forth by the Petitioner is that in terms of the decision of this Court in RELIANCE INDUSTRIES LIMITED VERSUS STATE OF ORISSA (AND OTHER CASES) [ 2008 (2) TMI 825 - ORISSA HIGH COURT] it withheld the payment of entry tax. However, in the said decision handed down by this Court on 18th February 2008, the challenge to the validity of the OET Act was negatived. The Petitioner did not choose to join the Petitioners who had challenged the vires of the OET Act or even the requirement thereunder of having to pay entry tax on the goods purchased from outside the State - The decision of this Court was applicable to those who had approached it. Even, the interim order passed by the Supreme Court was confined to those parties who had approached the Court. The Petitioner could not have taken advantage of it. Therefore, the Petitioner had no reasonable cause to withhold payment of entry tax when it fell due. The Court is of the view that the penalty under Section 10 (2) of the OET Act was rightly levied on the Petitioner by the STO. In other words, the Court does not find any error having been committed by the STO in exercising the discretion in terms of Section 10 (2) of the OET Act to levy the penalty. The question framed is answered in the affirmative, i.e., in favour of the Department and against the Assessee. It is clarified that since the Tribunal has deleted the levy of interest as ordered by the DCST, it is not payable by the Assessee and any amount paid under that head will be adjusted again the penalty to be paid by the Assessee in terms of the impugned order of the Tribunal - revision petition dismissed.
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2022 (7) TMI 762
Reopening of assessment - Escapement of turnover - Issuance of SCN - whether the Sales Tax Tribunal committed error of law and fact particularly when it has held that the assessing authority had mechanically issued the notice under Section 12(8) of the OST ACT? - proper interpretation of the provisions of law with reference to the exemption allowed by the DIC and objection raised by AG(O) or not - HELD THAT:- The jurisdictional requirement of the STO having to form an independent opinion regarding the escapement of assessment was explained by this Court in The Indure Limited v. Commissioner of Sales Tax [2006 (7) TMI 572 - ORISSA HIGH COURT]. In that case also the assessment was sought to be reopened by the STO under Section 12 (8) of the OST Act only on the basis of audit objection without forming any independent opinion himself regarding escapement of turnover. Ultimately in The Indure Limited, the impugned notice of reassessment was quashed since the Sales Tax Officer had blindly initiated the assessment proceeding on order to objection without any independent application of mind. The facts of the present case are more or less similar. Here again it is seen from the order of the ACST, that the reopening assessment was made by the STO only on the basis of an audit objection and without any independent application of mind as to whether there had been an escapement of turnover for the periods in question. Following the decision in The Indure Limited, this Court is of the view that the reassessment orders of the STO cannot be sustained in law. The Tribunal erred in remanding the matters to the STO while the jurisdictional requirement of independent satisfaction by the STO in the manner explained in The Indure Limited was not existent in the present cases. The question framed by this Court is answered in affirmative by holding that the STO had mechanically issued the notices under Section 12(8) of the OST Act - the orders of the STO and the Tribunal are hereby set aside and the order of the ACST is restored to file - revision petition disposed off.
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Indian Laws
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2022 (7) TMI 761
Validity of Arbitral Award - seizure of award - whether the impugned award to the extent that it accepts MMTC s claim for non-receipt/shortfall in receipt of amounts against the invoices, is patently erroneous and vitiates the impugned award? - HELD THAT:- The Arbitral Tribunal held that Clause 4 of the Export Agreement fully safeguards the interest of MMTC with regard to the sale proceeds of the export . The Arbitral Tribunal referred to the Hypothecation Agreement and observed that Clause 22 of the Hypothecation Agreement also lent credence to the view that if the sale proceeds were not received, the concerned associates (in this case, Glitter) would be liable for its realisation. In addition, the Arbitral Tribunal also referred to certain letters issued by Glitter, which indicated that it had not disputed its liability for realisation of the exports done through MMTC - the arbitral tribunal had held in favour of MMTC and found that the concerned associate was liable for non-realisation of the sale proceeds. The award in that case was a subject matter of challenge before this Court and this Court had declined to interfere with the arbitral award. This Court does not find merit in the contention that the decision of the Arbitral Tribunal is perverse or one that no reasonable person could accept. Whether the Arbitral Tribunal had erred in accepting that MMTC was not responsible for securing an insurance cover from ECGC? - HELD THAT:- Merely because the impugned award is contrary to the arbitral awards rendered in other cases does not render it amenable to challenge under Section 34 of the A C Act. It is trite law that an arbitral award can be set aside only if an arbitral tribunal s view is not a possible view and no reasonable person could possibly accept the same. If an arbitral tribunal s decision is found to be a possible one, the same would warrant no interference in proceedings under Section 34 of the A C Act. It does follows that in certain contentious cases, where there are two plausible views, the decision of an arbitral tribunal accepting either one of them, would not render the award vulnerable under Section 34 of the A C Act. This Court is unable to accept that the Arbitral Tribunal s reasoning is one that no person could possibly accept. The view of the Arbitral Tribunal that since Glitter was required to prepare all the documents, it was essential for Glitter to include charges for the ECGC insurance cover for MMTC to secure the same, cannot, by any stretch, be held to be an implausible one; or one that vitiates the impugned award on the ground of patent illegality on the face of the award. Whether the impugned award is liable to be set aside on the ground that the Arbitral Tribunal had made observations to the effect that petitioner no.2 had played an active part in interpolation of the documents, facilitating the collection of the consignment by the foreign buyer? - HELD THAT:- Admittedly, no such ground was pleaded by MMTC and therefore, there was no occasion for Glitter to counter any such allegation. There is merit in the contention that Glitter s defence could not be rejected on the ground of any such allegation. The said issue was raised in the context of certain foreign buyers collecting the jewellery, which was sent on COD basis, without making any payment. It is seen that neither of the parties had provided any explanation as to how certain buyers were successful in taking deliveries of the goods without making any payment. According to MMTC, Glitter was required to bear the entire responsibility as Glitter had identified the buyers and was responsible for preparing the documents. According to Glitter, it was discharged of all the liabilities once it had manufactured the jewellery and supplied the same for export. Once it is accepted that Glitter was responsible for the entire export including delivery of the goods to the original buyer and recovery of the amount, the onus to take steps to mitigate losses would also fall substantially on Glitter. In such circumstances, it would be necessary for Glitter to prove that it had taken an initiative in this regard but was unable to take the necessary steps for reasons attributable to MMTC. There appears to be no reason why release of three consignments could not be secured from the Sharjah Customs Authorities. Neither of the parties have been able to establish any reasons for the same - this Court finds no ground to interfere with the Arbitral Tribunal s decision to award a sum of ₹1,02,62,076.88/-, in favour of Glitter (the invoiced amount less making charges). Award of interest - HELD THAT:- The Arbitral Tribunal awarded interest at the rate of 24% per annum on the amount of ₹1,02,62,078.88/-, as awarded against non-receipt/shortfall in receipt of payments against the twelve invoices, quantified at ₹5,98,58,350.74/-. The amended Statement of Claims does not indicate the basis for claiming interest at the rate of 24% per annum. However, the witness examined on behalf of MMTC had produced a printout from the website of State Bank of India, which showed that the rate of interest had increased to 19% per annum with effect from 02.03.1992. In addition, he had stated that SBI charges 2% penal interest, which according to him would work out to 24%. He had also deposed that Glitter had agreed to pay interest at the rate of 1% per annum over and above the SBI rate. The Arbitral Tribunal had apparently relied on the said testimony. Concededly, the rate of interest at the rate of 24% per annum is high. The Export Agreement contains no clause, whereby Glitter had agreed to pay interest at the rate of 1% above the SBI rate. There is no basis for awarding interest at the rate of 24% per annum considering that even according to MMTC, the rate of interest charged by SBI was increased to 19% in the year 1992. Further, it is common knowledge that interest rates have come down significantly over the years - the interest awarded by the Arbitral Tribunal at the rate in excess of 12% per annum, is set aside. Six kgs of gold confiscated by the Indian Custom Authorities - HELD THAT:- The amended Statement of Claims also does not expressly indicate that value of six kgs of gold at the material time was ₹31,26,326/-, as noted by the Arbitral Tribunal in the impugned award. However, Glitter has not disputed the said value, therefore, the same may be accepted. But there is no basis for entering an award for a sum of ₹3,21,45,351/-. The award of the said amount cannot be sustained as the Arbitral Tribunal has not provided any reason for quantifying the said amount. The same is also not discernible from the claim made by MMTC. Therefore, the impugned award to the extent it awards a sum in excess of ₹31,26,326/-, in respect of MMTC s claim on account of six kgs of gold confiscated by the Custom Authorities, is set aside. Award of ₹17,07,198/- as deferred payment interest - HELD THAT:- It appears that the interest deferment charges were also relatable to the twelve consignments, which were the subject matter of the principal claim. The Arbitral Tribunal had also awarded interest on the amounts recoverable by MMTC against the said consignments. Therefore, it is difficult to understand as to how a further claim of interest would arise in respect of the said amounts. It is apparent that the Arbitral Tribunal had awarded the said claim merely on the statement made by MMTC without comprehending the underlying liability or adjudicating the same. The complaint instituted by MMTC under Section 138 of the Negotiable Instruments Act, 1881 was also rejected as MMTC was unable to prove that the said cheques were issued against any liability - the award for a sum of ₹17,07,198/- in favour of MMTC is liable to be set aside. Consequently, the interest awarded on this amount is also liable to be set aside. The impugned award, to the extent it allows, interest on unpaid invoices at the rate in excess of 12% per annum; a sum in excess of ₹31,26,326/- on account of six kgs of gold confiscated by the Indian Custom Authorities; a sum of ₹17,07,198/- on account of Deferred Payment Interest and interest awarded on the said amount, is set aside - petition allowed.
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