TMI Tax Updates - e-Newsletter
July 29, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Scope of exemption - ‘religious ceremony’ versus ‘religious pilgrimage’ - As Haj Committees render services only in respect of Haj pilgrimage, the religious pilgrimage referred to in Clause 5A as regards the Haj Committee, is Haj pilgrimage. Thus, the Mega Exemption Notification exempts the two specified organisations that render services in respect of a religious pilgrimage - The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies. No religious ceremony is performed or conducted by the HGOs. The religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia. - Benefit of exemption not available - SC
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GST:
Liability of service tax / GST - service rendered to Haj pilgrims - Discrimination between HGOs and the Haj Committees - The Haj Committees are the agencies and instrumentalities of the State. Apart from arranging visits of Haj pilgrims for the purposes of Haj pilgrimage, there are important statutory duties assigned to the Haj Committee - the Central Government has all pervasive control over the Haj Committee. The State Governments have the same control over the State Committee. On the other hand, there are no onerous duties attached to HGOs. They earn profit by rendering service to Haj pilgrims. Except for the stringent conditions for the registration, the Government has no control over HGOs. - The arguments based on discrimination have no substance at all, as HGOs and the Haj Committees do not stand on par - SC
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GST:
Liability of service tax / GST - service rendered to Haj pilgrims - Place of supply of services - As per Item (iv) of sub-clause (b) of Clause (i) of Rule 2 of the said Rules of 2012, the location of the service receiver will be the usual place of residence of the Haj pilgrim in India. Therefore, the service rendered by the HGOs to Haj Pilgrims is taxable for service tax as the service to Haj pilgrims is provided or agreed to be provided in taxable territory. The service is rendered by providing or agreeing to provide Haj pilgrimage tour package. - The similar provisions are in IGST - liability for service tax confirmed - SC
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GST:
Condonation of delay in filing appeal - extension of condonable period - Validity of SCN and order cancelling the petitioners’ registration - The extension of limitation applied even to the condonable period, and not just to the prescribed period of limitation under Section 107 of the Act - Even a plain reading of the provision does not suggest that the orders need not be signed. At the least, the respondents/revenue should have appended digital signatures on the SCN and the above-mentioned order, as it has grave implications for the assessee. - HC
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GST:
Difficulty in obtaining GST registration - discrepancy in PAN - Admittedly, the GST registration of the petitioner-Trust has not been successful because of the defect in the PAN Card issued to the petitioner. The method of rectifying the same is by approaching PAN Facilitation Centre or by filing an online application in Income Tax Department Portal and a writ of mandamus directing the respondents to complete the PAN based GST registration as prayed by the petitioner cannot be considered. - HC
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GST:
Seizure of goods alongwith the vehicle - case is that the goods were not accompanying with proper document as prescribed under the Act - Both the authorities lost sight of the fact that during the period from 01.02.2018 to 31.03.2018, requirement of U.P. e-way bill was not applicable to the transactions of the petitioner and therefore, the seizure, demand of security and penalty cannot be justified. - HC
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Income Tax:
Deemed dividend addition u/s 2(22)(e) - assessee purchase of adjacent old residential house in her own name but the payment was made through the bank account of the Company - if loan or advance is given to a shareholder as a consequence of any further consideration which is beneficial to the company, in such a case such loan or advance cannot be said to be deemed dividend within the meaning of the Act. - Additions deleted - AT
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Income Tax:
Exemption u/s 11 - amount spent outside India on account of boarding and lodging local transport etc. - Assessee has not even produced any iota of evidence/materials before the AO/CIT(A) or before us to suggest that the assessee has received foreign contribution as per law to meet the expenditure incurred by the assessee for boarding and lodging, local transport etc. outside India. Therefore we are not in a position to uphold the theory of reimbursement taken by the Assessee. - Additions confirmed - AT
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Income Tax:
Revision u/s 263 by CIT - remuneration paid to its working partners - such partners of the assessee firm is engaged in full time teaching profession - there is no bar under the law that the working partner should be full time working partner - initiation of proceedings u/s 263 is not valid on this count. - AT
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Income Tax:
Unaccounted investment towards the purchase of the property - element of payment of cash to the outgoing Doctors - We note that since the issue has already been decided there is no basis of agitating the same issue repeatedly by the Revenue in repeated litigation. - AT
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Income Tax:
Gain on sale of land - capital gain or business income - The statement read as a whole does not indicate that the assessee has admitted as observed by A.O. in assessment order i.e. he is engaged in the activity of business in property. The adverse inference drawn by A.O. in assessment proceedings is unjustified. It is noted that one of the property sold was owned and held for around 9 1/2 years and another property sold was owned and held for 6 years. Property owned and held was enjoyed for deriving agricultural income which is accepted in the case of assessee. Both the properties are held as co-owner. On above factual position it cannot be concluded that surplus arising is business income as held by A.O. - AT
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Income Tax:
Capital gain computation - adoption of value as deemed consideration u/s. 50C as against the actual sale consideration - Even if Section 50 is to be applied as per the dictum of the AO, then full value of the consideration had to be reduced from the complete block of WDV i.e. all building (Jodhpur and Jaipur). However, the AO had reduced the WDV of Jodhpur in his assessment order where as he should have reduced the WDV of both the places of Jodhpur and Jaipur meaning thereby the AO has treated separate building from block of depreciable asset. In view of the matter, we feel that there has been lacuna on the part of the lower authorities in applying Section 50 of the Act, on building of Jodhpur. - AT
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Income Tax:
Deemed dividend addition u/s 2(22)(e) - AO’s action treating the advances received from the company as business income already stands deleted. We hold that the same has no bearing on the instant issue of deemed dividend whose application stands sufficiently proved qua the loan and advances coming from the company side to his account. - AT
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Customs:
Legality of the the late fees - delay in filing the Bill of Entry - The satisfaction for sufficiency of cause is a subjective satisfaction which has to be exercised judiciously. The Assessing Officer has based on technicalities and without any judicious application of mind, levied the late payment charges which have been rightly set aside by the Appellate Authority and the Tribunal. By no stretch of imagination, it can be said that the Respondent-Company has not acted bona fide - HC
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Customs:
Maintainability of appeal before the High Court - A plain reading of sub-section (2) of section 130 of the 1962 Act would demonstrate, that the appeal to this Court could be preferred either by the Principal Commissioner of Customs or Commissioner of Customs or even “other party” aggrieved by any order of the Tribunal. The DA, to our minds, would if nothing else, fall within the category of “other party”. Therefore, this objection is without merit, and hence is rejected. - The preliminary objection taken by the respondents, as regards the maintainability of the instant appeal, cannot be sustained - HC
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Customs:
Liability of a Customs Broker - the licensing authority concluded that the said importers are paper firms and the respondent has kept the department in the dark about the identity of his client and thus allowing them to evade customs duties. Furthermore, the respondent company had deposited a sum of Rs. 65.40 lakhs by 26 demand drafts stated to be on behalf of the importers - the tribunal has picked holes in the evidence brought on record by the licensing authority which not only probabilises but also establishes the violation committed by the respondent thereby giving no room for interference. - It is pointed out that licence granted to the respondent is to expire on 22.07.2022 and in the event this Court does not agree with his submissions, the relief as granted by the Hon’ble Supreme Court can be considered in the case of the respondent. - the appeal filed by the revenue is allowed and the substantial questions of law are answered in favour of the revenue. - HC
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Customs:
Validity of summons issues - SEZ unit - Impact of proceedings under PML Act over Customs Act - allegation of diversion of duty free gold clandestinely diverted duty into the domestic market - As summoning of the petitioners by the respondents would not amount to taking any coercive steps like arresting them or prosecuting them, but only to proceed forward with the investigation and, however, as the learned Additional Solicitor General of India also conceded that they were not insisting on the presence of petitioners No.1 and 2, it is considered fit to allow the petition with regard to petitioner Nos.1 and 2 and to dismiss the petition with regard to petitioner Nos.3 to 5. The petitioners No.3 to 5 are directed to comply with the summons and to give their statements in person and to co-operate with the investigation in the interest of justice. - HC
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Indian Laws:
Dishonor of Cheque - role of the accused/petitioners - erstwhile directors - The certified copy of Form-32 is of sterling quality and can be considered by this Court at this stage. It is clear that once the petitioners had resigned way back in 2009 and 2010 respectively, they could not have been responsible either for the issuance of the cheque dated 25th April, 2016 nor for its dishonor in April and May, 2016. They could not have been impleaded as accused in the complaint. - HC
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IBC:
Rejection of application seeking consideration of his resolution plan submitted - Looking at the total circumstances of the case, including the views of joint lenders and also at the fact that the CoC did not wish to consider any further revised resolution plan as he had failed to provide required comfort to the lender banks by submitting/revising the resolution plan despite being provided with enough opportunities to do so, it is opined that such decision is within the ambit of commercial wisdom of the CoC. - Decision of CoC and NCLT upheld - AT
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IBC:
Initiation of CIRP - In the interest of justice, this Tribunal has granted ample opportunities to both the parties to explore the possibilities of an amicable resolution of the matter, however, the parties have failed to arrive at settlement - upon appreciation of the documents placed on record to substantiate the claim, this Tribunal admits this petition and initiates CIRP on the Corporate Debtor with immediate effect. - Tri
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Service Tax:
Extended period of limitation - Demand of Service Tax - It appears that non-payment of service tax could be on account of the belief that no service tax was payable in respect of the activities undertaken by the Appellants; that the very fact that various decisions of Tribunal referred to herein above have also held that no service tax is payable on activities such as those undertaken by the Appellants, itself shows that the Appellants’ belief was reasonable and bona fide. It is settled law that where demand has been worked out based on the records of maintained by the assessee and where non-payment of service tax is on account of bona fide belief that no service tax was payable, the larger period of limitation cannot apply. - AT
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Service Tax:
Extended period of limitation - penalties - intent to evade or not - Once the returns are filed, if Revenue was of the opinion that the self-assessment of service tax and the classification was not correct, it could have scrutinized the returns and issued notices within time. The show cause notice was issued on 30 September 2015 for the period covered October 2010 to June 2012, which is clearly beyond the normal period of limitation. Therefore, although Revenue is correct on merits, the demand is time barred and, therefore, cannot sustain. For the same reason, the penalties imposed upon the appellant under Sections 77 and 78 also cannot be upheld. - AT
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Service Tax:
CENVAT Credit - duty paying invoices - supplementary invoices - It is observed that neither the SCN nor the impugned Order-in-Original dated 04.12.2017 alleges that the invoices were not genuine, the services were not received or the same were not utilized in the manufacture of dutiable final product. Mere fact that the differential amount of service tax was paid by the service provider on being pointed out by central excise officers doesn't establish that the service tax was short paid or was not paid by reason of fraud, suppression, misstatement etc. with an intent to evade the payment of service tax - AT
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Service Tax:
Refund of service tax paid - export - Once it is not in dispute that the services are specified for refund purpose, and since Service Tax was actually paid on specified services pertaining to export activity, in terms of the broad scheme of refund under Notification No. 41/2012-S.T. as amended with clarifications, refund must be granted to the exporter - It would not be out of place to mention that the sole intention of the Government to bring out these rebate schemes is to promote the Indian exporters to enjoy a level playing field and to compete with the exporters of other countries in the global market. Further, it is not the intention of the Government to export taxes - AT
Articles
Notifications
News
Case Laws:
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GST
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2022 (7) TMI 1233
Liability of service tax / GST - service rendered to Haj pilgrims - Place of supply of services - Discrimination between HGOs and the Haj Committees - liability of Haj Group Organizers (HGOs) or Private Tour Operators (PTOs) to pay service tax - Nature of services provided by HGOs/ PTOs - Applicability of Mega Exemption Notification no.25 of 2012 ST - religious ceremony versus religious pilgrimage Nature of services provided by HGOs/ PTOs - HELD THAT:- Haj pilgrimage is a five-day religious pilgrimage to Mecca and nearby Holy places in Saudi Arabia. As per the Holy Quran, all Muslims who are physically and financially sound must perform the Haj pilgrimage at least once in their lives. As provided in Holy Quran, the Haj pilgrimage is one of the five pillars or duties of Islam. Haj takes place only once a year in the twelfth and final month of Islamic lunar calendar. Pilgrimage undertaken to Mecca at other times is known as Umrah. During the five days of Haj, the pilgrims are required to perform a series of rituals, the details of which are not relevant for deciding the issues involved in these petitions - To enable Haj pilgrims of India to undertake Haj pilgrimage, there is a bilateral agreement executed every year between the Kingdom of Saudi Arabia and the Government of India. As per the bilateral agreement, a quota of number of pilgrims is assigned to India. Out of the said quota, normally only 30% is allocated to HGOs. The rest of the quota is made available to the Haj Committee. Place of provision of services - HELD THAT:- The provisions of the 2012 Rules and the relevant provisions of IGST Act are to a great extent pari materia. As far as the location of service provider in this case (HGOs) is concerned, there is no dispute that all of them have to be registered under Rule 4 of the Service Tax Rules, 1994 and therefore, as per sub-clause (a) of clause (h) of Rule 2, the location of HGO will be the premises for which registration has been granted to HGO. Such premises are necessarily in India. Even assuming that any other sub-clauses of clause (h) are applicable, the location of the service provider, in this case, will be in India. As far as the location of service receiver under clause (i) of Rule 2 is concerned, in this case, the service receiver is the Haj pilgrim who is obviously not registered. As provided in Rule 3, the place of provision of service is the location of the recipient of service. In this case, the recipients of service from HGOs are Indian residents and accordingly, their place of residence in India will be the place of provision of service. Rule 8 provides that where the location of the provider of service as well as that of the recipient of service is in the taxable territory, the place of provision of service is the location of the recipient of service. Hence, in this case, the place of provision of service is the location of the service receiver in accordance with clause (i) of Rule 2 which will be in taxable territory. As per Item (iv) of sub-clause (b) of Clause (i) of Rule 2 of the said Rules of 2012, the location of the service receiver will be the usual place of residence of the Haj pilgrim in India. Therefore, the service rendered by the HGOs to Haj Pilgrims is taxable for service tax as the service to Haj pilgrims is provided or agreed to be provided in taxable territory. The service is rendered by providing or agreeing to provide Haj pilgrimage tour package. Applicability of Mega Exemption Notification - HELD THAT:- The Exemption Notifications under the IGST and the GST Acts so far as the Haj pilgrimage is concerned, are pari materia with the Mega Exemption Notification. It is, therefore, necessary to advert to the Mega Exemption Notification. The Mega Exemption Notification contains a list of services which are exempted from service tax leviable under Section 66B. Ex facie, Clause 5A will have no application as it is applicable to services by specified organisations in respect of a religious pilgrimage facilitated by the Ministry of External affairs of the Government of India under bilateral arrangement. The specified organisations have been defined in paragraph 1(1)(a)(zfa) of the Mega Exemption Notification. Specified organisations, as stated therein, are only two categories of organisations. The first one is Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking and Haj Committee or State Committee under the said Act of 2002. The Haj Committee renders services in relation to the Haj pilgrimage which is facilitated by the Ministry of External Affairs of the Government of India under the bilateral arrangement with the Kingdom of Saudi Arabia. It must be noted here that Clause 5A of the same Mega Exemption Notification grants exemption to the service rendered by Haj Committees in respect of a religious pilgrimage. Thus, the same Mega Exemption Notification makes a clear distinction between religious ceremony and religious pilgrimage . As Haj Committees render services only in respect of Haj pilgrimage, the religious pilgrimage referred to in Clause 5A as regards the Haj Committee, is Haj pilgrimage. Thus, the Mega Exemption Notification exempts the two specified organisations that render services in respect of a religious pilgrimage - The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies. No religious ceremony is performed or conducted by the HGOs. The religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia. Discrimination made under the Mega Exemption Notification between the services rendered by specified organisations and the services rendered by other service providers in respect of religious pilgrimage - HELD THAT:- The Haj Committee is under an obligation to publish proceedings of the Committee. Under Section 30, it is the duty of the Committee to create Central Haj Fund. Similarly, under Section 32, the State Committees are under an obligation to create State Haj Funds. The Central Government has the power to reconstitute the Haj Committee and to remove the Chairperson, the Vice-Chairperson and the Members of the Committee. There is a similar power vesting in the State Government in respect of the State Committees. Thus, the Haj Committees are statutory bodies working under the control and supervision of the Government. The Haj Committees are the agencies and instrumentalities of the State. Apart from arranging visits of Haj pilgrims for the purposes of Haj pilgrimage, there are important statutory duties assigned to the Haj Committee - the Central Government has all pervasive control over the Haj Committee. The State Governments have the same control over the State Committee. On the other hand, there are no onerous duties attached to HGOs. They earn profit by rendering service to Haj pilgrims. Except for the stringent conditions for the registration, the Government has no control over HGOs. The arguments based on discrimination have no substance at all, as HGOs and the Haj Committees do not stand on par and in fact, the Haj Committees constitute a separate class by themselves, which is based on a rational classification which has a nexus with the object sought to be achieved. There is no merit in the challenge in the petitions - Petition dismissed.
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2022 (7) TMI 1232
Reopening of portal for filing of forms TRAN-1 and TRAN-2 - transitional credit - HELD THAT:- Goods and Service Tax Network (GSTN) is directed to open common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months i.e. w.e.f. 01.09.2022 to 31.10.2022. Any aggrieved registered assessee is directed to file the relevant form or revise the already filed form irrespective of whether the taxpayer has filed writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology Grievance Redressal Committee (ITGRC) - GSTN has to ensure that there are no technical glitch during the said time. The concerned officers are given 90 days thereafter to verify the veracity of the claim/transitional credit and pass appropriate orders thereon on merits after granting appropriate reasonable opportunity to the parties concerned - the allowed Transitional credit is to be reflected in the Electronic Credit Ledger. SLP disposed off.
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2022 (7) TMI 1231
Maintainability of petition - availability of alternative remedy of appeal - allegation is that ITC availed by the petitioner on the basis the fake and sham supply of goods from M/s Star Metal and other firms through the fake invoices issued by the firms - HELD THAT:- Since the disputed question of fact is involved, therefore, the petitioner is delegated to avail remedy of Appeal under Section 107 of the Act. The writ petition is dismissed on the ground of alternative remedy, leaving it open for the petitioner to file appeal before the appellate authority.
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2022 (7) TMI 1230
Condonation of delay in filing appeal - extension of condonable period - Validity of SCN and order cancelling the petitioners registration - case is that Order-in-Appeal passed by respondent no.1 is founded on the ground that the appeal was instituted beyond the prescribed period of limitation - HELD THAT:- Concededly, the period of limitation prescribed for filing the appeal under Section 107 of the CGST Act, 2017 is three months, which is amenable to extension by the period of one month by the Commissioner on sufficient cause being shown - The prescribed period of limitation would thus, end on 24.02.2020, with a one-month leeway available to the Commissioner to extend the period of limitation. The condonable period of one month, in this instance, would end on 24.03.2020. The extension of limitation applied even to the condonable period, and not just to the prescribed period of limitation under Section 107 of the Act - Even a plain reading of the provision does not suggest that the orders need not be signed. At the least, the respondents/revenue should have appended digital signatures on the SCN and the above-mentioned order, as it has grave implications for the assessee. The appeal preferred by the petitioners is restored - Petition disposed off.
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2022 (7) TMI 1229
Cancellation of registration of petitioner - registration was obtained by means of fraud, willful misstatement or suppression of facts or not - signature not verified - unsigned document - HELD THAT:- When it is observed that both documents indicate non-application of mind, Ms.Vyas states that the officer whose name appears, Kalpana Anil Patil is present in court and she has been informed that these were system generated documents. Ms. Vyas states that even Commissioner had personally informed her that these are system generated documents and the Commissioner has accelerated the problem to the central authority in Delhi. In fact, it would have been expected from respondents to show what the Hon ble Gujarat High Court in the case of Aggarwal Dyeing and Printing Works Vs. State of Gujarat and ors. [ 2022 (4) TMI 864 - GUJARAT HIGH COURT ], had directed that the department shall issue notices and pass order in physical form containing all the necessary information and particulars. This judgment of Gujarat High Court has been delivered on 24th February, 2022. Still respondents including GST Network (GSTN) have not set their house in order. The impugned order is set aside - the respondents shall restore petitioner s registration forthwith, in any case before 4.30 p.m. today - petition disposed off.
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2022 (7) TMI 1228
Time Limitation - Tenability of the blocking order which was triggered by the respondents/revenue via the impugned communication - HELD THAT:- The blocking order does not comply with the jurisdictional prerequisites which are embedded in Section 83 of the 2017 Act. The argument advanced by Mr Prakash that the period provided in Section 83 of the Act i.e., one year, will expire only on 01.08.2022 is also flawed, for the reasons given:- (i) Firstly, the impugned communication is not issued under Section 83 of the 2017 Act. (ii) Secondly, there are, concededly, no proceedings pending against the petitioner under the provisions referred under Section 83 of the 2017 Act, as it stood at the relevant point in time (i.e., Sections 62, 63, 64, 67, 73 74 of the 2017 Act.) (iii) Thirdly, the order passed by the Supreme Court in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2022 (1) TMI 385 - SC ORDER] , will not extend the time frame provided under Section 83 of the 2017 Act. (iv) Lastly, Mr Prakash seeks to place reliance on, the timeframe provided therein, which is, one year, would have perhaps expired in the first week of June 2022. As indicated above, this part need not detain us, as the impugned communication and action is otherwise unsustainable in law. The impugned communication is, thus, quashed - the writ petition is disposed off.
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2022 (7) TMI 1227
Difficulty in obtaining GST registration - discrepancy in PAN - Seeking a writ of mandamus directing the respondents to complete the PAN based GST registration of petitioner-Trust by showing the continuation of business as Trust - rectification in the PAN card - HELD THAT:- Admittedly, the GST registration of the petitioner-Trust has not been successful because of the defect in the PAN Card issued to the petitioner. The method of rectifying the same is by approaching PAN Facilitation Centre or by filing an online application in Income Tax Department Portal and a writ of mandamus directing the respondents to complete the PAN based GST registration as prayed by the petitioner cannot be considered. The writ petition is hereby dismissed reserving the liberty to the petitioner to seek rectification of its PAN card.
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2022 (7) TMI 1226
Cancellation of GST registration of petitioner - non-filing of statutory returns under the provisions of the respective GST Acts - HELD THAT:- The issue has been decided in the case of [ 2022 (2) TMI 933 - MADRAS HIGH COURT ] where it was held that The petitioners are directed to file their returns for the period prior to the cancellation of registration, if such returns have not been already filed, together with tax defaulted which has not been paid prior to cancellation along with interest for such belated payment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not been already paid. The writ petition is disposed off.
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2022 (7) TMI 1225
Seeking to direct the respondent not to harass the petitioners during enquiry - adoption of 3rd degree method or not - fake GST claims - HELD THAT:- It is seen that the respondent finding materials regarding fake GST claims, had summoned the 2nd petitioner for enquiry in accordance with Section 70 of the GST Act, 2017. In such circumstances, the 2nd petitioner is bound to appear for enquiry. The enquiry shall be conducted in accordance with the procedures. The 2nd petitioner shall be permitted to be assisted by her Accountant of necessary. The respondent shall not harass. The Criminal Original Petition stands disposed off.
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2022 (7) TMI 1224
Seizure of goods alongwith the vehicle - case is that the goods were not accompanying with proper document as prescribed under the Act - HELD THAT:- Admittedly, air conditioners were coming from Delhi to Ghaziabad and were intercepted by the Mobile Squad, Noida. On that basis, 9 air conditioners were seized and security, along with equal amount of penalty, amounting to Rs. 1,14,124/- was demanded, which was confirmed upto the appellate authority. The only discrepancy pointed out by the seizing authority and the appellate authority is that U.P. e-way bill was not accompanying the goods. Both the authorities lost sight of the fact that during the period from 01.02.2018 to 31.03.2018, requirement of U.P. e-way bill was not applicable to the transactions of the petitioner and therefore, the seizure, demand of security and penalty cannot be justified. The Division Bench of this Court in M/S GODREJ AND BOYCE MANUFACTURING CO. LTD., L.G. ELECTRONICS INDIA PVT. LTD., BHARTI AIRTEL LIMITED, M/S GUALA CLOSURES (INDIA) PVT. LTD., M/S. RAS POLYTEX PVT. LIMITED, RIMJHIM ISPAT LIMITED, RIMJHIM ISPAT LIMITED, M/S. GAURANG PRODUCTS PVT. LTD., M/S. ADITYA BIRLA FASHION AND RETAIL LTD., M/S. NAVYUG AIRCONDITIONING AND M/S. PROACTIVE PLAST PVT. LTD. VERSUS STATE OF U.P. AND 02 OTHERS AND STATE OF U.P. AND 3 OTHERS [ 2018 (9) TMI 1261 - ALLAHABAD HIGH COURT] has held that the goods were not required to accompany with UP e-way bill during the period from 01.02.2018 to 31.03.2018. The air conditioners, which were detained by the respondents on 26.03.2018, and thereafter, levy of security and penalty, cannot be justified. The writ petition is allowed with a cost of Rs. 1,000/-, which shall be deposited within a month from today.
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Income Tax
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2022 (7) TMI 1223
Penalty levied u/s 271(1)(b) - violation of notice issued - HELD THAT:- In the assessment order the assessing officer has nowhere mentioned/ initiated penalty under section 271(1)(b) for non-compliance of any such notice. The assessing officer for the first time in the show cause notice under section 274 rws 271(1)(b) has made the reference of notice dated 08.12.2018. In fact no such notice dated 08.12.2018 was ever issued by the assessing officer. The assessing officer while issuing show cause notice as well as penalty passing penalty order has not verified the fact properly and levied the penalty in a mechanical way. Hence, the penalty levied by assessing officer of Rs. 10,000/- is deleted. In the result, the grounds of appeal raised by the assessee is allowed.
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2022 (7) TMI 1222
Penalty u/s 271(1)(c) - As argued AO has not specified specific limb in the show cause notice - HELD THAT:- We find that the assessee has not raised any specific ground of appeal on the merits of the penalty. The assessee has raised limited ground of appeal that the assessing officer has not specified specific limb in the show cause notice. No evidence regarding such plea is placed on record despite the facts that this appeal is pending from 2019. Neither the assessee has filed any evidence, nor came forward to explain the fact in his favour. Thus, in absence of any such supporting evidence we have no other option except to uphold the order of ld CIT(A) is sustain the order of penalty. In the result, the sole ground of appeal raised by these is dismissed.
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2022 (7) TMI 1221
Deemed dividend addition u/s 2(22)(e) - assessee purchase of adjacent old residential house in her own name but the payment was made through the bank account of the Company - AO noted that assessee did not furnish any proof to support the claim that they had tried to get property converted for commercial use - contention of the assessee that the company had agreed to buy the adjacent old residential house for the purpose of the expansion of its hospital and for which an advance payment was made to the vendor - HELD THAT:- The property that has been purchased is also reflected in the books of account of the hospital. Before us, Revenue has not placed any material on record to demonstrate that the impugned transaction was a smoke screen to cover a benefit obtained by the assessee from the company in which the assessee is a shareholder. Further, Revenue has also not placed any contrary material on record to the controvert the submissions of the Ld AR. In such a situation and in the light of the judicial decisions cited herein above, we are of the view that the amount advanced to the assessee was not a gratuitous loan but the transaction was entered to protect the advance money of Rs. 90 lacs from being forfeited and that the business expediency for entering the transaction has been proved by the assessee. As in the case of Pradip Kumar Malhotra [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] has held that if loan or advance is given to a shareholder as a consequence of any further consideration which is beneficial to the company, in such a case such loan or advance cannot be said to be deemed dividend within the meaning of the Act. It has further held that gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of Section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. We are of the view that the CIT(A) was not justified in upholding the addition made by AO by invoking the provisions of s. 2(22)(e) - Decided in favour of assessee.
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2022 (7) TMI 1220
Disallowance of interest expenses claimed u/s.57 - entitlement of the assessee towards deduction of interest paid on borrowed funds u/s.57(iii) - nexus between the interest bearing funds raised by the assessee and the interest bearing amounts given - HELD THAT:- Dynasty Tradelink Pvt. Ltd - As interest bearing amounts raised by the assessee from M/s. Dynasty Tradelink Pvt. Ltd. had been wholly and exclusively advanced on interest to GDR Educational Society, therefore, the interest expenditure so incurred on the interest bearing funds was rightly claimed by the assessee as a deduction u/s. 57(iii) of the Act. Our aforesaid view is fortified by the judgment of the Hon ble Apex Court in the case of Commissioner of Income Tax Vs. Rajendra Prasad Moody [ 1978 (10) TMI 133 - SUPREME COURT] - Thus taking cognizance of the fact that an inextricable nexus between the interest bearing funds raised by the assessee from M/s Dynasty Tradelink Pvt. Ltd. and the interest bearing amounts given to GDR Educational Society is proved to the hilt, therefore, set-aside the order of the CIT(Appeals) and vacate the disallowance of the assessee s claim for deduction under Sec. 57(iii) of the interest paid to M/s Dynasty Tradelink Pvt. Ltd. Rajni Rungta - As we find substance in the claim of the AR as regards the allowability of the assessee s claim for deduction of the interest expenditure on the old loan of Smt. Rajani Rungta which was advanced as an interest bearing loan/advance for earning of interest income. Our aforesaid conviction is supported by the fact that the assessee s claim for deduction of interest paid on the loan raised from the aforesaid person, viz. Smt. Rajani Rungta, as was raised by him in his return of income for the immediately preceding year, i.e AY 2012-13, had not been dislodged by the department. Nothing to the contrary has been brought to our notice by the ld. DR to rebut the aforesaid factual position as had been canvassed by the ld. AR before us. As the fact situation qua the issue in hand during the year under consideration remains the same as was there in the immediately preceding year, therefore, going by the principle of consistency we find no reason to take a different view, and thus, allow the assessee s claim for deduction of interest on the aforesaid loan - Decided in favour of assessee.
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2022 (7) TMI 1219
Levy of income tax - assessee has opted for the taxation under the concessional scheme of taxation under section 115BAA - manner in which the provisions of Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020, are required to be interpreted and whether dehors the statutory linkage between the time permissible for furnishing of return under section 139(1) and filing the intimation of exercising the option for the concessional regime of taxation under section 115BAA(5) - HELD THAT:- When the economic activities worldwide were seriously disrupted on account of the Covid pandemic, if more relaxations were required to be given, in the wisdom of the legislature, in respect of filing documents other than income tax returns, such statutory relaxations could not be declined on the ground that this differentiation is alien to the scheme of the Income Tax Act, 1961. The general scheme of timeframe prescribed under the Income Tax Act 1961 has to make way for the specific relaxation provisions under the Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020. The time permitted for filing of form 10-IC, by virtue of section 3(1)(b) of TOLA, must be treated as 31st March 2021, even as the time permitted for filing of the income tax return under section, in the light of third proviso to Section 3(1) and read with subsequent notification, was only upto 15th February 2021. The plea of the assessee thus is indeed correct. The short question before us relates to the interpretation of provisions with respect to relaxations to mitigate the hardships caused during the Covid pandemic period, by the Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020, and it is our considered view that such relaxation provisions must be interpreted in a liberal and non-pedantic manner, and so as to give full effect to the relaxations permitted by the legislature. Viewed thus also, the proposition canvassed by the assessee is a reasonably possible view of the matter, and it merits acceptance. In view of all these discussions, and bearing in mind the entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to accept the exercise of the option by the assessee for the concessional taxation regime under section 115 BAA. The assessee must therefore get the relief, as admissible, on the application of the scheme of taxation under section 115BAA.
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2022 (7) TMI 1218
Addition u/s 68 on accommodation entries receipt - addition in the hands of this assessee on protective basis - HELD THAT:- In this case, the assessee is found to be a conduit company providing accommodation entries to various parties. Names of entry operators are also mentioned in the assessment order and the statements are also recorded wherein they have categorically stated that all these entries are accommodation entries. During the year, this company invested in five different companies as share capital - AO made an addition of the accommodation entry amount as well as the concerned commission in the hands of the assessee on productive basis - CIT (A) deleted the addition on protective basis for the reason that on substantive basis these incomes have been taxed in the hands of all the beneficiaries. Naturally when the substantive addition is confirmed by the appellate authorities, we do not find any reason to dislodge the finding of the learned CIT (A) in deleting the addition in the hands of this assessee on protective basis. Commission income at the rate of 2.5% of the accommodation entry - CIT-A deleted the addition - HELD THAT:- We do not find any reason to not to reverse the finding of the learned CIT (A) in deleting the commission income at the rate of 2.5% of the accommodation entry. Assessee is undisputedly an accommodation entry provider and therefore, the commission income requires to be added in the hands of the assessee. Accordingly, ground no. 3 of the appeal is allowed.
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2022 (7) TMI 1217
Deduction u/s 10 AA - interest income earned from SEZ Unit - HELD THAT:- We find that in the present case the assessee is a company, which is eligible for deduction u/s 10 AA of the income tax act. It also received certain interest income on which the deduction was claimed u/s 10 AA - This issue is already decided by the coordinate bench in assessee s own case for earlier years, the learned and CIT- A followed the same and allowed the claim of the assessee. In view of this we do not find any infirmity in the order of the CIT A in holding that assessee is eligible for deduction u/s 10 AA of the income tax act so far as the interest income is concerned. Accordingly, ground number 1 4 of the appeal is dismissed. Late payment of the employee s contribution to fund - HELD THAT:- It is undisputed that both the above contribution has been deposited before the due date of filing of the return of income. CIT A deleted the disallowance following decision of the honourable jurisdictional High Court in case of CIT versus Ghatge patil transport private limited [ 2014 (10) TMI 402 - BOMBAY HIGH COURT] and CIT versus Hindustan organic chemicals Ltd [ 2014 (7) TMI 477 - BOMBAY HIGH COURT] As the learned CIT A has deleted the disallowance following the decision of the honourable jurisdictional High Court and no contrary decision is pointed out by the learned departmental representative, we do not find any infirmity in the order of the CIT A in deleting the above disallowance . Accordingly, ground numbers 5 6 of the appeal are dismissed.
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2022 (7) TMI 1216
Penalty u/s 271(1)(c) - Receipt of money in addition to the sale consideration disclosed in the sale deed - HELD THAT:- In the case of CIT Vs. Fortune Hotels and Estates Pvt. Ltd. [ 2014 (10) TMI 783 - BOMBAY HIGH COURT] , it has been help that where in respect of sale of a property, matter was referred to DVO who determined sale consideration at a higher amount, that by itself would not amount to furnishing of inaccurate particulars of income so as to levy penalty u/s 271(1)(c) in respect of addition made u/s 50C. Further, in the case of Harish Voovaya Shetty [ 2014 (7) TMI 1032 - ITAT MUMBAI] it has been held that penalty u/s 271(1)(c) cannot be imposed in respect of the addition made by applying Section 50C when there was no material on record to show that the assessee had received more amount than that shown by it on sale of property. In the present case, AO in the absence of any evidence regarding receipt of money in addition to the sale consdiertion disclosed in the sale deed and even without there being any allegation to that effect, the A.O based on the fiction created u/s 43CA of the Act, the addition has been made which cannot be sustained under law. By following the settled principal of law mentioned above, we are of the opinion that, CIT(A) has justified in deleting the penalty imposed by the Ld. A.O. Therefore, the order of the Ld.CIT(A) requires no interference. Accordingly, we dismiss the Revenue s Grounds of Appeal.
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2022 (7) TMI 1215
Exemption u/s 11 - amount spent outside India on account of boarding and lodging local transport etc. - HELD THAT:- In the case of India Brand Equity Foundation [ 2012 (7) TMI 799 - ITAT DELHI ] it was held that amount spent outside India for participating in a fare held outside India cannot be treated as application of income of trust for purpose of section 11(1 )(a) - as observed that if the income of die trust can be applied even outside India so long as the charitable purposes are in India, then there is no need for die trust which tends to promote international welfare in which India is interested and which was created after 04/01/1952 to apply to the CBDT for a general or special order directing dial the income to the extent to which it is applied to die promotion of international welfare outside India shall not be denied die exemption nor would it be necessary for a charitable or religious trust created before die aforesaid date to seek such a order from CBDT in respect of its income which is applied to charitable or religious purposes outside India. It was further held that the words in India appearing in section ll(l)(a) and the words outside India appearing in section 11(l)(c) qualified the word applied appearing in these provisions and not the words said purposes. Thus, it is well settled law that the expenditure incurred by the trust outside India cannot be considered as application of income as per Section 11(1)(a) of the Act. Therefore in the present case, the disallowance of Rs. 10,15,818/- which was spent outside India on account of boarding and lodging local transport etc. cannot be considered as application income as per Section 11(1)(a) of the Act. Assessee has not even produced any iota of evidence/materials before the AO/CIT(A) or before us to suggest that the assessee has received foreign contribution as per law to meet the expenditure incurred by the assessee for boarding and lodging, local transport etc. outside India. Therefore we are not in a position to uphold the theory of reimbursement taken by the Assessee. Thus Order passed by the Ld. CIT (A) is just and proper, which requires no interference, accordingly we dismiss the Grounds No. 1 to 3 of the assessee.
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2022 (7) TMI 1214
Deduction u/s.80P(2)(a)(i) - whether the Assessee can be said to be a co-operative Bank? - HELD THAT:- Deduction u/s.80P(2)(a)(i) of the Act cannot be denied to the Assessee. The latest verdict by the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] held that section 80P being a benevolent provision must be read liberally and reasonably and in case of any ambiguity it must be interpreted in favour of the assessee. Supreme Court observed that section 80P(2)(a)(i) which covers a co-operative society engaged in the business of banking or providing credit facilities to its members does not require that the assessee has to be a primary agricultural credit society. Section 80P(2)(a)(i) does not require that the society has to give agricultural credit only. It further observed that once the co-operative society provides credit facility to its members, the fact that it also provides credit facility to non-members does not disentitle the society from availing of deduction. Supreme Court observed that the object of section 80P(4) was to exclude co-operative banks that function at par with other commercial banks and noted that as primary agricultural credit societies are not entitled for obtaining a banking license would not be hit by this provision. In the light of the law on the issue discussed above Assessee is entitled to deduction u/s.80P(2)(a)(i) of the Act as claimed and the same is directed to be allowed.
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2022 (7) TMI 1213
Validity of reopening of assessment u/s 147 - notice beyond four years from the end of the relevant assessment year - HELD THAT:- From the perusal of the reasons, it is evident that the ld. AO had not applied the proviso to Section 147 of the Act by indicating in the reasons as to whether there was any failure on the part of the assessee to make full and true disclosure of facts that are material for the purpose of assessment. Hence, the reopening proceedings deserve to be quashed on this count also. Thus the re-assessment proceedings are hereby quashed. Since the re-assessment proceedings are quashed on legal ground, the other grounds raised by the assessee on merits need not be adjudicated.
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2022 (7) TMI 1212
Intimation issued u/s 143(1) and the rectification order passed u/s 154 - Non grant foreign tax credit u/s. 90 / 90A - HELD THAT:- We are not in agreement with the order of the NFAC, Delhi in the instant case as admittedly the assessee has claimed foreign tax credit in accordance with provisions of Section 90 / 90A of the Act. The credit for the same was denied to the assessee in the intimation u/s.143(1) of the Act without any reason. CIT(A) atleast ought to have looked into the same and decide the issue which was not done in the instant case. Ultimately, we find that this is a matter requiring factual verification and accordingly, we deem it fit and appropriate to set aside this issue to the file of the ld. AO to grant foreign tax credit after due verification in accordance with law. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
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2022 (7) TMI 1211
Revision u/s 263 by CIT - remuneration paid to its working partners - such partners of the assessee firm is engaged in full time teaching profession, remuneration paid to her by the assessee firm is not allowable u/s 40A(2)(a) and as seen that the AO omitted to disallow the same in the assessment order and no enquiries were made in this regard during the assessment proceedings - HELD THAT:- As main contention of the assessee is that Smt.Dadi Anuradha is a teacher. After school working hours, she used to attend office for an administration work and verification of loan applications etc and is paid reasonable remuneration of Rs.3,80,000/- only and there is no bar under the law that the working partner should be full time working partner. Therefore, she is working as a part time / temporary teacher in the said school. Considering all, there is also possibility to attend the work during holidays and after school hours. Therefore, we are of the view that initiation of proceedings u/s 263 is not valid on this count. Hence, we set aside the order passed by the Ld.Pr.CIT u/s 263 and allow the grounds raised by the assessee.
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2022 (7) TMI 1210
TP Adjustment - ALP determination - assessee claimed that if CUP method is applied for determining the arms length price of international transaction of brokerage and commission earned, downward adjustment to the extent of 50% is required to be granted to the assessee - HELD THAT:- Rule 10 B (1) (a) (ii) of the income tax rules 1962 also allowed adjustment to the prices which could materially affect the price in the open market. Further guidelines (2022) at paragraph number 2.17 also suggest that in considering whether controlled and uncontrolled transaction is comparable, regard should be held to the effect on price of broader business functions other than just product comparability. Where the differences exist between the controlled and uncontrolled transaction is on between the enterprises undertaking those transactions, it may be difficult to determine reasonably accurate adjustment to eliminate the effect on price. However such difficulties should in all fairness be adjusted reasonably but that should not preclude the application of cup method. In the present case for earlier years the learned and CIT A has granted adjustment to the extent of 40%, which is been upheld by the coordinate benches in case of the assessee for earlier years, we also direct the learned assessing officer/transfer pricing officer to adjust and grant benefit of 40% discount to the assessee. Comparability analysis - AO/TPO/ CIT(A) should have considered both overseas and domestic independent clients -As now assessee has submitted the details, wherein the third party rates are charged by the assessee for clearing house trading is 0.25% and adjustment on account of volume marketing etc. at the rate of 50% makes the arms length price of the brokerage at 0.13%. The assessee has charged the brokerage of 0.14% from Mauritius entity and 0.21 % from UK entity. Therefore, final amount of adjustment is in case of clearing house trades. With respect to the delivery versus Payment towards third party rates charged by assessee is 0.38% and after deduction of 50% it comes to 0.19%. Assessee has charged from Mauritius Associated Enterprises 0.14 % and from UK Associated Enterprises of 0.22%, looking to the volume of trade, the adjustment with the UK entity is Rs. Nil and with Mauritius entity is Rs. 9,59,202/-. AO is directed to verify the same and computation of arms length price has directed the above. Accordingly, ground no. 1.4 of the appeal is allowed with above direction. Transaction of charging of brokerage commission income from its associate enterprise is at arm s length price for the reason that third party brokerages namely Motilal Oswal Securities Limited and ICICI Brokerage Services Limited have charged higher brokerage rates to these associate enterprises - We find that in case of 19 transactions, the ICICI brokerage Securities Limited on clearing house transaction has charged 0.1% as commission rate and also 0.05%. There is a difference of almost 3 times between the lowest rates charged and the highest rate charged by the ICICI brokerage Securities Limited. Coming to the Motilal Oswal Securities rate, the identical situation is depicted. In two of the transactions there is a nil rate of commission and in three of the transactions it is at 0.16%. There is no justification for such wide variants in the rates. With respect to the DVP rates, the assessee has only given a single instance where the commission expenditure is merely Rs.15,542/-. No justification is coming from the side of the assessee with respect to such a wide variance in the rates. Further, 40% deduction granted by the ITAT also covers such issue. The reliance on the decision First Credit ITES (P.) Ltd. ( 2022 (5) TMI 1423 - ITAT MUMBAI] also do not apply to the facts of the case as the issue in that case related to the adoption of other method where the authentic quotes were accepted. In the present case, the huge rate variants do not inspire any confidence in the data submitted by the assessee. Further assessee cannot change the benchmarking and comparability analysis at his own whims and fancies. Accordingly, ground no. 1.1 is dismissed. Addition of overseas support services received from its associate enterprises - Issue decided in favour of assessee as per assessee own case for assessment year 2000 01 and 2001 02. Disallowance of remuneration paid to Mr. Ashith Kampani under Section 40A(2) - HELD THAT:- As we find no infirmity in the order of the learned CIT(A) in deleting the disallowance which has been confirmed by ITAT in assessee s own case for earlier years. We also find that the learned Assessing Officer has not given any reason that why the above remuneration is excessive and unreasonable looking to the legitimate needs of the business. Further, the approval granted under the companies Act cannot use for making disallowance under the income tax Act, for the reason that both the enactments have different objects and reasons. Accordingly, ground no. 3 is dismissed. Disallowance u/s 14A - CIT(A) held that Rule 8D applies only with A.Y. 2008-09. He therefore, upheld the disallowance of only ₹1 lacs - HELD THAT:- There is no change in the facts and circumstances of the case and further Rule 8D of the Rules does not apply for this year also. Respectfully following the order of the co-ordinate Bench in assessee s own case, we upheld the order of the learned Commissioner of incometax (Appeal). Accordingly, ground no. 4 is dismissed. Addition u/s 40(a)(ia) - Disallowance of transaction charges lease line charges and VSAT charges paid by assessee to the Stock exchanges - HELD THAT:- We find that now this issue is squarely covered by the decision of Hon'ble Supreme Court in case of CIT vs. Kotak Securities Limited [ 2016 (3) TMI 1026 - SUPREME COURT] wherein it has been held that these are the standard facilities and no tax is required to be deducted for the reason that these are the services not specifically sought by the user but are standard services. In view of this, we do not find any infirmity in the order of the learned CIT(A) in deleting the above disallowance.
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2022 (7) TMI 1209
Validity of Assessment u/s 153A - Scope of amendment - HELD THAT:- As the assessee not able to demonstrate how the condition laid down u/s 153A of the Act has not been fulfilled. More so, assessee is dis-entitled to agitate the issue with regard to the validity of the search proceedings in view of the amendment to section 132 of the Act by insertion of explanation by Finance Act, 2017 with retrospective effect from 1.4.1962 - In view of the above retrospective amendment, we are inclined to hold that the assessee is precluded from challenging the validity of invoking jurisdiction u/s 153A of the Act. Accordingly, this ground of assessee is dismissed. Addition of unproved debts - Addition u/s 68 - HELD THAT:- Primarily, u/s 68 of the Act, assessee has to explain any credits found in the books of accounts maintained by assessee in the previous year relevant to the assessment year concerned and assessee not required to explain the credits which are not appearing in his books of accounts - assessee not required to explain the credits appearing in the books of accounts of some other party u/s 68. In the present case, assessee has already explained the credits an amount of Rs.57.11 lakhs which is appearing in its books of accounts for which CIT(A) have no quarrel and he has accepted to that extent. He has sustained the addition over and above Rs.57.11 lakhs, which has appeared in the books of accounts of the creditors. CIT(A) not justified in sustaining addition which is not appearing in the books of accounts of the assessee and which is appearing in the books of accounts of the creditors. Accordingly, we delete the addition of Rs.17.64 lakhs also sustained by the Ld. CIT(A). Addition of unproved loans - HELD THAT:- As these entries are wrongly posted to the account of Rajendra Runwal, Bangalore and only a clerical mistake cropped up while maintaining the books of accounts of the assessee. The assessee produced a copy of ledger account and also confirmation letters which are kept on record - We have also carefully gone through the ledger account of Shri Rajendra Runwal. The assessee has to also explain from whom it has received this amount. Once the assessee proved that it is wrongly posted to the account of Mr. Rajendra Runwal instead of some other party, the addition to be deleted. In view of this, we delete this addition of Rs.51 lakhs. Accordingly, this ground of appeal of assessee is allowed. Addition as income from sale of lands - HELD THAT:- We are inclined to delete the addition on the reason that there was no cross examination of parties concerned and also AO relying on only oral statement of Shri Kuppendra Reddy to make this addition deleted. Accordingly, the ground of assessee s appeal is allowed and revenue s appeal is dismissed. Addition of unproved loans in the name of Venkataramana without giving opportunity to the AO as required under Rule 46A of the I.T. Rules, 1962 - HELD THAT:- These facts have not been doubted by the AO. If he has any doubt regarding the genuineness of these credits, he could have issued summons to the concerned party before making such addition. He has not carried out necessary enquiry and Shri Venkata Ramana was the representative of Sapphire Infrastructure company. The Ld. CIT(A) at first appellate stage considered confirmation letter from that party, and to delete the addition. The assessee vide its letter dated 23.11.2011 filed before the CIT(A) confirmed that these details/information being submitted are the ones which were already filed/submitted during the search, post search and assessment proceedings and no new details/information being filed. As such the evidence furnished by the assessee before CIT(A) cannot be considered as an additional evidence and on that basis the addition is deleted. Being so, we do not find any infirmity in the order of Ld. CIT(A) and the same is confirmed. This ground of appeal of revenue is dismissed. Accrued income in the hands of the assessee - HELD THAT:- The mere receiving of amount does not create any legal enforceable right to receive the same. Hence, without any right to receive the said amount, it cannot be treated as income of the assessee only on receipt basis. Such a right accrues only when the other party has either agreed to pay the amount in accordance with terms of MOU or as per verdict by an appropriate forum or arbitration, only then the income could be charged to tax as there was accrual of income. Where an assessee does not have any legal enforceable claim on the amount so received, the basis of taxability cannot be receipt basis. Even if the assessee treated it as income in its books of accounts, it is not material where the income is not accrued to the assessee to tax the same on receipt basis. The conduct of the assessee in treating an income in a particular manner is a material fact whether income had accrued or not. Although the conduct of the assessee is relevant whether income had accrued or not, yet the ipse dixit of the assessee cannot be the last word. What had accrued must be considered from the point of view of the probability of improbability of accrual in realistic manner. The amount if it is received without entitlement to receive the same, it has to be held that there was no accrual of income to the assessee as the necessary events for accrual of income has not materialized. In the present case in our opinion it is to be held that the income will accrue to the assessee only when the assessee acquires right to receive that income by completion of project undertaken by the assessee and by simply receiving the amount from the parties itself cannot be treated as income of the assessee. It is only advance received by assessee which is nothing but liability and cannot be treated as income of the assessee in these asst. years. We are of the opinion that the lower authorities are not justified in taxing an amount of Rs.7 crores as accrued income in the hands of the assessee. The same is deleted and this ground of the appeal of the assessee is allowed. Addition towards sum received towards sale consideration - HELD THAT:- These impugned receipts are part and parcel of consideration received from M/s. Shobha Developers as evidenced from MOU entered with M/s. Shobha Developers vide MOU cited (supra), wherein assessee received an amount and we have already held that this condition laid down in MOU has not been fulfilled and there is a pending litigation between the parties as discussed in immediate earlier ground with regard to deletion of addition of Rs.7 crores. On similar lines, we are of the opinion that Ld. CIT(A) is justified in deleting the addition. Addition towards sale of land by Narasimha Murthy - A.O held that the appellant violated the provisions of section 40A(3) of the Act and allowed expenditure made disallowed - HELD THAT:- Before the A.O., the assessee has accepted that it has been the transaction of assessee carried out by Sri C.N. Murthy on its behalf. The only argument of the assessee before the lower authorities that only the net income from this transaction is to be computed after working out the further expenditure of construction of road and also there are various other expenditure to be considered to arrive at net income from this transaction. In our opinion, this plea of the assessee is valid. A.O. cannot overlook certain expenditure incurred relating to this transaction and he has to give due deduction to all the expenditure incurred in relation to the receipt of this sale consideration. A.R. submitted that the net income arouse from this transaction only at Rs.4, 64,635/-. We direct the AO to give due credence to the all expenditure incurred by assessee in relation to impugned property purchased by Smt. Rajya Lakshmi vide sale deed dated 27.7.2007. The assessee has to furnish all the details to the AO with regard to the expenditure incurred with regard to this receipt of Rs.26 lakhs. The AO has to decide it fresh after giving opportunity of hearing to the assessee and to tax the only net income arise out of this transaction This ground of appeal of assessee is partly allowed for statistical purposes. Net income on sale deed of said property - HELD THAT:- As there was no execution of absolute sale deed in this case, as such, we direct the AO to tax the net income from this transaction only on actual registration of sale deed of said property. In our opinion, since there was no registered sale deed was executed in the case of 3 acres and 8 guntas there is only registered sale agreement and execution of GPA along with handing over of possession of property. Thus, after receiving entire sales consideration and execution of sale deed, it is to be considered as a transfer and the gain on this account to be brought to tax in that assessment year only. However, the lower authorities have been brought to tax the gain by in this assessment year under consideration which is incorrect. This part of the ground of appeal of the assessee is allowed. Addition on protective basis - HELD THAT:- The contract between the assessee and M/s. Shobha Developers has not materialized and it is subject matter of litigation before arbitration and it is pending for award as such addition cannot be made even on protective basis. Accordingly, we dismiss this ground raised by revenue.
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2022 (7) TMI 1208
Unaccounted investment towards the purchase of the property - element of payment of cash to the outgoing Doctors - cash component in making payment towards the consideration of the property for consideration of the hospital - CIT-A deleted the addition - addition made by the Ld. AO since on the basis of the statement made by this doctors admitting cash payment for the purchase of the land in question - HELD THAT:- As we have already discussed on the observation made by the Coordinate Bench on the identical issue involved in this matter in DR KEYUR PARIKH OTHERS VERSUS ASSTT COMMISSIONER OF INCOME TAX OTHERS [ 2013 (11) TMI 1242 - ITAT AHMEDABAD] relation to the addition on the ground of unaccounted investment for the purchase of land whereby and whereunder it has been repeatedly hold that there was no evidence found in the possession of Revenue to hold that assessee had in fact made unaccounted investment towards the purchase of the property or was there any element of payment of cash to the outgoing Doctors, we at this stage find no reason to deviate from such stand taken by the Coordinate Bench in holding otherwise. We note that since the issue has already been decided there is no basis of agitating the same issue repeatedly by the Revenue in repeated litigation. We, therefore, find no ambiguity in the order passed by the Ld. CIT(A) in deleting the addition passed by the Revenue in view of the order passed by the Coordinate Bench in holding no unaccounted investment found towards purchase of the property in question. We, therefore, upheld the same. The Revenue s appeal is, thus, found to be devoid of any merit and hence dismissed.
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2022 (7) TMI 1207
Reopening of assessment u/s 147 - AO received information from the DGIT(Inv), Mumbai revealing hawala transactions in bogus purchases - HELD THAT:- As the learned lower authorities have not made any disallowance or addition pertaining to the sole reason of reopening. That being the case, we quote CIT vs. Jet Airways [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY ] that such reopening is not sustainable as held that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words and also are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee.
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2022 (7) TMI 1206
Addition u/s 36(1)(va) on a/c of delayed payment of PF ESI - delayed deposit of employees contribution to PF and ESIC on the ground that the same were deposited beyond the due date prescribed in the said Act - HELD THAT:- We find the co-ordinate benches of the Tribunal are now consistently taking the view that no disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) can be made on account of delayed payment of PF and ESIC, if such payments are made before the due date of filing of the return. It has further been held in these decisions that the amendment to section 43B as well as section 36(1)(va) r.w.s. 2(24)(x) by the Finance Act, 2021 are prospective and not retrospective in nature. Since, the assessee in instant case has admittedly paid the employees contribution to PF and ESIC before the due date of filing of the return, therefore, we set aside the order of the CIT (A)/NFAC and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.
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2022 (7) TMI 1205
Unexplained cash credit u/s. 68 - CIT-A deleted the addition - HELD THAT:- CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by the CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We note that various adverse inferences drawn by A.O. in assessment order have been correctly dealt with in his appellate order and does not call for any interference. We are in agreement with the findings and reasoning recorded by CIT(A) in his appellate order reproduced hereinabove deleting the addition in the case of assessee. Considering totality of facts and circumstances in the case of assessee and considering legal evidence on record. We hold that that addition made by A.O. is unjustified and unsustainable. We uphold the order of CIT(A) deleting addition made in the assessment framed. Grounds of appeal 1 to 5 of revenue are dismissed. Addition u/s. 69C on account of unexplained expenditure - expenditure on account of commission paid for bringing back money in his books as bogus long term capital gain - HELD THAT:- The very premise for which the addition is made has been held to be not correct and thus consequent addition made by A.O. for alleged expenditure is unjustified and unsustainable. It is seen that the A.O. has made adverse inference which is not based on any material or evidence on record. A.O. has not even stated as to whom the aforesaid money is paid so as to constitute the expenditure incurred which may require to be explained by assessee. It is settled position of law the onus is on A.O. to show first that the expenditure is incurred and question of same required to be explained by assessee arises thereafter. In the first place there being no evidence of expenditure incurred by assessee, the question of any addition for the same does not survive. The addition made by A.O. is unjustified and unsustainable. We therefore hold that there is no case for making any addition u/s. 69C - Addition made by A.O. has correctly been deleted by learned CIT(A). Gain on sale of land - capital gain or business income - HELD THAT:- The assessee has sold properties and surplus arising on the same has been declared as long term capital gain at the hands of assessee. The computation of income indicates that the surplus shown in the return is under the head long term capital gain. The properties sold by assessee are held for more than 36 months is undisputed fact on record. The investment made by assessee is recorded in books of account as investment being capital assets. A.O. has referred to statement of assessee as reproduced in assessment order at page 20 to conclude that the assessee has admitted that he is carrying on business in real estate. The assessee was questioned in the statement as to what is the source of your livelihood. The statement read as a whole does not indicate that the assessee has admitted as observed by A.O. in assessment order i.e. he is engaged in the activity of business in property. The adverse inference drawn by A.O. in assessment proceedings is unjustified. It is noted that one of the property sold was owned and held for around 9 1/2 years and another property sold was owned and held for 6 years. Property owned and held was enjoyed for deriving agricultural income which is accepted in the case of assessee. Both the properties are held as co-owner. On above factual position it cannot be concluded that surplus arising is business income as held by A.O. In case of assessee property having been held for more than 36 months as investment indicates that the intention of acquisition of property was to hold the same as capital assets and thus surplus arising on the same is correctly declared to be assessable under the head long term capital gain. We therefore hold that no fault can be found with regard to income declared under the head long term capital gain on sale of property. CIT(A) has correctly directed to accept long term capital gain and not assess income as business income. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. We find no merit in appeal of revenue. - Decided in favour of assessee.
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2022 (7) TMI 1204
Assessment u/s 153A - Whether any incriminating material found during the course of search? - AY 2009 -10 - HELD THAT:- As mentioned in the judgement of jurisdictional High Court in the case of Delhi International Airport Pvt. Ltd. [ 2021 (11) TMI 928 - KARNATAKA HIGH COURT ] it is clear that, in case of persons searched, the assessment for those assessment years where the assessments are concluded as on the date of search, cannot be disturbed unless incriminating material pertain to such assessment year is found and seized during the course of search. Hence, in our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2009-10 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. Accordingly, we quash the assessment for the assessment year 2009-10. For AY-2010-11 and AY 2011-12 - Addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. In our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2011-12 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. AY 2012-13 - In this assessment year 2012-13, though there was no seized material, time limit to issue notice u/s 143(2) of the Act is not lapsed. The assessment is pending, which is abated and it is not a concluded assessment. Being so, the AO validly assumed jurisdiction u/s 153A of the Act consequent to the search action u/s 132 of the Act so as to frame the assessment u/s 153A of the Act. Accordingly, framing of assessment u/s 153A of the Act for the assessment year 2012-13 is valid. Unexplained opening balance - HELD THAT:- In this case, the addition was made only on the reason that opening capital has not been explained by the assessee in the relevant assessment year. In our opinion, AO cannot make any addition on the basis of carry forward opening balance. In case had he any doubt, he could have questioned only in the earlier assessment year prior to assessment year 2007-08 not in the assessment year 2007-08. Accordingly, addition made by AO is deleted. Treatment of agricultural income as taxable income in assessment year 2007-08, 2008-09 2011-12 - HELD THAT:- AO not brought any material to suggest that the income declared by the assessee as an agricultural income is earned from any other unknown sources. AO made an allegation that assessee has not filed details of agricultural land owned, crafts cultivated in various seasons, gross income earned out of agricultural operations, details of expenditure income to earn that income and that the evidences, details of crop sold and not income earned and copies of RTC of the properties. In our opinion, in case of such assessments framed u/s 153A of the Act as held by the Delhi bench in the case of Ashok Kumar Tyagi [ 2022 (3) TMI 899 - ITAT DELHI ] it is not possible to treat the agricultural income as non-agricultural income without any seized material. Further, in a proceeding u/s 153A of the Act, addition has to be made on the basis of incriminating material found as a result of search. Since the decision of the assessment officer to treat the agricultural income as income from other sources which is not based on incriminating material seized during the course of search action, no addition or disallowance could be made. Adhoc disallowance of expenditure debited to the P L account - HELD THAT:- As carefully gone through the cash book for these assessment years and also ledger extracts filed by the assessee before us. Admittedly, these are the regular books of accounts maintained by assessee produced before the AO and only after going through the P L account, the AO disallowed these expenditures debited to the P L account at 50% as not incurred wholly and exclusively for the purpose of business. To come to that conclusion, the AO have no material which is inappropriate. Accordingly, we will delete this addition made in all these assessment years on adhoc basis. This ground of appeal of the assessee is allowed in all the above appeals. Correct head of income - treating of income offered under head Capital Gain OR business income - HELD THAT:- In this case, admittedly assessee treated the purchase of agricultural land as capital asset and on relinquishment of the same in favour of Shri Kempegowda, the income resulted was treated as Capital gain. However, the AO without any material came to conclusion of the assessee holding the property as stock in trade and arrived at business income instead of capital gain disclosed by the assessee. If there was no material in the hands of AO to consider as this transaction as adventure in the nature of trade, we are of the opinion that the land was held by assessee as capital asset for investment, the income generated from this transaction on entering into a relinquished deed, the income has to be considered as short term capital gain and not as business income. This view of ours is supported by the order of the coordinate bench of Hyderabad in the case of M/s. SSPLL Ltd. [ 2013 (7) TMI 18 - ITAT HYDERABAD ] - Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us. Loss on sale of property - loss has not been treated as capital loss - HELD THAT:- In case of another property situated at Gollahalli whereas the assessee has sold 21 sites for a total consideration of Rs.92,11,500/-The assessee computed the short term capital gain of Rs.25,64,072/-. The AO treated it as business income. The income generated is treated as business income. The assessee filed additional evidence for this assessment year producing the ledger account of development expenses and copy of vouchers and prayed that the issue may be remitted. Without prejudice to our finding on legal issue for the purpose of completion of the proceedings, we remit this issue to the file of AO for fresh consideration relating to both transactions as discussed in earlier para in this order in earlier assessment years under consideration. Unexplained investment - HELD THAT:- The assessee has taken this plea before lower authorities that the payment is accounted in his books of accounts. However, Ld. CIT(A) sustained the addition. In our opinion, there is no necessity of making such addition when the transaction is duly reflected in the books of accounts as shown in the ledger extract in page no.170 of the paper book. Accordingly, we delete this addition. Unexplained cash credit addition - HELD THAT:- After hearing both the parties, we are of the opinion that this issue was not properly examined of the addition and proper enquiry has not been made. Hence, the issue may be remitted to the file of AO. We accede to the request of the assessee s counsel. Accordingly, this issue remitted to the AO to decide afresh after making proper enquiry and giving opportunity of hearing to the assessee. Addition based on seized document in search - HELD THAT:- The suspicion in the minds of the revenue authorities that the assessee made certain payments as per the loose slips cannot be reason to make an addition. In the absence of concrete evidence brought on record by the authorities concerned, the addition cannot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that authorities have to follow the principles of natural justice and the discovery of the documents in the form of loose slips not enough to make an addition without giving an opportunity of cross examination of the concerned parties. The lose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, this issue remitted to the AO for fresh consideration to decide in the light of above observations.
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2022 (7) TMI 1203
Deduction u/s. 80IB(10) - whether the assessee is entitled to deduction u/s.80IB(10) with respect to the profits on sale of flats which was earmarked the land owners and which was sold on their behalf at their request by the assessee? - HELD THAT:- The assessee has entered into agreements whereby the land owners wanted the assessee to sell the flats that were to be allotted to them as per the terms mentioned therein the consideration is paid towards the land, the super built up area which is the land owner s out of 37% of the undivided right as per the original agreement entered into with the assessee. Thus the argument of the ld AR that the consideration paid by the assessee to the landowners is nothing but due amounts paid for purchase of the land which forms part of the overall cost of the project developed by the assessee has merits. Further as per the provisions of section 80IB(10), the profit derived from such housing project is eligible for deduction which need to be considered in total, subject to other conditions mentioned in the said section. A plain reading of section 80-IB(10) evidently makes it clear that deduction is available in a case where an undertaking develops and builds a housing project on the profits derived from such housing project. In the given case the profit from the sale of flats earmarked for the land owners is also derived by the assessee from the development and building of the housing project. In view of the above discussion we are of the considered view that the assessee is entitled claim deduction u/s.80IB(10) on the profits derived from sale 22 flats earmarked for the land owners. The appeal is allowed in favour of the assessee.
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2022 (7) TMI 1202
Capital gain computation - adoption of value as deemed consideration u/s. 50C as against the actual sale consideration of the impugned property u/s 50C - HELD THAT:- In the present case, it is noted that the Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2) of the Act despite specific prayer made by the assessee at the first stage. AO and the CIT(A) have also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we hold that the CIT(A) was not justified in confirming the action of the AO in adopting deemed sale consideration in violation of section 50C(2) of the Act. The failure of the AO to follow the procedure as prescribed under section 50C (2) in particular, and therefore, the CIT(A) action in confirming such order is held unjustified and against law by sustaining stamp duty value of property Rs. 11,19,40,441/- as deemed sale consideration u/s. 50C against actual sale consideration and fair market value Rs. 8,81,00,000/-. Accordingly, the AO is directed to adopt the value of sale consideration at Rs. 8,81,00,000/- of the subject property for the purpose of computation of Long Term Capital Gains. Allowability of deduction to the assessee u/s. 54F - appellant has ownership of more than one residential house - HELD THAT:- Admittedly, the AO had accepted the contention of the assessee that the said residential houses are unsold properties of the trading business of the assessee and the assessee himself has reflected the seven residential house properties as stock in trade in his books of account and thus it is not disputed by the AO that the aforesaid seven house properties were accounted for by the assessee in his books of accounts as stock in trade. Thus, in our considered opinion, the said residential houses cannot be taken as capital asset within the meaning of Section 2(14) - it cannot be held that the assessee owned more than one residential house as on the date of transfer of the impugned properties. It is also not disputed that the assessee had purchased new house property within specified period as per provisions of Section 54 of the Act and the conditions stipulated u/s. 54F stands fulfilled by the assessee. Thus, taking into consideration, the facts, circumstances of the case and written submissions of the assessee, we feel that the ld. CIT(A) has been justified in judiciously allowing the deduction u/s. 54F of the Act, to the assessee and therefore, we concur with the findings of the ld. CIT(A). Thus Ground No. 1 of the Department is dismissed Sustaining gain from sale of building of discontinued business treated as short term capital gain in terms of Section 50 - HELD THAT:- Even if Section 50 is to be applied as per the dictum of the AO, then full value of the consideration had to be reduced from the complete block of WDV i.e. all building (Jodhpur and Jaipur). However, the AO had reduced the WDV of Jodhpur in his assessment order where as he should have reduced the WDV of both the places of Jodhpur and Jaipur meaning thereby the AO has treated separate building from block of depreciable asset. In view of the matter, we feel that there has been lacuna on the part of the lower authorities in applying Section 50 of the Act, on building of Jodhpur. Thus, consideration peculiar the facts, and circumstances of the case, it would not be justified to approved the findings of the lower authorities. We find merit in the contentions of the appellant and therefore, accept the prayer of the appellant that provisions of section 50 of the Act are not applicable in the case of the assessee and thus, the Ground No. 2 of the assessee is allowed. Addition of notional rent on old unusable house - HELD THAT:- It is noted from the available record that the assessee had 07 buildings at Jawahar Nagar which were held by the assessee as stock in trade for trading purpose. The conditions of the house building was very old, dilapidated condition and not fit for habitable purposes. AO also deployed his Inspector to inspect the conditions of the building whose report was silent on the evidences produced by the assessee during the assessment proceedings which approved the validity of the submission of the Assessee as to the state of affairs of the building. It is also imperative to mention that the case of Ansal Housing Finance Leasing Co. Ltd. ( 2009 (8) TMI 846 - ITAT MUMBAI] cited by the authorities below does not apply to the facts of the present case. As in the case of M/s. Ansal Housing Finance Leasing Co. Ltd. (Supra) there was a new building ready to use in for habitable purpose whereas in the assesses case it was a damaged/dilapidated and inhabitable building. Therefore, the finding of the AO/CIT(A) based on decision of Ansal Housing Finance Leasing Co. Ltd. are devoid merit. Considering the facts and circumstances of the case we do not incline to agree with the findings of the ld. CIT(A). Thus, the Ground No. 3 of the assessee is allowed.
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2022 (7) TMI 1201
Deemed dividend addition u/s 2(22)(e) - Whether trade advances in the nature of commercial transactions do not fall within the ambit of Section 2(22)(e)? - HELD THAT:- We make it clear that the assessee s detailed paper book contains his JDA with the company as therein suggests that the assessee as well as the company along with other owners/shareholders had to open/operate an escrow account with joint signatures in which the corresponding sale proceedings had to be deposited to be disbursed to the developers. Mr. Shingte sought to clarify at this stage that no such Escrow account had been opened which means that the said stipulation stood rendered frustrated. We are unable to accept the assessee s arguments as it is clear not only from a perusal of case records as well as the CIT(A) s findings but also from the evidence on record that the impugned sum(s) over and above the balance payable by the company represent the latter s accumulated profits only. We make it clear that the learned CIT(A) has also discussed a catena of case law regarding assessee s contention that the impugned addition deserves to be restricted to its 34% stake only AO s action treating the advances received from the company as business income already stands deleted. We hold that the same has no bearing on the instant issue of deemed dividend whose application stands sufficiently proved qua the loan and advances coming from the company side to his account. We accordingly uphold the impugned identical deemed dividend addition in assessee s twin appeals. These two cases fail accordingly. Disallowing set-off which already has been taxed as deemed dividend - Faced with this situation and keeping in mind the fact that we have upheld Section 2(22)(e) addition in preceding paragraphs, we are of the view that larger interest of justice would be met in case if the Assessing Officer readjudicates the assessee s instant solitary substantive grievance in this third assessment year 2014-15 afresh as per law. We order accordingly. We make it clear that the assessee shall be at liberty to file all the relevant details in consequential proceedings. This last appeal is allowed for statistical purposes, therefore.
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Customs
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2022 (7) TMI 1200
Legality of the the late fees charged in the adjudication order - delay in filing the Bill of Entry - applicability of time limitation for filing of bills of entry as per Section 46(3) of the Customs Act, 1962 - HELD THAT:- Section 46(3) of the Act that an Importer is to present a Bill of Entry for home consumption or for warehousing in the prescribed form before the end of the next day following the day on which, the vessel carrying the goods arrives at a customs station at which such goods are to be cleared. There is a proviso which allows a period of thirty days for presentation of an advance bill of entry. The second proviso is the one, applicable here, which provides that where the Bill of Entry is not presented within the time, and the proper officer is satisfied that there was no sufficient cause for such delay, the Importer shall pay such charges for late presentation of the Bill of Entry as may be prescribed. In the present case, it is observed that the Respondent-Company had filed the Bill of Entry No.9375854 for the entire quantity on 20th April, 2017 within the prescribed time limit and as such, there was no objection to the same. It had also paid the entire duty for 98450 metric tons of Goonyella C Coking Coal, even though, 1,341 metric tons had not landed in Marmagao but had landed in Jaigad and as soon as the amendments to the IGM were approved by the Appellant on 14 th March, 2018, again the Respondent-Company filed the Bill of Entry on the very same day in respect of 1,341 metric tons - The second proviso clearly invests a discretion on the Authorities while considering levy of late payment charges as imposed on the Respondent-Company. The satisfaction for sufficiency of cause is a subjective satisfaction which has to be exercised judiciously. The Assessing Officer has based on technicalities and without any judicious application of mind, levied the late payment charges which have been rightly set aside by the Appellate Authority and the Tribunal. By no stretch of imagination, it can be said that the Respondent-Company has not acted bona fide. The entire confusion was due to the short landing of 1,341 metric tons of Goonyella C Coking Coal at Marmagao though full duty in respect of which has been paid by the Respondent-Company and even after it was found out that 1,341 metric tons was landed in Jaigad, the Respondent-Company has taken efforts to get the IGM amended and no sooner the the IGM was amended, the Bill of Entry in respect thereof was filed on the same day within time. This shows the Respondent Company s eagerness to be on the right side of the law. We are satisfied that the Respondent-Company has shown its bona fides by all these actions. There are no fault with the order of the Appellate Authority or the Tribunal - the Appeal does not raise any substantial question of law and is accordingly dismissed.
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2022 (7) TMI 1199
Maintainability of appeal before the High Court - Imposition of ADD - DI Pipes originating in or exported from China - Request for second sunset review - case of appellant that the claim of respondents regarding the likelihood of recurrence of the injury, in the event of cessation of ADD, was not made out - HELD THAT:- CTA, inter alia, provides for levy of additional duty (equal to excise duty for the time being leviable on like articles produced or manufactured in India), countervailing duty (CVD); safeguard duty and ADD. This is apparent on a bare perusal of Sections 3, 8(B), and 9(A) of the said Act i.e., CTA - Insofar as anti-dumping is concerned, both CTA and the 1995 Rules provide for a mechanism for initiating an investigation, albeit in the prescribed manner, provided the affected party i.e., the complainant meets the requisite parameters, as provided in the CTA and the attendant rules. The review, concerning the imposition of ADD, is provided in sub-section (5) of Section 9A of the CTA, read with Rule 23 of the Rules. The review can be carried out by the DA, either on its own initiative or upon a request being made in that behalf by an interested party under sub-rule (1A) of Rule 23 of the 1995 Rules - sub-rule (1B) of Rule 23 provides, that ADD can be imposed for a period not exceeding five years from the date of its imposition unless the DA comes to a contrary conclusion. Once the investigation is commenced, the DA is obliged to inquire as to the existence, degree and effect of the alleged dumping in relation to the import of the subject article. The investigation, thus, requires the DA to identify the article and also submit findings, provisional or otherwise, to the Central Government concerning the normal value, export price and margin of dumping concerning the article under investigation, and that, such dumped article is causing injury or threatens injury to an industry established in India or would bring about material retardation in the establishment of such an industry in India - clearly, the nature of the inquiry, even in the first instance, when a decision is to be taken concerning the imposition of ADD, requires the DA to keep all the aforesaid facets in mind, before it can recommend to the Central Government, the amount of ADD which is to be imposed in a given case. It is, to our minds, a decision, which is industry-specific, being a remedial measure, that, the Central Government may take to preserve the interests of the domestic industry. The provisions of sections 35G and 35L of the CE Act are pari materia with the provisions of section 130 and section 130E(b) of the 1962 Act. Under section 35G of the CE Act, an appeal lies to the High Court from every order passed in appeal by the Appellate Tribunal, if it involves a substantial question law under section 35G(1), save and except when the order concerns determination of any question having a relation to the rate of duty of excise or the value of goods of the purposes of assessment . The appeal, thus, relating to the rate of duty or the value of goods for the purposes of assessment, under section 35L(b) of the CE Act lies to the Supreme Court. It is in this context, that matters concerning exigibility to tax, were required to be dealt with by the Supreme Court, under Section 35L(b) of the CE Act. If the Court were to conclude, that the activity did not fall within the four corners of the concerned statute, no tax/duty would be leviable. Likewise, if an activity or the subject goods are so classified to fall in an entry, different from the one which the revenue propounds, more often than not, it would impact the rate of duty. Such a situation may also arise when one is dealing with an exemption notification. Its impact may lead to a situation, where the assessee may either become the beneficiary of a concessional rate of duty, or even a nil rate of duty - However, this is not the situation that arises for consideration in the instant case. The second sunset review, that the DA has carried out, relates to the ascertainment of whether or not withdrawing ADD would be injurious to the domestic industry i.e., will the withdrawal lead to continuation or recurrence of injury. There is one last aspect that is required to be dealt with. Mr Ramesh Singh had also raised an objection with regard to the tenability of the appeal on the ground that it was not preferred by the Principal Commissioner or Commissioner of Customs as provided in section 130(2) of the 1962 Act. It is required to be borne in mind, that the provisions of the 1962 Act and the rules and regulations made thereunder become applicable by virtue of sub-section (8) of section 9A of the CTA. A plain reading of sub-section (2) of section 130 of the 1962 Act would demonstrate, that the appeal to this Court could be preferred either by the Principal Commissioner of Customs or Commissioner of Customs or even other party aggrieved by any order of the Tribunal. The DA, to our minds, would if nothing else, fall within the category of other party . Therefore, this objection is without merit, and hence is rejected. The preliminary objection taken by the respondents, as regards the maintainability of the instant appeal, cannot be sustained - Registry is directed to list the appeal, for further directions, on the date
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2022 (7) TMI 1198
Liability of a Customs Broker - liability as per Regulation 17(9) of the Customs Broker Licensing Regulation 2013 - whether payment of differential amount duty, by the respondent to the appellant does not prove admission of liability and involvement of the respondent functioning as importer itself? - statements made by the director of the respondent admitting the offence and the involvement thereto binds the respondent company - doctrine of proportionality - HELD THAT:- In terms of clause (d) of Regulation 11, the respondent was bound to advise his client to comply with the provisions of the Act and in case of non-compliance, the respondent should bring the matter to the notice of the Customs Authorities. In terms of clause (n) of Regulation 11, the respondent has to verify the antecedents, the correctness of the importer, exporter code no. identity of his client and functioning of his client at the declared address by using reliable, independent, authenticate document, data or information. Admittedly, the conduct of the respondent clearly shows that he has breached the said provision. It is also noted the legal principle of Preponderance of Probabilities which is required to be applied and not proof beyond reasonable doubt. Bearing this in mind, when we examine the order passed by the licensing authority dated 21.09.2017 by which the license was revoked, the statement of Shri Subhasish Bhattachariya, Director of the respondent company recorded under Section 108 of the Act on 03.09.2016, 05.09.2016 and 11.11.2016 were taken note of. There is a clear admission that there was a mis-declaration in the weight of the imported consignment, and that the weigh bridge operator of CONCOR-CFS Kolkata used to ask staff of the respondent about the declared weight in the Bill of Lading or IGM and used to issue weighment slip matching with the declared weight. Further he had stated that the customs authorities never checked the weight of the packing materials of the bills of the old and used clothing but relied on the declaration in the imported documents. Further he had stated that after examination by the customs, the weighment slips were destroyed by the respondent company. Shri Marinmoy Das, another Director of the respondent in his statement under Section 108 of the Act recorded on 15.09.2016 stated that no weighment slips were found from their office by the DRI as they were destroyed as per the instructions of the importer because the weight of the consignment were not as per declaration. The manipulated weighment slips were not only handed over to the representatives of the respondent and the actual weight and 6 containers were available in the computer installed in the Weigh Bridge. The weigh bridge operator has specifically implicated the Director of the respondent and the G Card holder who dealt with the cargo on behalf of the respondent. The statement recorded from the transporter shows that the declared weight of the container is much less than the actual weight. The importers did not respond to the summons issued under Section 108 of the Act and the same were returned undelivered with remark not found/ not existed . Therefore, the licensing authority concluded that the said importers are paper firms and the respondent has kept the department in the dark about the identity of his client and thus allowing them to evade customs duties. Furthermore, the respondent company had deposited a sum of Rs. 65.40 lakhs by 26 demand drafts stated to be on behalf of the importers - the tribunal has picked holes in the evidence brought on record by the licensing authority which not only probabilises but also establishes the violation committed by the respondent thereby giving no room for interference. It is pointed out that licence granted to the respondent is to expire on 22.07.2022 and in the event this Court does not agree with his submissions, the relief as granted by the Hon ble Supreme Court can be considered in the case of the respondent. The order passed by the tribunal suffers from errors of law and perversity calling for interference - the appeal filed by the revenue is allowed and the substantial questions of law are answered in favour of the revenue.
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2022 (7) TMI 1197
Seizure of goods - Gold Jewellery - the only allegation against the petitioner is that he did not follow the Standard Operating Procedure (SOP) dated 29.03.2016 - allegation of Advance Authorization Scheme through circular trading of gold jewellery exported under the guise of exhibition from India through hand carry and subsequently smuggling Gold jewellery into India under the garb of reimporting the said jewellery without the required documents and permissions - HELD THAT:- It is not in dispute that in certain matters pending before the Supreme Court, challenge has also been laid to the amendments brought about in the Customs Act, 1962 via the Finance Act, 2022. Therefore, this aspect of the matter is also receiving the attention of the Supreme Court. It is relevant to note that in the counter-affidavit filed in the abovementioned writ petition, averments have been made by the respondents, in rebuttal, vis- -vis the SOP dated 29.03.2016. These are captured on page 2 of the counter-affidavit - Although, no rejoinder has been filed, Mr Gautam has attempted to explain that the stand taken by the respondents would not withstand scrutiny. Although a DPC was convened in December 2021, the writ petitioner was not considered. Mr Gautam says that the official respondents could consider the following: (i) Expedite the adjudicatory process vis- -vis the writ petitioner, given the fact that the charges against him fall in a narrow compass; (ii) Consider the writ petitioner s representation for convening a Review DPC - Mr Harpreet Singh says that both requests will be considered as per law and having regard to the facts obtaining in the matter. The writ petition can be disposed of.
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2022 (7) TMI 1196
Seeking release/return of the detained goods - Gold Bangles, weighing 150 grams - prohibited goods or restricted goods - passenger staying abroad for more than six months - HELD THAT:- It is not in dispute that the petitioner is working in Singapore for the past 3 years and he is having a valid Work Permit Card issued by the Republic of Singapore and is also having a Bank Account in Singapore. As could be seen from the Detention/Seizure of Passengers Baggage Receipt issued by the third respondent, the petitioner had left India on 02.10.2018 to Singapore and returned to India again after 3 years i.e. , on 01.05.2022, which shows that for the past 3 years, the petitioner was working in Singapore and he is also having a valid Work Permit Card issued by the Republic of Singapore. The petitioner came to India to attend the family marriage and for that purpose, he was carrying three gold bangles in his bag and not concealed the same in his baggage or on his body. Further, there is no declaration slip obtained from the petitioner and there is no specific rebuttal on the petitioner's assertion that no declaration slip is obtained from him. In fact, he was orally declared by the Customs Officers that he is carrying 3 gold bangles, totally weighing 150 grams for his family marriage, is not specifically denied. Further, it is not in dispute that the petitioner has returned from Singapore after 3 years. A statement has been recorded from him on 01.05.2022, which has been immediately refuted on 02.05.2022, as could be seen from the records. The petitioner had consistently taken a stand that he has been working in Singapore and got work permit and is also having a Bank Account for crediting his salary. With his earnings, he had purchased three gold bangles. He had also produced the invoice of the gold bangles to the authorities. Further, there is no concealment of gold in a baggage or body, which prima facie , shows that there is no smuggling and at the most, it is seized for non-declaration. Added to it, adjudication proceedings is yet to be completed. The Delhi High Court in Vaibhav Sampat More vs. National Investigation Agency, Through its Chief Investigation Officer [ 2022 (6) TMI 220 - DELHI HIGH COURT] held that import of gold is not prohibited, but restricted subject to prescribed quantity on payment of duty. Thus, import of gold is not prohibited, but restricted subject to prescribed quantity on payment of duty. Section 125 of the Customs Act, 1962, gives rights to the owner or from whom the goods have been seized to redeem such goods on payment of fine. Further, this Court consistently held that goods can be handed over on executing 50% of the Bank guarantee on the duty amount. In view of the same, this Court directs the petitioner to execute 50% of the Bank guarantee in lieu of customs duty and on execution of the Bank guarantee, the respondents are directed to hand over the gold bangles to the petitioner, within two weeks from thereon. It is for the respondents to proceed with the adjudication proceedings to save the revenue to the Nation. The adjudication proceedings shall be completed within a period of three months from the date of receipt of a copy of this order. Petition disposed off.
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2022 (7) TMI 1195
Validity of summons issues - SEZ unit - Impact of proceedings under PML Act over Customs Act - allegation of diversion of duty free gold clandestinely diverted duty into the domestic market and exported fake ornaments made from little quantity of gold by mis-declaring them as studded jewellery. - Seeking to declare the action of the respondents in summoning the petitioners under Section 108 of the Customs Act, 1962, as illegal and contrary to the provisions of the Cr.P.C. - seeking to direct the respondents to record the statement of the petitioners through video conferencing - Sections 4, 5, 160 and 161 of Cr.P.C. and Section 108 of the Customs Act, 1962 - HELD THAT:- Not only under Section 104(3) relating to arrest, but also under Section 105(2) relating to search of premises it was specifically mentioned that the Code of Criminal Procedure is applicable. Under Section 108(3) prviso, it is stated that the exemption under Section 132 of the Code of Civil Procedure shall be applicable. Thus, wherever the concerned provisions are applicable, it is specifically stated in the Act. In the PML Act, there is a specific provision under Section 65 stating that the provisions of Cr.P.C. are applied insofar as they are not inconsistent with the provisions of the said Act to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under the Act. But, there is no such specific provision in the Customs Act, 1962, applying the Code of Criminal Procedure to all the provisions relating to the stages of investigation, trial etc. Admittedly, the Hon ble Apex Court observed in the case of POOLPANDI VERSUS SUPERINTENDENT, CENTRAL EXCISE [ 1992 (5) TMI 147 - SUPREME COURT] that it was not at the whims of the person that the investigation should be done at his or her convenience. Hence, the petitioners could not take shelter of the judgment of the Delhi High court when it was not in accordance with the judgment of the Hon ble Apex Court. Whenever a statute creates a new offence and also sets up a machinery for dealing with it, the provisions of Cr.P.C. relating to the matters covered by such Statute would not be applicable to the said offences. The Customs Act was enacted in 1962 and had created the offences under Chapter-XVI and the manner of enquiry and investigation are prescribed in Chapter-XIII. The Customs Act is enforced only by the Customs Officers by its own machinery. The Customs Officers are empowered with the power of investigation as contemplated under Chapter-XIII of the Customs Act, 1962 - The Customs Officer is not a police officer as per the judgment of the Hon ble Apex Court in STATE OF PUNJAB VERSUS BARKAT RAM [ 1961 (8) TMI 28 - SUPREME COURT] and the statement made before him by a person who is arrested or against whom an enquiry is made are not covered by Section 25 of the Indian Evidence Act. As summoning of the petitioners by the respondents would not amount to taking any coercive steps like arresting them or prosecuting them, but only to proceed forward with the investigation and, however, as the learned Additional Solicitor General of India also conceded that they were not insisting on the presence of petitioners No.1 and 2, it is considered fit to allow the petition with regard to petitioner Nos.1 and 2 and to dismiss the petition with regard to petitioner Nos.3 to 5. The petitioners No.3 to 5 are directed to comply with the summons and to give their statements in person and to co-operate with the investigation in the interest of justice. The Writ Petition is partly allowed.
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Insolvency & Bankruptcy
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2022 (7) TMI 1194
Dismissal of Application filed under Section 9 of the IBC by the Appellant - direction to Adjudicating Authority to issue SCN under Section 65(1) to the parties for appropriate action - related party transaction or not - HELD THAT:- The loan sanction order which has been placed before us indicates that along with the Corporate Debtor who was Applicant for the loan, the Director of the Operational Creditor Mr. Jhurani was also co-applicant. Thus, when both the Operational Creditor and the Corporate Debtor were Applicants, it cannot be seen how the Operational Creditor can claim payment of fee for procuring the loan. We in the present case are considering the initiation of the CIRP, the Adjudicating Authority had sufficient reason to believe that debt itself is doubtful. No error has been committed by the Adjudicating Authority in refusing to initiate the CIRP on such suspicious debt. Thus, the order of the Adjudicating Authority refusing to initiate CIRP cannot be faulted and we affirm the said order passed by the Adjudicating Authority. Show-cause notice under Section 65(1) of the IBC - HELD THAT:- The notice has been issued consequent to the impugned order passed, to which the parties were entitled to file reply. Learned Counsel for the Appellant submits that the Appellant has already filed a Reply to show-cause notice and Learned Counsel for the Respondent submits that he has also filed a Reply to the show-cause notice. Order under Section 65 after considering the show-cause notice are yet to be passed by the Adjudicating Authority. We only observe that while passing the order under Section 65, the Adjudicating Authority shall consider the Reply given by the Respondent and shall not be influenced by any observation made in the impugned order. Appeal dismissed.
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2022 (7) TMI 1193
Seeking directions to the Respondents to provide for and make good to the Corporate Debtor for the losses caused due to the Respondent s indulgence in fraudulent transactions - Section 66 of the IBC - HELD THAT:- The Respondent Nos. 9 and 10 were not the officers of the Corporate Debtor so as to any punishment can be awarded on them under Section 69. The direction in paragraph 29 insofar as Respondent Nos. 9 and 10 (Appellants before us) for prosecution under Section 69 is deserves to be set aside and is hereby set aside. Both the Appeals are partly allowed insofar as direction in paragraph 29 for instituting prosecution under Section 69 against the Appellants is concerned - Appeal disposed off.
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2022 (7) TMI 1192
Rejection of application seeking consideration of his resolution plan submitted - HELD THAT:- The CoC authorized the leader of lenders to submit the common view before the NCLT that the CoC is of the final view that no further opportunity should be given to prospective resolution applicant (PRA), as he has failed to provide desired comforts to the lenders for the acceptable terms in resolution plan, which could be successfully implemented. Looking at the total circumstances of the case, including the views of joint lenders and also at the fact that the CoC did not wish to consider any further revised resolution plan as he had failed to provide required comfort to the lender banks by submitting/revising the resolution plan despite being provided with enough opportunities to do so, it is opined that such decision is within the ambit of commercial wisdom of the CoC. The statutory scheme given in the IBC regarding the time period of CIRP in section 12 of IBC stipulates that a total of 330 days could be spent in obtaining prospective resolution plan. In the present case, approximately 559 days are over since the initiation of CIRP till the date of Impugned Order and enough opportunities have already been given to the prospective resolution applicant to provide resolution plan without success - the Adjudicating Authority has not erred in passing the Impugned Order, and while passing the order it has considered the views of the CoC as well as the lapse of stipulated time period of more than 330 days in the CIRP. Appeal dismissed.
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2022 (7) TMI 1191
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - list of charges appearing in the Applicant s/Corporate Debtor s Master Data, in respect of the immovable property even though in the Applicant's/Corporate Debtor's audited accounts there is no immovable property reflected - did the default occur? If yes, then when? - HELD THAT:- It is apparent that there is no dispute to the fact that the Corporate Debtor was in need of funds and had approached the Financial Creditor for financial support. Subsequently, the Financial Creditor invested in the Corporate Debtor in the form of ICD, between 29 November, 2016 to 08 March, 2017. However, be that as it may there is no agreement on record which would support the terms and conditions upon which that transaction took place between the parties. With respect to the question of default, it is pertinent to mention that the Financial Creditor is relying on the letter dated 09 January, 2019, whereas, as per the contention of the Corporate Debtor, only letter sent by the Financial Creditor to the Corporate Debtor is letter dated 08 May, 2020. The notice dated 08 May, 2020 by the Financial Creditor nowhere mentioned of their previous letter dated 09 January, 2019. It is also relevant to divulge that, albeit, the Balance Sheet as on 31 March, 2019 of the Corporate Debtor at page 36 of the Petition reflects the name of the Financial Creditor under the heading of Long- Term borrowings, but mere entry in the Balance Sheet cannot be construed as default; neither, the Independent Auditors report talks about any such default by the Corporate Debtor. For initiation of a CIRP under section 7 of the Code, one of the pivotal point is the establishment of default. However, in this instant application the authencity of the letter dated 09 January, 2019 as relied on by the Financial Creditor, which would be the cornerstone for initiation of CIRP against the Corporate Debtor, is itself under consideration before the Ld. CJM. It is also pertinent to mention that the proceeding before this Adjudicating Authority is summary proceeding, we cannot call on for the trial of the parties to substantiate their evidences relied on. Thus, there is a debt and default, which are that win ingredients to warrant initiation of CIRP proceedings in terms of section 7 of the Code, against the Corporate Debtor - petition dismissed.
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2022 (7) TMI 1190
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - levy of the pendente lite interest claimed by the Financial Creditor - HELD THAT:- The said pendente lite interest has not been claimed by the Financial Creditor in its application under Section 7 of the Insolvency and Bankruptcy Code, 2016. It is trite law that insolvency proceedings are not recovery proceedings and the same should not be reduced into a mere recovery proceedings in as much as the entire substratum of the Insolvency and Bankruptcy Code, 2016 would fail if the same is allowed to be misused by creditors to extort money from the Corporate Debtor with the threat of initiation of Corporate Insolvency Resolution Process - It is imperative to note that Corporate Insolvency Resolution Process of a corporate debtor is to be commenced by this Tribunal after observing all the necessary facts and considering the expedience of initiation of CIRP as has been laid down in Vidarbha Industries Power Limited v/s. Axis Bank Limited [ 2022 (7) TMI 581 - SUPREME COURT ]. On perusal of the contents of the Form 1 filed by the Financial Creditor and the supplementary affidavit filed on behalf of the Corporate Debtor, it is clear that the Corporate Debtor has paid the entire sums claimed by the Financial Creditor. The fact that such payment has been accepted to the full satisfaction of the Financial Creditor is further apparent from the statements made by the Financial Creditor. Since the entire amounts as claimed by the Financial Creditor in its application under Section 7 of the Insolvency and Bankruptcy Code, 2016 has been paid by the Corporate Debtor, there exists no financial debt within the meaning of Section 5 (8) of the Insolvency and Bankruptcy Code, 2016 - the instant petition is dismissed with no order as to costs as no financial debt within the meaning of Section 5 (8) of the Insolvency and Bankruptcy Code, 2016 subsists.
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2022 (7) TMI 1189
Seeking direction to Resolution Professional to accept the remaining claim along with interest in terms of Section 16 of M.S.M.E. Act, 2006 up to the date of actual realization - HELD THAT:- It is clear that the Resolution Professional conveyed the status of the claims of the applicant upon review of documents submitted by applicant. He was asked to submit additional information within 7 days thereafter - It is also significant to note, according to the applicant in paragraph 5, the contract was completed somewhere in August, 2015 and the claim for loss of profit damages etc. in delayed payments has been claimed for the first time before the Resolution Professional only somewhere in 2019. The alleged default, at page 6 of the application is stated to have taken place on 1st of August, 2015. It is clear that the applicant never took any steps for adjudication of his claims before any forum competent for this and notwithstanding, apparently failed to furnish the required information/documents before Resolution Professional. This Adjudicating Authority cannot adjudicate upon the question of loss or profit interest etc. This Tribunal in its summary jurisdiction can in no way go into crystallizing the alleged claims. It is clear from the above position that the works were executed somewhere in 2015 and the claims have been raised for the first time before the Resolution Professional and that too has been observed by Resolution Professional without the required documents in support. Application dismissed.
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2022 (7) TMI 1188
Seeking Voluntary Dissolution of Company (M/s. R.S. Earthmovers Private Limited) - section 59 of the Insolvency and Bankruptcy Code, 2016 (Code) read with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 (IBBI Regulations) - HELD THAT:- In view of the steps taken and the satisfaction accorded by the voluntary liquidator by way of the present application, there is no legal impediment in allowing the prayer of the applicant. The Prayer of Liquidator to dissolve the Company U/S. 59 of IBC is allowed and the said company is hereby dissolved with effect from the date of the present order. The Liquidator is directed to preserve a physical or electronic copy of the reports, registers, books of account referred to in Regulation 8 and 10 for at least eight years after the dissolution of the corporate person, either with himself or with an information utility. Application allowed.
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2022 (7) TMI 1187
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Mere plain reading of the provision under section 7 of IBC shows that in order to initiate CIRP under Section 7 the applicant is required to establish that there is a financial debt and that a default has been committed in respect of that financial debt. That while dealing with an application under section 7 the Adjudicating Authority is required to consider the question whether the 'debt' and 'default' is proved or not. In the present case, the Corporate Debtor, in his reply admitted the debt and liability, further vide daily order dated 09.05.2022 the Corporate Debtor has again admitted its liability and has expressed its inability to pay the outstanding amount of Rs. 1,32,91,986/- - the Loan agreements executed between the Financial Creditor and the Corporate Debtor clearly substantiate the Financial Creditor's claim that the Corporate Debtor has defaulted on repayment which is duly admitted by Corporate Debtor. In the interest of justice, this Tribunal has granted ample opportunities to both the parties to explore the possibilities of an amicable resolution of the matter, however, the parties have failed to arrive at settlement - upon appreciation of the documents placed on record to substantiate the claim, this Tribunal admits this petition and initiates CIRP on the Corporate Debtor with immediate effect. Application admitted - moratorium declared.
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2022 (7) TMI 1186
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- This Tribunal after comprehensively hearing the said matter is of the view that, the debt and default had been proven beyond reasonable doubt. Furthermore the audited financial statements of the Corporate Debtor for the year ended on 31.03.2015, 31.03.2016 and 31.03.2018 clearly proves the presence of a debt due and payable by the Corporate Debtor to the Applicant Financial Creditor. Time Limitation - HELD THAT:- Further, the date of default is stated to be 19.03.2015 by the virtue of this Tribunal order dated 07.01.2022 in which the Applicant was 'allowed' to amend the date of default in Part-IV of the main Application IBA/706/2020. In the question of limitation, the Hon'ble Supreme Court in the case of LAKSHMI PAT SURANA VS. UNION BANK OF INDIA ANOTHER [ 2021 (3) TMI 1179 - SUPREME COURT ] has clearly stated that fresh period of limitation will come into play on the due acknowledgement of debt by the Corporate Debtor. The Application stands well within the period of limitation by the virtue of reflection of debt amount reflected in the Balance Sheet of the Corporate Debtor for the year ended on 01.09.2018 and the same shall be treated as acknowledgement of debt by the virtue of the Hon'ble Supreme Court judgment in ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS. BISHAL JAESWAL . ANR, [ 2021 (4) TMI 753 - SUPREME COURT ], Further this Applicant has filed this present Application on 20.11.2020, thus this Application stands well within the period of limitation. In view of the facts and also in view of the 'financial debt' which is proved by the Financial Creditor and the 'default' being committed on the part of the Corporate Debtor, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor. Application admitted - moratorium declared.
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PMLA
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2022 (7) TMI 1185
Grant of regular bail - Money laundering - illegal transportation of essential commodities of Wheat and Rice from godowns - Conspiracy - scheduled offences - proceeds of crime - dirty money - offence under Section 3 and punishable under Section 4 of the PMLA, 2002 - statements of the applicant was recorded under Section 50 of the PMLA 2002 - compliance with the twin conditions under Section 45 of the PMLA 2002 or not - HELD THAT:- The Hon ble Supreme Court of India recently in the case of J. SEKAR @ SEKAR REDDY VERSUS DIRECTORATE OF ENFORCEMENT [ 2022 (5) TMI 309 - SUPREME COURT ] has held that in cases of PMLA, the Court cannot proceed on the basis of preponderance of probabilities. It is further observed that on perusal of the statement of objects and reasons specified in PMLA, it is the stringent law brought by Parliament to check money-laundering. Thus, the allegations must be proved beyond reasonable doubt in the Court. Even otherwise, it is incumbent upon the Court to look into the allegations and the material collected in support thereto and to find out whether the prima-facie offence is made out. It is further held that unless the allegations are substantiated by the authorities and proved against a person in the Court of law, the person is innocent. The findings of the Forensic Audit Report, the observations are that the aforesaid eight firms received amounts from IMAAL with some unidentified receipts and the amount received have been withdrawn in cash and further, these firms did not carry any business relations with IMAAL - In this case, the scheduled offence was registered on 19/07/2018, whereas, the Forensic Audit Report is for the period January 2018 to July 2018. The findings of the Forensic Audit Report, as referred above, only mention that all the said firms received amount from IMAAL with some unidentified receipts and they did not carry any business relations with IMAAL. The expression proceeds of crime is defined under clause (u) of Section 2(1) of the PMLA which makes it clear that proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property - It is the case of the prosecution in the predicate offence that the co-accused in the said case Kapil Bajrang Gupta of Shri Lambodhar Trading Company handed over to truck driver some forged documents pretending to be his own Lambodhar Trading Companies food grains. The said accused Kapil Bajrang Gupta in accomplish of the Government food grains transport contractors namely Lalit Raj Brijlal Khurana and Raju Pralhad Arshewar had supplied food grains to the company of the applicant, pretending that the food grains were his own goods. In absence of any allegation that the applicant had any such knowledge as referred herein above, making the payment of Rs.80,10,000/- by the applicant to Kapil Bajrang Gupta, which amount is the part of proceeds of crime, creates doubt about the veracity in respect of allegations as regards transactions with the remaining seven companies and payments made to the said companies, particularly when there is nothing to prima-facie show that the applicant is related or having control over the said companies - In the present case, the prosecution has failed to bring on record the foundational facts to show that the proceeds of crime is connected with the scheduled offence. As far as the judgment in the case of Gautam Kundu [ 2015 (12) TMI 1133 - SUPREME COURT ] as regards twin conditions under Section 45 of the PMLA 2002, there is no dispute that the twin conditions are mandatory. The applicant shall be released on bail - application is allowed.
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Service Tax
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2022 (7) TMI 1184
Classification of services - designing and constructing office interiors, customized exhibitions booths/stalls, television studios and retail fit outs - services classified as erection, commissioning and installation service and commercial or industrial construction service prior to June 01, 2007 - works contract service or pandal and shamiana services - demand of differential duty along with interest and penalty - HELD THAT:- It is undisputed that the services provided by the appellant were on turnkey basis and a composite amount is charged by the appellant for its services and for the goods used in providing them. It is undisputed that the appellant treated this as works contract services and paid VAT to the respective State Governments as appropriate. The appellant had classified these services with effect from 1.6.2007 under the head works contract service and had classified them under the heads of commercial or industrial construction service and erection commissioning or installation service prior to this date and paid service tax. Even while paying service tax under these heads before 1.6.2007 the appellant had claimed abatement as available under various notifications. It has been settled by the Supreme Court in the case of Larsen Toubro that composite works contract services involving supply of goods/deemed supply of goods and rendering services are a separate species of contract known to commerce and must be treated as works contract services only. Such services become taxable under the head of works contract service under Section 65(105)(zzzza) of the Finance Act, 1994 with effect from 1.6.2007. Prior to this there was no charge of service tax on works contract services. Therefore, there was no levy of service tax on such composite services under any other head before 1.6.2007. Since it is undisputed that the appellant s contract involved provisions of services as well as supply/deemed supply of goods they can only be classified under the head works contract services as per the law laid down in Supreme Court in Larsen Toubro. Such services could not have been charged with service tax under any other head either before or after 1.6.2007. The show cause notices demanding service tax under the head Pandal and Shamiana services from the appellant, therefore, cannot be sustained. Appeal allowed - decided in favor of appellant.
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2022 (7) TMI 1183
Levy of Service Tax - Erection, Commissioning or Installation service or not - sub-contractor of L T Ltd in respect of Flyover/Bridge, Railway etc - sub-contractor of Techno Fab L T in respect of fabrication of various steel structures - sub-contractor of Geodesic Techniques in respect of Airport - fabrication of Hulls/ Parts of body of Ships, etc for ABG Shipyard Ltd - sub-contractor of L T, activity of construction in SEZ unit of Reliance Petroleum Ltd, Jamnagar and in SEZ unit of Reliance Oil Gas Terminal, Kakinada - Extended period of limitation - Jurisdiction - HELD THAT:- It emerges that the appellant undertook the activity of fabrication of various structural items as sub-contractor of L T, Techno Fab ABG Shipyard. It also emerges that the said activity of fabrication of structural items viz. beams structs, pylons etc was carried out at various places in India in respect of Flyover, Bridges, Railway and Airport. Fabrication of structural items viz beams, structs, pylons etc which would become part of civil structure viz. Flyover/Bridge etc would therefore fall within the definition of taxable service of Commercial or Industrial Construction Service as given in Section 65 (25b) of the Finance Act 1994 which specifically excluded service in respect of Bridges, Railways, Airport etc from the tax net. Flyovers/Bridges cannot be equated with Plant, Machinery and Equipment. Therefore, activity undertaken by the Appellants would not fall within the definition of Erection, Commissioning or Installation under Section 65 (39a) as in force during 2004-05 and 2005-06 which covered Erection, commissioning or installation of Plant, Machinery or Equipment. The impugned orders vide which it is held that work undertaken by the Appellant in relation to Bridges, Rails, Airport etc was of only fabrication of various beams, structs, pylons etc and does not amount to undertaking of work of Civil construction is not tenable as fabrication of various Beams, Struts, Pylons, etc is indeed part of Civil construction and hence fall under the definition of Commercial or Industrial Construction Service as given in Section 65 (25b) of the Finance Act 1994 which excludes from its purview services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams and hence not taxable. Whether the activity of undertaking fabrication of steel structures out of the raw materials of clients is taxable under erection, commissioning and installation services ? - HELD THAT:- There is no dispute to the fact that the appellant undertook fabrication of steel structures using raw material of clients viz Techno Fab and L T Ltd. The said activity was thus in the nature of job-work activity of production on behalf of clients; and as steel structures are excisable goods liable to duty, the same was not liable to service tax - Even if the said job work activity of production amounts to rendering of service, it would at best be Business Auxiliary Service covered under Section 65 (19) (v) of Finance Act 1994 and exempted under Notification No.8/2005-ST dated 1-3-2005. It is not in dispute that the production was done with materials of the clients at their site and therefore Notification No.8/2005-ST is satisfied. Even if the said exemption is to be held to be inadmissible there is no demand for Service tax in the Show Cause Notice under Business auxiliary service. The demand in the Show Cause Notice is under Erection, Commissioning or Installation, which is clearly not tenable. Levy of service tax - fabrication of Hulls/ Parts of body of Ships, etc for ABG Shipyard Ltd. - HELD THAT:- It is an admitted position in the Show Cause Notice that the Annual reports of the Appellant do not show any receipt of any amount from ABG Shipyard Ltd. This clearly shows that Appellant has not undertaken any fabrication work for ABG Shipyard. The Show Cause Notice has demanded service tax from the Appellant on payments made by ABG Shipyard to a firm other than the Appellant, having the same name as the Appellant. It is available from the records that Form 16A issued by ABG Shipyard shows payment to M.K. Enterprise with PAN AACPZ5313R, which is not PAN of the Appellants proprietor. This aspect has not been rebutted by the Commissioner in his Order. Hence service tax demand on the fabrication of Hull/parts of body of ships, etc from ABG Shipyard Ltd cannot be sustained. Extended period of limitation - HELD THAT:- Unless there is evidence of suppression of facts or contravention with intent to evade payment of service tax, larger period of limitation of 5 years specified in the Proviso to said Section 73 (1) is inapplicable. It appears that non-payment of service tax could be on account of the belief that no service tax was payable in respect of the activities undertaken by the Appellants; that the very fact that various decisions of Tribunal referred to herein above have also held that no service tax is payable on activities such as those undertaken by the Appellants, itself shows that the Appellants belief was reasonable and bona fide. It is settled law that where demand has been worked out based on the records of maintained by the assessee and where non-payment of service tax is on account of bona fide belief that no service tax was payable, the larger period of limitation cannot apply. The Larger Bench recently by its decision in COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [ 2019 (6) TMI 518 - CESTAT NEW DELHI] decided the said issue, it is settled law that where the issue has not been free from doubt requiring reference to Larger Bench, the larger period of limitation cannot apply. Accordingly the demand for the extended period is not sustainable on limitation also. Jurisdiction - HELD THAT:- It is seen that appellant have obtained registration from 2007 and hence Commissioner of Central Excise Service Tax, Surat may have jurisdiction to demand tax for the period after the date of registration in respect of services provided outside his jurisdiction, however the tax demand is not sustainable on merits and on limitation the said issue is of only academic importance. Hence we are not giving our conclusive finding on this issue of jurisdiction. Appeal allowed - decided in favor of appellant.
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2022 (7) TMI 1182
Classification of services - construction services - composite supply - appellant had paid service tax on its activities under head CICS both before and after 01.06.2007 - requirement of taxability after 01.06.2007 under Works Contract services - HELD THAT:- Considering that the appellant in this case has used material for rendering service and has paid an exemption fee under the Rajasthan VAT Act in order to exemption from payment of the Act there cannot be any doubt that the contracts involved deemed sale of materials. There are no basis for the appellant s contention that its contracts were for services simpliciter classifiable under CICS. Clearly, the contracts of the appellant were not services simpliciter but involved supply/use of materials in the course of rendering such services as well. They clearly fall under the category of WCS. Therefore, the appellant s contention that they were not rendering WCS, has no legs to stand on. Another interesting proposition by the learned Counsel for the appellant is that the service provider has an option to pay service tax either under CICS or under WCS. This submission is completely misplaced and is contrary to any canons of taxation. When any tax is levied, the taxable event is defined in the Act. In case of Customs, the taxable event is the import or export, in case of excise, it is the manufacture, in case of VAT, it is the sale or deemed sale of goods and in case of income tax, it is the earning of income. If no taxable event takes place, no tax can be levied. The taxable event under Finance Act, 1994 in case of services simpliciter is rendering of a taxable service and in the case of works contract it is rendering of a service along with supply or deemed supply of goods. To determine tax liability, it must first be established as to whether the service rendered falls in one of the taxable services. This classification is not a matter of choice or discretion either of the officers or of the assessee. A service cannot, at the same time be classified under more than one head - For instance a salary can only be classified as an income from salary and not as income from profession or business to claim deductions. Therefore, the submission of the learned Counsel for the appellant that it is open for the appellant to classify its services under any head it pleases is not correct. Extended period of limitation - penalties - intent to evade or not - HELD THAT:- There are no proof of intent to evade either from the show cause notice or from the impugned order. Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or willful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation - Once the returns are filed, if Revenue was of the opinion that the self-assessment of service tax and the classification was not correct, it could have scrutinized the returns and issued notices within time. The show cause notice was issued on 30 September 2015 for the period covered October 2010 to June 2012, which is clearly beyond the normal period of limitation. Therefore, although Revenue is correct on merits, the demand is time barred and, therefore, cannot sustain. For the same reason, the penalties imposed upon the appellant under Sections 77 and 78 also cannot be upheld. Appeal allowed - decided in favor of appellant.
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2022 (7) TMI 1181
Taxability - Rent a Cab Operator Service - Rent a Cab Operator - nature of the service is not supported by any documentary evidence - absence of any documentary evidence to justify the claim of the assesse - HELD THAT:- It is found that the appellant from the adjudication stage till this appellate stage claimed that the demand is not sustainable on the ground that vehicle which was used for Rent a Cab Operator is of 12 seater Therefore, the same is not covered under the Rent a Cab Operator service. They also submitted that in some cases they have provided their service as sub- contractor and for that reason also the Service Tax on the service of subcontractor is not taxable. It is also submission of the appellant that they have provided services to UNICEF. The claim of the appellant legally appears to be correct. However, the appellant has not submitted any documentary evidence in support of their claim either before the lower authority or before this Tribunal. Even department also not adduced any evidence in support of the show cause notice for demand of service tax about the nature of service. In this position, without having documents on record, the claim of the appellant cannot be established regarding non taxability of the service. In the interest of natural justice, one opportunity can be given to the appellant to present their case before the adjudicating authority and to submit all the documents whereby the claim of the appellant can be established - matter remanded to the adjudicating authority for re-consideration of the entire case a fresh - appeal allowed by way of remand.
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2022 (7) TMI 1180
CENVAT Credit - duty paying invoices - eligibility of credit on the strength of supplementary invoices issued by the service providers - credit availed based upon such supplementary invoices which were raised by those service providers who short paid the service tax with mala fide intent - suppression of fact of availment of Cenvat Credit on the strength of supplementary invoices - levy of penalty - invocation of extended period of limitation. Rejection of Cenvat Credit of service tax on the strength of supplementary invoices issued by the service providers - Rule 3 (1)of Cenvat Credit Rules, 2004 - HELD THAT:- The Rule clarifies that credit can be availed by manufacturer of final product for any input service received by him. In the present case apparently and admittedly, appellant is the manufacturer of medicaments. The contract labour was received for the said manufacture by two manpower recruitment supply agencies. Hence the services received from said agencies are nothing but the input service for the appellant being used in manufacture of his final product. Thus, it stands clear that appellant was entitled for availment of Cenvat credit - credit allowed. Rejection on the ground that the Cenvat Credit is availed based upon such supplementary invoices which were raised by those service providers who short paid the service tax with mala fide intent - HELD THAT:- In the present case, there is no dispute about availment of Cenvat Credit by the appellant on the amount of initial invoices which was for service charges in respect of providing manpower services to the appellant. The dispute is only with respect to the Cenvat Credit availed on the amount of service tax which was paid for certain reimbursable amounts which were demanded by the service providers by way of supplementary invoices due to the reason that an investigation had initiated against them in February, 2012 denying them the exemption from the tax liability towards the reimbursable amounts - Since the service providers had voluntarily paid the said duty demand that they issued the supplementary invoices to the appellants claiming the amount of tax liability already discharged by them. Non-payment of service tax on the reimbursable expenses of the salary/ wages of the contract labours received by the service providers of manpower recruitment agencies from their service recipients - HELD THAT:- Hon ble Apex Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT ] has held as per Section 67 (un-amended prior to 1st May, 2006) or after its amendment w.e.f. 1st May, 2006 the only possible interpretation of the said section 67 is that for the valuation of taxable services for charging service tax, the gross amount charged for providing such taxable services only has to be taken into consideration. Any other amount which is not for providing such taxable service cannot be the part of the said value. It was clarified that the value of service tax cannot be anything more or less than consideration paid as quid pro quo for rendering such services. Accordingly, it was held that section 67 of Finance Act, 1994 do not allow inclusion of reimbursable expenses in valuation of service rules - keeping in view that the period of dispute in the present case is the period prior to May, 2015, it is held that the appellant as well as its service providers were rightly under the bonafide belief that there is no service tax liability as far as the reimbursable part of the salary/ wages is concerned. Rejection of Cenvat credit availed on supplementary invoices - HELD THAT:- This Tribunal in the case of MADRAS CEMENTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [ 2010 (6) TMI 397 - CESTAT, CHENNAI ] has held that supplementary invoices on the strength of which disputed credit was taken cannot be an in-eligible document - Credit remains allowed. Levy of penalty under section 76, 77 and 78 of the Finance Act, 1992 - HELD THAT:- Section 78 of the Finance Act provides for imposition of penalty due to suppression of facts or contravention of provision of law on part of the assessee with the intent to evade payment of duty etc. The service tax liability was duly discharged by the appellant and by the service provider with reference to the amount charged for providing manpower and that there is no denial about the same - the proviso to Rule-9(1)(bb) containing exclusion clause cannot be pressed into service to deny CENVAT Credit against supplementary invoices. Above all, Commissioner (Appeals) himself has set aside the penalty as was imposed under section 78 of Finance Act observing no malafide on part of the appellant. Confirmation of demand still relying upon section 9 (1) (bb) is therefore held wrong. It is further observed that neither the SCN nor the impugned Order-in-Original dated 04.12.2017 alleges that the invoices were not genuine, the services were not received or the same were not utilized in the manufacture of dutiable final product. Mere fact that the differential amount of service tax was paid by the service provider on being pointed out by central excise officers doesn't establish that the service tax was short paid or was not paid by reason of fraud, suppression, misstatement etc. with an intent to evade the payment of service tax - penalty set aside. Extended period of Limitation - HELD THAT:- The issuance of Show Cause Notice in the year 2017 is apparently beyond the reasonable time for issuing the same. At least it stands clear that fact of availment of Cenvat credit on disputed supplementary invoices was in the notice of the Department since the year 2012-2013. The Department is not entitled to invoke the extended period of limitation. The entitlement of the appellant to avail Cenvat credit has been denied are hereby set aside - appeal allowed - decided in favor of appellant.
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2022 (7) TMI 1179
Refund of service tax paid - input services utilised for export of goods made under 26 shipping bills of export - benefit of provision 3 (h) of Notification No.41/2012-ST dated 29.06.2012 - the ld.Commissioner (Appeals) observed that the exporter should be registered with the Export Promotion Council and being registered with The Solvent Extractors Association of India, which is a Trade Promotion Organisatiion (TPO), would be of no help in getting the benefit of the said Notification - HELD THAT:- The Deputy Commissioner of Service Tax has passed a detailed order incorporating shipping bill numbers, date, name of service provider, invoice numbers etc. and in short, he has gone through all the documents and has discussed the conditions of the said Notification or eligibility of refund claim and after making point-wise observation and has finally sanctioned the refund. It can be seen that there is no dispute as to the fact that the goods were exported by the appellant-assessee. Once it is not in dispute that the services are specified for refund purpose, and since Service Tax was actually paid on specified services pertaining to export activity, in terms of the broad scheme of refund under Notification No. 41/2012-S.T. as amended with clarifications, refund must be granted to the exporter - the order passed by the Learned Commissioner (Appeals) cannot be sustained as substantive benefit should not be denied to an assessee if the conditions are fulfilled. It would not be out of place to mention that the sole intention of the Government to bring out these rebate schemes is to promote the Indian exporters to enjoy a level playing field and to compete with the exporters of other countries in the global market. Further, it is not the intention of the Government to export taxes, hence after much research these schemes have been notified and if the refund claims are rejected on such flimsy grounds, it defeats the very purpose of rebate schemes and traps the exporters under unnecessary litigations. Appeal allowed.
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Central Excise
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2022 (7) TMI 1178
Condonation of losses for pig iron - What was the stock notionally determined and actually determined by the respondent assessee and how it was adjusted in their accounts without being reflected in the Central Excise records? - accepting a reconciliation statement as submitted by the respondent assessee without explaining the same that what was the stock notionaly determined and actually determined by the respondent assessee and how it was adjusted in their accounts without being reflected in the Central Excise records? - applicability of Circular of CBEC being CBEC circular No.52/79-CX-6 dated 26th October, 1979 - HELD THAT:- In terms of Circular issued by the CBEC dated 26th October, 1979, the condonation of losses for pig iron have been fixed at 2% and for the iron in any crude form at 25% and with regard to tariff item 26AA and 26, it was fixed at 1%. The assessee had filed a reconciliation statement before the Tribunal which shows that the percentage of loss was well within the parameters fixed by the CBEC in the Circular stated above. That apart, the Tribunal has also taken note of the earlier decisions of the Tribunal and in particular, the decision in the case of RASHTRIYA ISPAT NIGAM LTD. VERSUS COMMR. OF CUS. C. EX., VISAKHAPATNAM [ 2008 (9) TMI 663 - CESTAT, BANGALORE] . The facts of the said case are identical to that of the case on hand - it was held in the case that As far as clearance of these products is concerned, it is based on weighment. But when the products are used for capital consumption, the accounting of clearance for the capital consumption is done on the basis of standard grab weight. During the stock verification, the method followed is volumetric calculation method. Based on the volume and density the weight is calculated. Thus, we find that different criteria are adopted for estimating the pig iron for different purposes. Therefore, in the very nature of the accounting, there is bound to be difference. Unless it is shown that the appellants had cleared the goods without payment of duty in a clandestine manner, or in other words, unless there is evidence to show that there is clandestine clearance, this type of demand of duty is not sustainable. The period covered by the show-cause notices was as on 31st March, 1989, 31st March, 1990 and 31 st March, 1991. Two show-cause notices were issued on January 30, 1991 and March 31, 1992 for which the assessee had submitted replies on August 2, 1991 and January 25, 1993, after a gap of nearly 17 years from the relevant period where a notice of personal hearing was issued on 19 th August, 2006 and the respondent assessee co-operated with the adjudication and also filed the written submission and the adjudication order was passed on 21st November, 2006. It is not clear as to why there was so much of delay in taking up the show-cause notice for adjudication and more particularly, when 17 years have elapsed after the relevant period the adjudication itself should be termed to be a stale adjudication. The Learned Tribunal rightly allowed the appeal filed by the respondent assessee and the revenue has not made out any grounds to interfere with the said order - Appeal dismissed.
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2022 (7) TMI 1177
CENVAT Credit - sale of electricity sold outside the factory - liability to pay the amount at 6% when admittedly the respondent has reversed the proportionate credit of inputs and input services attributable to sale of electricity - liability to pay as per Rule 6(3) of the Cenvat Credit Rules - electricity generated from waste gas / tail gas - classifiable under Chapter Heading 27 16 00 00 and whether the same can be said to be exempted goods or not - waste gas or tail gas as obtained from process of manufacture as defined in Section 2 (f) of the Central Excise Act, 1944 - invocation of extended period of limitation - HELD THAT:- The decision in GULARIA CHINI MILLS AND OTHERS VERSUS UNION OF INDIA AND OTHERS [ 2013 (7) TMI 159 - ALLAHABAD HIGH COURT] which was affirmed by the Hon ble Supreme Court in UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] will also aid the case of the assessee. It was held that bagasse was a waste and hence, it was not manufactured of exempted goods and electricity generated from bagasse was neither excisable under Section 2(d) of the Central Excise Act, 1944, nor exempted good under rule 2(d) of the Cenvat Credit Rules 2004 and hence, Rule 6 of the said Rules is not applicable. In the present case it could not be pointed out as to whether any process in respect of Bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty. The Tribunal rightly allowed the appeal filed by the assessee and set aside the order of adjudication - the appeal filed by the revenue is dismissed and the substantial questions of law are answered against the revenue.
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2022 (7) TMI 1176
Demand of Central Excise duty - electricity so used in a manner other than production of the goods in their factory - captive consumption - benefit of N/N. 67/1995-CE dated 16.03.1995 - HELD THAT:- The electricity generated by the Appellant in the captive power plant is used for both production of the finished goods within the refinery and for other purposes including the electricity wheeled out. In such circumstances, it is found that Hon ble Supreme Court and Hon ble Punjab Haryana High Court referred to by Ld.Authorized Representative have clearly held that in respect of electricity wheeled out, the benefit would not be available. In the case of Maruti Suzuki Ltd. v. Commissioner [ 2017 (5) TMI 697 - PUNJAB AND HARYANA HIGH COURT ], the Hon ble Supreme Court has held that assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price. T he matter needs to be remanded back to the original authority for re-consideration and re-quantification - appeal allowed by way of remand.
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2022 (7) TMI 1175
Wrongful availment of Cenvat Credit by the appellant - recovery as per Cenvat Credit Rules, 2004 read with section 11A (5) of Central Excise Act, 1944 - submission of relevant documentary evidences by the appellant at any point of time - HELD THAT:- The submission made by learned Authorised Representative seems to be reasonable as the demand was confirmed by the Adjudicating Authority only on the ground that the appellant did not produce any documentary evidence in support of their submission. Therefore without going into the merits of the appeal, the matter is remanded to the Adjudicating Authority. But what is gathered from the impugned order is that the documents filed by the appellant on 05.03.2015/13.05.2015 were not available with the Adjudicating Authority, for whatever reason. Therefore, the appellant is directed to file all the relevant documentary evidence with the Adjudicating Authority within a period of two weeks from the date of this order, in support of their submission qua the demand of the amount of Rs. 15,50,625/- as the Adjudicating Authority is the proper Authority to examine the documentary evidences. The Adjudicating Authority is directed to decide the issue involved herein afresh after taking into consideration the documentary evidence to be produced by the appellant in support of their submission and after following the principle of natural justice. The appeal is allowed by way of remand.
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CST, VAT & Sales Tax
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2022 (7) TMI 1174
Separate powers of the Central and the State - repugnancy owing to the application of the State laws to the vehicle permit issued under the law made by Parliament - Constitutional validity of sub-sections (7) and (8) of Section 4, Section 15 of the 1976 Act and Section 8A of the Kerala Motor Transport Workers Welfare Fund Act, 1985 - thrust of the challenge is on the ground that the State Legislature by way of stated amendments to the welfare legislation has effectively bootstrapped the obligation to make contribution to the workers welfare fund with the obligation to pay tax for operating motor vehicles - encroaching and overriding the relevant provisions of the Central legislation i.e., the Motor Vehicles Act, 1988, to paralyse the Stage and Goods Carriage Operation or to undermine the effectiveness of the transport permit provided under the 1988 Act - HELD THAT:- As regards the 1976 Act enacted by the State Legislature, the same is ascribable to Entries 56 and 57 of List II State List. Entry 56 deals with taxes on goods and passengers carried by road or on inland waterways. Entry 57 deals with taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of Entry 35 of List III. In one sense, the law made by the State Legislature is also ascribable to Entry 35 of List III under which the Parliament has already enacted 1988 Act. However, as aforementioned, the law made by the Parliament, being 1988 Act, does not touch upon or deal with the field of manner of levy of vehicle tax and collection thereof. Whereas, the 1976 Act enacted by the State Legislature is to consolidate and amend the laws relating to the levy of tax on motor vehicles and on passengers and goods carried by such vehicles in the State of Kerala. The levy of tax is spelt out in Section 3 of this Act. Section 4 deals with payment of tax and issue of licence. From the scheme of the 1976 Act, it is amply clear that it is specific to levy of tax on motor vehicle and passengers and goods carried by such vehicle in the State of Kerala. It is not a law regulating the issuance of a permit by the Authority under the 1988 Act as such. Indisputably, the permit issued by the Authority is hedged with conditions including the condition of regular payment of vehicle tax. Section 15 provides for the consequences for non-payment of tax consistent with Sections 10 and 11 of the 1976 Act. Thus understood, there is no occasion for conflict between the two provisions much less repugnancy. As regards the argument regarding bootstrapping of liabilities of permit-holder under two different State legislations, it is to say the least tenuous. It is open to the Legislature to combine levies for other purposes, such as education cess, etc., for collection of tax due and payable by the same tax-payer. It is one thing to say that the person is being compelled to discharge liability under two different State enactments, although he is not liable under one of the two. That is not the argument of these writ petitioners. The petitioners are not disputing their liability under both the State Enactments. The argument, however, is that the writ petitioners may intend to invoke remedy of appeal and revision in respect of liability fastened under the 1985 Act. This argument has been rightly negatived by the High Court in paragraph 18 of the impugned judgment by observing that sufficient safeguard has been provided under the relevant enactment to file appeal/revision by remitting 50 per cent of the amount demanded - The High Court has already issued directions to extend similar benefit even in cases where review petition is filed within the prescribed time. The fact remains that no prejudice whatsoever is caused to the permit-holder who intends to pursue remedy under the 1985 Act against the demand received by him relating to the contribution of the Welfare Fund. Reverting to the 1985 Act enacted by the State Legislature, indisputably, it is a welfare legislation constituting a fund to promote the welfare of motor transport workers in the State of Kerala. This Act is ascribable to Entries 23 and 24 of List III Concurrent List. Entry 23 deals with social security and social insurance; employment and unemployment and Entry 24 deals with welfare of labour including conditions of work, provident funds, employers liability, workmen s compensation, invalidity and old age pensions and maternity benefits. Ostensibly, it may appear that the liability arising from the obligations under the 1985 Act have nothing to do with the subject of vehicle tax. However, the 1985 Act has been enacted with the objects and reasons noted. As a vast number of employees were being engaged in Motor Transport Industry in the State in the private sector, the Government thought it necessary to provide for the constitution of a Fund to promote the welfare of such of the motor transport workers in the private sector who are not covered by the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and the Payment of Gratuity Act, 1972. The activities of motor transport workers are directly linked to the use and operation of the motor transport vehicles having permit issued under the 1988 Act in that regard. Under the said Act, the permit-holder is obliged to ensure that the vehicle tax is paid regularly. The law clearly provides for action to be taken against the motor transport vehicle for failure to pay vehicle tax including to reject renewal of the permit. The stipulation in the 1985 Act is in the nature of ensuring that the vehicle owner/permit-holder discharges both the liabilities and does not commit default in contributing to the welfare fund as also pay vehicle tax on time. Non-payment of vehicle tax may entail in stopping of motor vehicle by the Officers of Police or Motor Vehicles Department in exercise of power under Section 10 of the 1976 Act including to seize and detain the same pending production of proof remittance of tax as predicated in Section 11 of the Act. Additionally, the vehicle owner may have to suffer penalty under Section 16 and face prosecution under Section 17, besides the permit being rendered ineffective if tax is not paid by virtue of Section 15. Considering the scheme of the State legislations, it is incomprehensible to countenance the argument that the two provisions (of 1988 Act on the one hand and of 1976 Act and 1985 Act on the other) are inconsistent in any manner whatsoever. Whereas, the State enactments are complementary and can be given effect to without any disobedience to the Central legislations. The 1988 Act does not cover the field of the manner of levy of vehicle tax and collection thereof. The same is covered by the State legislations. Concededly, the appellants have not disputed their liability to pay the vehicle tax levied under the 1976 Act as well as to pay contribution towards the workers welfare fund under the 1985 Act. So understood, the real grievance in these appeals by the motor transport vehicle owners/permit-holders is about compelling them to pay the welfare contribution dues as a precondition for collection of vehicle tax. We have no hesitation in taking the view that such dispensation cannot be construed as unconstitutional. Further, such a plea cannot be countenanced at the instance of someone who otherwise concedes liability to pay both the dues towards welfare fund contribution and vehicle tax. It is beyond comprehension that the vehicle owner/permit-holder can be heard to argue that he would not pay the dues under the 1985 Act and, yet, would continue with the business of motor transport as usual in the State of Kerala by exploiting the workers on the specious plea that the validity of the permit to operate transport vehicle cannot be interdicted under a State legislation - The liability of the vehicle owner/permit-holder to pay welfare fund contribution as well as to pay vehicle tax arises under the legislation enacted by the State Legislature. As such, there is nothing wrong in State Legislature making it compulsory to pay outstanding welfare fund contribution first before accepting the vehicle tax which had become due and payable. In this view of the matter, it would be unnecessary to dilate on the argument regarding validity of Section 15 of the 1976 Act because of lack of Presidential assent after coming into effect of the 1988 Act. There are no hesitation in concluding that the provisions of the 1976 Act and the 1985 Act, enacted by the State Legislature, are only intended to ensure that the vehicle owner/permit-holder does not remain in arrears of either the welfare fund contribution or the vehicle tax both payable under the State enactments. These provisions are in no way in conflict with the law made by the Parliament (1988 Act). The State enactments do not create any new liability or obligation in relation to the permit issued under the 1988 Act (Central legislation), but it provides for dispensation to ensure timely collection of the welfare fund contribution as well as vehicle tax payable by the same vehicle owner/permit-holder. These appeals must fail and the same are dismissed with costs.
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2022 (7) TMI 1173
Jurisdiction - Complete waiver of pre-deposit required to be made under the Delhi Value Added Tax Act, 2004 not done by Delhi Value Added Tax, Appellate Tribunal, Delhi - whether the Objection Hearing Authority (OHA) had the power, under Section 74 of the Act, to remand the matter to the Assessing Authority? - if such a power was vested in the OHA, whether the assessment, pursuant to remand, had to be carried out within the limitation period prescribed under Section 34 of the Act? - HELD THAT:- In the matter at hand, there is an arguable defence available to the respondent/revenue. The matter needs deliberation and cogitation. The interests of both sides would be served if the appeal is disposed of with the following directions: (i) The appellant will deposit 5% of the disputed demand. (ii) The appellant will deposit the aforementioned amount, within four weeks from the date of receipt of a copy of the judgement. (iii) If the directions issued hereinabove, are complied with by the appellant, the Tribunal will hear the matter on merits. The appeal is disposed off.
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2022 (7) TMI 1172
Requirement of petitioner s authorized representative to make an appearance on the date stipulated - seeking direction for a refund of Rs. 2 crores which was made over as a pre-deposit for the purposes of having its objection heard by the Special Commissioner-I, Department of Trade and Taxes, GNCTD - also seeking grant of interest on the delayed release of pre-deposit i.e., Rs.2 crores - error in classification of goods - Apple Watches/transmission devices - HELD THAT:- The error concerning classification cannot be separated from the facts obtaining in the case - it is also noted that the concern that this decision would impact revenue collections in the future, has been neutralized, as watches now attract a uniform tax rate of 12.5%. Entry 11 obtaining in the Fourth Schedule at the relevant point in time, stands deleted w.e.f. 09.05.2016 - the revenue implications are confined to three quarters i.e., two quarters of Financial Year (F.Y.) 2015-2016 and the first quarter of F.Y. 2016-2017. Application disposed off.
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Indian Laws
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2022 (7) TMI 1171
Dishonor of Cheque - role of the accused/petitioners not clearly mentioned in the complaint - impleadment of petitioner in the complaint who had already resigned in 2009 and 2010 - issuance of cheque by the petitioners or not - legal notices not sent to the petitioners as well - HELD THAT:- It is settled law that in a complaint under Section 138/141/142 of the NI Act, the specific roles of the accused must be delineated in the complaint. It is generally mentioned in the complaint filed by the respondent that the accused No. 2 to 6 including the petitioners herein are jointly and severally liable for the offences. It is nowhere pleaded that the cheque that was dishonoured had been issued by any of the petitioners. The Form-32 produced before the learned Trial Court was by the complainant/respondent himself and he did not dispute the genuineness of that Form that he had placed on the record. When the document was not disputed and it is a form that is filed as a statutory requirement entailing consequences for false information being furnished to the Registrar of Companies, on the mere say so of the complainant that the present petitioners were still active Directors, the learned Trial Court chose to reject their plea for discharge. It was of the view that without the certified copies, the undisputed documents could not be accepted. The proof that they would have led as evidence would be the certified copies of the Form-32 filed before the ROC. They have now filed the certified copies before this Court. In fact, the learned Trial Court could have called for the same. The certified copy of Form-32 is of sterling quality and can be considered by this Court at this stage. It is clear that once the petitioners had resigned way back in 2009 and 2010 respectively, they could not have been responsible either for the issuance of the cheque dated 25th April, 2016 nor for its dishonor in April and May, 2016. They could not have been impleaded as accused in the complaint. The absence of a legal notice to these petitioners would suggest that the respondent was aware of the fact that they have resigned from the company long ago. Petition allowed.
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2022 (7) TMI 1170
Dishonor of Cheque - non-application of mind by magistrate before taking cognizance - Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- From the entire recital of petition of complaint and also from statement recorded by Magistrate during initial deposition, not even a single word has been used anywhere which can constitute offence under section 138 of N.I. Act. In the catena of judgments it has been reiterated that taking cognizance of an offence is not a mere formality. At the time of taking cognizance of the offence, the court is required to consider the averments made in the complaint. Taking of cognizance is thus a sine quo non or condition precedent for holding a valid trial. This is evident from the fact that chapter XIV (sections 190-199) of the code deals with under the heading conditions requisite for initiation of proceeding , then comes Chapter XVI (Section 204-210) under the heading commencement of proceeding before Magistrate - if initiation of proceeding has been made by Magistrate under section 138 of N.I. Act under Chapter XIV of the code, Magistrate cannot issue process quoting section 323/498A/500/34 I.P.C. by dint of section 204 under aforesaid chapter XVI of the code, because it can be highly prejudicial for the accused, who has right to know the cause of summoning. It is well-settled that when a Magistrate receives a complaint, he is not bound to take cognizance unless the fact alleged in the complaint discloses the commission of offence. This is clear from the use of the words 'may take cognizance' in section 190 of the code. The word 'may' gives a discretion to the Magistrate in the matter - when on receiving a complaint, the Magistrate applies his mind for the purpose of proceeding under Section 200 and the succeeding sections in Chapter XV of the Code, he said to have taken cognizance of the offence within the meaning of Section 190(1) (a) of Code of Criminal Procedure. In the present case, Magistrate received a complaint which discloses an allegation that the petitioner herein has defamed her inter alia by describing her as ex-wife in open place and also by threatening her and if the Magistrate on receiving such complaint would have spent few seconds in order to go through the same and further had he spent his time to apply his judicial mind, then by no stretch of imagination, he could have observed that the case filed under section 138 of N.I. Act - Cognizance is taken at the initial stage when the Magistrate applies his judicial mind to the facts mentioned in the complaint. Having considered the aforesaid facts and circumstances of the case and also considering the fact that this Court under section 482 Cr.P.C. not competent to pass a direction upon the Magistrate to take cognizance upon a complaint on a particular section from a particular statute, the remedy of the opposite party no. 1, who failed to question the order No. 1 passed by the Magistrate for not taking cognizance of the offence in respect of which she lodged the complaint against the petitioner, is to file a fresh complaint against the petitioner on the basis of selfsame allegation, if so advised. Application disposed off.
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2022 (7) TMI 1169
Dishonor of Cheque - Territorial Jurisdiction - Maintainability of the criminal proceeding and issuance of notice - cause of action vis-a-vis the alleged transactions between the parties arose within the State of Orissa - Notice pending in the file of learned Chief Metropolitan Magistrate, Vishakhapatnam - whether this Court exercising power under Section 482 Cr.P.C. can set aside or quash a criminal proceeding pending before the court of the Chief Metropolitan Magistrate, Vishakhapatnam in the peculiar facts and circumstances of the case? - HELD THAT:- In the present case, as it appears from Annexure-1 series, the alleged cheque stated to have been presented at Vishakhapatnam, if at all the averments therein are to be believed and accepted at its face value. If such is the case, then OP No. 1 can be said to have rightly filed the complaint at Vishakhapatnam where his banker is situated. The transactions might have taken place in Orissa and for that, civil litigations could have been brought before any court situated at such places where a part of cause of action arose but for the purpose of a criminal action under Section 138 of the N.I. Act, in view of Section 142(2), it has to be at a place where the cheque was presented and dishonoured. In the instant case, the transactions stated to have taken place within the State but the alleged cheque as claimed by OP No. 1 stood dishonoured at Vishakhapatnam, whereafter, the complaint was filed in the court of Chief Metropolitan situated there. The Court is of the considered view that the petitioner would have to respond to the notice in question which has been received under Annexure-2 or if so advised, may also question the maintainability of the complaint on merits by approaching the High Court of Andhra Pradesh since above is the prima facie view of this Court which is based on the available materials. Petition dismissed.
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