TMI Tax Updates - e-Newsletter
August 1, 2023

Case Laws in this Newsletter:

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

Articles

1. Limiting Judicial Intervention in relation to powers of arrest under Writ Jurisdiction

   By: Bimal jain

2. LEASE RENT - AN OPERATIONAL DEBT?

   By: DR.MARIAPPAN GOVINDARAJAN

3. No service tax is to be levied on renting immovable property when sharing profits

   By: Bimal jain

News

1. Gross Fixed Capital Formation (GFCF) in Indian economy increases from Rs. 32.78 lakh crore (constant 2011-12 prices) in 2014-15 to Rs. 54.35 lakh crore in 2022-23 (Provisional Estimates)

2. 6,23,10,598 loans sanctioned under Pradhan Mantri MUDRA Yojana (PMMY) in FY 2022-23

3. Monthly Review of Accounts of Union Government of India upto the month of June, 2023 for the Financial Year 2023-24

4. Impact assessment of National Logistics Policy undertaken at Inter-Ministerial Meeting

Notifications

DGFT

1. 22/2023 - dated 31-7-2023 - FTP

Amendment in Export Policy of Food Supplements containing botanicals

GST - States

2. F.12(11)FD/Tax/2023-28 - dated 26-7-2023 - Rajasthan SGST

Seeks to amend Notification No. F.12(56)FD/Tax/2017-Pt-III-137 dated 31.12.2018 regarding amendment in the definition of “Foreign Trade Policy” and “Handbook of Procedures”

3. F.12(11)FD/Tax/2023-27 - dated 26-7-2023 - Rajasthan SGST

Seeks to amend Notification No. F.12(56)FD/Tax/2017-Pt-I-51 dated 29.06.2017 regarding amendment in the Annexure III of the said notification

4. F.12(11)FD/Tax/2023-26 - dated 26-7-2023 - Rajasthan SGST

Seeks to amend Notification No. F.12(56)FD/Tax/2017-Pt-I-50 dated 29.06.2017 regarding extension of GST exemption on satellite launch services supplied by private sector

5. F.12(11)FD/Tax/2023-25 - dated 26-7-2023 - Rajasthan SGST

Seeks to amend Notification No. F.12(56)FD/Tax/2017-Pt-I-49 dated 29.06.2017 regarding declaration filed by GTA every year

6. F.12(11)FD/Tax/2023-24 - dated 26-7-2023 - Rajasthan SGST

Seeks to make amendments in Notification No. F.12(56)FD/Tax/2017-Pt-I-40 dated 29.06.2017- State Tax (Rate)

Highlights / Catch Notes

GST

• Court Rules E-way Bills Prove Ownership; Orders Release of Wrongfully Seized Goods After Erroneous Penalty by Revenue Authority.

  Case-Laws - HC : Levy of penalty upon the petitioner by not treating the petitioner to be the owner of goods - seeking release of seized goods - The E-way Bills being the documents of title to the goods were accompanying the goods hence, the conclusion of the revenue that the petitioner was not the owner of the goods is patently erroneous. - HC
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• Court Overturns Detention of Goods After E-Way Bill Expired Due to Vehicle Fault; Orders Penalty Refund.

  Case-Laws - HC : Detention of goods alongwith vehicle - expiry of e-way bill - mechanical fault in the vehicle transporting the goods - period of expiry of e-way bill is very minor i.e. just only three hours and the reason for such expiry is supported with relevant documents - Order set aside - Amount of penalty as deposited directed to be refunded - HC
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• Anti-Profiteering Provisions Not Applicable: Section 171 CGST Act Excludes Projects Beyond Investigated "Tinsel Town" Case.

  Case-Laws - CCI : Profiteering - The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent is not executing any project other than the project “Tinsel Town” which has already been investigated and profiteered amount has also been determined by the NAA - CCI
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Income Tax

• High Court Orders Reconsideration of Tax Demand Stay Petition u/s 220(6); Lack of Justification by Tax Officer Noted.

  Case-Laws - HC : Stay of demand - recovery proceedings - scope and ambit of enabling provision namely Section 220(6) - petitioner apart from other reliefs also prayed for not insisting to take 20% of the demand and grant complete stay without any deposit - ITO / AO has not assigned any 'reason' as to why stand taken by the petitioner was not treated to be trustworthy - Matter restored back for reconsideration - HC
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• Subsidy Receipts Misclassified as Revenue: Section 2(24)(xviii) Inapplicable Due to Assessment Year Preceding Proviso Insertion.

  Case-Laws - AT : Nature/Character of receipt - subsidy receipt - revenue or capital receipt - Applicability of purpose test - section 2(24)(xviii) would be attracted, in principle, but would not apply as the assessment year under consideration is prior to the insertion of the proviso. It is, therefore, held that the authorities below were not justified in treating the amount of subsidy as a ‘Revenue’ receipt chargeable to tax. - AT
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• Undisclosed Income Linked to WhatsApp Documents u/ss 69A, 69C; Incriminating Evidence Aligns with Assessee's Records.

  Case-Laws - AT : Addition u/s 69A or 69C - WhatsApp documents relied upon - as rightly pointed out by the CIT(A), the details to be found in this WhatsApp document tallies with the dates of borrowings as admitted by the assessee in its books of accounts. - Undoubtedly, this is an incriminatory material, and it is not open for the assessee to challenge the reliance of Revenue on this document, without explaining the existence of contents of the document. - AT
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• Late Tax Audit Report Penalty Waived if Loss Return Accepted and Report Available During Assessment Proceedings.

  Case-Laws - AT : Penalty u/s 271B - tax audit report could not be filed on time - when the loss return has been accepted by the Revenue and the audit report filed belatedly was available with the AO during the assessment proceedings, we are of the view that no adverse inference can be drawn against the assessee for not filing the audit report within the prescribed time. - AT
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• Court Rules Section 11 Explanation 5 of Income Tax Act Doesn't Impact Assessment Year 2015-16; Prior Year Deficits Stand.

  Case-Laws - AT : Exemption u/s 11 - Accumulation of income - Carry forward of deficit - Carry forward of excess expenditure carried forward from the earlier assessment years - The Explanation 5 to Section 11 as inserted by the Finance Act 2021 w.e.f 1/04/2022 won’t any bearing for the impugned assessment year 2015-16. - Benefit of excess expenditure in the earlier years cannot be denied - AT
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• ATMs Classified as Plant and Machinery for Higher Depreciation Rate of 40% Instead of 15% for Tax Purposes.

  Case-Laws - AT : Depreciation on ATMs - to be treated as computers or plant and machineries - @15% or 40% - AO directed to allow higher depreciation of 40% as claimed by the assessee on ATM machine - AT
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• Tax Penalty u/s 271I Deleted: Retrospective Effect of Curative Amendments Confirmed by CIT(A) Decision.

  Case-Laws - AT : Penalty u/s 271I - Penalty for failure to furnish information or furnishing inaccurate information u/s 195 - The amendment though came into effect from 16th December 2015, but it is a settled law that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended. - Order of CIT(A) deleting the penalty sustained - AT
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• Court Reviews Validity of Assessment Reopened u/s 147 for Unexplained Cash Credits in Bank Deposits.

  Case-Laws - AT : Reopening of assessment u/s 147 - unexplained cash credit - We fail to understand that without taking note of the quantum of income returned to tax, how could the AO have formed belief of escapement of income to the extent of cash found deposited in the bank account of the assessee. - AT
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Customs

• Imported Goods Classification: Transmission Shaft Articles Excluded from Chapter 87 Due to Section XVII Rules.

  Case-Laws - AT : Classification of imported goods - goods are for use solely or principally with the Transmission Shafts which may be used in Motor Vehicles - In view of the specific exclusion of 'articles of heading 8483' from the ambit of the Section XVII under which chapter 87 falls, the impugned goods will not fall under Chapter 87 - AT
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• Roasted Cashews Tax Exemption Allowed Despite Inconclusive CEPCI Report on Cardanol Presence and Impact of Roasting.

  Case-Laws - AT : Benefit of exemption - roasted cashew - On going through the test report submitted by the CEPCI, Kerala there would not be any hesitation to say that the report creates more confusion than giving a fonding/opinion on the product - it can be said that presence of Cardanol was noticed and if the sample is roasted traces of Cardanol will be less but the report lacks the basic clarity - Benefit of exemption allowed - AT
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• Self-ordering kiosks in parts classified as "Cash Register" under Sub-heading 84705010, eligible for exemption benefits.

  Case-Laws - AAR : Classification of goods - Self-ordering Kiosks' imported in disassembled form into India, where Display Unit, Connection Box & Stand would be imported simultaneously, in a single shipment, then 'Self-ordering Kiosk' with components, display unit and connection box will have the essential character of complete or finished article i.e. 'Cash Register' and merit classification under Sub-heading 84705010 - Benefit of exemption available - AAR
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• Customs Dispute: Revenue Department's Appeal Overlooks Key Distinctions in Valuation of Imported Barge Aqua Float 300.

  Case-Laws - AT : Undervaluation of goods - import of a barge, Aqua Float 300, towed by tug, Fordeco 61 - enhancement of value - The appeal of Revenue appears to have ignored this fundamental and crucial difference between adjustment of transaction value for cost and services and alternatives to declared price upon rejection under rule 10A of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988. - AT
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IBC

• NCLT Dismisses CIRP Application: Appellant Failed to Prove Direct Loan to Corporate Debtor, No Corporate Veil Piercing.

  Case-Laws - AT : Initiation of CIRP - Given the fact that the Appellant has failed to establish that he had given any loan to the Corporate Debtor directly, it does not stand to reason for him to press for piercing the corporate veil to alleviate the burdens of his financial misadventure - NCLT rightly rejected the application - AT
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PMLA

• Money Laundering Penalty Unjustified for Reporting Entities Acting in Good Faith Belief of Non-Compliance Requirement.

  Case-Laws - HC : Money Laundering - Levy of penalty - Reporting Entity / Agency - PayPal - the imposition of penalty would also not be justified where a person is found to have proceeded on the bona fide belief that it was not covered by the provision or legally obliged to effect compliance. - HC
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• Court Examines If PayPal is a Reporting Agency Under PMLA, Affecting Its Money Laundering Compliance Obligations.

  Case-Laws - HC : Money Laundering - Whether an Online Payment Gateway Service (OPGSP) could be said to be a Reporting Agency under the PMLA? - It is the case of the respondents that PayPal is a payment system operator and thus a reporting entity. - PayPal is liable to be viewed as a “payment system operator” and consequently obliged to comply with reporting entity obligations as placed under the PMLA. - HC
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Service Tax

• Natural Justice Breach: Petitioner Not Served Show Cause Notice; Matter Restored for Reconsideration Under General Clauses Act.

  Case-Laws - HC : Principles of natural justice - Copy of the SCN and order was not served to the petitioner - Section 27 of the General Clause Act will not come in aid to the respondent. The respondents failed to show any material that the impugned order dated March 6, 2018 was served upon the petitioner - Matter restored back - HC
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• Set-Top Box Supply Not Taxable as Broadcasting Service; Exempt from Service Tax Due to Right-to-Use Transfer.

  Case-Laws - AT : Broadcasting services - STGU services - The supply of STBs cannot be categorized as a taxable service under the definition of ‘broadcasting’. Even considering the same as a taxable service under the category of STGU, the same cannot meet the requirement of levy of service tax in the case of the appellants inasmuch as the right to use the STBs were transferred by the appellants to the subscribers. - AT
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Central Excise

• Reversal of CENVAT Credit: Absolute Exemption Leads to Lapse, Partial Exemption Requires Reversal of Specific Input Credits.

  Case-Laws - AT : Reversal of CENVAT credit - New exemption from duty - As per the provision of section 11, only in a case where the exemption which is opted for, if it is absolute exemption, the remaining amount of cenvat credit after reversal as per clause (i) shall lapse, whereas if the exemption is not absolute only requirement is to reverse the credit attributed to input as such, input in process and input contained in the finished goods lying on the date of opting of exemption notification. - AT
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• Refund Denial of Cenvat Credit on DEEC/Advance License Inputs Unjustified Without Export Failure Allegation.

  Case-Laws - AT : Refund of accumulated Cenvat Credit - whether inputs procured under DEEC/ Advance License Scheme - since the Department has not specifically alleged that the appellant had not exported the finished goods, denial of benefit of refund on the ground that the inputs procured under the DEEC/Advance License Authorization Scheme will not be sustained, inasmuch as the statute does not debar such availment of benefit by the exporter. - AT
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VAT

• Customized Software Subject to Sales Tax Under KGST Act, Even if Tailored for Specific Client Needs.

  Case-Laws - HC : Goods - activity of developing and supply of customised software to its clients - Merely because the software developed by the respondent/assessee in the instant case was customised for a particular user and was not sold to other users, the charges collected from the customer cannot escape the levy of sales tax under the KGST Act. - HC
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Case Laws:

• GST

• 2023 (7) TMI 1294
  Levy of penalty - seeking release of detained goods - petitioner submits that the petitioner intends to file an appeal, for which requisite amount has already been deposited by him - HELD THAT:- This petition is disposed of permitting the petitioner to file an appeal within a period of three weeks from today and in the eventuality of doing so, the Appellate Authority shall consider the claim of the petitioner on the merits of the case in accordance with law ignoring the point of limitation. As the goods are perishable in nature, the Appellate Authority to take prompt steps to decide the appeal and in case any application is filed within a period of ten days from today seeking interim relief the same may also be considered expeditiously in accordance with law.

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• 2023 (7) TMI 1293
  Cancellation of registration of petitioner - rejection on the ground that registration was obtained by means of fraud, wilful misstatement or suppression of facts - HELD THAT:- It would not be appropriate to enter into the merits of the contentions raised by the Revenue regarding the stand of the petitioner at this stage. Suffice it to state that the order at Annexure-A dated 12.06.2023 is to be set aside on the ground that order is passed on grounds not made out in the show-cause notice at Annexure-D. However, the show-cause notice at Annexure-D would stand subject to the condition being imposed by this Court, that the respondent-Revenue to furnish the material in support of Annexure-D to the petitioner, upon the petitioner marking his appearance before the respondent-Commercial Tax Officer on 05.08.2023. Though the learned counsel for the petitioner submits that by virtue of the Order at Annexure-A being set aside, order of suspension requires to be revoked - Petition disposed off.

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• 2023 (7) TMI 1292
  Withholding of GST amount - impact while paying bills from the month of September, 2019 - liability to pay GST shall be that of the Respondents in terms of the amended work order or not - reimbursement of GST - case of the petitioner is that there was no confusion till the letter of award was issued, inasmuch as, the Letter of Award was issued pre-enactment of GST - violation of principles of promissory estoppel - HELD THAT:- After analysing different clauses of tender agreement especially original Clause 10.7 of NIT and the subsequent amendment and also the pre-bid clarification dated 06.09.2016; it appears that as per the agreed terms of the contract, the respondent No. 2 is legally bound to pay/reimburse the impact of GST on all affected transactions under the contract in totality for equitable adjustment in the contact price. The words impact of GST on affected transactions under the contract in totality read in its ordinary natural sense would include all affected transactions in totality under the contract, going by the plain words. The intentions of the parties to reimburse/pay and receive the impact of GST on direct transactions and also indirect transactions (bought out items) is clear from the deletion of portions from Clause 10.7 of GCC which restricted reimbursement of GST only to direct transactions. After deletion of the said portion, the word affected transactions and in totality and equitable adjustment has to be interpreted in the context of amended Clause 10.7. It is evident that the portions of the original Clause 10.7 which carved out an exception to indirect transactions (bought out items) for non-reimbursement of GST, is deleted and is no more part of the agreed terms of the contract. The Clause 31 of the GCC cannot be read in such a manner to bring back what is deleted by the parties as per agreed terms and do violence with amended Clause 10.7, Pre-bid clarification and Clause 28 of LOA. The Clause 31 of the GCC has be to be read in the context of amended Clause 10.7 Pre-bid clarification and Clause 28 of LOA and in light of clear intention of the parties to delete the portion which barred reimbursement impact of GST on indirect transactions. It is further apparent that the contract in the instant case is supply contract, are for sale of goods, hence, in any case, in terms of Section 64 A of the Sale of Goods Act, 1930 the petitioner is entitled to GST impact on the indirect transactions - the actions of the respondent No. 2 violates principles of promissory estoppels and contrary to the doctrine of legitimate expectations of the petitioner and hence, offends Article 14 of the Constitution of India. The petitioners having shifted their position in view of the pre-bid meeting and clarification, now at this stage, the licensee cannot take a U-Turn by not paying the GST impact. The contention of the Respondent No. 2 that the GST was reimbursed as indirect transaction provisionally is extraneous and does not bear out from the agreed terms but the Respondent No. 2 remained silent - In the case of MAHABIR AUTO STORES VERSUS INDIAN OIL CORPN. [ 1990 (3) TMI 346 - SUPREME COURT] it is held by the Hon ble Apex Court that State or its instruments entering any commercial transaction under Article 298 of the Constitution of India, are State under Article 12 and its actions must be reasonable, fair and just even when no formal contract has been entered into between the parties and it should inform and take into confidence the affected party when any adverse action is contemplated - Similar view was taken in the case of SECURITY PRINTING MINTING CORPN. OF INDIA LTD. VERSUS GANDHI INDUSTRIAL CORPORATION [ 2007 (10) TMI 9 - SUPREME COURT] wherein it is held by the Hon ble Supreme Court that principles of sub-silentio not applicable when terms and condition are well known and clearly understood between parties. In the instant case there is no ambiguity or conflict between the contract documents, hence, the order of precedence under Article 1.2 would not apply. The Respondent No. 2 under Para 10(i) of the Counter Affidavit has accepted that stipulations/documents do not reveal any sort of contradiction amongst them. In fact, both the clauses are seen supporting and complementing each other, which have been just re-iterated in the REC S Letter dated 30-06-2016. With regard to the contention of the Respondents on the question of maintainability; now it is well settled that the writ in contractual matters against public authority or instrumentality or agencies of state are State within the meaning of Article-12 of the Constitution of India and hence are maintainable. Now the law is no more res integra, even in contractual matters the writs would maintainable against the Government or instrumentality or agencies of the Government. Even in cases of money claim writ against State within the meaning of Article 12 of the Constitution of India would be maintainable. In the case at hand, the acts and actions of the Respondents are in derogation to the Article 14, 19(1)(g), 21 and 300A of the Constitution of India. The respondents were not justified in withholding the amount of GST impact and the same is arbitrary, violative and against their own terms of agreement - in view of introduction of GST during the continuance of the ongoing contract, the liability to pay GST shall be that of the Respondent JBVNL in terms of the amended work order incorporating the impact of GST - the matter is remitted back to the Respondent JBVNL to calculate and pay the withheld amount which has been deducted from various bills of the petitioner since September, 2019 till the date of actual payment as the petitioner is entitled for reimbursement of GST along with statutory interest in terms of the GST Act, 2017 read with the Rules framed thereunder. Application disposed off.

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• 2023 (7) TMI 1291
  Levy of penalty upon the petitioner by not treating the petitioner to be the owner of goods - seeking release of seized goods - intent to evade or not - it is contended that the petitioner is the owner of the goods and is ready and willing to deposit penalty under protest under Section 129(1) (a) to get the goods released - perishable goods - HELD THAT:- Strong reliance has been placed upon the decision of this Court in M/s Sahil Traders Vs. State of U.P. [ 2023 (6) TMI 360 - ALLAHABAD HIGH COURT] which applies squarely to the case at hand. Sri Ankur Agarwal, learned counsel representing the revenue has vehemently opposed the writ petition by submitting that the petitioner has rightly been held not the owner of the goods and the penalty has rightly been imposed upon the petitioner under Section 129(1) (b). He, however, could not dispute the fact that intention to evade tax is a per-requisite for imposition of penalty under Section 129 of the Act. The E-way Bills being the documents of title to the goods were accompanying the goods hence, the conclusion of the revenue that the petitioner was not the owner of the goods is patently erroneous. Consequently, the penalty proceedings were liable to be initiated under Section 129(1)(a) and not 129(1)(b) as has been done in the present case. Thus, expressing full agreement with the view expressed by the Coordinate Bench of this Court in the case of M/s Sahil Traders, the impugned penalty order is set aside - The Respondent No.2 is directed to pass fresh order treating the petitioner to be eligible to the benefit of Section 129(1) (a) of the Act. The writ petition is allowed.

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• 2023 (7) TMI 1290
  Entitlement for difference of Goods and Service Tax paid by him after issuance of work order pursuant to the circular dated 13.07.2022 issued by the Ministry of Finance, Government of India - HELD THAT:- Considering the nature of grievance raised by petitioner based on the notification issued by Government of India and also Clause 7.2 of the tender document without entering into merits on the claim of petitioner, this petition is disposed off permitting petitioner to submit detailed representation before the respondents No.4 to 7 and in the event, the representation is submitted, the concerned authorities shall consider and decide the same strictly in accordance with law expeditiously preferably within a period of four weeks from the date of receipt of representation keeping in mind the circular dated 13.07.2022 issued by Government of India as also the Clause 7.2 of the tender documents. This petition stands disposed off.

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• 2023 (7) TMI 1289
  Detention of goods alongwith vehicle - expiry of e-way bill - mechanical fault in the vehicle transporting the goods - HELD THAT:- Taking into consideration that period of expiry of e-way bill is very minor i.e. just only three hours and the reason for such expiry is supported with relevant documents, the aforesaid impugned order of the adjudicating authority and the order of the appellate authority are set aside and as a consequence petitioner will be entitled to get refund of the penalty and tax in question expeditiously, preferably within a period of one week from the date of communication of this order. Petition disposed off.

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• 2023 (7) TMI 1288
  Profiteering - existence (or not) of projects other than the project Tinsel Town being constructed by the Respondent under single GST Registration - liability to pass on the benefit of ITC in respect all the other Projects/Blocks to the buyers, or not - HELD THAT:- The Respondent is executing a single project namely Tinsel Town under GSTIN 27AAHFN999N1Z3. The above project is being executed by the Respondent in two Phases i.e. Phase I Phase II. The Phase I II of the above project has been registered with Maharashtra RERA under Registration No. P52100000392 P52100017178. The NAA vide its Order in SHRI SHUBHAM SAXENA, SH SHYAM AGGARWAL S-201, SH. PRAKHAR VARSHNEY, A201, DIRECTORATE GENERAL OF ANTI-PROFITEERING NEW DELHI VERSUS M/S NEW WORLD REALTY LLP [ 2022 (8) TMI 1413 - NATIONAL ANTI-PROFITEERING AUTHORITY] has already determined profiteered amount of Rs. 1,45,28,245/- in respect of the above two phases of the project Tinsel Town . It is also observed by the Commission that the Respondent is not executing any other project other than the project Tinsel Town under the same GSTIN 27AAHFN999N1Z3 and the same has been verified by the DGAP by visiting the website of Maharashtra RERA. From the website of Maharashtra RERA, it has been observed that the Respondent has obtained Tower-wise registration of two phases of the project Tinsel Town and no other project than the above project is being executed by him under the above GSTIN. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent is not executing any project other than the project Tinsel Town which has already been investigated and profiteered amount has also been determined by the NAA vide its Order in Shri Shubham Saxena. Accordingly, the proceedings initiated against the Respondent under Rule 133 (5) of the CGST Rules, 2017 are hereby dropped.

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• Income Tax

• 2023 (7) TMI 1287
  Denial of benefit of House rent allowance (HRA) to both husband and wife - recovery from the leave encashment to be paid to the petitioner of house rent was for the period from February 1986 up to March 2014, when the petitioner retired - both the petitioner and his wife have been residing in the same house belonging to the late father of the petitioner, but house rent allowance has been paid to the wife of the petitioner from February 1986 as well as to the petitioner too - As decided by HC, Government Order specifically provides that if both the husband and wife are in government service and if they are residing in the same accommodation, then house rent allowance can be claimed only by one of them and also provides that the same conditions would apply if the spouse was employed in Local Bodies, Educational Institutions, Universities, Public Enterprises, Corporations etc, etc and wife of the petitioner was an employee of the Oriental Bank of Commerce, an enterprise of the Central Government HELD THAT:- We do not find any reason to interfere with the order impugned in this petition. The special leave petition is, accordingly, dismissed.

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• 2023 (7) TMI 1286
  Bogus loss incurred in penny stock - addition made as transaction was pre-arranged as well as sham and was carried out through penny scripts companies / paper companies - ITAT deleted addition - whether the assessee genuinely purchased and sold the shares of the above referred two companies through stock exchange? - HELD THAT:- As the conclusion drawn by the AO was on the assumption that there was an agreement to convert unaccounted money by taking fictitious LTCG. On appreciation of facts, tribunal held that the decision of the AO was unsupported by any material on record and the finding was purely on assumption basis. Tribunal has also observed that the respondent had successfully discharged the initial burden cast upon it under the provisions of Section 68 - It is not in dispute that the shares of the aforesaid two companies were purchased online and the payments were made through banking channel and the shares were dematerialized and the shares have been routed from demat account and the consideration was also received through bank channels. AO does not have any independent source or evidence to show that there was an agreement between the assessee and any other party. The learned tribunal has also observed that in absence of any specific finding against the assessee, the assessee cannot be held to be linked to the wrong acts merely on the basis of surmises and assumptions. No substantial question of law.

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• 2023 (7) TMI 1285
  Stay of demand - recovery proceedings - scope and ambit of enabling provision namely Section 220(6) - petitioner apart from other reliefs also prayed for not insisting to take 20% of the demand and grant complete stay without any deposit - Respondent No.3 rejected the prayer of petitioner and directed him to deposit 20% of disputed demand - HELD THAT:- Respondent No.3 has not taken pains to deal with the factual backdrop, the relevant statutory provision and the judgments cited by the petitioner in support of his contention in the said application (Annexure P/4). While reaching to a conclusion , the respondent No.3 has not assigned any reason as to why stand taken by the petitioner was not treated to be trustworthy by the respondent No.3. The reasons are held to be heart beat of conclusions. In absence of reasons, conclusion cannot sustain judicial scrutiny. Apex Court in the case of M/s. Kranti Associates Pvt. Ltd and another Vs. Masood Ahmed Khan and others [ 2010 (9) TMI 886 - SUPREME COURT] emphasized the need of assigning reasons in administrative, quasi-judicial and judicial function/order. Thus it is be clear that the impugned order is devoid of any reason. Thus, it deserves to be jettisoned. Accordingly, the impugned order dated 03.01.2023 is set aside. The matter is restored in the file of respondent No.3 at the stage of consideration of application (Annexure P/4). Since that order was passed because of non-payment of disputed amount of 20% and this Court while setting aside the impugned order dated 03.01.2023 is kind enough in remanding the matter for fresh consideration, the said attachment order may also be stayed till fresh decision.

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• 2023 (7) TMI 1284
  Application for settlement of cases u/s 245C - Application abated in accordance with the provisions of Section 245HA(1)(ii) - as mandated additional tax on the income disclosed in such application and the interest thereon had to be paid on or before 31st day of July, 2007 - HELD THAT:- Petitioner had complied with the provisions of Section 245D(2D) of the Act by paying the additional tax and interest on the income disclosed by him in his Applications before 31st July, 2007 as per his calculations, as required by Section 245D(2D) of the Act, and that is what was required of the Petitioner. Therefore, his Applications have to be allowed to be further proceeded with. This is more so, as, at no point of time prior to 31st July, 2007, the Respondents intimated to the Petitioner that the taxes and interest paid by him on the additional income disclosed by him in his Applications were not correct. In our view, the fact that Respondent No. 2 intimated to the Petitioner by his letter dated 18th December 2007 what, according to Respondent No. 2, was the correct tax and interest to be paid by the Petitioner under the provisions of Section 245D(2D is irrelevant. It is absurd to interpret the provisions of Section 245D(2D) as suggested by Respondents. How is one expected to know before 31st July 2007, the figure disclosed only in December 2007. Therefore, it says disclosed in the application. Thus the Order which holds that the proceedings arising out of the two Applications filed by the Petitioner had abated in accordance with provisions of Section 245HA(1)(ii) of the Act, is erroneous and contrary to the provisions of Section 245D (2D) of the Act. Petitioner had complied with the requirements of Section 245D(2D) of the Act, Respondent No. 1 ought to have allowed the Applications of the Petitioner to be further proceeded with and wrongly came to the conclusion that the same had abated in accordance with the provisions of Section 245HA(1)(ii) .

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• 2023 (7) TMI 1283
  Penalty u/s 271(1)(c) - Offences u/s 276 C(1) and 277 - petitioners have not explained the source of income for incurring cash expenses - Tribunal factually found that there is no material for cash payment made by the petitioners and in these circumstances, allowed the Appeal - HELD THAT:- As applying the ratio laid down in Radheshyam Kejriwal s case [ 2011 (2) TMI 154 - SUPREME COURT ] when the findings of the Income Tax Appellate Tribunal are in favour of the petitioners, a criminal prosecution on the same set of facts is not maintainable and is unsustainable and the same is liable to be quashed. Decided in favour of assessee.

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• 2023 (7) TMI 1282
  Assessment u/s 144C(1) r.w.s. 92C(a) - Validity of Order u/s 254 in the context of Section 92C(a) - case of the petitioner is that after an order was passed u/s 254 in the context of Section 92C(a) first respondent ought to have passed an Assessment Order, before the expiry of nine months from the end of the financial year - HELD THAT:- This writ petition is opposed by the Standing Counsel for the respondents stating there is no clarity as to whether the amount that has been demanded for the AY 2013-2014 is inclusive of the amount that was added in the Assessment Order dated 09.12.2016, which has been set aside by the Appellate Tribunal. The demand that has been made prima facie appears to be contrary to the order passed by the Appellate Tribunal. Be that as it may, this is a fit case for giving a Mandamus to the respondents to consider and pass appropriate orders on the representation dated 08.06.2023 of the petitioner. Petitioner s representation shall be disposed by the first respondent within a period of six weeks from the date of receipt of a copy of this order. The giving effect to order shall be passed by the second respondent within a period of twelve weeks from the date of receipt of a copy of this order. The first respondent shall pass appropriate assessment order within a period of four weeks thereafter. This order shall be communicated to the third respondent and the third respondent. Adjustment of the amounts due in respect of the Assessment Year 2013-2014 shall be only after appropriate orders are passed by the second respondent and by the first respondent in terms of the timelines stipulated as above.

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• 2023 (7) TMI 1281
  Nature/Character of receipt - subsidy receipt - revenue or capital receipt - Applicability of purpose test - HELD THAT:- The amount of subsidy received by the assessee is towards the investment made in expansion of its industrial unit under the Package Incentive Scheme 2001. Applying the purpose test, it would be characterised as a Capital receipt. Further, it is not the case of the AO that Explanation 10 to section 43(1) is attracted. Thus, section 2(24)(xviii) would be attracted, in principle, but would not apply as the assessment year under consideration is prior to the insertion of the proviso. It is, therefore, held that the authorities below were not justified in treating the amount of subsidy as a Revenue receipt chargeable to tax.

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• 2023 (7) TMI 1280
  Unexplained cash credit u/s 68 - reliance on the report of Inspector that parties are not available at the address provided by assessee - Rejection of books of accounts - HELD THAT:- AO has not referred the contents of reply and conveniently overlooked and simply rejected such contention. AO straightway proceeded to make the addition u/s 68 by making reliance on the report of Inspector that parties are not available at the address provided by assessee. It is settled position that for making addition u/s 68, maintenance of books of account is compulsory and any sum found to be credited and the name of creditors which remained outstanding is treated as cash credit. Assessee right from the beginning has a clear stand that he made sales to the impugned debtors in A.Y. 2015-16 and the amount was reflected in sundry creditors in the audited balance sheet as on 31/03/2015 so the books of account of current year cannot be rejected when books of account of preceding year was duly audited and debtors were appearing in the audited financial statement. Sales made during the earlier year were supported by bills and challans. We find merit in the contention of assessee that in the course of assessment proceedings, the assessee filed sales register for financial year 2014-15, copies of bills and ledger accounts of the parties. Assessee also filed cash book of current year where sale proceeds were received from debtors and creditors. No defects were found by AO in such cash book. AO made addition u/s 68, which is not justifiable as the impugned amount was brought to tax twice, firstly on account of sales and secondly by treating it as unexplained. We find merit in the alternative plea of the ld AR for the assessee that if the receipts from the debtors are not accepted as genuine, the deduction should be given for trading loss as in case of such hypothesis amount of cash on hand added by Assessing Officer is not existent and therefore, deduction of trading loss/bad debts is required to be given against deemed income. Thus, in view of the afforesaid factual and legal position, the grounds of appeal raised by the assessee are allowed.

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• 2023 (7) TMI 1279
  Condonation of filing of appeal before the ITAT - monetary limits for filing of Departmental appeals before the ITAT - appeal of the Department is time barred by 363 days - DR submitted CBDT vide Circular No.23 of 2019 dated 06.09.2019 had mandated that notwithstanding anything contained in Circular issued u/s. 268A specifying monetary limits for filing of Departmental appeals before the ITAT, High Courts and SLPs/appeals before the Supreme Court, appeals may be filed on merits as an exception where the Board, by way of special order directs filing of appeal on merits in cases involved in organized tax evasion activity - HELD THAT:- The appeal was filed on 07.02.2020. The order appealed against was received by the Department on 11.12.2018 and, therefore, the last date for filing the Departmental appeal before the ITAT was 09.02.2019. Circular No. 23 of the CBDT is dated 06.09.2019 and the OM is dated 16.09.2019. Therefore, the Circular based on which the Department has filed this appeal was issued almost seven months after the expiry of the limitation period for filing of the appeal. Even after the issuance of the said Circular and OM, the present Departmental appeal was filed on 07.02.2020 i.e. almost five months after the issuance of the said Circular. Filing of the appeal five months after the issuance of Circular has not been suitably explained by the Department. Therefore, we are unable to consider the prayer of the Department to condone the delay and we dismiss the appeal as being unadmitted and being barred by limitation. Decided against department.

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• 2023 (7) TMI 1278
  Addition u/s 68 - Unsecured Loans transaction - as per assessee the first proviso to sec 68 is restricted to credits on account share application money, share capital and share premium etc. and this does not apply to transactions in the nature of unsecured loans - HELD THAT:- CIT(A) confirmed the addition without proper appreciation of facts and relevant law and the same is based on the incorrect and wrong factual findings. CIT(A) wrongly noted that the assessee did not requested to provide cross examination and wrongly noted that the search was carried out in the premises of Anirudh Joshi whereas in fact the search was carried on in Skylarc Group on 25.04.2017 and these incorrect facts have not been disputed by the ld. Senior DR. CIT(A) recorded a finding that no proof of interest payment and TDS but the confirmations and other documentary evidence not only reveals the fact of payment of interest to the creditors after deduction of TDS by the assessee but also reveals the factum of repayment of entire loan during FY 2013-14 and these vital facts cannot be ignored or kept aside by way of incorrect appreciation and recording of wrong findings. Assessee has discharged onus lay on it as per mandatory requirement sec 68 - Per contra, as per discussion made hereinabove based on self speaking documentary evidences of the assessee we are compelled to hold that the assessee has properly discharged said onus by way of sustainable explanation and documentary evidence showing and establishing identity, capacity creditworthiness of lenders and genuineness of transaction therefore no addition can be made in the hands of assesses u/s. 68 or any provision of the Act. - Decided in favour of assessee.

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• 2023 (7) TMI 1277
  Addition u/s 69A or 69C - WhatsApp documents relied upon - no entry about the interest component in the books of assessee - HELD THAT:- There is no rebuttal of the finding of the AO that there is no entry about the interest component in the books of assessee. When this document was sent by one K.V. Rao Director of assessee acknowledged the same. Further, as rightly pointed out by the CIT(A), the details to be found in this WhatsApp document tallies with the dates of borrowings as admitted by the assessee in its books of accounts. We, therefore, are of the considered opinion that undoubtedly, this is an incriminatory material, and it is not open for the assessee to challenge the reliance of Revenue on this document, without explaining the existence of contents of the document. Quantum of addition - when the document itself reads that the payment of interest was only Rs. 1 crore and the balance of Rs. 1,62,85,178/- was clearly shown therein, Revenue may accept or reject the document as a whole. They cannot say that this document proves the charging of interest and its rate, but ignore the payment of Rs. 1 crore alone. Revenue is accepting the rate of interest and charging thereof, but they are not accepting the quantum of payment. It is impermissible. Revenue has to accept or reject the documents as a whole. Since we are of the considered opinion that this document cannot be thrown away without consideration, we accept the same as a whole and reach a conclusion that the assessee paid interest only in part to the tune of Rs. 1 crore and the balance of liability is Rs. 1,62,85,178/-. With that view of the matter, we sustain the addition only to the tune of Rs. 1 crore, which is an interest expense, not to be found in the books and direct the learned Assessing Officer to delete the balance. Appeal of the assessee is partly allowed.

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• 2023 (7) TMI 1276
  Addition u/s. 68 - unexplained cash credit - discharge of onus to prove or not? - HELD THAT:- Assessee has successfully discharge onus lay on him as per requirement of section 68 of the Act and hence proved identity, capacity and creditworthiness of lender company and genuineness of transaction and no addition u/s. 68 of the Act was required to be made thus he was right in deleting the addition. Our conclusion also gets strong support from the judgments of CIT vs Odeon Builders Pvt. Ltd. [ 2019 (8) TMI 1072 - SUPREME COURT] and case CIT vs Vrindavan Farms (P) Ltd. [ 2015 (11) TMI 279 - DELHI HIGH COURT] and PCIT vs. Goodveiw Trading Company ( 2016 (12) TMI 617 - DELHI HIGH COURT] - Accordingly, grounds of revenue are dismissed. Appeal of revenue is dismissed.

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• 2023 (7) TMI 1275
  Assessment u/s 153A - disallowance of deduction u/s. 54F - A.O. did not satisfy with the details/documents furnished by the assessee and completed assessment proceedings u/s 143(3) by determining the total income of the assessee more as against the returned income of assessee - HELD THAT:- Since in the impugned assessment order u/s. 153A AO had not made any addition or disallowance and has impliedly accepted the earlier original assessment order u/s. 143(3) of the Act dated 26.12.2017, therefore the ld. CIT(A) rightly directed the Assessing Officer to adopt the income computed or assessed after appeal effect of the first appellate order dated 09.03.2020 in relation to said original scrutiny assessment order u/s. 143(3) of the Act dated 26.12.2017. Thus, the income after appeal effect in respect of original assessment order came to Rs. 18,38,28,500/- i.e. the income originally returned by the assessee in the return filed u/s.139(1) of the Act. It is pertinent to mention that the issue of disallowance of deduction u/s. 54F could have raised by the revenue only by way of filing appeal against the first order of ld. CIT(A) relating to original scrutiny assessment order dated 26.12.2017 and not in the present appeal, which has been filed against the subsequent order of ld. CIT(A), in the second appeal dated 22.06.2020 which was passed in the first appeal filed by the assessee against search assessment order dated 22.12.2019 passed u/s. 153A r.w.s. 143(3) of the Act. As neither the Assessing Officer has examined the issue of deduction u/s. 54F of the Act nor has made any addition or disallowance either u/s. 54F of the Act or under any provision of the Act, in the said search assessment order. Since in the original scrutiny assessment order u/s. 143(3) of the Act has been quashed by the ld. CIT(A) by passing first order, consequently returned income of assessee as per return of income u/s. 139(1) was accepted by the Department as there was no appeal against the said order before the Tribunal. In the second round of search litigation the returned income of assessee in the subsequent return filed response to notice u/s. 153A of the Act, was enhanced and thus the returned income increased. CIT(A) ignored the subsequent suo motto addition made by the assessee in the subsequent return filed in response to notice u/s. 153A - Resultantly, the controversy took rest by the subsequent order of ld. CIT(A) wherein the Assessing Officer was directed to adopt taxable income as per appeal effect order of earlier first appellate order dated 09.03.2020 ignoring the enhancement of income by Rs. 28,760/- therefore the Assessing Officer directed to take note of said suo motto enchantment by the assessee and thus, the taxable income of assessee was to be enhanced by said amount. The grounds of revenue are partly allowed in the manner as mentioned hereinabove.

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• 2023 (7) TMI 1274
  Reopening of assessment u/s 147 - change of opinion - receipt of capital grant/subsidy - HELD THAT:- As reasons recorded by the AO for reopening of assessment, used the phrase It was seen that the assessee had shown capital grant/subsidy . Thus it is proved beyond doubt, the AO from the very same materials available on record proceeded to make reassessment without any new tangible material, which is not permissible in law and the same amount to mere change of opinion from the original assessment order passed which amounts to Review his own order, such a power is not available to the A.O. There is no failure on the part of the assessee in full and true disclosure of materials relevant for the assessment. As relying on ATUL LTD. [ 2020 (10) TMI 43 - SC ORDER] we have no hesitation in holding that in the absence of any tangible material, reopening of assessment amounts to change of opinion only. Therefore the reopening of assessment is not valid in law - Decided in favour of assessee.

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• 2023 (7) TMI 1273
  Penalty u/s 271B - not only the return of income but also the tax audit report could not be filed on time - reasonable cause in terms of section 273B or not? - HELD THAT:- We find that the learned AR is the other director of the assessee company, who has also signed Form no.36 of the present appeal and has claimed to be not well-versed with the daily affairs of the company and other accounting aspects. Therefore, when the loss return has been accepted by the Revenue and the audit report filed belatedly was available with the AO during the assessment proceedings, we are of the view that no adverse inference can be drawn against the assessee for not filing the audit report within the prescribed time. We are of the considered view that the assessee had reasonable cause in terms of section 273B for not furnishing the audited report under section 44AB of the Act in time. Appeal by the assessee is allowed.

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• 2023 (7) TMI 1272
  Deduction u/s 80P - interest income received from the Co-operative Banks - HELD THAT:- There is no dispute that the assessee is a Co-Operative Housing Society. Thus, if any income as referred to in sub-section (2) to section 80P of the Act is included in the gross total income of the assessee, the same shall be allowed as a deduction. We find that the Hon ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Co-operative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. Section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co-operative Bank, claims a deduction under section 80Pwhich is not the facts of the present case. Therefore, we find no merits in the aforesaid reasoning adopted by the AO and upheld by the learned CIT(A) in denying deduction under section 80P(2)(d) of the Act to the assessee. Deduction u/s 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co-operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d) - See KALIANDAS UDYOG BHAVAN PREMISES CO-OP SOCIETY LTD., VERSUS ITO-21 (2) (1) , MUMBAI [ 2018 (4) TMI 1678 - ITAT MUMBAI] - Decided in favour of assessee.

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• 2023 (7) TMI 1271
  Correct head of income - Nature/characterization of income - gain on sale of shares - importance of the rule of consistency - analysis of period of holding - short term capital gains u/s.111A or business income - HELD THAT:- As in the immediately preceding assessment year and also in subsequent assessment year on similar high value transaction the AO has accepted the profits as short term capital gains. As pertinent to mention to the observations of the Hon ble High Court of Delhi in the case of Prem Kumar Chopra [ 2023 (5) TMI 1228 - DELHI HIGH COURT] wherein the Hon ble High court has highlighted the importance of the rule of consistency that consistency does not mean putting iron fetters on the subsequent decision making; it only means expecting that a deviation from the previous decision in similar set of circumstances is explained by way of cogent and rational reasons.The appeal filed by the revenue is dismissed.

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• 2023 (7) TMI 1270
  Disallowance of 50% of expenses excluding Travelling and Conveyance - assessee had not produced books of accounts along with original bills and vouchers for examination before the AO during the course of assessment proceedings - CIT(A) deleted the addition - HELD THAT:- AO has not made any allegation that amount have been spent for the purposes which are other than for meeting the objections of the trust or are not for charitable purpose. Considering the fact that the assessee has provided the details of the expenses on account of travelling and conveyance before the A.O., we find no error or infirmity in the order of the CIT(A) in deleting the addition - Decided against revenue. Disallowance of depreciation - assessee is charitable or religious institution - during the appellate proceedings the assessee requested for withdrawal of the ground raised against the said issue - HELD THAT:- Since the issue regarding applicability of the amendment to Section 11 has been settled in DIT (Exemption) Vs. Indraprastha Cancer Society case [ 2014 (11) TMI 733 - DELHI HIGH COURT] and other connected Appeals, we find no error or infirmity in the order of the CIT(A). Merely because a ground has been deleted by the assessee and later on pressed the said ground by way of a submission, the authorities cannot deny the legal entitlement of allowability of depreciation to the assessee, which has been rightly granted to the Assessee by the CIT(A), accordingly, we find no merit in revenue ground.

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• 2023 (7) TMI 1269
  Exemption u/s 11 - Accumulation of income - Carry forward of deficit - Carry forward of excess expenditure carried forward from the earlier assessment years - CIT(A) held excess expenditure in the earlier years is to be allowed to be carried over in the subsequent years - HELD THAT:- In case of CIT Vs. Market Committee, Karnal [ 2010 (7) TMI 1223 - PUNJAB AND HARYANA HIGH COURT ] has held that the excess of expenditure incurred could also be adjusted against the income of the following years and requirement of Section 11 was only to apply the income which could also cover adjustment of the income for the expenditure for charitable purposes. In view of the submissions made by both the parties and given the admitted position that the matter is squarely covered against the Revenue by the decision of Subros Educational Society [ 2018 (4) TMI 1622 - SC ORDER ] as well as that of the Hon ble Punjab and Haryana High Court in decisions referred supra, we affirm the findings of the ld CIT(A) allowing the carry forward of excess expenditure which has been carried forward from the earlier assessment years as well as for the year under consideration for set off in the subsequent assessment years. Explanation 5 to Section 11 has been inserted by the Finance Act 2021 w.e.f 1/04/2022 which provides that For the purpose of this sub-section, it is hereby clarified that the calculation of income required to be applied or accumulated during the previous year shall be made without any setoff or deduction or allowance of any excess application of any of the year preceding the previous year. is made effective from 1/04/2022, thus, it won t any bearing for the impugned assessment year 2015-16. Appeal of the Revenue is dismissed.

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• 2023 (7) TMI 1268
  Deduction u/s 80IB - not considering the miscellaneous income while calculating the eligible income for deduction - Additional evidences as submitted like copies of certain ledger accounts like slaughtering charges, account of gain of loss from forward contract, account of commission receipt, freight charges paid, account of JSB cargo and account of Refund from UP Sales Tax etc.not been admitted by the Ld. CIT(A) on the ground that the same is outside the purview of conditions stipulated u/s 46A of the Act HELD THAT:- Considering all we are of the considered opinion that, the Ld. CIT(A) should have accepted the additional evidence and after verifying the documents produced by the assessee should have decided regarding eligibility or otherwise of the assessee regarding claim u/s 80IB therefore, we deem it fit to remand the matter to the file of the Ld. CIT(A) with direction to admit the additional documents produced by the assessee and decide the matter afresh.

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• 2023 (7) TMI 1267
  Depreciation on ATMs - to be treated as computers or plant and machineries - @15% or 40% - HELD THAT:- As identical issue has been considered by the tribunal in assessee s own case for assessment year 2017- 18 [ 2022 (8) TMI 1414 - ITAT CHENNAI] where the Tribunal by following its earlier order for assessment years 2015-16 2016-17, held that ATM machines are entitled for higher depreciation of 60% as against normal depreciation of 15% allowed by the Assessing Officer. We direct the AO to allow higher depreciation of 40% as claimed by the assessee on ATM machine - Decided in favour of assessee.

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• 2023 (7) TMI 1266
  Disallowance of provision on standard assets - Addition on the ground that it pertains to provision for standard assets and not for bad and doubtful debts and deduction u/s 36(1)(viia) can be allowed only in respect of provisions which are made for bad and doubtful debts, same is liable to be disallowed - HELD THAT:- We are of inclined to agree with the contentions put forth by assessee on this issue. In the case of ACIT Vs Jila Sahakari Kendriya Bank [ 2023 (5) TMI 68 - ITAT INODRE ] ITAT held that provision for Standard Assets are allowable under Section 36(1)(viia). The ITAT in the case of Nagaur Urban Co-operative Bank Ltd. [ 2013 (11) TMI 1696 - ITAT JODHPUR ] also held that the provision for standard assets was held to be a provision for bad debts allowable u/s 36(1)(viia). Thus we too hold that the provision made by assessee qua standard assets is allowable u/s 36(1)(viia) of the Act. Disallowance on account of member s gift expenses - assessee had only made provision for gifts to members of the bank and hence it is not allowable as business expenditure - assessee did not furnish any documentary proof in support of the genuineness of the aforesaid expenses - HELD THAT:- Similar expenses have been allowed in the immediately preceding assessment year, in the interest of justice, the matter is being set aside to the file of Ld. CIT(Appeals) to check the veracity/genuineness of expenses incurred for gifts to its members and the assessee may also give supporting evidence in support of genuineness of the claim. Golden/Diamond Jubilee expenses - Addition made as expenses as bogus and not incurred for the purpose of business - HELD THAT:- Department has made a specific allegation that the assessee has not been able to establish the genuineness of the expenses and the fact that these expenses had in fact been incurred at all. Ld. CIT(Appeals) in the appellate order has made a specific noting that statement of account is not supported by any records and evidences. Accordingly, in the interest of justice, the matter is being set aside to the file of Ld. CIT(Appeals) to check the veracity/genuineness of expenses incurred. Disallowance u/s 14A r.w.r. 8D - assessee had earned a dividend income - HELD THAT:- In the case of South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT ] held that where interest free funds available with assessee banks exceeded their investments in tax-free securities; investments would be presumed to be made out of assessee s own funds and proportionate disallowance was not warranted u/s 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income. In the case of UTI Bank Ltd. [ 2022 (10) TMI 613 - SC Orde ] held that where interest free funds available with assessee exceeded their investments in tax-free securities, investments would be presumed to be made out of assessee s own funds and proportionate disallowance was not warranted u/s 14A.

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• 2023 (7) TMI 1265
  Nature of receipt - Sales Tax subsidy - revenue or capital receipt - HELD THAT:- Tribunal in [ 2012 (9) TMI 281 - ITAT DELHI] and others have given a categorical finding that Sales Tax subsidy is of capital in nature, following the Special Bench decision in the case of Reliance Industries Ltd [ 2003 (10) TMI 255 - ITAT BOMBAY-J] which was subsequently affirmed by the Hon ble High Court of Bombay [ 2009 (4) TMI 516 - BOMBAY HIGH COURT] . Thus Sales Tax subsidy is treated as capital receipt. Recomputation of depreciation by reducing the capital subsidy from written down value of assets - CIT(A) was of the opinion that Sales Tax subsidy is solely meant to encourage setting up of industries in under-developed regions and merely because subsidy given was quantified according to investment made in fixed assets, it would not become payment for meeting cost of any or all the fixed assets. - HELD THAT:- Hon ble Madras High Court in the case of Standard Fireworks Private Limited [ 2008 (6) TMI 344 - MADRAS HIGH COURT] held that where subsidy was given based on specified percentage of fixed capital cost, is not a payment directly or indirectly made to meet any portion of the actual cost and, therefore, such subsidy was not to be reduced from the actual cost u/s 43(1) of the Act. This view was fortified by the decision of Eicher Tractors Ltd [ 2007 (5) TMI 688 - DELHI HIGH COURT] . We do not find any error or infirmity in the findings of the ld. CIT(A). Disallowance of deduction u/s 10B - allocation of expenses - AO has computed the profits of EOU units on pro-rata basis in the ratio of sales turnover of EOU units and non-EOU units - HELD THAT:- We find that the entire quarrel revolves around the payment of Senior Management Salary, which has been allocated by the Assessing Officer in the ratio of turnover of EOU and non-EOU units as against appellant s allocation of 5% of total expenses. In A.Y 2006 07, AO was not convinced with the allocation and in the year under consideration i.e A.Y 2007 08, the assessee itself has allocated the Senior Management Salary cost in the ratio of sales of EOU units and non-EOU units. Therefore, the adverse inference of the AO in A.Y 2006 07 has been taken care of in A.Y 2007 08. Thus no merit in the action of the Assessing Officer in reducing the claim of deduction u/s 10B of the Act. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A). Ground No. 1 is, accordingly, dismissed. Depreciation on computer accessories - @60% OR 15% - HELD THAT:- CIT(A) was of the correct opinion that the ratio laid down in the case of BSES Rajdhani Ltd [ 2010 (8) TMI 58 - DELHI HIGH COURT] squarely apply wherein the Hon ble High Court has held that peripherals, such as printers, scanners, server, formed, integral part of computer, and therefore, eligible for deduction of depreciation, @ 60%. Addition on account of loan processing charges - CIT(A) deleted the addition - HELD THAT:- We find that the loan was utilized for business purpose is not in dispute. Merely because it was one-time payment made by assessee for loan processing charges would not make it a capital expenditure. As decided in India cement case [ 1965 (12) TMI 22 - SUPREME COURT] loan obtained is not an asset or advantage of an enduring nature, expenditure was made for securing the use of money for a certain period and it is irrelevant to consider the object with which the loan was obtained. Consequently, in the circumstances of the case, the expenditure was revenue expenditure - Decided in favour of assessee.

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• 2023 (7) TMI 1264
  Addition u/s 68 - Bogus share transactions - as per AO companies were operated by a single person and these were not in existence, but operated by some entry provider, who issued cheques in favour of the beneficiaries in lieu of cash - HELD THAT:- As transactions have been made through banking channel, entries are duly reflected in the bank accounts of both the parties. Share applicant companies have furnished complete Income tax details alongwith their respective bank statements and it is not the case of the AO that the assessee has purchased cheque by paying cash, nor there is any allegation or suspicion on the documentary evidences furnished by the assessee. For discharging the initial onus cast by section 68 assessee has to establish (1) identity, (2) credit, worthiness and (3) genuineness of the transaction. Once the assessee proves all these three things, his onus is discharged. Facts on records show that the assessee has successfully discharged the initial onus cast upon it. We do not find any merit in the additions made by the AO and do not find any reason to interfere with the findings of the ld. CIT(A). Decided in favour of assessee.

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• 2023 (7) TMI 1263
  Unexplained cash credit u/s 68 - payment made by its debtors through the third party - HELD THAT:- It is the settled business practice that one has to recover the money from the party against sales. If the version of the department is accepted, then it is implied that no payment has been received by the assessee from M/s Shaikh Traders which is against the prevailing business norms. As such, the revenue before doubting the adjustment entry made by the assessee, should have brought something on record so as to justify that the sale was bogus, or the payment was received by the assessee in an unaccounted form or in the undisclosed bank account of the assessee or by any other mode. But no such detail has been brought on record by the revenue. It is also pertinent to note that the AO in his remand report has clearly stated that receipt of money does not pertain to the year under consideration as it was received on 24th February 2012 financial year 2011-12 but the addition has wrongly been made in the year under consideration. Be that as it may be, it will not have any bearing on the given facts of the case. It is for the reason that the addition made by the AO which was subsequently confirmed by the CIT-A is not sustainable for the reasons elaborated above. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed.

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• 2023 (7) TMI 1262
  Penalty u/s 271I - Penalty for failure to furnish information or furnishing inaccurate information u/s 195 - non-furnishing of Form 15CA - HELD THAT:- Apparently there was conflict between section 195 and rule 37BB regarding the compliance of Form 15CA, which was later on amended by the government by Notification No. G.S.R. 978(E) dated 16th December, 2015. Since, the remittances which were made, were against the import of goods and does not attract the provision of withholding tax and the requirement to furnish the details u/s 195(6) r.w. Rule 37BB is not mandatory. Therefore, CIT(A) correctly held that there is lack of clarification of words expressively in the provisions, and only during this assessment year and no express specification have been made for penalty for each default. The Income Tax Rules were amended w.e.f. from 16/12/215, in which the list of payments of specified nature mentioned in Rule 37BB, which do not require submission of Forms 15CA and 15CB, has been expanded from 28 to 33. The amendment though came into effect from 16th December 2015, but it is a settled law that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended. CIT(A) held that the penalty provisions u/s 271I of the Act will not be applicable in the case and therefore CIT(A) deleted the same. As gone through the above findings of ld CIT(A) and noted that there is no infirmity in the conclusion reached by ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. Decided in favour of assessee.

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• 2023 (7) TMI 1261
  Assessment u/s 153A - unexplained credit into bank accounts - scope of unabated assessment - existence of incriminating material to initiate assessment - HELD THAT:- During the course of hearing here DR was specifically asked to refer and the produce the incriminating material qua this addition of unexplained credit into bank accounts. DR despite providing sufficient time of more than one month, he failed to produce or link the addition with the any incriminating material. Neither the AO nor the ld. CIT(A) has specifically linked this addition with any incriminating material found and seized during the course of search, therefore, in absence of any incriminating material qua this addition, same cannot be sustained. The ground No. 2 of the appeal is accordingly allowed. Unexplained cash credit on the basis of the revised balance sheet furnished by the assessee - HELD THAT:- This addition is not based on incriminating material found during the course of the search and accordingly same cannot be sustained relying on ratio in the case of Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] - additions cannot be sustained on the legal ground of no incriminating material. Unexplained cash credit - As submitted that additions which are in respect of same party for same deposit, but made once under credit in bank account and secondly under unexplained cash credit in books of account, same might be eliminated - HELD THAT:- We are of the opinion that addition could not be made twice for the same entry of the deposit, once, appearing in the bank statement and secondly appearing in the books of accounts of the assessee and similar is the situation in respect of cash deposit in bank account. The Assessing Officer shall verify the contention of the assessee and accordingly take appropriate action in accordance with law.

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• 2023 (7) TMI 1260
  Revision u/s 263 - exemption of interest income earned by the assessee cooperative society from other co-operative banks or other banks - debatable issue - HELD THAT:- As relying on TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] interest income earned on fixed deposits with bank partake of the business income which is eligible for deduction u/s 80P(2)(a)(i) of the Act. The above discussion clearly brings out the fact of existence of debate on the issue of taxability of the interest income earned on the deposits made with other co-operative banks or other banks. Therefore, in the light of the law settled by the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] the power of revision cannot be exercised by the ld. PCIT in exercising of power vested with him u/s 263 in respect of debatable issue. Decided in favour of assessee.

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• 2023 (7) TMI 1259
  Revision u/s 263 - Period of limitation of two years - HELD THAT:- When the claim of interest on income tax was not a subject matter of subsequent order passed by the Ld. AO u/s 143(3) r.w.s. 263 of the Act then the limitation period of two years as prescribed under subsection (2) of section 263 of the Act would reckon from the date of the first assessment and not from the second assessment. Accordingly, we are of the considered view that the impugned revision order passed by the ld. Pr. CIT dated 24.02.2021 is beyond the period of limitation of two years provided under sub-section (2) of section 263 of the Act and consequently, the impugned order is not sustainable in law and liable to be quashed. Decided in favour of assessee.

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• 2023 (7) TMI 1258
  Addition u/s 68 - Unexplained cash deposits - ingenuineness of the transactions noting that the three parties had issued cheques to the assessee for advances made from cash deposited in their accounts immediately before the cheques were issued - HELD THAT:- Cash deposits were attributed to loans taken from several farmers who were never verified to the AO - improbability of so many farmers giving loans to these persons was clearly made out by the AO pointing out that all these farmers are residing at a far away Taluka Gondal and had come to Rajkot apparently to open a bank account and to make these cash deposits only for advancing it to these persons. Their bank accounts were also found to be opened in the same bank where these depositors had bank accounts. Even the person introducing the farmers was found to be the director of the assessee-company. The preponderance of probability of such circumstances clearly is that the genuineness of the advances was clearly not established as rightly held by the AO. Advances made to the assessee were suspect and the assessee having failed to discharge its onus of clearing all these suspicions in any whatsoever - be it by producing parties for confirmation or the farmers for confirmation, the AO, we hold that, has rightly held that the cash deposits were unexplained. We, therefore, see no reason to interfere with the order of the learned CIT(A) confirming the addition - Decided against assessee.

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• 2023 (7) TMI 1257
  TP adjustment - outstanding loan due from AE located in Dubai - TPO had taken interest rate @ 10.589% and charged interest on the loan amount - HELD THAT:- As in AY 2009-10 and 2010-11, the assessee did not make transfer pricing study. As noticed that the assessee had charged interest @ 5.14% and 5.08% respectively in those years, while the average LIBOR rate was 2.853742 and 1.284833 in those years respectively. It appears that no TP adjustment was made in those years. We are of the view that interest rate may be fixed at LIBOR + 300 basis points - we direct the AO/TPO to recompute the transfer pricing adjustment by adopting interest rate of average LIBOR + 300 basis points. Disallowance u/s 14A - assessee had made investments AO disallowed 0.5% of the average value of investments, income from which does not form part of investments - HELD THAT:- As we notice that the details of quantum of exempt income were not given. It is well settled proposition that the amount of disallowance u/s 14A should not exceed exempt income. Accordingly, we restore this issue to the file of AO and direct him to restrict the disallowance to the quantum of exempt income. Disallowance of Travelling expenses - expenses incurred towards purchase of foreign exchange - HELD THAT:- In our view, the assessee may be provided with one more opportunity to offer explanations. Accordingly, we restore this issue to the file of AO for examining it afresh. Addition of interest income found in ITS data, but not reported by the assessee in the return of income - HELD THAT:- We notice that the assessee has accepted this addition before the AO. Hence we dismiss this ground of the assessee. Addition u/s 41(1) of the Act towards remission of liability - huge sum was due from party for quite long time - HELD THAT:- We notice that the AO has not examined as to whether the above said amount was claimed as expenditure in any of the years, which is the paramount condition for invoking provisions of sec.41(1) of the Act. Accordingly, we are of the view that this issue requires fresh examination. Accordingly, we restore this issue to the file of AO. We also direct the assessee to furnish all the relevant details to AO. Disallowance of set off of short term capital gain considering it as bogus/sham transactions - HELD THAT:- In our view, this issue also requires fresh examination. Accordingly, we restore this issue to the file of AO. We also direct the assessee to furnish all the relevant details to the AO. Disallowance u/s 43B - reducing the same from closing Work in Progress - HELD THAT:- We notice that the interest was payable to Punjab and Maharashtra Co-operative Bank. The interest payable to a co-operative bank was brought within the ambit of sec.43B of the Act with effect from AY 2018-19. Accordingly, we direct the AO to delete this disallowance and consequently, the same is not required to be deducted from the value of Work in Progress.

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• 2023 (7) TMI 1256
  Addition of income appearing in Form No. 26AS not found at ITBA portal - For financial for next year F.Y. 2017-18 wherein such receipts are shown/declared by the appellant - AO added lumpsum disallowance of 20% out of expenses so claimed - HELD THAT:- The appellant filed the documentary evidence/proof of said receipts duly shown in the F.Y. 2017-18 highlighting the relevant entries vide annexure 3 of the reply dated 07-11-2022. However the Ld. CIT(A) without providing any opportunity passed the order by simply mentioned that above said details were not found on ITBA portal though assessee AOP mentioned in its letter. It is, thus evident that said income of stall rent was income of financial year 2017-18 (A.Y. 2018-19) and has been duly shown in return filed for A.Y. 2018-19 and, therefore its addition wrongly confirmed by Ld. CIT(A) in A.Y. 2017-18 is a double addition which is wrong and bad in law and the same deserves to be deleted. Deduction u/s 80G - Donation given to CM Relief Fund - Deduction denied as proof of such donation was not found at the ITBA portal - HELD THAT:- A.O. did not required assessee in assessment proceedings to produce receipt of contribution made by Association in C.M. Relief Fund for which deduction u/s 80G was claimed in return filed. The said receipt is filed at page no. 22 of annexure 3 uploaded on ITBA portal on 07-11-2022. The said receipt is again enclosed herewith. It is therefore prayed that deduction u/s 80G may kindly be allowed. Addition made based on 26AS - As based on the arguments of both the parties that the contentions raised before us found acceptable. The deduction of donation is required to be given as the ld. AO has not asked and the ld. CIT(A) has not given any adverse finding we direct the assessee to file the proof of donation made to the file of the ld. AO. The ld. AO is directed to verify the receipt of the donation and allow the claim of the assessee in accordance with the law. As regards the addition based on the receipt reported in the year under consideration the ld. AO is directed to verify that whether the same is recorded in the receipt shown by the assessee in the subsequent year and after verification the receipt which has been shown in the accounts of the subsequent year then the ld. AO is directed to deleted the amount which has already been offered in the subsequent year.

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• 2023 (7) TMI 1255
  Reopening of assessment u/s 147 or assessment u/s 153C - Unexplained investment - assessee has purchased the property by paying on money - addition on the basis of statement of one Shri Madan Mohan Gupta [scheme developer from whom assessee purchased a plot in residential project] - HELD THAT:- Since in this case there is no direct material related or pertained to the assessee but the information and disclosure based on the incriminating documents suggest that information came to the knowledge of the AO based on the incriminating documents revealed during the search. Therefore, we are of the view that in this case considering the peculiar circumstances, notice is correctly issued under section 148/147 of the IT Act and we are of the view that there is no direct evidence for issue of notice u/s. 153C of the Act in this case. Transaction of on money - As regards the facts found from the seized material, it is evidently clear that the receipt of the cheque money is accepted by Shri Madan Mohan Gupta. Even the possession of the land is given by Shri Madan Mohan Gupta . The receipt of the money was also given by Shri Madan Mohan Gupta. Not only that, based on these incriminating documents Shri Madan Mohan Gupta accepted the transaction of on money and has offered the tax in his after search disclosure and return. Therefore, no reason of accepting the contention of the assessee that he has not paid any on money for purchase this property. As regards the opportunity for cross examination, the ld. A/R did not demonstrate before us any request made so far before the lower authorities and even the ld. CIT (A) has categorically dealt this aspect in his order and we do not find any infirmity in his finding also. Therefore, assessee is expressly shown as purchaser of the plot based on the Receipt, possession letter and incriminating documents based on which even the seller has disclosed the on money payment. There is no reason or any material based on which we accede to the request of the assessee that he has not paid any on money . Even the assessee has not filed any other document specifically controverting these finding of fact of the lower authorities and, therefore, no merit in the grounds taken by the assessee.

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• 2023 (7) TMI 1254
  Reopening of assessment u/s 147 - unexplained cash credit which was not disclosed in the financial statement filed by the assessee - distinction between a belief and suspicion of escapement of income - HELD THAT:- In the present case, the mere information of cash deposit, we hold, could not by itself have lead to formation of belief of escapement of income. The decision in the case of Mariyam Ismail [ 2016 (8) TMI 1472 - ITAT AHMEDABAD] and Bir Bahadur Sijwal [ 2015 (2) TMI 60 - ITAT DELHI] being rendered in identical backdrop of facts holding cash deposits being insufficient information to lead to belief of escapement of income, the said decisions squarely apply to the present case. As per the reasons recorded, the assessee had filed his return of income for Asst. Year 2010-11 and 2011-12. AO formed belief of escapement of income for the said two years. In his reason recorded, the AO has not even mentioned the income which the assessee had returned to tax in these years. We fail to understand that without taking note of the quantum of income returned to tax, how could the AO have formed belief of escapement of income to the extent of cash found deposited in the bank account of the assessee. In the circumstances, the return of income disclosed sufficient income returned to tax so as to justify cash deposited in the bank account of the assessee, there could not have been any possibility of formation of belief of escapement of income. Even as per the reasons recorded, the reopening was resorted to by the AO to verify source of cash deposited. It is settled law that reopening cannot be resorted to make fishing and roving inquiries and for verification purpose. For the above reasons, therefore, we hold that the reasons recorded for reopening of the case of the assessee were not sufficient to form belief of escapement of income and jurisdiction assumed by the AO, therefore, to frame assessment under section 147 of the Act was bad in law. The order passed, as a consequence, in all three appeals by the AO, is held to be invalidly passed and accordingly set aside. Jurisdiction assumed by the AO to reopen the case of the assessee in all the years impugned before us, was invalid. Assessment orders passed for all the years are accordingly set aside. Decided in favour of assessee.

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• 2023 (7) TMI 1253
  Income from House property - deemed rental income - treating the property of the assessee held as fixed assets, as being eligible for being subjected to tax under section 22 of the Act, on the deemed rental income earned thereon as per the provisions of said section - HELD THAT:- On going through order of the AO, we find that he has rightly interpreted the provision of section 22 and applied it to the facts of the present case. The AO has rightly referred to provision of section 22 as specifying that property consisting of any building or land appurtenant thereto of which the assessee is the owner, other than the property which he occupies for the purpose of any business or profession, to be chargeable to tax under the head income from house property. AO has noted that all the properties, held as fixed assets by the assessee, who is in the business of real estate, are eligible for taxing their ALV as per section 22since the assessee is not carrying out any business from these properties. Assessee has been unable to controvert this finding of the authorities below. Therefore, the arguments of assessee that the properties held by it as fixed assets were for the purpose of business of the assessee, and their ALV was to be excluded for taxation under section 22 of the Act, is rejected as untenable in law. Since the properties were vacant throughout the year, the assessee is entitled to vacancy allowance, and accordingly, the ALV of the property would therefore be NIL - AO, we find, has rejected this contention of the assessee noting that the sub-clause(c) of sub-section (1) of section 23 which deals with providing vacancy allowance allows the same only when the property is actually let out and not based on the intention of letting out. The ld. counsel for the assessee was unable to controvert this finding of the AO. No reason to interfere in the order of the ld.CIT(A) holding that the property held as fixed assets qualified for the ALV thereon being subjected to tax as income from house property as per the provisions of section 22 of the Act. Whether interest paid by the assessee qualified for deduction against the ALV of the properties in terms of section 24 of the Act while computing the income from house property? - As assessee was unable to point out how it had been demonstrated to the CIT(A) that all interest expenses qualified for deduction under section 24 of the Act. In view of the above, we see no merit in the ground no.4 raised by the assessee in its CO seeking allowance of claim of interest expenses u/s 24 of the Act. CIT(A), we have noted, has been fair enough, in allowing the assessee another opportunity to bring out the facts of its case, and claim allowance of interest expenditure after verifying of the facts by the AO and determining amount allowable as per law. In this view of the matter, ground no.4 of the CO is also dismissed. Deemed rent on stock in trade - CIT(A) deleted the addition - HELD THAT:- CIT(A) deleted the addition following decision of the Hon ble jurisdictional High Court in the case of Neha Builders [ 2006 (8) TMI 105 - GUJARAT HIGH COURT] holding that property held as stock-in-trade did not qualify for ALV thereto being subject to tax in terms of section 22 - DR was unable to distinguish the said case before us. Inview of the same, we see no reason to interfere in the order of the ld.CIT(A) deleting the addition made on account of deemed rental income amounting to Rs. 28,85,598/- on property held as stock-in-trade by the assessee. Disallowance of interest u/s. 36(i)(iii) - CIT(A) noted that the assessee was in the business of real estate and had made investment in property only, which were classified as fixed assets or as stock-in-trade, thus directed allowance of the claim of interest against such properties, as per section 24 - HELD THAT:- Since the disallowance made by the AO was in relation to property held as fixed assets, and since these very same properties have been subjected to tax on account of deemed rental income under the head income from house property , CIT(A) has we hold rightly held that the assessee is entitled to claim interest expenses against the same, as per section 24 of the Act. DR was unable to point out any infirmity in the finding of the ld.CIT(A) in this regard, therefore, we see no reason to interfere in the order of the ld.CIT(A) deleting the disallowance made under section 36(1)(iii) of the Act. Addition u/s 14A - Addition to book profit u/s. 115JB on account of disallowance u/s. 14A - CIT(A) deleted the addition - H ELD THAT:- No infirmity in the order of the ld.CIT(A) vis- -vis legal proposition followed by it while restricting the disallowance to the extent of exempt income earned. In view thereof, we see no reason to interfere in the order of the ld. CIT(A) restricting the disallowance of expenditure under section 14A MAT addition - As we see no reason to interfere in the order of ld.CIT(A) deleting the adjustment made to the book profits of the assessee on account of expenses disallowed under section 14A of the Act as relying on TORRENT CABLE LTD. case [ 2017 (1) TMI 564 - ITAT AHMEDABAD] .

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• Customs

• 2023 (7) TMI 1252
  Refund of Customs Duty - Principles of unjust enrichment - applicability to Public Sector Undertakings with regards to excess paid duties arising out of finalization of provisional assessment in terms of section 18 read with section 27 of the Customs Act 1962 - HELD THAT:- A solitary contention with regard to unjust enrichment was urged before the CESTAT. Following the authority in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] the CESTAT has rightly held that the Doctrine of unjust enrichment shall not be applicable in the case on hand as the claimant is a PSU. Applicability of Doctrine of unjust enrichment is applicable to PSUs - HELD THAT:- No material is placed to show that the view taken in Mafatlal Industries has been reversed/modified. Both, Commissioner (Appeals) and the CESTAT have considered the principle of unjust enrichment and dismissed the appeals. Admittedly, Shipping Corporation is a PSU. Hence, there are no illegality or perversity in the view taken by both the Authorities. This appeal must fail and it is accordingly dismissed.

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• 2023 (7) TMI 1251
  Classification of imported goods - U.J. Cross-parts - U.J. Cross Body - U.J. Cross Cup - U.J. Cross Needly Roller - U.J. Cross SNAP Ring - to be classified under heading 8483 60 90 of the Customs Tariff or not - HELD THAT:- It is observed that the usage of these goods is not in dispute in as much as these goods are for use solely or principally with the Transmission Shafts which may be used in Motor Vehicles. It is an admitted fact by the appellant- that universal joints or parts of universal joint and transmission parts fall under Tariff Entry No. 8483. The goods imported are Universal Joint parts to be used in Transmission Shafts. Transmission Shafts are further used in automobiles. Transmission shafts are classifiable under CTH 8483. In view of the Section Note 2, the parts which are goods included in any of the heading of chapter 84 are in all cases to be classified in their respective headings, except for the heading 8409, 8431, 8448, 8466, 8437, 8487. The goods in question are included in heading 8483 of Chapter 84. However, such classification of the parts in their respective headings is subject to Note 1 of this Section XVI, which excludes the article of Section XVII. Therefore, it is further inevitable to examine the Notes of Section XVII - the parts and accessories of Section XVII don t apply to article of heading 8483 (clause (e) of Section Note 2). In view of the specific exclusion of articles of heading 8483 from the ambit of the Section XVII under which chapter 87 falls, the impugned goods will not fall under Chapter 87. The judgment of Tribunal Mumbai in the case of TELCO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2006 (1) TMI 281 - CESTAT, MUMBAI ] relied upon by the Commissioner (Appeals) is not applicable in as much as the goods, namely, Gear and Gear Box etc involved in the case were specifically covered under heading 8708. The impugned goods are rightly classifiable under heading 8483 60 90 of the Customs Tariff Act - appeal allowed.

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• 2023 (7) TMI 1250
  Benefit of exemption - Ignoring certificate of origin issued by the exporting Country in respect of imported goods namely cashew - roasted cashew so as to be covered under the exemption N/N. 46/2011-Cus. dated 01.06.2011 as amended vide N/N. 63/2016-Cus. dated 31.12.2016, or not - HELD THAT:- There are no objection to accept the certificate of origin copy available at page 156 of the Appeal Memo that has been issued by the Ministry of Agriculture and Rural Development the Government of Vietnam. At column 8 of it they have certified it as cashew nut Kernel roasted BB Grade. Therefore, in view of the requirement of Annexure-3 of the Customs Tariff (Determination of Origin of Goods) Rules, 2009 in case of doubt regarding certificate of origin containing erroneous description of goods, resolution should have been made in consultation with Competent Authority issuing the certificate but apparently the same has not been followed by the Respondent-Department and, therefore, on this score alone the demand would not survive. On going through the test report submitted by the CEPCI, Kerala there would not be any hesitation to say that the report creates more confusion than giving a fonding/opinion on the product - it can be said that presence of Cardanol was noticed and if the sample is roasted traces of Cardanol will be less but the report lacks the basic clarity as to if Cardanol presence is much more than the same is supposed to be present in roasted cashew! Likewise at point No. 4, it is clearly mentioned that Fatty Acid is found to be higher above 3% and as per FSSAI standard the maximum limit prescribed is 1.25% for plain cashew. If this is the observation, then the sample should have been considered as roasted cashew since Fatty Acid presence is above 3% as for plain cashew Fatty Acid content should be less than 1.25% but surprisingly it (the report) said that on the basis of the above fact it was concluded that the sample was Plain/Raw Cashew Kernel (baby bits). The only conclusion that can be drawn is that the report is devoid of all logic and it is apparently prepared to favour the department but it contains the basis of such preparation that is favouring the stand taken by the importer appellant - On perusal of the report, it is noticed that on which date those test were conducted is not available in the said report and on which date they have forwarded the same to the Commissioner, JNCH is also not indicated except putting a head-note on these 10 pages report that it is a clarification of CEPCI with reference to test certificate No. 1039 dated 04.04.2018. It is quite imposable to preserve the samples for 5 years without exposure to moisture etc. having its self-live period also. Therefore, the veracity of these reports are questionable apart from the fact that page 4 of the said report that contents quality parameter of Cashew Kernel during AR roasting indicates that the more time it is exposed to heat the more it looses its moisture content, but from it, no reference could be made as to if after being exposed to moisture again subsequent to roasting also cashew nuts would absorb moisture further. The order passed by the Commissioner of Customs (Appeals), JNCH, Nhava Sheva, Mumbai-II is here by set aside - Appeal allowed.

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• 2023 (7) TMI 1249
  Undervaluation of goods - import of a barge, Aqua Float 300, towed by tug, Fordeco 61 - enhancement of value - value of other equipment on board the barge was required to be added separately or not - Confiscation - redemption fine - penalty - HELD THAT:- It is found that the two individuals who were not imposed with penalties in the impugned order are not notices and, to that extent, the appeal proceedings is limited to the importer. For asserting that the equipment on board the barge should be charged, independent of the barge, to duty separately, the appellant- Commissioner has relied upon an unauthenticated and untenable source for claiming that these were not integral to the barge. We find no evidence on record that these were not on board the barge when acquired by the importer and, in such circumstances, these cannot be disaggregated from the barge for separate determination of assessable value. There is no allegation in the show cause notice that the cost, in CIF terms, is in question and rejection of declared value was proposed, under rule 10A of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988, only owing to the purchase price, and declared value, not being inclusive of freight. Non-inclusion of freight is to be proceeded with under rule 9(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 whereas rule 10A of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 is limited to recourse to rule 5 to rule 8 of the said Rules. The appeal of Revenue appears to have ignored this fundamental and crucial difference between adjustment of transaction value for cost and services and alternatives to declared price upon rejection under rule 10A of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988. The determination by the adjudicating authority cannot, therefore, be displaced on the grounds preferred in the appeal. Penalties - HELD THAT:- As no misdeclaration has been found insofar as the import is concerned, there is no reason to consider imposition of penalties, too, on the individuals. Appeal dismissed.

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• 2023 (7) TMI 1248
  Classification of goods proposed to be imported - proposed import of Self-ordering Kiosk , in disassembled form where its display unit, connection box and stand would be imported, simultaneously, in a single consignment or where its display unit and connection box (without stand) would be imported, simultaneously, in a single consignment or where its display unit, connection box and stand would be imported on a standalone basis, in separate consignments - to be classified under HSN: 8470 5010 or under HSN: 8471 4190? - exemption under N/N. 24/2005 - Customs, dated 01-03-2005. HELD THAT:- Self-ordering Kiosk is a multi-functional device, having capability to perform a number of functions; Self-ordering Kiosk has been designed to not just be a simple data processing machine but it performs a specific function of facilitating sale of products/services and enable customers to make payments via an interactive display interface; it possesses integrated payment terminals, printing function bar-code/QR code scanning function; component/part of Self-ordering Kiosk i.e connection box is its integral part, designed to function solely/principally with it, with a pre-defined bracket, where display unit is placed for the Self-ordering Kiosk to start functioning and carries out various functions in Self-ordering Kiosk , inter-alia receipt printer, barcode leader, QR code reader, payment terminals, wi-fi connectivity, NFC connectivity; component/part of self-ordering kiosk i.e display unit is an integral component/part, designed to function solely/principally with self-ordering kiosk and aids its various functions viz. Touch-enabled display panel, processor, memory interface, storage unit and operating system; stand is designed to be used solely with Self-ordering Kiosk , is also an integral part of Self-ordering Kiosk but it is an optional accessory. Further, the applicant has declared that no processing whatsoever would be carried out on the imported goods, post importation into India. On going through the comments of the concerned Commissionerate regarding classification of Self-ordering Kiosks , imported in disassembled form into India, where Display Unit, Connection Box Stand would be imported simultaneously, in a single shipment or where display unit and connection box would be imported simultaneously, in a single shipment, the display unit and connection box would merit classification under Sub-heading 84798999, whereas the stand would merit classification under Sub-heading 94032010/94032090 and as regards applicability of exemption under Notification under serial number 7 of Notification No. 24/2005 -Customs, dated 01-03-2005, the opinion is in negative. Further, the concerned Commissionerate has opined that the components/parts of Self-ordering Kiosk namely display unit, connection box and stand, imported on standalone basis in different/separate consignments at different point of time, the part, display unit merit classifiable under Sub-heading 85285900 and the connection box is classifiable under Sub-heading 84798999, whereas, the stand, being not a part of the Self-ordering Kiosk , but is in the nature of optional accessory, would merit classifiable under Sub-heading 94032010/94032090, as the case may be; that the components/parts of Self-ordering Kiosk namely display unit, connection box and stand appears to be not classifiable under heading 8470, the said goods are not entitled for exemption specified at serial number 7 of Notification No. 24/2005 - Customs dated 01-03-2005, when imported on standalone basis in different/separate consignments over a period of time. Reference drawn to Note 6(E) of Chapter 84 is relevant for the purposes of classification as the Self-ordering Kiosks have specific end-use in retail environment and enables a smart solution to browse products/services and provide multiple payment options; therefore, the Self-ordering Kiosk performs a specific function other than data processing; thus, by virtue of Note (E) of Chapter 84, the Self-ordering Kiosk would not be classifiable as an ADP, under the heading 8471. Classification of Self-ordering Kiosk in dis-assembled form - HELD THAT:- Display Unit is a comprehensive component/part which acts as an interface with the customer and performs several functions on its own; moreover, Connection Box facilitates payments against sale of products; it is an integral part in functioning of Self-ordering Kiosk . Further, both, Display Unit and Connection Box are designed to function solely/principally with the Self-ordering Kiosk . In view of the observations, the Self-ordering Kiosk imported in disassembled form into India, where display unit, connection box are imported simultaneously, in a single shipment, would be classifiable under Sub-heading 84705010 and will be entitled for exemption stipulated under serial number 7 of Notification No. 24/2005 - Customs, dated 01-03-2005. Where Self-ordering Kiosk imported in disassembled form into India, where display unit, connection box are imported simultaneously, in a single shipment along with Stand , then in terms of rule 2(a) of GRI, as presented, Display Unit and Connection box , the incomplete or unfinished articles has the essential character of the complete or finished Self-ordering Kiosk or Cash Register . Stand being an optional accessory, not compulsorily supplied along with other components forming Self-ordering Kiosk , simultaneously in a single shipment, will merit classification under the heading appropriate to it under heading 9403, in terms of rule I of GRI. Applicability of exemption vide Notification No. 24/2005-Cus. dated 01.03.2005 on import of different goods - HELD THAT:- It is noticed that under serial number 7 of the said notification, all goods falling under heading 8470 are exempt from whole of duty of Customs leviable thereon under the First schedule of the Customs Tariff Act, 1975 and under serial number 9 of this notification all goods falling under Sub-heading 84732100 or 84732900 are exempted. Thus, exemption from customs duties under serial number 7 and 9 is based on the classification of goods under said heading and Sub-heading respectively. Classification of components/parts of Self-ordering Kiosk namely (1) Display Unit, (2) Connection Box, (3) Stand, imported on standalone basis in different/separate consignments at different point in time - HELD THAT:- Display Unit is a comprehensive component/part which acts as an interface with the customer and performs several functions on its own; moreover, Connection Box facilitates payments against sale of products; it is an integral part in functioning of Self-ordering Kiosk . Further, both, Display Unit and Connection Box are designed to function solely/principally with the Self-ordering Kiosk . Thus, Display Unit or Connection Box, imported on standalone basis would merit classification under Subheading 84732900 in terms of Note 2(b) of Section XVI read with heading 8470 read with rule 1 of GRI thereby concluding that parts and accessories which are designed for use solely or principally with a machine classifiable under headings 8470 - 8472, would be classifiable under the heading 8473. and Stand would merit classification under heading 9403, classification of Stand at the Sub-heading level would depend upon its constituent material and end-use.

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• Corporate Laws

• 2023 (7) TMI 1247
  Removal of unauthorised occupants from Premises - seeking to ensure a clear passage of 20 feet from the front portion of the main road so to enable the entry of vehicles into premises - HELD THAT:- In terms of the order dated 25 April, 1990, the applicant was directed to pay the balance purchase consideration in quarterly instalments over a period of 18 months. The applicant has only paid an aggregate amount of only Rs. 40,25,000/-. Admittedly, there remains an amount of Rs. 17,25,000/- due and payable. The obligation of any purchaser to ultimately pay the entire purchase consideration within the prescribed time period is a necessary pre-condition to any sale. To this extent, the confirmation of sale is in one sense incohate. There is a shortfall in the sale consideration even after a period of 33 years. The applicant is solely responsible for such default. The duty to timely pay the entirety of the purchase consideration in terms of the order dated 25 April, 1990 was squarely on the applicant. Non-payment of the entire consideration in terms of the order dated 25 April, 1990 renders the sale a nullity. On a plain reading of section 54 of the Transfer of Property Act, 1882, the time of payment of price is not necessarily a sine qua non to the completion of the sale. However, the order dated 25 April, 1990 provided for a stipulated time period for payment which assumes significance in cases of sale by Courts. The exercise of any discretion must be in good faith, fairly, for the purpose for which the power is being conferred and without exceeding the limits of such power. No discretion should be legally unfettered. The exercise of any discretion cannot be arbitrary, vague and fanciful; but legal, regular and according to reason. The Rule of Law requires that no discretion should be unconstrained so as to be potentially arbitrary - Section 457 of the Companies Act, 1956 read with Rule 272 of the Company Court Rules, 1959, govern sales by the Official Liquidator. The duty of the Company Court while conducting a sale under Rule 272 is a more onerous task than an ordinary sale conducted by Court in executing a decree. In a sale by the Company Court, the Court holds a fiduciary duty position protecting the interests of all stakeholders. On the other hand, in sales in execution of a decree the sale is rarely held without notice to the judgment debtor. Ordinarily, the judgment debtor in such sales is present to protect its interests. There has been a conscious effort to perfect the so very imperfect marketable title of the applicant and the original owners vis-a-vis the premises. There are no grounds either pleaded nor which exist which warrant condonation of the inordinate delay in the applicant being unable to make payment of the balance consideration after a period of 33 years. There is no question either in law or equity to permit the applicant to pay the shortfall in price after a delay of 33 years. The benevolence and magnanimity shown to the applicant must end. There are no substance in the contention that the application is not maintainable since there is a permanent stay of the winding up proceedings. The order of permanent stay does not completely obliterate the winding up order. Company petitions even when dismissed on merit are traditionally not regarded as dismissed or disposed of but as permanently stayed - the sale in terms of the order dated 25 April, 1990 is declared to be a nullity. Application dismissed.

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• 2023 (7) TMI 1246
  Professional Misconduct - failure to report non-compliance with accounting standards - Non-provision of Interest Costs on Borrowings from Bank and NBFCs - Non-provisioning for Trade Receivables- Unsecured, Considered Doubtful - Wrong Accounting of Deferred Tax Assets - Non-disclosure of Cost Formula for the Measurement of Inventories - Wrong amortization of Expenses - Non-compliance with the format of Financial Statements - Non-compliance with requirements of SA 230 regarding Audit Documentation - Non-compliance Regarding Agreement on Terms of Audit Engagements - Non-compliance Regarding Appointment of Engagement Quality Control Reviewer - Non-compliance Regarding Communication with TCWG. Non-provision of Interest Costs on Borrowings from Bank and NBFCs - HELD THAT:- The charges relating to failure to report non-provision of Interest Costs pertaining to Borrowings from bank and NBFCs stand proven. The omission being material in nature, the EP should have taken them into consideration before issuing his opinion in accordance with SA 705 , which he failed to do. Non-provisioning for Trade Receivables- Unsecured, Considered Doubtful - HELD THAT:- SA 200 requires the auditor to comply with all SAs relevant to the audit and mandates an understanding of the entire text of an SA, including its application and other explanatory material, to understand its objectives and to apply its requirements properly. Objective of SA 705 is to express clearly an appropriately modified opinion on the financial statements when the conditions for modifications are met - The opinion expressed in this case is ambiguous as the basis of qualification did not have a proper description and quantification of the financial effects of the misstatement or other explanations as required by Para 17 of SA 705. Hence, the audit opinion is not meeting the objective of SA 705. Such an opinion is misleading to the users of the financial statements as well. The charges regarding non-compliance with SA 705, therefore, stand proven. Wrong Accounting of Deferred Tax Assets - HELD THAT:- It is noted that there is no documentation of evaluation of misstatement identified during the audit as required under SA 450. It is important to note that SA 450 requires the auditor to accumulate misstatements identified during the audit, determine whether overall audit strategy and audit plan needs revision, communicate all misstatements accumulated to the appropriate level of management, evaluate the effect of uncorrected misstatements after reassessing materiality in the context of entity s actual financial result and determine whether uncorrected misstatements are material individually or in the aggregate taking into account the financial statements as a whole and also communicate the same to TCWG. However, none of these steps were performed by the EP - In the absence of such an evaluation in the Audit File, there is no evidence of how the EP assured himself of reasonable assurance . Hence the arguments regarding DT A not being material and being 2% of total balance sheet are afterthoughts and the charges regarding non-reporting the wrong accounting of DTA stand proven. Non-disclosure of Cost Formula for the Measurement of Inventories - HELD THAT:- The replies of the EP are not acceptable as disclosure of cost formula for inventory is a mandatory requirement under the AS 2 and the financial statements of the company do not indicate the same. Use of specific cost for measurement is also a type of cost formula and should have been included in the Accounting Policies of the company. Use of different formulae permitted under para 14-1 7 of AS 2 can have material impact on the carrying amount of inventories in the Balance Sheet cost of sales in the Profit or Loss. Therefore, disclosure of cost formula in the Financial Statements has relevance significance to the users - As a diligent auditor, it was necessary for him to take up with the TCWG/Management to ensure that there is proper disclosure of accounting policy. In the absence of such action taken by the EP or any work paper in the Audit File pointing to same, the charge regarding not reporting the non-disclosure of cost formula for valuation of inventories in the financial statements stands proven. Wrong amortization of Expenses - HELD THAT:- EP has admitted his mistake and was of the view that these were presentation errors and not material and sought pardon for the same - In light of the auditor s acceptance of his errors, it is clear that the provisions of AS 26 and AS 22 have not been adhered to and the charge regarding non-reporting of the wrong amortization of expenses stands proven. Non-compliance with the format of Financial Statements - HELD THAT:- Section 129(1) of the Act very clearly states that the financial statements shall be in the format as may be provided for different class or classes of companies in Schedule III. Therefore, any deviation from the prescribed format is a non-compliance with the statutory provisions and therefore the auditor s submission in this regard is unacceptable as it is auditors responsibility to report such non-compliances with the prescribed format. Non-compliance with requirements of SA 230 regarding Audit Documentation - HELD THAT:- As per para A21 of SA 230, Audit Documentation, the Audit File needs to be compiled within a period of 60 days from the date of signing of the Audit Report, not six months as mentioned by EP. This time period of sixty days is given in the Standards on Auditing taking into consideration the constraints faced by the chartered accountants. As the auditor has stated that the documents were scattered in various files and have been compiled only for the submission of Audit File to NFRA, it is evident that the Audit File had not been compiled by the Auditor even after 5 years of signing of Audit Report. The charges against the EP are, therefore, proved. Non-compliance Regarding Agreement on Terms of Audit Engagements - HELD THAT:- The contention of the EP is not acceptable as in case of recurring audits, Para 12 of SA 220 requires an assessment from the auditor of whether circumstances require the terms of the audit engagement to be revised and whether there is a need to remind the entity of the existing terms. There is no document evidencing such an assessment and there is no such procedure documented in the Audit File. Moreover, there was no audit engagement letter (as prescribed by SA 210) in the Audit File. Hence the charges against EP stand proven. Non-compliance Regarding Appointment of Engagement Quality Control Reviewer - HELD THAT:- The EP was charged for not complying with para 19(a) of SA 220 and para 60 of SQC-1 as there was no evidence that he had determined that Engagement Quality Control Reviewer (EQCR, hereafter) had been appointed, which is required for audits of listed entities - there are no other persons accountable for this assignment. Therefore, there was no requirement for the appointment of any other person on quality control. Non-compliance Regarding Communication with TCWG - HELD THAT:- The EP was charged for not complying with para 7, 10, 11, 12, 13 19 of SA 260 SA 265 as he did not determine TCWG and did not communicate with TCWG about the responsibilities of auditor, overview of planned scope and timing of the audit etc. and did not make required documentations. The Audit File did not have any documentation regarding communication with TCWG - The mistakes made in the audit were unintended and happened due to lack of knowledge of accounting standards and standards on auditing. He further added that he was a budding Chartered Accountant and had only four years of experience at the time of this audit. It was his first audit of a listed company and that he is not doing audits of any listed companies anymore. In addition, the EP showed his inclination for further studying the Accounting Standards and Standards on Auditing and the Act and submitted that the sanctions be imposed lightly lest they adversely impact his career. Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which the Companies Act views cases of professional misconduct is evident from the fact that a minimum punishment is laid down by the law. Considering the proven professional misconduct by CA Sachin Kansal, acceptance of mistakes by him, the nature of violations, size of the audit firm, and applying the principles of proportionality, following sanctions under Section 132( 4 )( c) of the Companies Act, 2013 have been ordered: (i) Imposition of a monetary penalty of Rs 1,00,000 (Rupees One Lakh) upon CA Sachin Kansal. (ii) CA Sachin Kansal is debarred for one year from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• 2023 (7) TMI 1245
  Professional Misconduct - Lapses pertaining to Related Party Transactions - Conversion of Loan into Capital Advance to Merino Shelters Pvt. Ltd. (MSPL) - Failure to report full particulars of loan to a Related Party - Failure to report non-disclosure of Related Party Loans on gross basis - Failure to report non-disclosure of material transactions - Issues related to Credit Risk Exposures (Trade Receivables) - errors in Presentation and Disclosures - Ageing Analysis of Trade Receivables - Inadequacy of disclosures regarding credit risk exposure of trade receivables required under Para 35M and 35N of Ind AS 107 - Failure to report non-consolidation of subsidiary - Failure to obtain Sufficient Appropriate Audit Evidence (SAAE) - Recognition and measurement of Expected Credit Loss Allowance - Audit of Internal Financial Control Over Financial Reporting(Clause (i) of sub- section 3 of Section 143 of the Companies Act, 2013 - Failure to plan the audit of Financial Statements - Failure to perform risk assesment procedures and response to such risks - Failure to design and implement auditors response to assessed risks - Failure to determine materiality - Failure to perform Analytical Procedures - Failure to prepare documentation regarding Auditor s responsibilities relating to fraud - Failure to Communicate with Those Charged with Governance (TCWG) . Findings on Articles of Charges of Professional Misconduct by the Auditors - HELD THAT:- It is concluded that the Auditors have committed professional misconduct as defined in Section 132 (4) of the Companies Act, read with Section 22 the Chartered Accountants Act 1949 (the CA Act), as amended from time to time, as detailed below: i. The Auditors committed professional misconduct of failure to disclose a material fact known to them which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where they are concerned with that financial statement in a professional capacity . ii. The Auditors committed professional misconduct of failure to report a material misstatement known to them to appear in a financial statement with which they are concerned in a professional capacity. iii. The Auditors committed professional misconduct by not exercising due diligence and being grossly negligent in the conduct of their professional duties. iv. The Auditors committed professional misconduct by failing to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion. v. The Auditors committed professional misconduct by failing to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances. Findings on Additional Articles of Charges of Professional Misconduct by the Audit Firm - HELD THAT:- The Audit Firm has committed Professional Misconduct as defined in Section 132(4) of the Companies Act, read with Section 22 the Chartered Accountants Act 1949, as amended from time to time, as failure to exercise due diligence and being grossly negligent and by failing to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances, in the conduct of professional duties in respect of matters as explained in Section E above and thus violated SQC I. Penalty and Sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law - Independent Auditors of Public Listed Companies serve a critical public function of enabling the users of Audited Financial Statements to take informed decisions. The Auditors in the present case were required to ensure compliance with SAs to achieve the necessary audit quality and lend credibility to Financial Statements to facilitate its users. As detailed in this Order, substantial deficiencies in the audit, abdication of responsibility and inappropriate conclusions on the part of CA Devang Dalal establish his professional misconduct. Despite being a qualified professional, CA Devang Dalal has not adhered to the Standards and has thus not discharged the duty cast upon him. On the contrary, he has tried to cover up by giving unsubstantiated and unconvincing replies to the SCN - The Firm, M/s. M H Dalal Associates has also failed to exercise appropriate control and monitoring of the work of the EP and the Engagement Team during the audit engagement and has abdicated its responsibility to ensure audit quality as per Professional Standards. Under the circumstances, we proceed to order the following sanctions keeping in mind the deterrence, proportionality, and the signalling value of sanctions. Considering the fact that professional misconducts have been proved and considering the nature of violations and principles of proportionality, we, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, order: i. Imposition of a monetary penalty of Rs.10,00,000/- (Rupees Ten Lakhs) upon CA Devang Dalal who is also debarred for Five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of Financial Statements or internal audit of the functions and activities of any company or body corporate. ii. Imposition of a monetary penalty of Rs.50,00,000/- (Rupees Fifty Lakhs) upon M/s. M H Dalal Associates.

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• 2023 (7) TMI 1244
  Professional Misconduct - Failure in understanding the nature of business of MACEL resulting in lapses in audit relating to fraudulent diversion of funds - Lapses in audit relating to accounting of related party borrowings and bank borrowings resulting in misstatements by Rs 2,363.34 crore due to fraud - Lapses in audit relating to misstatement of Rs 909.99 crores in Cash Flow Statement - Lapses in evaluation of corporate guarantee and creation of charge on the assets of the company (Rs 130 crores) - Lapses in making audit conclusions and forming audit opinion - other non-compliances. HELD THAT:- The Audit Firm was charged with various omissions and commissions observed in the audit, as discussed in the preceding paragraphs, for its role as the statutory auditor appointed under section 139 of the Act. The Audit Firm was also charged with failure to comply with para 2 of SA 220 and para 3 of SQC 1, which stipulate that Quality Control Systems, Policies and Procedures are the responsibility of the Audit Firm. The Audit Firm was also charged with failure to establish and maintain a system of quality control to provide it with reasonable assurance that: a) The firm and its personnel comply with professional standards and regulatory and legal requirements; and b) The reports issued by the firm or engagement partners are appropriate in the circumstances. On examining pointwise reply it is found that all charges are proved except the charge relating to constitution of the Audit Committee. Therefore, CA Lavitha Shetty, Proprietor of the Audit Firm is also responsible for non-compliance with provisions relating to Quality Control Systems, Policies and Procedures of SA 220 and SQC 1. Articles of Charges of Professional Misconduct by the Statutory Auditor - HELD THAT:- The Auditor has made a series of serious departures from the Standards and the Law, in conduct of the audit of MACEL for FY 2018-19 - it is proved that the Auditor had issued unmodified audit opinion on the Financial Statements without reporting diversion of funds, evergreening of loans and committed other serious lapses during performance of audit. Based on the discussion and analysis, it is concluded that the Auditor has committed Professional Misconduct as defined in Section 132 (4) of the Companies Act, read with section 22 the Chartered Accountants Act 1949 (the CA act), as amended from time to time. Penalty and sanctions - HELD THAT:- Section 132( 4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law - The Auditor was required to ensure compliance with Standards on Auditing, Laws and Regulations to achieve the necessary audit quality and lend credibility to Financial Statements to facilitate its users. As detailed in this order, substantial deficiencies in Audit, abdication of responsibility and inappropriate conclusions on the part of the Auditors establish her professional misconduct and lack of due diligence. Despite being a qualified professional, the Auditor has not adhered to the Standards and have thus not discharged the duty cast upon her. Considering the proved professional misconduct, the nature of violations and principles of proportionality, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered that Imposition of a monetary penalty of Rs Five Lakhs only upon CA Lavitha Shetty. In addition, CA Lavitha Shetty is debarred for a period of five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate . Application disposed off.

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• Insolvency & Bankruptcy

• 2023 (7) TMI 1243
  Violation of principles of natural justice - evidence produced by the Corporate Debtor showing that claims by Operational Creditor were bogus on the basis of 12 fake invoices, were not considered suitably by the Adjudicating Authority - existence of operational debt over Rs. 1 Crore existed between the Corporate Debtor and the Respondent No. 1 or not - HELD THAT:- It is noted from the averments that there has been no pre-existing dispute between the parties and the Corporate Debtor did not raise any dispute before the demand notice was issued. Even during pleading before this Appellate Tribunal, no pre-existing dispute on any ground has been brought out by the Corporate Debtor. It is the case of the Corporate Debtor that 12 invoices which have been claimed by the Respondent No. 1 are not genuine and have been fabricated by the Respondent No. 1 to get more money out of the Corporate Debtor. From this, only point emerges is regarding existence of 12 invoices and not regarding any other point including supply or quality of the material/ pre-existing disputes. The Corporate Debtor has also taken the plea that the Respondent No. 1 has not furnished documents to prove his claims like weight scale receipt of Dharamkata. On this account the Respondent No. 1 has submitted that he was never required to submit the Dharamkata receipt as it was choice on part of the Corporate Debtor as buyer of the goods to get the products weighted at its end, if so required, and to communicate discrepancy, if any, the Respondent No. 1. The Respondent No. 1 further clarified that even for the invoices admitted by the Corporate Debtor, no Dharamkata receipts have been produced, by the Corporate Debtor as such the plea of the Corporate Debtor about non-submission of documents is prima-facie not convincing. The Corporate Debtor has admitted that there was no formal written contract agreement for supply of material by the Respondent No. 1 and similarly no formal purchase order was issued by him. The Corporate Debtor also admitted that on the representative of the Corporate Debtor used to ask the Respondent No. 1 to supply goods on oral instructions and subsequently payment would be claimed by the Respondent No. 1 based on invoices issued by him to the Corporate Debtor. Hence, there cannot be any dispute regarding payment being made on the basis of invoices issued by the supplier of the material, here in case, by the Respondent No. 1 - On consideration of various invoices which have been relied upon by the Respondent No. 1 had been attached with the application filed before the Adjudicating Authority under Section 7 of the Code. On this account, it may also be pertinent to note that these invoices have stated to been reported in the GST returns and necessary ITC have also been claimed. It is the case of the Corporate Debtor that CGST Department had enquired into alleged fake purchases by the Corporate Debtor based on the alleged fake documents/ invoices issued by alleged non-existent Respondent No. 1. The Corporate Debtor has admitted that he was undergoing financial stress and there have been delays in making payments as well as in default at relevant period. In fact, the Corporate Debtor indeed tried to settle the matter by making payments as already discussed earlier, however, the Corporate Debtor failed to settle the matter - there are not in position to accept the plea of the Corporate Debtor regarding alleged fraudulent invoices claimed by the Respondent No. 1 or over payment made by the Corporate Debtor to the Respondent No. 1. There are no error in the challenged Impugned Order - The Appeal being devoid of any merit(s) is dismissed.

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• 2023 (7) TMI 1242
  Maintainability of application u/s 7 of IBC - initiation of CIRP - legitimate loan transactions between the Appellant and the Corporate Debtor or not - disbursement to the Corporate Debtor against the consideration for the time value of money or not - HELD THAT:- It is pertinent to note that Section 7(1) clearly spells out that a Section 7 application can only be initiated only by a Financial Creditor either by itself or jointly. A perusal of the definition of expression Financial Creditor would show that it refers to a person to whom a financial debt is owed and includes even a person to whom such debt has been legally assigned or transferred to. The trigger for initiation of the corporate insolvency resolution process by such a Financial Creditor under Section 7 of IBC is the occurrence of a default by the Corporate Debtor above a prescribed threshold limit. Default in the IBC framework means the incidence of non-payment of debt in whole or in part when the debt has become due and payable, in law and in fact. Debt means a liability or obligation in respect of a claim which is due from any person and claim means a right to payment even if it is disputed. From a bare reading of Section 7 of IBC, it is amply clear that insolvency process under IBC can be triggered only by a Financial Creditor either singularly or jointly. The primary and fundamental basis for a creditor to be treated as a financial creditor for the purpose of Section 7 in Part II of the IBC requires that a financial debt is owed to that person in terms of Section 5(7) of IBC. Such a financial debt could cover any of the transactions outlined in Section 5(8) (a) to (i) of the IBC. That being so, the basic requirement of existence of financial debt being owed by the Corporate Debtor to the Financial Creditor has to be first satisfied and cannot be overlooked. Whether the Appellant had made any disbursement to the Corporate Debtor against the consideration for the time value of money? - HELD THAT:- In the present facts of the case, it is an undisputed fact that the Corporate Debtor has neither admitted to owing a financial debt to the Appellant nor has the Appellant been able to successfully substantiate that he directly disbursed any sum of money against the consideration for time value of money to the Corporate Debtor - the Appellant has clearly failed to adduce evidence to prove the existence of financial debt qua the Corporate Debtor. In the absence of financial debt qua the Corporate Debtor, the Appellant cannot be said to be a financial creditor under Section 5(7) of IBC. There are no hesitation in holding that the Appellant does not meet the specific and distinct connotations required to be treated as a Financial Creditor qua the Corporate Debtor. Since the Appellant is not a Financial Creditor of the Corporate Debtor and the transactions in question are not in the nature of financial debt owed by the Corporate Debtor, there is no error in the judgment of the Adjudicating Authority that no case has been made out against the Corporate Debtor for initiation of CIRP. Thus, it is a settled proposition of law that a company is a legal personality entirely distinct from its directors. Once a company is incorporated, it becomes an artificial person and must be treated separately from its members. In the present factual matrix, the Respondent No.1-THPL is a corporate person in terms of Section 3(7) of IBC and therefore enjoys a legal entity separate from that of BKT and NT. From the juristic point of view, therefore, the rights, duties and liabilities of THPL are distinctive from those enjoyed, exercised or discharged by directors in their personal capacity. It is abundantly clear that the Appellant has not entered into any direct transactions with the Corporate Debtor at any stage - Given the fact that the Appellant has failed to establish that he had given any loan to the Corporate Debtor directly, it does not stand to reason for him to press for piercing the corporate veil to alleviate the burdens of his financial misadventure - the findings of the Adjudicating Authority are satisfying that the Section 7 application filed by the Appellant before it was not liable to be admitted. The Adjudicating Authority did not commit any error in rejecting the Section 7 application filed by the Appellant. The impugned order does not warrant any interference - Appeal dismissed.

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• PMLA

• 2023 (7) TMI 1241
  Money Laundering - Whether an Online Payment Gateway Service (OPGSP) could be said to be a Reporting Agency under the PMLA? - It is the case of the respondents that PayPal is a payment system operator and thus a reporting entity. Money Laundering - Global Experiences - HELD THAT:- The FIU-IND essentially acts as the central nodal agency for receiving, processing and analysing information relating to suspicious financial transactions. It is thus tasked with the collection of information, analysis thereof and the consequential sharing of information with other national intelligence and law enforcement agencies. FIU-IND represents the coordinated mechanism adopted by nations aimed at strengthening the collection and sharing of financial intelligence by the creation of a national, regional and a global network to detect illicit financial flows and combat money laundering - The extent and reach of payment facilitation platforms and the exponential increase in transactions accomplished thereon is also evident from the disclosures made by FIU-IND in these proceedings. FIU-IND had, with the aid of data disclosed on the record of these proceedings drawn the attention of the Court to the increase in the value of transactions completed on the PayPal platform between 2020 to March 2022 and stated that the transactional value which stood at Rs. 9951 crores in 2020 had increased to Rs. 12327 crores in 2021 and as of March 2022 that figure stood at Rs. 3048 crores. While the Court has taken note of the global trends and the multifaceted complexities which emerging technologies and tools have brought on in the fight against money laundering and terror financing, it has done so only to broadly note the scenario which prevails and which appears to have prompted FIU-IND to require the petitioner to comply with reporting obligations under the PMLA. Central Theme of Payments and Settlements System Act 2007 (PSS Act) - HELD THAT:- The PSS Act essentially appears to regulate the functioning of Intermediaries and PAs who are directly engaged in handling funds and acting as a conduit between customers and e-commerce sites/merchants. This is also evident from the activities relating to settlement and netting which are spoken of in Section 23 of the Act, the opening of separate and independent import/export collection accounts by AD Category I Banks, the opening of NOSTRO accounts, all of which deal with the range of activities which are undertaken by Intermediaries and PAs while being directly engaged in the handling of funds received from customers. The aforesaid conclusion is further fortified from Para 8 of the Guidelines which obligates non-bank PAs to maintain a separate escrow account to which all monies collected by them would be credited. The said escrow account is to be opened and maintained with a scheduled commercial bank. This is apart from the requirement of an additional escrow account being maintained with a different scheduled commercial bank at the discretion of the PA. Paras 8.4 and 8.5 also indicate that the aforenoted directions and guidelines principally regulate the activities of Intermediaries and PAs who directly receive funds from customers in their accounts before they are transmitted onwards to merchants or other beneficiaries. The Court thus comes to the firm conclusion that the PSS Act is concerned with PAs and Intermediaries who are engaged in the direct handling of funds received from customers and the various aspects connected therewith including the settlement and netting of such funds. The PSS Act does not appear to control technology platforms, interfaces and facilitators, who though not directly concerned with the handling of funds, may yet constitute an intermediary in the movement of funds, though a cog in the wheel yet constituting a critical functional element in the remittance of funds. Pari materia question - HELD THAT:- The Court also finds itself unable to accept the submission that the similarity of the definition clause in the two enactments would lead to PayPal being held to fall outside the ambit of Section 2(1)(rb) of the PMLA. The conclusions aforenoted, however, do not rest merely on the interpretation accorded on the provisions of the PSS Act, its discernible scheme, the regulatory regime embodied therein or the circulars and directions issued by the RBI noticed hereinabove. This since the Court is of the considered opinion that the answer to the principal question posited must necessarily be answered bearing in mind the objectives and the legislative policy underlying the PMLA and the various provisions incorporated therein. What the Court seeks to underline is that the meaning to be ascribed to the phrase payment system must necessarily be ascertained bearing in mind the theme and ethos of the PMLA as opposed to an answer that is beclouded by how that subject is treated under the PSS Act. Approaching the issue from any other angle would in fact fall foul of certain well accepted tenets of statutory interpretation as would be manifest from the discussion which follows in the latter parts of this decision. Payment system under PMLA - HELD THAT:- The PMLA constructs various regulatory measures and safeguards to aid and assist the jurisdictional authorities in uncovering proceeds of crime. It must be remembered that the said enactment is not concerned merely with meting out punishment for commission of the crime created by Section 3 thereof. The various declarations, disclosures and reporting measures put in place by Sections 11A, 12, 12A, 12AA are all aimed towards discovery and prevention of fraudulent and suspicious transactions. Those provisions are concerned with collation of data, a centralized analysis thereof all of which would then enable the authorities to detect patterns of suspicious financial flows and assist in eradicating the scourge of money laundering. Of equal significance are the provisions comprised in Chapter IX which deals with reciprocal arrangements and gives teeth to the collaborative resolve of nations to tackle the complexities surrounding money laundering - The aforesaid discussion indubitably brings to the fore the regulatory aspects of the legislation and establishes that the PMLA goes far beyond being intended to be a mere penal statute. This aspect has also been noticed by the Supreme Court in VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. [ 2022 (7) TMI 1316 - SUPREME COURT] . It is these salutary objectives of the statute which must be borne in mind while seeking to unravel the intent and scope of its various provisions. Undoubtedly, the technology on which the platform of PayPal rests enables the transfer of money between parties at different ends. The mere fact that the said platform also interacts with AD Category Banks or other PAs would not detract from the platform of PayPal being otherwise understood and recognised to be a system which enables payment and one which is concerned with money transfer operations. The Court deems it apposite to emphasise that bearing in mind the objectives underlying the promulgation of PMLA and the activity that it seeks to regulate and penalise, there appears to be no legal justification to interpret Section 2(1)(rb) to embrace only those entities which are directly engaged in the handling, retention or transfer of funds. In terms of the Amending Act, clauses (ra) to (rc) came to be inserted in Section 2(1). If it was the intent of Parliament to accord an identical meaning upon the phrase payment system as already defined in the PSS Act, it could have conveniently adopted the tool of legislation by reference/incorporation. Notwithstanding such recourse being available, it appears to have consciously introduced Section 2(1)(rb) as well as the other amendments embodied in the 2009 Amending Act being aware of the distinct scheme and objective of the PMLA. This too leads the Court to come to the irresistible conclusion that the meaning of the term payment system as contained in the PSS Act was not intended by Parliament to be directly infused or blindly transposed in the PMLA. Paypal s Global Compliances - HELD THAT:- The Court finds merit in the submission so addressed and is of the considered opinion that the question of whether PayPal is liable to be treated as a payment system operator must fundamentally be answered on a construction of Section 2(1)(rb) and (rc) of the PMLA alone and not by its conduct in other jurisdictions where the gamut of services provided by it range far wider than those that are ordinarily extended by an OPGSP. Ultimately the question of whether it is liable to be recognised as a payment system operator would have to be answered solely on the anvil of the statutory provisions embodied in the PMLA. This is precisely what the Court has attempted to focus upon and has hopefully achieved. Its ultimate conclusions, as would be evident from the body of this decision, have remained uninfluenced by the conduct of PayPal in foreign jurisdictions. PAYPAL AND TPAPs - HELD THAT:- The National Payments Corporation of India is an organisation that owns and operates the Unified Payments Interface and is essentially charged with the authority of prescribing rules for and approving the participation of Customer Banks, PSPs, TPAPs and Prepaid Payment Instrument issuers in the UPI. More fundamentally in terms of the UPI structure, all details relating to the remitter as well as the beneficiary are captured end to end. In fact, in order to participate on that system both the remitter as well as the beneficiary have to be pre-enrolled. Appropriate particulars of individuals and entities are thus fully captured quite apart from the transactions themselves being conducted through banking channels. Penalty unjustified - HELD THAT:- The Court finds merit in the challenge raised by PayPal in this regard for the following reasons. On first principles, the Court notes that undisputedly the levy of penalty is imbued with a quasi- criminal characteristic. It is this aspect which was highlighted by the Supreme Court in Hindustan Steel when it observed that penalty would be justified provided it is established that a party had failed to comply with legal obligations deliberately, in defiance of the law or be guilty of contumacious or dishonest conduct. The Supreme Court pertinently observed that penalty would not be leviable merely because it was lawful to do so. Hindustan Steel went further to hold that the imposition of penalty would also not be justified where a person is found to have proceeded on the bona fide belief that it was not covered by the provision or legally obliged to effect compliance. It is manifest that the imposition of penalty is clearly unjustified in the facts of the present case. As the record would bear out, PayPal had consistently taken the position that it could not be held to be a payment system operator under the PMLA. The stand taken by the petitioner in this regard cannot possibly be said to be wholly specious or in wilful disobedience to abide by a legal obligation which was either apparent or free from doubt. The issue was further compounded by the affidavit filed by RBI in the Abhijit Mishra proceedings. PayPal can thus be justifiably said to have been proceeding under the bona fide belief that its operations did not fall within the ambit of the PMLA. The Court also cannot lose sight of the fact that the stand of PayPal as evident from its communications with FIU-IND was essentially collaborative and a testament to its intent to arrive at a mutually acceptable solution. This is also manifest from its approach of both parties identifying a mutually acceptable mechanism and the suggestion of three models of information sharing forming part of their letter dated 20 December 2019. It was, in the considered opinion of this Court, imperative for FIU-IND to have recorded reasons in justification of the levy of the maximum penalty provided under the statute. For all the aforesaid reasons, the Court finds itself unable to be sustain the imposition of penalty as embodied in the impugned order. Deeming fiction argument - HELD THAT:- The Court also finds itself unable to sustain the impugned order insofar as it proceeds to observe that PayPal would be deemed to be a payment system operator. A deeming fiction must stand specifically engrafted in a statutory provision. A legal fiction would be available to be invoked only in a situation where the Legislature engrafts such a measure or frames the provision in language which justifies the existence of such a fiction being recognised to operate. The Court holds that PayPal is liable to be viewed as a payment system operator and consequently obliged to comply with reporting entity obligations as placed under the PMLA. The imposition of penalty in terms of the impugned order dated 17 December 2020 is quashed. The instant writ petition is partly allowed.

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• Service Tax

• 2023 (7) TMI 1240
  Rejection of SVLDRS application filed by the petitioner - it is alleged that the quantification of tax liability was not done before 30.06.2019 - HELD THAT:- As per Section 125(1)(e), though benefit of the scheme was to be given where there was a quantification on or before 30.06.2019 and in the perception of the department that quantification was not done before that relevant date appears to be misconceived. It is apparent from the letter dated 21.05.2019 of the petitioner that it was the case of the petitioner that during the course of verification of record, the petitioner had agreed to the points raised during the verification/scrutiny quantifying the amount. It was even admitted by the statement made on behalf of the assessee as is evident from the statement of 03.06.2020. Communications of the revenue authorities of 24.10.2019 as well as SVLDRS forms 1 and 2 indicate that there was no discrepancy in the figures of the outstanding amounts in the perception of the department and the ones that the petitioner had paid and informed accordingly to the department before 30.06.2019 i.e. on 21.05.2019. Apparently, therefore, the perception of the department that there was no quantification before 30.06.2019 is clearly misconceived. Support can be drawn from the circular of the department itself dated 27.08.2019 wherein in para 10 (g) thereof a clarification was made that quantified would also include a written communication intimating duty demand or duty liability admitted by a person during inquiry. That admission in the facts of the case had come on 21.05.2019 for the dues already paid and admitted by the assessee which was not even disputed as has now come on record by virtue of an order being OIO passed on 20.06.2023 pursuant to the investigation proceedings wherein the figure of outstanding tax dues is quantified at the same figure as that in the communication dated 21.05.2019. The amount in question stood quantified before the cut-off date in accordance with the circulars of the department and thus the action on the part of the department making the petitioner ineligible to file declaration under the scheme is required to be quashed and set aside - the impugned order set aside - respondents are directed to accept the declaration filed by the petitioner on 03.12.2019 as per SVLRDS-1 and close the issue including the OIO dated 28.06.2023 - petition allowed.

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• 2023 (7) TMI 1239
  Principles of natural justice - SCN was not served upon the petitioner and without giving an opportunity of hearing, the Adjudicating Officer had passed the order and the copy of the order was not served to the petitioner - Levy of penalty u/s 78 of the Finance Act, 1994 - HELD THAT:- In the case of SARAL WIRE CRAFT PVT. LTD. VERSUS COMMISSIONER CUSTOMS, CENTRAL EXCISE AND SERVICE TAX OTHERS [ 2015 (7) TMI 894 - SUPREME COURT] , the Hon ble Supreme Court held that an order must be tendered on the person concerned or his authorised agent, in other words, on no other person, to ensure efficaciousness. In the case of M/s RU s Marketing and Creative Unit [ 2018 (1) TMI 220 - MADRAS HIGH COURT] , the Hon ble Division Bench of Madras High Court held that it is clear that after the word sending it by registered post with acknowledgement due the words i.e. or by speed post with proof of delivery has been inserted. The aforesaid amendment itself would clearly shows that the amendment sought to be made is not only clarificatory in nature but also purely procedural for the purpose of communication of decisions/orders/summons to the parties. It is the basic Principle of Law long settled that if the manner of doing a particular is prescribed under any statute, the must be done in that manner or not at all. Section 27 of the General Clause Act will not come in aid to the respondent. The respondents failed to show any material that the impugned order dated March 6, 2018 was served upon the petitioner - respondents have already realised the amount from the petitioner and the same is lying with the respondents, therefore, to safeguard the interest of revenue at this stage, it is not proper to direct the amount to be returned to the petitioner as this Court has not gone into the merit of the matter. Matter remanded back to the Adjudicating Authority to decide the matter of fresh by allowing the petitioner to file reply to show cause and after giving an opportunity of hearing to the petitioner, the Adjudicating Authority shall dispose of the said matter within a period of eight weeks from the date of receipt of this order - petition allowed by way of remand.

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• 2023 (7) TMI 1238
  Interpretation of statute - broadcasting services - STGU services - essence of services under the category of broadcasting and STGU, both under the un-amended definition of taxable service (effective up to 30.06.2012) and service under Negative List regime (w.e.f. 01.07.2012). HELD THAT:- For the period pre-2012, Supply of Tangible Goods for Use (STGU) are covered as a taxable service, under Section 65 (105) (zzzzj) of the Finance Act, 1994. Such taxable service has been defined to mean, the service provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances. Similarly, the phrase broadcasting has also been defined in sub-section (15) read with clause 105 (zk) of Section 65 of the Act of 1994 - in providing DTH television channels for viewing by the subscribers, the appellants are providing transmission of signals, sounds, images, pictures etc. of various channels such as, pay channels, free to air channels or other bouquet of channels direct to the subscribers. This is definitely covered under the category (i) and/or (iii) of the broadcasting services explained above. However, it is found that the provision of STBs is outside the scope and ambit of any of the above said three groups, in order to fall within the ambit of broadcasting service . It is not the case of Revenue that the appellants had retained the effective control over the STBs supplied to their buyers. Since, the effective control of the STB was with the buyer/subscriber to operate and to view the channels to his own choice, the transaction between the appellants and the buyer/subscriber cannot fall within the ambit of STGU for levy of service tax and would be considered as a deemed sale, attracting payment of VAT - CBEC in the circular dated 29.02.2008, has also accepted the legal provision and clarified that if VAT has been paid on a transaction, there is no question of levy of service tax under the STGU services. What is nature of activity undertaken by the appellants in supply/provision of Set top Boxes (STBs) to their customers/ subscribers? - HELD THAT:- It is found from the plain reading of the above statutory provisions that every DTH operator is required to provide STBs to their subscribers in order to provide DTH service, inasmuch as STB is a necessary equipment to receive the DTH signals sent in encrypted form, to be received through the dish antenna, and which can be decoded and displayed on the television of the subscriber. From the above, we thus come to the conclusion that STB is a part of Customer Premises Equipment which is necessary for providing DTH service to a subscriber. It may be seen that STB is used as an equipment, being part of CPE, and that whenever the television channels are viewed by a subscriber, the said STB along with antenna are used for receiving and decoding the signals as a part of conditional access system. The broadcasting of signals by the appellants for viewing television channels are distinct by themselves from the STBs and other equipment. Thus, it is concluded that the nature of activity undertaken by the DTH operator in providing STB to a subscriber, is provision of an equipment, which is one-time activity, and it is not a part of DTH service in providing television channels for viewing by the subscriber. Whether provision of STBs by the appellants to the subscribers would amount to rendition of service? - HELD THAT:- On reading of Regulation 10 of the DTH Regulations, it would transpire that a subscriber may or may not pay for his subscription charges. However, as a provider of DTH service, the appellants herein are entitled, even when no broadcasting signals go to the subscriber, to collect lease rental amounts for such period when the STBs remain with the subscriber. Hence, it can be concluded that the subscriber had control over the STBs during the time when he pays for the lease rental for the same and he can exercise the right of control by viewing free to air channels like Doordarshan etc., even if does not able to view the other channels for non-payment of requisite charges - there are no hesitation, but to conclude that supply of STBs by the appellants is not a service, rather it is a deemed sale, leviable to VAT under the State legislature, inasmuch as the right to use of STB has not been retained by the appellants and the same was transferred to the subscriber for viewing the channels etc. according to his own choice and will. Whether the charges collected by the appellants for STBs are amenable for levy of service tax under any other taxable category? - HELD THAT:- From the records of the case, it is seen that the charges collected by the appellants in respect of providing STBs are on rental basis. The learned Advocate for the appellants argues that they are rightly paid the VAT on supply of STBs considering it as deemed sale - supply of STB on rental basis is a deemed sale in terms of Article 366(29A) of the Constitution, and thus, such transactions per se are not amenable to charge of service tax, for the reason that the right to use the STBs has not been retained by the appellants and same has been provided or transferred to the subscribers for viewing the broadcast channels according to their choice. The supply of STBs cannot be categorized as a taxable service under the definition of broadcasting . Even considering the same as a taxable service under the category of STGU, the same cannot meet the requirement of levy of service tax in the case of the appellants inasmuch as the right to use the STBs were transferred by the appellants to the subscribers. In other words, if the right to use and control of the STBs retained by the appellants, the same would fall under the purview of STGU for levy and payment of service tax under that category of service. These aspects have been adequately dealt with in the Circulars and Educational Guide issued by CBEC. Such guidelines were issued by the Board by considering the Budget Speech delivered by the Finance Minister in the floor of the Parliament, which is to the effect that right to use the goods, would be subjected to levy of service tax, in cases where VAT is not payable on such goods. The appellants have assailed the impugned order on the ground that the present demand is a duplication one, as the amount has already been considered in the other adjudication order dated 27.12.2016. Further, the appellants have also contended in the appeal that the amount received by them as lease rentals is on account of deemed sale and not service and accordingly, not chargeable to service tax. Since, the issue in both the impugned orders is identical, this order passed by the Bench will have equal force in respect of both the appeals filed by the appellants. There are no merits in the impugned orders, in so far as the adjudged demands were confirmed on the appellants - appeal allowed.

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• Central Excise

• 2023 (7) TMI 1237
  Refund claim - Availment of excess credit - inputs supplied to 100% EOU by not following the formula prescribed under Rule 3(7)(a) of Cenvat Credit Rules, 2004 - allegation that appellant had not paid excise duty of Rs. 54,796/- on the removal of samples of medicines taken out for the purpose of testing/ chemical examination - whether the original adjudicating authority of the refund claim was required to issue a show cause notice before appropriation of the confirmed dues or not? HELD THAT:- It is a matter on record that amount of duty and penalty which has been confirmed by the Additional Commissioner vide his order dated 07.01.2010 has already attained finality. The appeal filed by appellant against this order has already been rejected by the Commissioner (Appeals) - there are no order of this Tribunal on the confirmed dues as per the order of Additional Commissioner dated 07.01.2010. It is a matter on record that Assistant Commissioner processed the refund claim of the appellant and thereafter the entire amount which was deposited by them amounting to Rs. 7,49,664/- has been sanctioned and as per the provisions of Section 11 of Central Excise Act, 1944, the confirmed dues amounting to Rs. 5,89,662/- has been appropriated from the refund amount due to the appellant. There are no legal short-coming in the order of the Adjudicating Authority. As there are no stay on the confirmed dues and as per the provisions of Central Excise Act, 1944, the officer sanctioning the refund is authorised to make deductions of any tax dues which are recoverable from the appellant. In the case of COMMISSIONER OF CENTRAL EXCISE, INDORE VERSUS GAHOI FOODS PVT. LTD. [ 2004 (11) TMI 147 - CESTAT, NEW DELHI] ), the Tribunal has held that the Deputy Commissioner was justified in adjusting the amount of refund against the pending demand. The appeals are without any merit and deserve to be dismissed - appeal dismissed.

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• 2023 (7) TMI 1236
  Reversal of CENVAT credit - New exemption from duty - Recovery of CENVAT credit with interest and penalty - case of the department is that while availing the exemption Notification No. 30/2004- CE dated 09.07.2004, the appellant was not entitled to utilize the cenvat credit lying unutilized after reversal - HELD THAT:- As per the clause (i) of Section 11 (3), assessee who opts for exemption is required to reverse the credit on input, input in process and input contained in the finished goods. As per the clause (ii) of Section 11 (3) if the assessee avail an absolute exemption notification in that case the remaining unutilized amount after reversal in terms of clause (i) shall stand lapse. As per the above provision, only in a case where the exemption which is opted for, if it is absolute exemption, the remaining amount of cenvat credit after reversal as per clause (i) shall lapse, whereas if the exemption is not absolute only requirement is to reverse the credit attributed to input as such, input in process and input contained in the finished goods lying on the date of opting of exemption notification. In the present case since the Notification No. 30/2004-CE is undisputedly a conditional one therefore clause (ii) of the Rule 11 (3) is not applicable. Consequently the remaining amount of unutilized cenvat credit shall not lapse. In this case the appellant has utilized an amount of Rs. 4,42,539/- out of unutilized cenvat credit which is not barred under any of the provision. In the case of SYNFAB SALES AND INDUSTRIES LTD VERSUS C.C.E S.T. -SILVASA [ 2022 (1) TMI 259 - CESTAT AHMEDABAD] , this Tribunal dealing with the absolutely identical issue held that The issue has been considered by the tribunal time and again and after interpreting Rule 11(3) (i) and (ii) came to conclusion that in case of conditional notification the assessee is not required to lapse the remaining credit after reversal on input as such, input in process and input contained in finished goods. The issue is no longer res-integra. Accordingly, the impugned order is set aside - Appeal allowed.

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• 2023 (7) TMI 1235
  Refund of accumulated Cenvat Credit - whether inputs procured under DEEC/ Advance License Scheme has not suffered any duty and hence, availment of refund for export under such scheme would tantamount to double benefit to the appellant? - HELD THAT:- The manufacturer of excisable goods is entitled for grant of refund of accumulated Cenvat Credit availed on the inputs, subject to fulfillment of the condition that the finished goods have been exported. In the present case, since the Department has not specifically alleged that the appellant had not exported the finished goods, denial of benefit of refund on the ground that the inputs procured under the DEEC/Advance License Authorization Scheme will not be sustained, inasmuch as the statute does not debar such availment of benefit by the exporter. In an identical case, this Tribunal in the case of COMMISSIONER OF C. EX., JAIPUR-II VERSUS BHILWARA SPINNERS LTD. [ 2011 (2) TMI 584 - CESTAT, NEW DELHI] has dealt with the situation and allowed the refund benefit in favour of the assessee. There are no merits in the impugned order, insofar as it has denied the refund benefit to the appellant. Therefore, by setting aside impugned order, the appeal is allowed in favour of the appellant with consequent benefit of refund, if any, as per law.

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• CST, VAT & Sales Tax

• 2023 (7) TMI 1234
  Goods - Levy of Service Tax or Sales tax - activity of developing and supply of customised software to its clients - Levy of penalty - wilful suppression of facts or not - HELD THAT:- Even a customised software will satisfy the definition of goods for, it is evident that it has the attributes having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of being transmitted, transferred, delivered, stored and possessed. Once the said attributes are seen satisfied in the software in question, then whether the software is treated as customised or non-customised, it would nevertheless be categorised as goods for the purposes of levy of tax - The said view of the Supreme Court has since been followed in later decisions including a recent decision of the Supreme Court in COMMISSIONER OF SERVICE TAX DELHI VERSUS QUICK HEAL TECHNOLOGIES LIMITED [ 2022 (8) TMI 283 - SUPREME COURT] . Merely because the software developed by the respondent/assessee in the instant case was customised for a particular user and was not sold to other users, the charges collected from the customer cannot escape the levy of sales tax under the KGST Act. This is more so because the mere fact that it was customised for a particular user did not lead to the software ceasing to be goods for the purposes of levy of sales tax. Issue in favour of the assessee and against the Revenue.

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• 2023 (7) TMI 1233
  Validity of Best Judgement Assessment - fixation of rate of Gross Profit - 70% or 80% of cost of goods sold (COGS) - invocation of provisions under Section 41(1) of the Kerala General Sales Tax Act, 1963 - HELD THAT:- In the instant case, the Appellate Tribunal found that the assessee was given the opportunity, both at the time of issuance of notice for the production of the books of accounts as well as at the time of issuance of proposal notice, to produce the books of accounts. However, the assessee did not avail of those opportunities. The Appellate Tribunal noticed that no audited statements in Form 50A and 50B were produced before the first appellate authority and no such audited statements were produced before the Tribunal as well. After considering the rival contentions, the Appellate Tribunal, by the order dated 03.11.2022, dismissed the appeals filed by the assessee. In the instant case, in Annexure-A assessment orders for the year 2017-18 and 2018-19, the assessing authority fixed gross profit at the rate of 80%, to complete the assessment for those years on the basis of best judgment assessment . In Annexure-C orders for the year 2017-18 and 2018-19, the first appellate authority modified Annexure-A assessment orders by adopting a gross profit of 70% of the cost of the goods sold for those assessment years, considering the fact that the assessee is conducting business at a distance of 8 kilometres from the town. It is an admitted fact that, for the years 2015-16 and 2016-17, the assessing authority adopted a gross profit of 65% of the cost of the goods sold, while completing the assessment of the assessee for those years on the basis of best judgment assessment , in the assessment orders dated 11.03.2020 and 16.03.2020. In best judgment assessment there is always a certain degree of guesswork and it is the assessee himself who is to blame, as he did not submit proper accounts. In the facts and circumstances of the case on hand, it cannot be said that the estimation of gross profit by the assessing authority at 70% of the cost of the goods sold for those assessment years is not bona fide or without a rational basis. There are no reason to interfere with the orders of the authorities below, which are impugned in these S.T. Revisions - Revision dismissed.

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• Indian Laws

• 2023 (7) TMI 1232
  Dishonour of Cheque - insufficiency of funds - acquittal of the accused - discharge of liability or not - Burden of rebuttal of presumption - Section 138 of the Negotiable Instruments Act. Burden of rebuttal of presumption - HELD THAT:- The presumption mandated by Section 139, does indeed include the existence of a legally enforceable debt or liability. Bare denial of the passing of the consideration and existence of debt, is not enough to rebut the presumption. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complaint in a criminal trial - Apart from adducing direct evidence to prove that the consideration did not exist, or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. In the present case, the accused persons could not/did not discharge their liability under Section 139 of the N.I Act. The complainant has proved the issuance of the cheque by the accused firm by a partner. No evidence otherwise has been adduced. The dishonour of the cheque and the due service of notice has also been duly proved. Thus, the findings of the trial court being not in accordance with the evidence on record and with law is liable to be set aside. The cheque is of the year 2002. More than 20 years have passed. The complainant has proved his case against the accuseds/respondents by way of oral evidence and documents. The accuseds/respondents no. 1 to 3 are found guilty and convicted of offence punishable under Section 138 of the N.I. Act and sentenced to pay compensation of Rs.50 lakhs within one month from the date of this order, in default to suffer simple imprisonment for a period of one year in respect of respondents/accuseds no.2 and 3 and attachment in respect of the respondent/accused no.1 firm. Appeal disposed off.

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