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2023 (12) TMI 100 - ITAT GUWAHATI Income Tax

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Issues involved:
The appeal against the order of the Principal Commissioner of Income Tax under section 263 for A.Y. 2015-16.

Issue 1 - Power of Principal Commissioner under section 263:
The assessee contested the assumption of power under section 263 by the Principal Commissioner, challenging the setting aside of the assessment order passed under section 143(3) of the Income Tax Act. The Principal Commissioner found the assessment order erroneous and prejudicial to the interest of revenue due to discrepancies in expenses claimed by the assessee.

Details for Issue 1:
The assessee filed the return of income declaring total income, and the case was selected for limited scrutiny. The scrutiny assessment was conducted by the Assessing Officer. The Principal Commissioner identified discrepancies in expenses claimed by the assessee, such as 'Loss on shares' and 'Expenses on let out property' not in compliance with relevant provisions of the Income Tax Act. The Principal Commissioner set aside the assessment order for fresh enquiry and assessment on these issues, as the assessee did not respond to the notice.

Issue 2 - Limited scrutiny and conversion to complete scrutiny:
The assessee argued that the case was for limited scrutiny and could not be converted to complete scrutiny. The counsel referred to relevant circulars and case law to support the contention that the items in question should not have been examined by the Principal Commissioner.

Details for Issue 2:
The counsel for the assessee contended that the case was for limited scrutiny and could not be converted to complete scrutiny. However, the Tribunal observed that the items in question fell within the issues identified for limited scrutiny, specifically related to income from heads of income other than business/profession mismatch. The Tribunal noted that the expenses claimed were not in accordance with the Income Tax Act, and the acceptance of such claims by the Assessing Officer was erroneous. The Tribunal found no merit in the appeal, as the assessee did not provide any explanation for the discrepancies identified by the Principal Commissioner.

Conclusion:
The Tribunal upheld the decision of the Principal Commissioner under section 263, dismissing the appeal of the assessee. The assessment order was set aside for fresh enquiry and assessment on specific issues related to expenses claimed by the assessee, which were found to be in contravention of the Income Tax Act. The Tribunal rejected the argument that the case was for limited scrutiny only, as the identified issues were within the scope of the initial scrutiny.

Tribunal Confirms Reassessment for 2015-16 Over Discrepancies in Share Loss and Property Expenses Claims.
The Tribunal upheld the Principal Commissioner's decision under section 263, dismissing the assessee's appeal. The assessment order for A.Y. 2015-16 was set aside for fresh enquiry and assessment due to discrepancies in expenses claimed, such as 'Loss on shares' and 'Expenses on let out property,' which were not in compliance with the Income Tax Act. The Tribunal rejected the argument that the case was limited to scrutiny, affirming that the issues identified were within the scope of the initial scrutiny, and the acceptance of such claims by the Assessing Officer was erroneous.

Power of revision under section 263 - assessment erroneous and prejudicial to the interest of revenue - allowability of expenditure against income from house property - disallowance under section 71(3) in respect of loss on shares - scope of limited scrutiny and permissible scope of examination - relevance of CBDT Circular No. 20 of 2015Power of revision under section 263 - assessment erroneous and prejudicial to the interest of revenue - disallowance under section 71(3) in respect of loss on shares - Validity of exercise of revisionary power under section 263 to set aside assessment on account of allowance of 'Loss on shares' contrary to section 71(3). - HELD THAT: - The Principal Commissioner examined the record, noted that a sum debited as 'Loss on shares' had been allowed in assessment despite being contrary to the provision identified by him, formed the opinion that the assessment was erroneous and prejudicial to the revenue, issued show-cause and, in absence of any explanation from the assessee, set aside the assessment for fresh enquiry. The Tribunal observed that these aspects were squarely within the issue framed in the limited-scrutiny notice concerning mismatches in heads of income other than business/profession and that the Commissioner was entitled to examine and correct a patently erroneous allowance. The assessee's non-response to the show-cause notice was also noted. On this basis the Tribunal found no error in the Pr. CIT's exercise of power under section 263 and upheld the direction to reopen the matter for fresh consideration. [Paras 4, 5, 7]Exercise of revisionary power under section 263 in relation to the allowance of 'Loss on shares' was valid; assessment set aside for fresh inquiry on this point.Power of revision under section 263 - assessment erroneous and prejudicial to the interest of revenue - allowability of expenditure against income from house property - scope of limited scrutiny and permissible scope of examination - Validity of exercise of revisionary power under section 263 to set aside assessment on account of allowance of expenses claimed against rental/let-out property which were not allowable under Chapter IV. - HELD THAT: - The Tribunal noted that one of the limited-scrutiny items related to mismatch in heads of income other than business/profession, which encompassed income from house property; under the statutory scheme only specified deductions governed by Chapter IV are allowable against such income. The Principal Commissioner found that certain expenses claimed as 'Expenses on let out property' and 'Expenses against Rental Income' were not covered by Chapter IV and yet were allowed in assessment, forming the basis for the conclusion that the assessment was erroneous and prejudicial. The Tribunal held that examining and correcting such a patently erroneous claim did not amount to converting limited scrutiny into full scrutiny, and that the Pr. CIT was entitled to set aside the assessment for fresh consideration, particularly in view of the assessee's failure to respond to the show-cause notice. [Paras 4, 5, 7]Exercise of revisionary power under section 263 in relation to disallowance of expenses against house-property/rental income was valid; assessment set aside for fresh inquiry on this point.Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the Principal Commissioner's order under section 263 for A.Y. 2015-16, holding that the revisional action in respect of the disputed 'loss on shares' and expenses claimed against let-out/rental property was justified and within the scope of the limited scrutiny; the matters are remitted to the Assessing Officer for fresh enquiry and assessment on those issues.

2023 (11) TMI 1185 - ITAT DELHI Income Tax

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Automotive manufacturer wins transfer pricing case after tribunal excludes multiple comparables for functional differences
ITAT Delhi ruled on transfer pricing adjustments for an automotive component manufacturer providing software development and business support services. The tribunal excluded multiple comparables including E-Infochips, Infosys, Thirdware Solutions, Persistent Systems, E-Zest, Tata Elxsi, Alphageo India, Mitcon Consultancy, HCCA Business, and Cyber Media Online due to functional incomparability, lack of segmental data, or engagement in high-end services versus the assessee's low-risk captive services. The tribunal deleted TPO's benchmarking of fixed asset imports as no prescribed method under section 92C was followed. Regarding delayed receivables, the matter was restored to AO/TPO for fresh adjudication after admitting additional evidence. Appeal was partly allowed for statistical purposes.

Arm's length price - transfer pricing adjustment - TNMM as MAM - comparability under Rule 10B - working capital adjustment - application of +/-5% tolerance band - government companies not comparable - imputation of notional interest on receivables - remand for verification of comparables - most appropriate methodComparability under Rule 10B - arm's length price - Exclusion of specified comparable companies from the final set for benchmarking provision of software development services - HELD THAT: - The Tribunal examined each challenged comparable against functional characteristics, segmental disclosures and precedents. Infinite Data Systems Pvt. Ltd. was excluded because its transactions (being at the behest of its holding company) do not amount to an international transaction comparable with the assessee, and therefore fall outside Rule 10B comparability. E Infochips Bangalore Ltd., Thirdware Solutions Ltd., Persistent Systems Ltd., E Zest Ltd. and Tata Elxsi Ltd. were excluded as functionally dissimilar or because segmental data did not permit isolation of software development margins; the Tribunal relied on contemporaneous judicial precedents where applicable. Infosys Ltd. was excluded following precedents that large branded product/service providers are not good comparables for low risk captive service providers. Evoke Technologies Ltd. was left excluded as the assessee did not press inclusion. The Tribunal directed the AO/TPO to exclude these comparables from the final list when benchmarking the software development international transactions.Specified comparables (Infinite Data Systems Pvt. Ltd., E Infochips Bangalore Ltd., Thirdware Solutions Ltd., Persistent Systems Ltd., E Zest Ltd., Tata Elxsi Ltd., Infosys Ltd., and Evoke Technologies Ltd. as not pressed) are to be excluded from the final set of comparables for the software development segment; the AO/TPO to revise benchmarking accordingly.Remand for verification of comparables - related party transaction filter - Reference back to AO/TPO for verification of Sonata Software Ltd.'s related party transaction details - HELD THAT: - The assessee produced detailed party wise related party receipts for Sonata Software Ltd. which were not the subject of a factual finding by lower authorities. The Tribunal found no conclusive factual determination on the RPT percentage and hence restored only the question of Sonata's inclusion to the file of the AO/TPO for factual verification of the party wise details submitted by the assessee and, if verified, for exclusion from the comparable set.Sonata Software Ltd.'s inclusion is remanded to the AO/TPO for verification of party wise related party transactions and appropriate exclusion if the assessee's figures are confirmed.TNMM as MAM - application of +/-5% tolerance band - Transfer pricing adjustment in respect of provision of software development services - HELD THAT: - After excluding the identified non comparable entities, the Tribunal disposed of the grounds challenging the TPO/DRP selection of comparables in the terms recorded, directing the AO/TPO to revise benchmarking in accordance with the exclusions and applicable TNMM analysis and working capital adjustments.Grounds challenging the selection of comparables and resultant TP adjustment for software development services disposed of by directing exclusion of specified comparables and revision by AO/TPO accordingly.Application of +/-5% tolerance band - working capital adjustment - Transfer pricing adjustment in manufacturing segment - HELD THAT: - The Tribunal compared the assessee's operating profit to sales ratio with the working capital adjusted arithmetic mean of the selected comparables. The assessee's margin of 8.41% was found to lie within the +/-5% tolerance band of the comparables' average margin of 10.03%, making an ALP adjustment unwarranted.TP adjustment in respect of the manufacturing segment deleted; assessee's manufacturing transactions treated at arm's length.Most appropriate method - transfer pricing adjustment - Adjustment in respect of import of fixed assets from associated enterprises - HELD THAT: - The TPO treated the import of tools as having nil ALP without applying or evidencing any of the prescribed methods under section 92C and Rule 10B; although the TPO mentioned CUP, no comparable uncontrolled transactions or CUP analysis was produced. The DRP's directions to reconsider contemporaneous documents were not obeyed. Absent adoption of a prescribed MAM and supporting comparables, the TPO's benchmarking was unsustainable.TP adjustment in respect of import/purchase of fixed assets deleted and ground allowed.Government companies not comparable - comparability under Rule 10B - Exclusion of specified comparables for business support services (ITES) benchmarking - HELD THAT: - The Tribunal held that certain comparables relied on by the TPO/DRP were functionally dissimilar or government entities and therefore inappropriate. Apitco Ltd. (a government company) was excluded following binding High Court and Supreme Court treatment of the issue; Alphageo (India) Ltd., Mitcon Consultancy Services Ltd., HCCA Business (on the basis of inadequate/indeterminate public information and KPO characteristics), and Cyber Media Online Ltd. (media business) were excluded as functionally not comparable to the assessee's low end, captive business support services. Educational Consultants (India) Ltd. was also held to have been rightly excluded as it is controlled by Government.The named comparables are to be excluded from the final comparable set for benchmarking business support services; AO/TPO to rework benchmarking without these comparables.Imputation of notional interest on receivables - remand for verification of additional evidence - Recharacterisation of delayed receivables as loans and imputation of notional interest - HELD THAT: - The TPO recharacterised outstanding receivables as unsecured loans and imputed interest at SBI PLR + 300 bps, applying interest on entire balances including opening receivables and segments for which invoice wise receipt dates were not available. The assessee sought to place on record invoice wise realization details, opening/closing receivable particulars and payable offsets and argued that working capital adjustments and netting of payables negate any separate imputation of interest. The Tribunal found the case fit for admission of additional evidence, allowed the additional evidence, and restored the entire issue to the AO/TPO for de novo adjudication in light of the additional documents and applicable judicial guidance.Issue remanded to AO/TPO for fresh adjudication after considering the admitted additional evidence; imputation of notional interest set aside for reconsideration.Final Conclusion: The assessee's appeal for AY 2010 11 is partly allowed: multiple specified comparables are excluded from the final comparable sets for software development and business support services, the manufacturing segment TP adjustment is deleted, the TP adjustment on import of fixed assets is deleted, Sonata Software Ltd.'s inclusion is remanded for factual verification, and the issue of imputed interest on delayed receivables is remanded to the AO/TPO for de novo adjudication after admission of additional evidence; the appeal is otherwise disposed of in the terms recorded and is partly allowed for statistical purposes.

2023 (11) TMI 1083 - PATNA HIGH COURT Money Laundering

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Money laundering proceedings cannot continue after acquittal in the predicate offence because linked property stops being proceeds of crime.
Proceedings under the Prevention of Money Laundering Act cannot continue where the person has been finally acquitted of the predicate scheduled offence. The Act depends on property being derived from criminal activity relating to a scheduled offence, so once acquittal removes the underlying offence, the linked property no longer qualifies as proceeds of crime. On that basis, continued action under the Act, including cognizance and summons based on the same predicate offences, is unsustainable and liable to be quashed.

Proceeds of crime - predicate offence - money-laundering as an independent offence dependent on predicate offence - acquittal of scheduled/predicate offence prevents action under the PMLA - cognizance under Section 4 of the Prevention of Money Laundering ActPredicate offence - proceeds of crime - acquittal of scheduled/predicate offence prevents action under the PMLA - money-laundering as an independent offence dependent on predicate offence - cognizance under Section 4 of the Prevention of Money Laundering Act - Whether proceedings under the Prevention of Money Laundering Act instituted by an ECIR can continue after the accused has been acquitted of the predicate scheduled offences on which the ECIR was founded - HELD THAT: - The Court applied the principle that the offence of money laundering, while independent in character, is dependent on the existence of proceeds of crime derived or obtained as a result of criminal activity relating to a scheduled (predicate) offence. Relying on the ratio in Vijay Madanlal Chaudhary, the Court recorded that authorities under the PMLA cannot treat recovered property as proceeds of crime or proceed for money laundering on mere assumption of commission of the scheduled offence; the predicate offence must be registered or pending and, if the person is finally absolved by discharge, acquittal or quashing of the scheduled offence, no action for money laundering can be sustained in relation to the property linked to that scheduled offence. Applying these principles to the facts, the petitioner had been acquitted in the predicate trials (Jamalpur P.S. Case No.121 of 2010 and Munger Kotwali P.S. Case No.227 of 2010) which formed the basis of the ECIR. The Enforcement Directorate did not, in the proceedings before the High Court, successfully controvert the legal position that acquittal of the predicate offences precludes continuation of the PMLA proceeding based on the same allegations. In view of the settled legal position and its application to the facts, the cognizance taken and summons issued under Section 4 of the PMLA could not be permitted to continue.The order dated 24.08.2018 taking cognizance under Section 4 of the PMLA and issuing summons to the petitioner is quashed.Final Conclusion: The High Court quashed the session court's order of cognizance and summons under the PMLA because the ECIR was founded on predicate offences in respect of which the petitioner stands acquitted, and acquittal of the scheduled offences precludes maintenance of the money laundering proceeding in respect of the alleged proceeds.

2023 (11) TMI 963 - CESTAT ALLAHABAD Central Excise

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Differential duty demand modified, penalties under Section 11AC set aside for following prescribed procedures
The CESTAT Allahabad allowed the appeal in part in this central excise valuation case. The appellant had paid differential duty based on cost accountant certificates for captive consumption goods. The tribunal held that demands for 2003-04 and 2005-06 were appropriated against amounts already paid by appellant. For 2004-05, differential duty demand was modified to Rs 66,13,705 with Rs 27,98,055 already paid being appropriated. The tribunal found the limitation period was computed correctly as the appellant followed prescribed procedures for provisional assessment. All penalties under Section 11AC were set aside as appellant followed accepted procedures, but interest demands under Section 11AB were upheld.

Assessable value determined under CAS-4 - Assessable value as per Rule 8 of the Central Excise Valuation Rules, 2000 - Self-assessment and provisional assessment under the Central Excise rules - Limitation under Section 11A - Explanation 1(b)(iv) - Interest liability under Section 11AB - Penalty under Section 11AC read with Rule 25 of the Central Excise Rules, 2002 - Appropriation of duty paid and CENVAT creditAssessable value determined under CAS-4 - Assessable value as per Rule 8 of the Central Excise Valuation Rules, 2000 - Final determination of assessable value for clearances in FY 2003-04, 2004-05 and 2005-06. - HELD THAT: - The Tribunal held that value for clearance must be determined as per CAS-4 and Rule 8, i.e., cost of production of the previous finalized year adjusted by the prescribed notional profit (110%). On the material available, the Tribunal accepted that where clearances were effected on the basis of previous year's finalized accounts the value is to be re-determined on the finalized records of the year during which clearances were made. Applying this, the Tribunal redetermined the cost per unit for 2004-05 (excluding interest/finance charges) and found the assessable values to be Rs.15.40 per unit (2003-04 as ultimately to be treated by reference to subsequent finalization) and Rs.23.03 per unit (2005-06 as cleared). The Tribunal found the post-SCN revised costing sheets were not fully reliable because the supporting documents could not be produced (unit closed), and noted material differences in heads (not only interest) between the original and revised sheets, therefore giving limited weight to the later charts. [Paras 4]Assessable value determined in accordance with CAS-4 and Rule 8; values for the years adjusted as per Tribunal's calculation (2003-04 and 2004-05 treated at Rs.15.40 and Rs.23.03 respectively; 2005-06 treated as cleared at Rs.23.03 with minor redetermination to Rs.23.09 which was accepted as meager and discharged).Appropriation of duty paid and CENVAT credit - Appropriation of amounts already paid against the demands and computation of differential duty payable year-wise. - HELD THAT: - On the documentary chart and admissions in replies and statements, the Tribunal found the appellant had admitted and paid the differential duty for 2003-04 and 2005-06 and part payment for 2004-05. Year-wise computation in the record was adopted to appropriate amounts paid: amounts for 2003-04 and 2005-06 were appropriated fully against the demand; demand for 2004-05 was recomputed to Rs.66,13,705 and adjusted against payments of Rs.27,98,055, leaving a balance differential upheld for 2004-05. The Tribunal noted that the sister unit had taken CENVAT credit on the supplementary invoices issued for differential duty. [Paras 4, 5]Appropriations made: duty paid for 2003-04 and 2005-06 appropriated; differential duty for 2004-05 recomputed and balance demand upheld to the extent shown by Tribunal.Limitation under Section 11A - Explanation 1(b)(iv) - Whether the demand was within limitation under Section 11A. - HELD THAT: - The Tribunal held that where the assessee paid duty on the basis of Cost Accountant certificates issued pursuant to finalized/audited accounting records of the previous year and subsequently paid differential duty after finalization, the relevant date for computation of limitation is the date of adjustment after final assessment as contemplated by clause (iv) of Explanation 1(b) to Section 11A. Given the procedure followed by the appellant (payment on previous year's cost followed by differential payment based on finalized current year certificate), the show cause notice had to be treated as issued within the normal period of limitation. [Paras 4]Demand held to be within limitation under Section 11A by reference to Explanation 1(b)(iv).Interest liability under Section 11AB - Self-assessment and provisional assessment under the Central Excise rules - Whether interest under Section 11AB on the differential duty is payable. - HELD THAT: - Relying on principles explained in the cited Supreme Court authority concerning when duty 'ought to have been paid' and the parity between provisional assessment and finalization, the Tribunal upheld demand of interest under Section 11AB. The Tribunal reasoned that where valuation is finally determined to be higher (even if provisional at removal), interest liability runs from the period indicated by the Act and Rules (month for which duty is determined/Rule 8 timelines), and the circumstances of payment/differential payment by the appellant did not negate the statutory remit for interest. [Paras 4]Interest demand under Section 11AB upheld.Penalty under Section 11AC read with Rule 25 of the Central Excise Rules, 2002 - Validity of penalty imposed under Section 11AC read with Rule 25. - HELD THAT: - The Commissioner had imposed penalty on the basis that there was suppression/mis-statement with intent to evade duty. The Tribunal found there was no substantial reason in the show cause notice or adjudication order to invoke extended period or to justify penalty: the appellant had followed the prescribed practice of paying duty on the basis of previous year's cost certificates and subsequently paying differential duty on finalization. Given that the procedure followed was an accepted method for captive clearances and differential duty payments, the Tribunal concluded that penalty under Section 11AC/Rule 25 was not sustainable and set it aside. [Paras 4, 5]Penalty under Section 11AC read with Rule 25 set aside.Final Conclusion: Appeal partly allowed: assessable values for the years were determined in accordance with CAS-4 and Rule 8 with appropriations made for amounts already paid; demand as recomputed for 2004-05 and interest under Section 11AB are upheld; penalty under Section 11AC read with Rule 25 is set aside.

2023 (11) TMI 877 - CESTAT KOLKATA Customs

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SAD refund verification: Tribunal remanded the claim for scrutiny of the Chartered Accountant's certificate and supporting documents.
A refund claim under the SAD exemption notification turned on whether a Chartered Accountant's certificate was a mandatory precondition and whether the earlier certificate's authenticity doubt justified recovery. The Tribunal noted that the certificate was not a condition precedent under the notification, no ulterior motive by the importer was established, and a fresh certificate had been produced for verification. Relying on precedent involving the same issue, it held that the proper course was to remand the matter so the adjudicating authority could verify the certificate and supporting documents before reconsidering the refund claim.

Refund of SAD under Notification No. 102/2007-CUS - veracity of Chartered Accountant's certificate - remand for verification and reconsideration of refund claim - non-mandatory nature of Chartered Accountant's certificate as condition precedent - setting aside of confirmed demand upon grant of refundNon-mandatory nature of Chartered Accountant's certificate as condition precedent - absence of mala fide in production of certificate - Production of the earlier Chartered Accountant's certificate was not shown to be actuated by any ulterior or mala fide motive and the certificate was not a mandatory condition precedent under Notification No. 102/2007-CUS. - HELD THAT: - The Tribunal examined the circumstances in which the earlier Chartered Accountant's certificate was produced and found no proof of any ulterior motive on the part of the appellant. The appellant had relied upon a third party to arrange the certificate and was unaware that the issuing Chartered Accountant had expired. The Tribunal accepted that the Notification did not make production of the Chartered Accountant's certificate a mandatory prerequisite and, on the facts, there was no mala fide conduct by the appellant. [Paras 5]No mala fide established; production of the earlier Chartered Accountant's certificate does not disentitle the appellant to consideration of the refund claim.Veracity of Chartered Accountant's certificate - remand for verification and reconsideration of refund claim - setting aside of confirmed demand upon grant of refund - Matter remanded to the adjudicating authority to verify the fresh Chartered Accountant's certificate and to reconsider the refund claim; if found in order, the refund is to be allowed and the confirmed demand (with interest and penalty) set aside. - HELD THAT: - Relying on the appellant's production of a fresh Chartered Accountant's certificate (with membership details verified) and precedent of this Tribunal, the Bench directed that the adjudicating authority should verify the veracity of the certificate and examine related documents. The Tribunal remitted the case for fresh consideration limited to verification and adjudication of entitlement to the refund. The Tribunal further directed that if the adjudicating authority holds the refund claim eligible, it must allow the refund and consequently set aside the earlier confirmed demand along with interest and penalty. [Paras 5, 6]Remanded for verification and fresh adjudication; allow refund and set aside demand if documents are found in order.Final Conclusion: The Tribunal found no mala fide in the production of the earlier Chartered Accountant's certificate, accepted the appellant's fresh certificate and remanded the matter to the adjudicating authority to verify the certificate and reconsider the refund claim; if the refund is held eligible, the earlier confirmed demand with interest and penalty is to be set aside.

2023 (11) TMI 814 - Supreme Court Indian Laws

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Delay condonation discretion upheld where sufficient cause and reasoned explanation for institutional delay were shown.
Delay condonation under Section 5 of the Limitation Act depends on whether sufficient cause is shown on the facts of each case, assessed pragmatically and with a liberal but justice-oriented approach. In appellate review of a discretionary condonation order, interference is warranted only if the lower court acted arbitrarily or reached a clearly wrong conclusion. The High Court's reliance on institutional delay and inter-departmental processing was treated as a reasoned exercise of discretion, so the challenge failed and the condonation order was upheld.

Condonation of delay under Section 5 of the Limitation Act - sufficient cause - discretionary power of courts - liberal and justice-oriented approach - governmental impersonal machinery and bureaucratic delay - interference by appellate court with discretionCondonation of delay under Section 5 of the Limitation Act - sufficient cause - governmental impersonal machinery and bureaucratic delay - liberal and justice-oriented approach - interference by appellate court with discretion - Whether the High Court was justified in condoning the delay of 479 days in presenting the appeal by the first respondent under Section 5 of the Limitation Act. - HELD THAT: - The Court examined the exercise of discretion by the High Court in condoning the delay and applied established principles that (i) the expression 'sufficient cause' must receive a liberal construction to advance substantial justice, (ii) the sufficiency and acceptability of the explanation - not merely the length of delay - determine the exercise of discretion, and (iii) the impersonal and procedural nature of governmental functioning may, within reasonable limits, be a relevant consideration. The Bench observed that while some recent decisions have declined to accept governmental lethargy as sufficient cause, the order under challenge must be tested against the then-prevailing precedents which endorsed a pragmatic and justice-oriented approach. The High Court had set out reasons - including preference for substantial justice over technicality, acceptance of explained (as opposed to inordinate unexplained) delay, and the view that negligence did not amount to callousness - and the Supreme Court found that those reasons did not amount to an arbitrary or clearly wrong exercise of discretion. It was further noted that an appellate court should not ordinarily interfere with a discretionary order unless it is clearly wrong; having regard to the material before the High Court and the line of authoritative decisions recognising limited latitude for governmental delay, the condonation was held to be within permissible judicial discretion. [Paras 30, 31, 32, 37, 38]The High Court did not commit any error in condoning the delay; its exercise of discretion in allowing the application under Section 5 was not vitiated and is upheld.Final Conclusion: The appeal is dismissed. The High Court's order condoning the delay in filing the appeal by the first respondent is upheld as a proper exercise of discretion; parties shall bear their own costs.

2023 (11) TMI 483 - CESTAT CHENNAI Customs

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Imported Cheese Polvaromas classified under CTH 3302 1090 as odoriferous substances not food preparations CTH 2106 9060
CESTAT Chennai classified imported Cheese Polvaromas (semi-finished flavour compound) under CTH 3302 1090 rather than CTH 2106 9060. The tribunal held that since the goods were used as industrial raw materials for manufacturing dry seasoning powder and not directly edible or consumable after minimal processing, they constituted odoriferous substances excluded from Chapter 2106. The products imparted flavour characteristics rather than serving as food preparations. The department's appeal for differential duty was rejected, confirming the lower classification.

Classification under Heading 3302 (mixtures of odoriferous substances) - Residuary heading 2106 and its scope as 'food preparations not elsewhere specified' - Chapter Note 2 to Chapter 33 - "odoriferous substances" includes synthetic aromatics - HSN Explanatory Notes - exclusion of preparations based on odoriferous substances from 2106 - Principle that a residuary entry cannot be invoked where a specific heading appliesClassification under Heading 3302 (mixtures of odoriferous substances) - Chapter Note 2 to Chapter 33 - "odoriferous substances" includes synthetic aromatics - HSN Explanatory Notes - mixtures of synthetic aromatics - Impugned goods (Cheese Polvaromas / Cheese Parmesan Polvaromas / Butter Cream Polvaromas) are classifiable under CTH 3302 1090 - HELD THAT: - The Tribunal held that the imported products are mixtures of odoriferous substances which include synthetic aromatics as per Chapter Note 2 to Chapter 33 and the HSN Explanatory Notes to heading 3302. The goods are used as industrial raw materials to impart flavour and cannot be consumed directly; laboratory reports and the importer's own materials show presence of aroma components (fatty acids/ketones) and a carrier (maltodextrin), supporting the characterization as mixtures of synthetic aroma compounds. The Note 2 categories (substances of heading 3301, isolated constituents, and synthetic aromatics) are independent; the requirement that substances in one category be of plant origin cannot be read across to synthetic aromatics. Consequently the Tribunal affirmed the adjudicating authority's classification under CTH 3302 1090.Classification affirmed under CTH 3302 1090; appeal on classification rejected.Residuary heading 2106 and its scope as 'food preparations not elsewhere specified' - HSN Explanatory Notes - exclusion of preparations based on odoriferous substances from 2106 - Heading 2106 is not the appropriate classification for the impugned goods - HELD THAT: - The Tribunal examined the scope of heading 2106 and the HSN Explanatory Notes, which cover preparations for human consumption either directly or after minimal processing. The impugned goods are not ready-for-consumption food preparations but industrial flavouring materials used as raw materials in manufacture of dry mix seasoning; they therefore do not satisfy the conditions for 2106. Moreover, the HSN Notes expressly exclude preparations based on odoriferous substances (which fall under heading 3302) from heading 2106. Even if the goods have origin from cheese, their character as mixtures of odoriferous/synthetic aroma substances precludes classification under 2106.Heading 2106 is inapplicable; 2106 cannot displace 3302 for these goods.Principle that a residuary entry cannot be invoked where a specific heading applies - Consequences for demand, extended period, confiscation and penalty when classification determined - No merit in Department's appeal seeking reclassification, differential duty, confiscation or penalties once classification under 3302 is sustained - HELD THAT: - Having held that the goods are rightly classifiable under CTH 3302, the Tribunal found the Department's challenge to the original adjudication unsustainable. The decision that 3302 applies obviated the need to sustain the proposals in the show cause notice for reclassification to 2106, invocation of extended limitation, confiscation and penalties. The Tribunal also relied on established authority that a residuary entry cannot be invoked where a specific heading is applicable, reinforcing that the Department could not re-categorise the imports under 2106 once 3302 was found to be the specific entry.Department's appeal rejected; proposals for differential duty, confiscation and penalties not sustained.Final Conclusion: The Tribunal affirmed classification of the imported Cheese Polvaromas under CTH 3302 1090 (mixtures of odoriferous substances, including synthetic aromatics), held heading 2106 inapplicable, and dismissed the Department's appeal seeking reclassification, differential duty, confiscation and penalties.

2023 (11) TMI 399 - CHHATTISGARH HIGH COURT GST

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Issues involved:
The petitioner challenged a notice issued under the Central Goods and Service Tax Act, 2017. The key issues were the repeated issuance of show cause notices by different tax authorities and the legality of the third show cause notice.

Issue 1: Repeated issuance of show cause notices
The petitioner, a Public Sector Undertaking, received multiple show cause notices regarding GST liability on CG Development Cess and CG Environment Cess under Reverse Charge Mechanism. The State Tax Authorities issued the first two notices, which were subsequently dropped. The third notice was issued by the Central Tax Authorities, leading to the current challenge.

Details for Issue 1:
- The petitioner argued that issuing multiple notices for the same cause of action was unjustified, citing a Supreme Court judgment.
- The respondents justified the third notice by claiming that earlier enquiries were not conducted properly, necessitating a fresh notice.
- The Court noted the sequence of events and reasons for dropping the previous notices, ultimately ruling that the authorities had the legal authority to issue the third notice.

Issue 2: Legality of the third show cause notice
The petitioner contended that the third show cause notice was unwarranted and violated principles of natural justice. The respondents argued that the notice was valid, emphasizing the petitioner's right to respond and the authority of the tax authorities to issue such notices under the GST Act.

Details for Issue 2:
- The Court examined the grounds for issuing the third notice, clarifying that it was based on new information from investigations.
- It was established that the petitioner had the opportunity to respond to the notice and that the notice was within the jurisdiction of the tax authorities.
- The Court concluded that no exceptional circumstances warranted interference, leading to the dismissal of the petition.

This judgment addressed the concerns raised by the petitioner regarding the repeated issuance of show cause notices and the legality of the third notice under the GST Act. The Court upheld the authority of the tax authorities to issue such notices and emphasized the petitioner's right to respond in the ongoing proceedings.

Public Sector Undertaking Successfully Defends GST Notice After Careful Judicial Review of Procedural Compliance and Natural Justice Principles
PSU challenged multiple GST show cause notices issued by tax authorities. SC upheld the legality of the third notice, finding that authorities had valid grounds to issue it after previous notices were dropped. The court determined the notice was procedurally sound, respected principles of natural justice, and did not warrant judicial intervention.

Validity of show cause notice - Section 73 of the Central Goods and Services Tax Act, 2017 - Maintainability of writ against statutory notice - Remedy of filing reply to show cause notice - Natural justiceValidity of show cause notice - Section 73 of the Central Goods and Services Tax Act, 2017 - Third show cause notice dated 16.01.2023 issued by respondent No.2 under Section 73 is not without jurisdiction. - HELD THAT: - The Court examined the chronology of earlier show cause notices issued by State authorities and the subsequent notice issued by the Central authority. On the material placed before it, the Court found that the Central and State authorities could both take cognizance of the matter and that the issuance of the third notice by respondent No.2 fell within the authority conferred by law under Section 73. The fact that earlier proceedings were dropped by State authorities did not render the Central authority's notice per se void. The Court noted departmental explanations indicating additional information and further scrutiny which led to the fresh proceedings, and treated the third notice as a simple show cause that invites the petitioner to respond rather than an exercise wholly without jurisdiction.The third show cause notice is intra vires and not quashed on jurisdictional grounds.Maintainability of writ against statutory notice - Remedy of filing reply to show cause notice - Natural justice - Writ petition under Article 226 seeking quashal of the show cause notice is not maintainable in the circumstances; petitioner must avail statutory remedy by filing a reply and defending its case before the authority. - HELD THAT: - The Court observed that the petitioner had been given opportunity to file replies to earlier notices and that there was no allegation of breach of natural justice or that the proceedings were wholly without jurisdiction. Given the availability of an efficacious statutory remedy in the form of filing a reply and contesting the notice before the issuing authority, the Court declined to exercise extraordinary jurisdiction to quash the notice. The Court relied on the principle that mere repetition of allegations does not automatically disentitle the authority to issue a fresh notice where further scrutiny or new information is said to have emerged, and held that interference would not be justified absent a compelling jurisdictional defect or denial of natural justice.The writ is refused and the petitioner is directed to pursue the available statutory remedy by filing a reply to the show cause notice.Final Conclusion: The petition is dismissed. The Central and State authorities were competent to issue the impugned show cause notice under Section 73, no violation of natural justice or jurisdictional defect was shown, and the petitioner must avail the statutory remedy of replying to the notice rather than seek quashal by writ.

2023 (11) TMI 344 - BOMBAY HIGH COURT Income Tax

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Issues involved:
The validity of notice under Section 148A(b) of the Income Tax Act, 1961, the order under Section 148A(d) of the Act, and the notice under Section 148 of the Act due to the deceased status of the assessee and lack of application of mind in granting approval under Section 151 of the Act.

Summary:

Issue 1: Validity of notice under Section 148A(b) of the Act:
The petitioner challenged a notice issued under Section 148A(b) of the Act to a deceased person, along with the order under Section 148A(d) of the Act and another notice under Section 148 of the Act. The primary contention was that the notice under Section 148A(b) was invalid as it was issued to a deceased individual. The petitioner had applied to be registered as the legal heir of the deceased assessee, which was accepted and verifiable from the Income Tax Portal. The court found that the notice under Section 148A(b) was issued without the mandated enquiry, rendering it invalid and supporting this view with a precedent judgment.

Issue 2: Lack of application of mind in granting approval under Section 151 of the Act:
The court also considered the approval granted under Section 151 of the Act, highlighting the total non-application of mind by the Assessing Officer and other tax officials involved. The approval form indicated errors, such as the time limit for proceedings and the quantum of income, which should have been corrected before granting approval. It was concluded that if the officials had reviewed the approval form properly, they would have realized the errors and not recommended or granted approval. Consequently, the order under Section 148A(d) of the Act and the subsequent notice under Section 148 of the Act were quashed and set aside due to the lack of application of mind in the approval process.

Conclusion:
In conclusion, the court quashed and set aside the order dated 18th April 2023 under Section 148A(d) of the Act and the consequent notice dated 18th April 2023 under Section 148 of the Act based on the invalidity of the notice under Section 148A(b) and the lack of application of mind in granting approval under Section 151 of the Act.

Court Annuls Tax Notice and Order for Deceased Individual Due to Invalid Issuance and Approval Errors by Officials.
The court quashed and set aside the order dated 18th April 2023 under Section 148A(d) and the subsequent notice under Section 148 of the Income Tax Act, 1961. The court found the notice under Section 148A(b) invalid as it was issued to a deceased individual without the required enquiry. Additionally, the court highlighted a lack of application of mind in granting approval under Section 151, noting errors in the approval process by tax officials. Consequently, both the order and notice were deemed invalid and were annulled.

Notice under Section 148A(b) of the Income Tax Act - Enquiry under Section 148A of the Income Tax Act - Legal heir registration and filing return on behalf of deceased assessee - Order under Section 148A(d) of the Income Tax Act - Sanction under Section 151 of the Income Tax Act - Non-application of mind in granting approval under Section 151 - Time limit for proceedings under Section 149(1)(b) of the Income Tax Act - Notice under Section 148 of the Income Tax ActNotice under Section 148A(b) of the Income Tax Act - Enquiry under Section 148A of the Income Tax Act - Legal heir registration and filing return on behalf of deceased assessee - Validity of the notice issued under Section 148A(b) of the Act where the assessee was deceased and no enquiry was made. - HELD THAT: - The Court found that the notice under Section 148A(b) was issued without undertaking the enquiry mandated by Section 148A. The petitioner averred, unchallenged in the reply affidavit, that he had been registered on the Income Tax Portal as the legal heir of the deceased assessee and had filed the return for the relevant year; the respondents' affidavit did not dispute these facts and failed to show that the statutory enquiry under Section 148A had been carried out. Had the Assessing Officer verified the Income Tax Portal or made the requisite enquiry, the death of the assessee (23rd July 2020) and the petitioner's status as legal heir would have been revealed, rendering the issuance of the Section 148A(b) notice improper. Reliance was placed on precedents of this Court addressing the requirement of enquiry under Section 148A. On this basis the notice under Section 148A(b) was held to be invalid. [Paras 2, 3]Notice under Section 148A(b) quashed and set aside.Order under Section 148A(d) of the Income Tax Act - Sanction under Section 151 of the Income Tax Act - Non-application of mind in granting approval under Section 151 - Time limit for proceedings under Section 149(1)(b) of the Income Tax Act - Notice under Section 148 of the Income Tax Act - Validity of the order under Section 148A(d), the sanction under Section 151 and the consequent notice under Section 148. - HELD THAT: - Having held the foundational Section 148A(b) notice invalid, the Court further examined the approval granted under Section 151 and the order under Section 148A(d). The approval form accompanying the reply disclosed inconsistent entries: Row 9 recorded the time limit as falling under Section 149(1)(b) (more than three years but not more than ten), whereas the assessment related to Assessment Year 2019-2020 and the impugned notice dated 29th March 2023 fell within three years. This demonstrated that the officer who applied for approval, the recommending Additional/Joint Commissioner, and the Principal Commissioner who granted approval had not applied their minds to the material facts. Because the sanction was granted without proper application of mind and the basic prerequisites for issuance of a Section 148 notice were absent, the order under Section 148A(d) and the consequent Section 148 notice could not stand. [Paras 5, 6, 7, 8]Order under Section 148A(d), the sanction under Section 151 and the consequent notice under Section 148 quashed and set aside.Final Conclusion: The notice dated 29th March 2023 under Section 148A(b), the order dated 18th April 2023 under Section 148A(d), the sanction/approval under Section 151 and the consequential notice dated 18th April 2023 under Section 148 are quashed and set aside; petition disposed.

2023 (11) TMI 328 - ITAT COCHIN Income Tax

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Tribunal Rejects Revenue's Application; Upholds Deduction of Interest Income for Cooperative Societies u/s 80P(2.
The Tribunal dismissed the Revenue's Miscellaneous Application, finding it not maintainable due to the absence of any identifiable mistake of fact or law. The Tribunal upheld its original decision regarding the deduction of interest income under section 80P(2) of the Income-tax Act, 1961, aligning with the Full Bench ruling of the jurisdictional HC. It instructed the Assessing Officer to evaluate the assessee's activities for compliance with the Kerala Co-operative Societies Act, 1969, and to assess the eligibility of interest income from investments with co-operative banks for deduction. The assessee was allowed to contest the AO's order based on the latest SC decision.

Deduction under section 80P(2) for co-operative societies - treatment of interest on deposits as income from business v. income from other sources - assessment officer to examine activities under the Kerala Co-operative Societies Act, 1969 - maintainability of miscellaneous application for rectification/review of Tribunal order - Tribunal's lack of power of review - precedential effect of Full Bench decisionMaintainability of miscellaneous application for rectification/review of Tribunal order - Tribunal's lack of power of review - Miscellaneous Application by Revenue seeking recall/rectification of the Tribunal order is not maintainable and is dismissed. - HELD THAT: - The Revenue sought rectification of the Tribunal's order dated 17.05.2019 on the ground that the Tribunal erroneously followed a co-ordinate bench decision. The Tribunal, however, applied the binding Full Bench decision of the jurisdictional High Court and directed the Assessing Officer to examine the issue in accordance therewith. The application did not point to any arguable mistake of fact or law in the impugned order and amounted to a request for review, which the Tribunal has no power to entertain. In these circumstances no interference with the impugned order was warranted and the miscellaneous application was dismissed. [Paras 3, 5]Miscellaneous application dismissed; no recall or rectification of the impugned order.Deduction under section 80P(2) for co-operative societies - assessment officer to examine activities under the Kerala Co-operative Societies Act, 1969 - treatment of interest on deposits as income from business v. income from other sources - precedential effect of Full Bench decision - Direction to the Assessing Officer to examine whether interest income is eligible for deduction under section 80P(2) by testing the assessee's activities against the requirements of a co-operative society registered under the Kerala Co-operative Societies Act, 1969 is appropriate and stands. - HELD THAT: - The impugned order restored the issue of deduction under 80P(2)(a)(i) to the Assessing Officer for examination in light of the Full Bench decision in the jurisdictional High Court. The Tribunal also observed that interest on investments may be assessable as income from business rather than income from other sources, but left open the question of grant of deduction under 80P(2) to be determined by the AO after verifying whether the assessee's activities conform to those expected of a co-operative society under the Kerala Act. The Tribunal's direction to the AO to examine and decide in accordance with law was upheld, and it was noted that any challenge to AO's consequent decision could be taken in the set-aside proceedings within the statutory time. [Paras 3, 4]AO to examine and decide entitlement to deduction under 80P(2) after verifying conformity of the assessee's activities with the Kerala Co-operative Societies Act; impugned direction in that regard stands.Final Conclusion: Revenue's miscellaneous application challenging the Tribunal's order for AY 2015-16 is dismissed; the Tribunal's direction that the Assessing Officer examine entitlement to deduction under 80P(2) in light of the Full Bench decision and the assessee's activities under the Kerala Co-operative Societies Act is upheld, and any challenge to the AO's decision lies in the ordinary course of appellate remedy.

2023 (11) TMI 318 - CESTAT HYDERABAD Customs

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Revenue appeal dismissed as agents entitled to refund excess customs duty on ship stores during vessel conversion under CBEC Circular 58/97
CESTAT Hyderabad dismissed Revenue's appeal regarding refund of excess customs duty paid on ship stores and bunkers during vessel conversion from foreign to coastal run. The tribunal held that agents were entitled to refund under CBEC Circular No. 58/97 dated 06.11.1997, which prescribes provisional assessment at 110% of estimated consumption during coastal operations. Since duty was collected on estimated quantities and actual consumption was lower, excess duty was refundable. The tribunal followed precedent from Atlantic Shipping case where similar refund was allowed, confirming the procedure aims to recover duty only on actual consumption during coastal run.

Doctrine of unjust enrichment - refund of excess customs duty on ship's stores and bunkers - provisional assessment and refund procedure for conversion of foreign-going vessel to coastal run under Board's Circular No.58/97-Cus - notional duty deposit arising from provisional assessmentDoctrine of unjust enrichment - refund of excess customs duty on ship's stores and bunkers - provisional assessment and refund procedure for conversion of foreign-going vessel to coastal run under Board's Circular No.58/97-Cus - Whether refund of excess customs duty paid on consumables and bunkers was rightly allowed without invoking the doctrine of unjust enrichment where the excess/unutilised stores remained on board on reversion to foreign run - HELD THAT: - The Tribunal accepted the factual finding that duty was paid on a provisional estimate at the time of conversion to coastal run and, on reversion to foreign run, an assessment finally quantified excess duty in respect of unutilised consumables that remained on board. Applying the special procedure framed by the Board in Circular No.58/97-Cus (and follow-up letter), the provisional duty paid on bunkers and ship's stores is a notional deposit recoverable against actual consumption; refund claims are to be adjudicated on the basis of inventories and reversion assessment. In these circumstances the authorities below correctly held that incidence of duty was not passed on to any other person because the unused stores continued to be on board, and therefore the element of unjust enrichment did not arise. The Tribunal further relied on earlier consistent decisions of other benches which held that unjust enrichment is not attracted to refunds of excess duty paid under the Circular's provisional-assessment regime. Having regard to the prescribed procedure and the admitted facts, there was no error in upholding the original refund order. [Paras 9, 10, 11, 12, 13]Refund allowed; doctrine of unjust enrichment held not applicable and appellate order upholding the refund is affirmed.Final Conclusion: Appeal dismissed. The Tribunal affirmed the Commissioner (Appeals) and Adjudicating Authority in allowing refund of excess duty on ship's stores/bunkers under the Board's Circular procedure, holding that unjust enrichment did not apply where unutilised consumables remained on board.

2023 (11) TMI 306 - CESTAT MUMBAI Service Tax

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ISSUES PRESENTED AND CONSIDERED

1. Whether the appellate authority exceeded the scope of the show-cause notice by deciding the refund claim on a ground not raised therein (applying Rule 4 of the Place of Provision of Services Rules, 2012 instead of Rule 9(c) as alleged in the show-cause notice), and if such action is sustainable.

2. Whether the Revenue is precluded from advancing a contrary decision in the present case where an identical legal point was previously accepted by the Department in respect of the same assessee/identical facts, and whether the Department can selectively accept or repudiate earlier favorable orders.

3. Whether the impugned appellate order rejecting the refund benefit is legally tenable in view of the foregoing considerations, and what consequential relief follows.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the appellate authority exceeded the scope of the show-cause notice

Legal framework: The foundational requirement that a show-cause notice must disclose the grounds upon which the Department proposes to reject a claim; principles governing limitation of issues at adjudication and appeal; Rule 5 of the CENVAT Credit Rules, 2004 and the relevant provisions of the Place of Provision of Services Rules, 2012 (notably Rule 9(c) and Rule 4) as they govern entitlement to refund for export of services.

Precedent treatment: The Tribunal relied on settled authorities establishing that a show-cause notice is the foundation for departmental cases and that review or appellate proceedings cannot take new grounds not canvassed in the show-cause notice. Earlier decisions to this effect were treated as binding precedent for limiting adjudicatory scope.

Interpretation and reasoning: The show-cause notice in the present matter had specifically proposed denial of refund on the basis that the appellant was an intermediary and thus covered by Rule 9(c). The original adjudicating authority did not sustain that proposal and granted refund under Rule 5. On departmental review and appeal the Pr. ADG reversed the original order but did so by applying Rule 4 (a ground not pleaded in the show-cause notice). The Court reasoned that the appellate authority thereby "went beyond the scope of the show-cause notice." The legal principle applied was that the Department cannot urge new grounds at the appellate stage which were not raised in the original notice; the show-cause notice delimits the issues to be litigated and decided.

Ratio vs. Obiter: Ratio - An appellate authority cannot decide a case on a ground that was not raised in the show-cause notice; doing so renders the appellate order unsustainable. Obiter - ancillary comments on the relative merit of Rule 4 versus Rule 9(c) were not necessary to the disposition.

Conclusion: The impugned appellate decision is unsustainable insofar as it rejects the refund by applying a rule not pleaded in the show-cause notice; the appeal to that extent must be allowed.

Issue 2: Whether the Revenue is precluded from taking a contrary position after earlier acceptance of the same legal point

Legal framework: Principles of departmental consistency and estoppel in revenue litigation - once the Department has accepted a legal position and granted relief in respect of that point for identical facts or for the same assessee for a given period, it cannot subsequently repudiate that position as against another closely identical case.

Precedent treatment: The Tribunal invoked settled law that where the Department accepts benefits available to an assessee in one case, it cannot later challenge the same issue for subsequent assessees or subsequent periods; departmental acquiescence precludes later contradictory decision-making on the same point.

Interpretation and reasoning: Records showed that for an overlapping/identical period the Department had sanctioned refund benefits in favour of the party based on an appellate order which adopted the legal view now contested. The Department did not appeal that earlier appellate order. The Tribunal treated the Department's acceptance of that earlier order as preclusive of its present contrary stance, reasoning that the Department cannot adopt a pick-and-choose approach and is bound by its earlier acceptance where the legal point and facts are the same.

Ratio vs. Obiter: Ratio - Departmental acceptance of an appellate determination on a legal point precludes the Department from adopting a contrary position thereafter in cases with identical facts; such selective repudiation is impermissible. Obiter - observations on ministerial or administrative reasons for divergence were unnecessary to the holding.

Conclusion: The Department was precluded from agitating the contrary decision in the present proceedings where it had earlier accepted the identical legal proposition; this militates against sustaining the impugned order.

Issue 3: Sustainment of the impugned order and relief

Legal framework: Application of the foregoing legal limits on departmental pleadings and consistency to determine the validity of the impugned appellate order; consequential relief principles where an order is set aside.

Precedent treatment: The Tribunal applied the established doctrines that (a) a show-cause notice delineates the limits of adjudication and appeal and (b) departmental acceptance of a legal point binds the Department vis-à-vis like cases.

Interpretation and reasoning: Having found that (i) the appellate authority decided on a ground not raised in the show-cause notice and (ii) the Department had earlier accepted the legal position favourable to the appellant in an identical context, the Tribunal concluded that the impugned order cannot be sustained. The combination of procedural infirmity (departure from pleaded grounds) and estoppel/consistency principles led to setting aside the impugned order.

Ratio vs. Obiter: Ratio - The impugned appellate order rejecting refund is invalid for travelling beyond the grounds in the show-cause notice and for contradicting an earlier departmental acceptance of the same legal point; consequently the appellate order is to be set aside and the original grant of refund restored. Obiter - peripheral remarks on departmental review practice were not essential to the decision.

Conclusion: The impugned order is set aside; appeal allowed in favour of the appellant with consequential relief as per law.

Appellate authority cannot reject refund claim on grounds beyond show-cause notice scope under Rule 4
CESTAT Mumbai held that the appellate authority exceeded the scope of the show-cause notice by applying Rule 4 instead of Rule 9(c) of Place of Provision of Services Rules, 2012 for rejecting refund claim. The SCN proposed denial under Rule 9(c) treating appellant as intermediary, but Commissioner (Appeals) rejected refund on entirely different grounds under Rule 4. CESTAT ruled that show-cause notice is the foundation of departmental case and new grounds cannot be raised at appellate stage, citing SC precedents. Appeal was allowed as impugned order went beyond SCN scope.

Show cause notice as the foundation of adjudication - travelling beyond the scope of the show cause notice - application of Place of Provision of Services Rules (Rule 4; Rule 9(c)) - refund under Rule 5 of the CENVAT Credit Rules read with Notification - export of service versus intermediary classification - departmental acceptance/estoppel arising from prior appellate order - limits of review proceedings and appellate groundsShow cause notice as the foundation of adjudication - travelling beyond the scope of the show cause notice - application of Place of Provision of Services Rules (Rule 4; Rule 9(c)) - export of service versus intermediary classification - Whether the Pr. ADG could reject the refund by applying Rule 4 when the show cause notice had proposed denial only under Rule 9(c). - HELD THAT: - The Tribunal found that the show cause notice had specifically proposed denial of refund on the ground that the appellant was an intermediary under Rule 9(c) and, accordingly, that proposal formed the foundation of the proceedings. The original authority had adjudicated on that notice and granted refund under Rule 5. On appeal, the Pr. ADG disposed of the matter on an entirely different ground by applying Rule 4, which was not canvassed in the show cause notice. The Tribunal relied on settled law that the Department cannot raise new grounds at the appellate stage or in review proceedings which were not indicated in the show cause notice, and therefore the Pr. ADG effectively travelled beyond the scope of the notice and his order could not be sustained. [Paras 4]The impugned order is unsustainable because the Pr. ADG travelled beyond the scope of the show cause notice by applying a different rule not raised in the notice.Departmental acceptance/estoppel arising from prior appellate order - limits of review proceedings and appellate grounds - refund under Rule 5 of the CENVAT Credit Rules read with Notification - Whether the Department could take a contrary stand in the present proceedings after accepting identical findings in an earlier appeal/order. - HELD THAT: - The Tribunal recorded that the Department had accepted the legal point decided by the learned Commissioner (Appeals) in the earlier Order dated 27.06.2018 in similar circumstances and that no appeal had been preferred by the Department against that order. The Assistant Commissioner (Review) also confirmed non filing of an appeal against that Order. The Tribunal applied the principle that once the Department accepts benefits available to an assessee in one case, it cannot subsequently agitate the same issue for another assessee and held that the Department cannot now adopt a contrary position selectively. [Paras 5]The Department cannot take a contrary view after having accepted the earlier appellate order; the impugned rejection is unsustainable on this ground as well.Final Conclusion: The Tribunal set aside the impugned order of the Pr. ADG for being beyond the scope of the show cause notice and contrary to the Department's earlier acceptance; the appeal is allowed in favour of the appellant with consequential relief as per law.

2023 (11) TMI 281 - ITAT BANGALORE Income Tax

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Indian company not required to deduct TDS under section 195 on payments to non-resident telecom operators for interconnect services
ITAT Bangalore ruled in favor of the assessee regarding TDS obligations under section 195 on payments to non-resident telecom operators for bandwidth and interconnect services. The tribunal held that interconnectivity utility charges received by non-resident operators cannot be classified as royalty under section 9(1)(vi) or India-Netherlands DTAA Article 12(4). The payments constitute business profits taxable in the resident country, not India, as no permanent establishment was established. The DTAA definition of royalty is narrower than domestic law, and the services provided did not involve transfer of equipment use or secret processes.

Characterisation of interconnectivity utility charges as "royalty" under the definition of royalty - Interpretation of the words "use" and "right to use" and the scope of "process" as intellectual property - Application and scope of Explanation 5 and Explanation 6 to the domestic definition of royalty and their relation to treaties - Primacy of the DTAA where domestic law is less beneficial to the taxpayer - Business profits and taxation in absence of a Permanent EstablishmentCharacterisation of interconnectivity utility charges as "royalty" under the definition of royalty - Interpretation of the words "use" and "right to use" and the scope of "process" as intellectual property - Application and scope of Explanation 5 and Explanation 6 to the domestic definition of royalty and their relation to treaties - Primacy of the DTAA where domestic law is less beneficial to the taxpayer - Business profits and taxation in absence of a Permanent Establishment - Receipts towards interconnectivity utility charges (IUC) are not 'royalty' chargeable in India under section 9(1)(vi) of the Income tax Act or under the India-Netherlands DTAA and instead constitute business profits not taxable in India in absence of a Permanent Establishment. - HELD THAT: - The Tribunal examined the statutory definition of 'royalty' (including Explanation 2) and the clarificatory Explanation 5 and 6 inserted by Finance Act, 2012, and held that the term 'process' in the definition must be read as a species of intellectual property by application of ejusdem generis and noscitur a sociis. The court observed there was no transfer of intellectual property, no grant of exclusive rights, and no evidence of possession, control or effective use of equipment or a 'secret process' by the payer such as would attract the treaty definition of 'royalty'. While Explanations 5 and 6 broaden the domestic definition, the Tribunal held those domestic clarificatory provisions do not and cannot amend or expand the narrower definition of 'royalty' in the DTAA; where domestic law is less beneficial, the DTAA governs. Applying established authorities and the reasoning of the Hon'ble Karnataka High Court in Vodafone Idea Ltd., the Tribunal concluded that the IUC receipts arise from provision of telecom carriage/connectivity services and are business profits of the non resident, taxable in the resident State and not liable to tax in India in the absence of a Permanent Establishment. Consequently, the receipts cannot be characterised as 'royalty' under Article 12(4) of the India-Netherlands DTAA or section 9(1)(vi) read with the Explanations. [Paras 9]Ground No.4 allowed: IUC receipts are not taxable as royalty in India and are business profits not taxable in India absent a PE.Consequential reliefs arising from primary decision on taxability - Interest under sections 234A/234B/234C and initiation of penalty proceedings were treated as consequential to the primary finding on taxability and therefore were not adjudicated on merits. - HELD THAT: - The Tribunal recorded that the challenges to interest and penalty are consequential upon the principal determination that the receipts are not taxable as royalty in India. Given the allowance of the substantive ground, adjudication of interest and penalty was not required and those grounds were left unadjudicated as consequences of the main decision. [Paras 10, 11]Grounds No.6 and 7 not adjudicated on merits as they are consequential to the main issue; appeals are partly allowed on the substantive point.Final Conclusion: The Tribunal allowed the appeals on the substantive ground that interconnectivity utility charges are not 'royalty' taxable in India but represent business profits not taxable in India in absence of a Permanent Establishment; consequential grounds relating to interest and penalty were not adjudicated. All four appeals stand partly allowed.

2023 (11) TMI 187 - ITAT CHENNAI Income Tax

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Issues:
The judgment involves two main issues:
1. Disallowance u/s 40(a)(i) for lack of deduction at source on certain foreign payments made by the assessee.
2. Rate of depreciation on computer software.

Issue 1: Disallowance u/s 40(a)(i) for lack of deduction at source on certain foreign payments made by the assessee:

In the Assessment Year 2010-11, the revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance made under section 40(a)(i) of the IT Act for payment of secondment cost to M/s. Caterpillar US without deduction of tax at source u/s. 195 of the IT Act. The revenue contended that the payments were for managerial services and should have been subject to TDS. However, the assessee argued that the payments were reimbursed on a cost-to-cost basis without any profit element, and tax was deducted at source u/s 192. The Tribunal found in favor of the assessee, citing previous decisions and finality of the issue in the assessee's favor. The Tribunal held that the payments did not require TDS u/s 195 since tax was already deducted u/s 192, and dismissed the revenue's appeal.

Issue 2: Rate of depreciation on computer software:

Regarding the depreciation on computer software, the assessee claimed a depreciation rate of 60%, while the Assessing Officer restricted it to 25% considering it as an intangible asset. The assessee argued that the software was an integral part of the computer system and should be eligible for the same rate of depreciation as the computer system itself. The Tribunal agreed with the assessee, citing the decision of the High Court of Madras, and upheld the higher depreciation rate of 60%. The revenue's appeal against this decision was dismissed.

Conclusion:
The Tribunal dismissed the revenue's appeal regarding the disallowance under section 40(a)(i) and upheld the higher depreciation rate of 60% on computer software. The cross-objections by the assessee challenging the validity of reassessment proceedings were deemed academic and dismissed.

Assessee wins on TDS u/s 195 secondment costs and 60% depreciation rate for computer software
The ITAT Chennai ruled in favor of the assessee on two issues. First, regarding TDS u/s 195 on secondment cost payments to US entities, the tribunal held that since the assessee reimbursed salary costs on cost-to-cost basis without profit and already deducted TDS u/s 192 (evidenced by Form 16), no additional TDS u/s 195 was required. Second, on depreciation of computer software, the tribunal allowed 60% depreciation rate instead of AO's restricted 25%, holding that software is integral to computer systems and eligible for the same depreciation rate as computers.

Disallowance under section 40(a)(i) for failure to deduct tax at source - tax deduction at source under section 195 vis-a -vis section 192 - reimbursement on cost-to-cost basis - secondment of employees and determination of employer/control for tax deduction - evidence of TDS by issuance of Form 16 - classification of computer software as integral to computer system for depreciation - applicability of higher depreciation rate for software treated as part of computersDisallowance under section 40(a)(i) for failure to deduct tax at source - tax deduction at source under section 195 vis-a -vis section 192 - reimbursement on cost-to-cost basis - evidence of TDS by issuance of Form 16 - secondment of employees and determination of employer/control for tax deduction - Impugned disallowance under section 40(a)(i) in respect of secondment payments reimbursed to overseas group entities. - HELD THAT: - The Tribunal found on the facts that the assessee had seconded employees from overseas group entities who worked under the supervision and exclusive control of the assessee in India, the overseas entity paid the employees and the assessee reimbursed those payments on a cost-to-cost basis without any profit element. The assessee had deducted tax at source under section 192 from the total salary paid to the expatriates, evidenced by Form 16, demonstrating that the tax obligation in India with respect to those salaries had been discharged. Given these facts, the Tribunal held there was no requirement to deduct TDS again under section 195 on the reimbursement made to the foreign entity, and therefore the disallowance under section 40(a)(i) was not warranted. The Tribunal also noted that a prior Tribunal decision in the assessee's own case had attained finality and supported the conclusion; a Supreme Court decision relied upon by revenue concerned service tax and was not germane to the TDS/disallowance question and therefore inapplicable. [Paras 4]Impugned disallowance under section 40(a)(i) deleted; revenue appeal dismissed on this issue.Classification of computer software as integral to computer system for depreciation - applicability of higher depreciation rate for software treated as part of computers - Rate of depreciation applicable to computer software claimed by the assessee. - HELD THAT: - The Tribunal accepted the assessee's contention that the software licence was an integral and inseparable part of the computer system, with the functioning of hardware and software interlinked. Relying on binding authority of the High Court of Madras and other decisions cited, the Tribunal concluded that such software qualifies for the same rate of depreciation as computers. On this basis the Commissioner of Income Tax (Appeals)'s direction to allow depreciation at 60% was upheld and the assessing officer's restriction to the lower rate applicable to intangible assets was not sustained. [Paras 5]Depreciation on software allowed at 60% as applicable to computers; revenue appeal dismissed on this issue.Final Conclusion: Both grounds of the revenue's appeal - the disallowance under section 40(a)(i) for secondment-related reimbursements and the restriction of depreciation on computer software - were dismissed; the assessing officer's adjustments were set aside and the appeal by the revenue stands dismissed, while the assessee's cross objection on reassessment was rendered infructuous.

2023 (11) TMI 186 - ITAT DELHI Income Tax

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Issues involved:
The appeal challenges the order of the Assessing Officer/National Faceless Appeal Centre, Delhi, regarding the transfer pricing order and the order of the Dispute Resolution Panel for the assessment year 2017-18.

Transfer Pricing Order without DIN:
The main issue raised by the assessee was that the Transfer Pricing Officer (TPO) issued the transfer pricing order under section 92CA of the Income Tax Act without quoting the mandatory Document Identification Number (DIN) as required by Circular No.19/2019. The assessee argued that the absence of DIN rendered the TPO order void-ab-initio, and the same applied to the order of the Dispute Resolution Panel (DRP) as well.

Validity of Communication without DIN:
The assessee contended that the absence of DIN in the communication, including the DRP order, violated the CBDT Circular requirements. The assessee argued that the entire proceeding was vitiated due to the lack of DIN in the communication.

Decision and Ruling:
The Tribunal noted that the transfer pricing order did not contain a DIN, which was a requirement as per Circular No.19/2019. Referring to a previous case, the Tribunal highlighted that the generation and communication of DIN were essential for compliance. The Tribunal emphasized that the absence of DIN rendered the orders null and void. Consequently, the appeal was allowed, the TPO's and DRP's orders were set aside, and the assessment order was deemed null and void. The Tribunal ruled in favor of the assessee based on the non-compliance with the DIN requirement, making other grounds irrelevant.

Conclusion:
The Tribunal found the absence of DIN in the transfer pricing order and communication to be a critical flaw, leading to the decision in favor of the assessee. The failure to comply with the DIN requirement rendered the orders null and void, resulting in the allowance of the appeal. The decision highlighted the importance of adhering to procedural requirements, such as the mandatory quoting of DIN, in tax assessments and related communications.

Tribunal Voids Tax Orders Due to Missing Document ID Number, Upholds Procedural Compliance for Validity.
The Tribunal ruled in favor of the assessee, finding that the absence of a Document Identification Number (DIN) in the transfer pricing order and the Dispute Resolution Panel's (DRP) order violated the requirements set by Circular No.19/2019. This procedural lapse rendered the orders null and void. Consequently, the appeal was allowed, and both the Transfer Pricing Officer's (TPO) and DRP's orders were set aside. The Tribunal emphasized the necessity of compliance with procedural mandates, such as the inclusion of DIN, in tax-related communications.

Mandatory quoting of DIN on communications issued by tax authorities - validity of assessment/transfer pricing/DRP orders in absence of DIN - CBDT Circular No.19/2019 compliance and consequences of non-compliance - void-ab-initio for orders issued without required DIN - effect of vitiated interlocutory orders on assessment orderMandatory quoting of DIN on communications issued by tax authorities - validity of assessment/transfer pricing/DRP orders in absence of DIN - CBDT Circular No.19/2019 compliance and consequences of non-compliance - Transfer pricing order passed by the TPO and the DRP order which do not bear the DIN on their face are invalid and render the resulting assessment order null and void. - HELD THAT: - The Tribunal accepted the assessee's submission that the transfer pricing order did not quote the mandatory Document Identification Number (DIN) on its body and that the DRP order similarly lacked the DIN. Reliance was placed on a Coordinate Bench decision interpreting CBDT Circular No.19/2019 and related instructions, which require that any communication (including notices, orders and correspondence) prepared outside ITBA and issued manually must state that it is issued manually without a DIN only with prior written approval and, ordinarily, must bear a DIN generated prior to signing and uploading. The Tribunal noted that a later/intimation of generation of DIN or subsequent forwarding of the DIN is not part of the assessment order and cannot cure the absence of DIN on the face of the communication. Applying that principle, the Tribunal held that issuance of the TPO order and the DRP order without quoting the DIN on the documents themselves amounted to non compliance with the Circular and instructions, rendering those orders void ab initio; consequently the assessment founded on those orders also becomes null and void.The TPO order and the DRP order are set aside as null and void for not quoting DIN as required; the assessment order consequently stands nullified and the appeal is allowed.Final Conclusion: The appeal is allowed: the transfer pricing order and the DRP order were quashed for non compliance with CBDT Circular No.19/2019 for failing to quote the DIN on their face, and the assessment arising therefrom is held to be void.

2023 (11) TMI 44 - DELHI HIGH COURT Income Tax

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Issues Involved:
The issues involved in this legal judgment are the validity of the notices issued under Section 143(2) and Section 142(1) of the Income-tax Act, 1961 for Assessment Year 2016-17 and whether these notices were time-barred.

Validity of Notices Under Section 143(2) and Section 142(1):
The petitioner/assessee challenged the notice dated 11.08.2018 (first notice) under Section 143(2) and the notice dated 31.08.2018 (second notice) under Section 142(1) of the Income-tax Act, 1961, for Assessment Year 2016-17, contending that these notices were barred by limitation. The petitioner had initially filed its Return of Income (ROI) on 14.10.2016, declaring a loss. Subsequently, notices were issued pointing out defects in the ROI, which were rectified by the petitioner. The Assessing Officer processed the ROI on 22.11.2017 after the defects were rectified. The petitioner argued that the impugned notices were time-barred as they were issued beyond the prescribed limitation period. The petitioner's position was supported by the decision in the case of Commissioner of Income-tax vs. Sohan Lal Chhajan Mal, which emphasized that a return of income should be considered valid once defects are rectified. The Supreme Court had dismissed a Special Leave Petition against this judgment on both delay and merit grounds.

Contentions of the Parties:
The petitioner contended that the impugned notices were time-barred as per the first proviso to Section 143(2) of the Act, which stipulated a limitation period of six months from the end of the financial year in which the ROI is filed. The financial year for the petitioner's original return ended on 31.03.2017, making the limitation period expire on 30.09.2017. The petitioner argued that the notices served after this date were invalid. On the other hand, the respondent/revenue argued that the notices were issued within the prescribed time after the defects in the ROI were rectified, as per the statute.

Judgment and Disposition:
The High Court found that the impugned notices under Section 143(2) and Section 142(1) were indeed time-barred. Considering the provisions of the Act and the relevant case law, the Court held that the notices served on the petitioner were beyond the limitation period specified in the first proviso to Section 143(2). Consequently, the Court quashed the impugned notices and disposed of the writ petition in favor of the petitioner/assessee. The interim order dated 01.11.2018 was also vacated in light of this decision.

Delhi HC quashes tax notices under sections 143(2) and 142(1) as time-barred after limitation period expired
The Delhi HC quashed notices issued under sections 143(2) and 142(1) as time-barred. The assessee filed an original return on 14.10.2016, which was later corrected for defects under section 139(9). The court held that the relevant date for calculating the limitation period was the original filing date, not the defect removal date. Since the financial year ended on 31.03.2017, the six-month limitation period expired on 30.09.2017. As the notices were served after this date, they were time-barred and consequently quashed.

Limitation for service of notice under Section 143(2) - defective return under Section 139(9) and effect on date of filing - processing of return under Section 143(1) and its legal consequenceLimitation for service of notice under Section 143(2) - defective return under Section 139(9) and effect on date of filing - notice under Section 142(1) consequent upon Section 143(2) - Validity of notices dated 11.08.2018 under Section 143(2) and 31.08.2018 under Section 142(1) for AY 2016-17 in view of limitation and treatment of a defective return - HELD THAT: - The original return of income for AY 2016-17 was filed on 14.10.2016. Defect notices under Section 139(9) were issued on 06.02.2017 and 10.07.2017 and the defects were removed on 18.02.2017 and 20.07.2017 respectively. The Assessing Officer processed the original return under Section 143(1) on 22.11.2017. The first proviso to Section 143(2), as amended w.e.f. 01.06.2016, prescribed that no notice under Section 143(2) shall be served after the expiry of six months from the end of the financial year in which the return is furnished. The financial year in which the original return was filed ended on 31.03.2017 and the six-month period therefore expired on 30.09.2017. Reliance on the decision of the High Court of Punjab and Haryana in Commissioner of Income-tax v. Sohan Lal Chhajan Mal - and the fact that the Special Leave Petition against that decision was dismissed - supports the legal position that a defective return (under Section 139(9)) does not alter the original date of filing for computing limitation under the proviso to Section 143(2). Applying these principles, the notice under Section 143(2) dated 11.08.2018 was issued after the prescribed period and is time-barred. Once the Section 143(2) notice is quashed as barred by limitation, the impugned Section 142(1) notice issued subsequently necessarily collapses. [Paras 12, 13, 14]The notice under Section 143(2) dated 11.08.2018 is time-barred and is quashed; the notice under Section 142(1) dated 31.08.2018 consequently collapses and is quashed; the writ petition is disposed of.Final Conclusion: For AY 2016-17 the High Court holds that the original date of filing governs computation of limitation under the proviso to Section 143(2); the impugned notices dated 11.08.2018 (Section 143(2)) and 31.08.2018 (Section 142(1)) are time-barred and are quashed.

2023 (10) TMI 1312 - ITAT DELHI Income Tax

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DRP order invalid without Document Identification Number, assessment order quashed following Brandix precedent
ITAT Delhi held that DRP order was invalid due to absence of DIN (Document Identification Number) on directions issued by DRP. The assessee was a foreign company incorporated in France and tax resident there. Following precedent from Brandix Mauritius Holdings Ltd. and Circular No. 19/2019, the tribunal ruled the DRP order invalid and deemed never passed. Consequently, the assessment order passed pursuant to the invalid DRP order was quashed.

Document Identification Number (DIN) requirement for departmental communications - Invalidity of communication issued without DIN / communication deemed to have never been issued - Binding effect of CBDT Circular No.19/2019 issued under Section 119 of the Income-tax ActDocument Identification Number (DIN) requirement for departmental communications - Invalidity of communication issued without DIN / communication deemed to have never been issued - Binding effect of CBDT Circular No.19/2019 issued under Section 119 of the Income-tax Act - Validity of the DRP order and consequent assessment passed in the absence of a computer generated DIN as mandated by CBDT Circular No.19/2019 - HELD THAT: - The Tribunal examined CBDT Circular No.19/2019 which mandates that no communication relating to assessment, appeals or orders shall be issued on or after 1 October 2019 unless a computer generated DIN is allotted and quoted; specified narrow exceptions require recording reasons and prior written approval and a prescribed format. Paragraph 4 of the Circular provides that any communication not in conformity with paras 2 and 3 shall be treated as invalid and deemed never to have been issued. Circulars issued under Section 119 are binding on revenue authorities. The DRP order in the present case contained no DIN nor recorded any of the exceptional circumstances or requisite approvals; therefore it did not comply with the Circular. Applying the Circular and following the reasoning of the jurisdictional High Court, the Tribunal held that the DRP order is invalid and, being the basis of the final assessment, the assessment passed pursuant thereto must be quashed. The Tribunal accordingly allowed the additional ground going to the validity of proceedings and did not adjudicate the remaining grounds as academic. [Paras 6, 7, 8]The DRP order lacking a DIN and without compliance with the exceptions in CBDT Circular No.19/2019 is invalid and deemed never to have been passed; the assessment order passed pursuant to that DRP order is quashed.Final Conclusion: The appeal is allowed: the DRP order without a DIN is held invalid under CBDT Circular No.19/2019 and the assessment order passed pursuant thereto is quashed for AY 2017-18.

2023 (10) TMI 1305 - SC Order Insolvency and Bankruptcy

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SC Upholds NCLAT Decision on 2015 Arbitral Award; Matter Referred to NCLT for Operational Creditor Categorization.
The SC upheld the National Company Law Appellate Tribunal's decision regarding the arbitral award dated 19.03.2015, as the appellants agreed to abide by the District Court's outcome. The court addressed the categorization of the respondent under operational creditors in the resolution plan but left the matter to the National Company Law Tribunal for consideration. The respondent chose not to pursue the contempt petition, leading to the disposal of the appeal and any related applications.

Arbitral award - operational creditor - resolution plan - category of operational creditors - remand for fresh consideration of categorisationArbitral award - The Supreme Court declined to interfere with the arbitral award dated 19.03.2015 and the National Company Law Appellate Tribunal's finding thereon. - HELD THAT: - The Court recorded that the appellants had not challenged the NCLAT's finding concerning the arbitral award dated 19.03.2015. The award is already the subject of proceedings in the District Court, Ankleshwar, Bharuch, Gujarat, and the parties have stated they will abide by the outcome of those proceedings. In view of these circumstances, the Court was not inclined to interfere with the arbitral award or the NCLAT's decision in respect of that award.The arbitral award dated 19.03.2015 and the NCLAT finding are not interfered with.Operational creditor - resolution plan - category of operational creditors - remand for fresh consideration of categorisation - The question of which category of operational creditor the respondent falls into under the resolution plan was not finally decided and is to be considered afresh by the adjudicating authority. - HELD THAT: - The impugned judgment contained observations about payment parity among categories but did not conclusively determine the specific category in which the respondent, Kanoria Chemicals and Industries Ltd., would be placed. Competing contentions were advanced before this Court that the respondent should be placed in category "H" while the respondent contended for "G" or, alternatively, "F". The Supreme Court clarified that those observations did not specify the respondent's category and directed that this aspect be raised and considered by the National Company Law Tribunal, leaving all pleas and contentions open for that forum to decide.Categorisation of the respondent as an operational creditor is remanded to the National Company Law Tribunal for fresh consideration; the matter is not finally adjudicated by this Court.Resolution plan - Contentions that the resolution plan has been substantially implemented were left open for determination by the tribunal. - HELD THAT: - The Supreme Court expressly left open the appellants' contention that the resolution plan has been substantially implemented and did not decide that question. That factual and legal contention is to be considered by the National Company Law Tribunal along with other related pleas.The question of substantial implementation of the resolution plan is left open for the tribunal to decide.Contempt petition - The respondent informed the Court that it would not press the contempt petition in view of the order passed, and the Court recorded the same. - HELD THAT: - On the respondents' statement before the Court that they would not pursue the contempt petition in light of the directions given, the Supreme Court recorded that the contempt petition would not be pressed. No separate adjudication on contempt was undertaken.Contempt petition will not be pressed by the respondent and is not pursued further in these proceedings.Final Conclusion: The appeal is disposed of: the Court declined to interfere with the arbitral award dated 19.03.2015 and the NCLAT finding thereon; the categorisation of the respondent as an operational creditor under the resolution plan and the question of substantial implementation are remitted to the National Company Law Tribunal for fresh consideration; the respondent will not press the contempt petition; pending applications stand disposed of.

2023 (10) TMI 1257 - SC Order Insolvency and Bankruptcy

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Appeal Dismissed: SC Affirms NCLAT Order in Company Appeal (AT)(CH) (Insolvency) No 259 of 2023, Applications Disposed
The SC dismissed the appeal, affirming the order of the NCLAT in Company Appeal (AT)(CH) (Insolvency) No 259 of 2023. Any pending applications were disposed of.

2023 (10) TMI 1256 - SC Order Insolvency and Bankruptcy

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Appeal dismissed: No substantial question of law found; NCLAT's May 4, 2023, order upheld. Delay in refiling condoned.
The SC dismissed the appeal, finding no substantial question of law involved, and upheld the order of the NCLAT dated 4 May 2023 in Company Appeal (AT)(Insolvency) No 841 of 2022. The delay in refiling the appeal was condoned.

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