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2023 (12) TMI 118 - CESTAT KOLKATA Central Excise

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Tribunal Rules in Favor of Appellant Due to Revenue Neutrality; No Suppression of Facts Found, Eligible for Relief.
The Tribunal allowed the appeals, finding that the proceedings were revenue neutral since the duty paid by the Appellant was eligible as Cenvat Credit for the receiving unit. It was determined that there was no suppression of facts, as all necessary data was available to the Department, and the Show Cause Notice was issued late. The decision was based on previous rulings that in cases of revenue neutrality, suppression does not apply. The Appellant was deemed eligible for consequential relief according to the law.

Revenue neutrality - Cenvat credit - assessable value in related party/parent subsidiary transfers - limitation and suppression in revenue neutral casesRevenue neutrality - Cenvat credit - assessable value in related party/parent subsidiary transfers - Whether proceedings demanding differential duty on gear boxes cleared by the subsidiary to its parent were sustainable when duty paid by the subsidiary was availed as Cenvat credit by the parent unit. - HELD THAT: - The Tribunal held that where duty paid by the supplying unit is eligible to and actually availed as Cenvat credit by the receiving unit, the dispute over additional excise demand becomes revenue neutral. Applying the principle from earlier decisions of the Tribunal, the adjudication challenging the assessable value adopted by the subsidiary (cost plus 15%) could not be sustained because the tax incidence, if any, was neutralised by the credit mechanism available and availed by the parent unit. The Tribunal accepted the appellants' contention that the duty paid by the subsidiary had been utilized as Cenvat credit by the parent and, on that basis, treated the proceedings on merits as liable to be set aside.Appeals allowed on merits; differential demand set aside as proceedings were revenue neutral.Limitation and suppression in revenue neutral cases - Cenvat credit - Whether the show cause proceedings were barred by limitation or vitiated by alleged suppression where department had access to monthly returns. - HELD THAT: - The Tribunal found that the Show Cause Notice was issued belatedly despite the department having the relevant data through regular monthly returns. In circumstances where the matter is revenue neutral because the receiving unit availed Cenvat credit, the element of 'suppression' does not arise. On that factual and legal basis, the Tribunal concluded that the demand could not be sustained on limitation grounds and the confirmed demand required setting aside.Appeals allowed on limitation; confirmed demand set aside for being time barred and not involving suppression.Final Conclusion: Both appeals allowed: the demands were set aside on the dual grounds that the dispute was revenue neutral because the parent availed Cenvat credit and that the show cause proceedings were belated and could not be sustained for suppression; appellants entitled to consequential relief as per law.

2023 (12) TMI 103 - JHARKHAND HIGH COURT Income Tax

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Issues Involved:
1. Legality and jurisdiction of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Applicability of the time limit prescribed under Section 149 of the Income Tax Act.
3. Distinction between search and survey operations under the Income Tax Act.

Summary:

1. Legality and Jurisdiction of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioners challenged the jurisdiction for issuance of notice under Section 148 of the Act, arguing that the notices were issued on a factually incorrect premise and beyond the prescribed limitation period. The court examined the legislative intent behind the Finance Act, 2021, which aimed to reduce the time limit for ordinary cases to three years and introduced a threshold amount for invoking an extended time limit of ten years. The court found that the notices were issued based on information obtained from search and seizure operations, which suggested that income chargeable to tax had escaped assessment.

2. Applicability of the Time Limit Prescribed Under Section 149 of the Income Tax Act:
The court noted that under the old provisions, the Assessing Officer could assess six assessment years in the case of a search. The Finance Act, 2021, expanded this to ten years under certain conditions. The court concluded that the notices issued under Section 148 for the assessment year 2013-14 were within the jurisdiction as they fell within the ten-year period from the end of the relevant assessment year. The court emphasized that the first proviso to Section 149 stipulates that notices can be issued if they could have been issued under the old provisions of Sections 153A and 153C.

3. Distinction Between Search and Survey Operations Under the Income Tax Act:
The petitioner argued that since only a survey was conducted in the case of Devika Constructions, the ten-year period should not apply. The court rejected this argument, stating that Section 153C(2) of the Act clearly explains that the Assessing Officer shall issue notice and assess or reassess the total income of such other person in the same manner as provided in Section 153A. The court found no distinction between search and survey in this context and upheld the notices issued.

Conclusion:
The court held that the Assessing Officer was justified in reopening the assessment for the assessment year 2013-14 for both petitioners, as they had taken the previous sanction of the competent authority. There was no illegality in the initiation of reassessment proceedings by issuing notices under Section 148 of the Income Tax Act. Consequently, both writ applications were dismissed without interfering with the respective show-cause notices.

Reassessment notices under Section 148 valid despite time-bar claims when third-party search yields assessee documents
The Jharkhand HC upheld the validity of reassessment notices issued under Section 148 for AY 2013-14, rejecting the petitioner's contention that the notices were time-barred. The court held that where search was conducted on a third party and documents relating to the assessee were seized, the 10-year limitation period under Section 149 applied. The court clarified that Section 153C(2) permits assessment in the same manner as Section 153A, and distinguished between survey and search was irrelevant. The AO was justified in reopening assessment with proper sanction from competent authority. Petition dismissed.

Reopening of assessment by notice under Section 148 - limitation for reassessment and scope of amended Section 149 - deeming provision for information where search or survey conducted (Explanation 2 to Section 148) - interplay between Section 153A/153C and amended reassessment regime - requirement of prior approval of specified authority for issuance of notice - income escaping assessment represented in the form of assetReopening of assessment by notice under Section 148 - limitation for reassessment and scope of amended Section 149 - deeming provision for information where search or survey conducted (Explanation 2 to Section 148) - interplay between Section 153A/153C and amended reassessment regime - Notice issued under Section 148 for A.Y. 2013-14 is within jurisdiction and not time-barred. - HELD THAT: - The Court examined the amended provisions (post Finance Act, 2021 and subsequent amendments) and their interaction with pre-amendment provisions applicable to search/survey. Having regard to Explanation 2 to Section 148, where a search or a survey (on or after 01.04.2021) yields books/documents/assets relating to the assessee, the Assessing Officer is deemed to have information suggesting income has escaped assessment for the three assessment years preceding the previous year in which the search/survey is conducted. The first proviso to amended Section 149 operates to permit issuance of a Section 148 notice for assessment years beginning on or before 01.04.2021 if such a notice could have been issued under the pre-amendment scheme of Sections 153A/153C. In the present cases, a search/survey event occurred on 09.06.2022; seized documents (NKK01) contained entries showing accommodation loans to the petitioner company for the years relevant to A.Y. 2013-14 which were not reflected in the books and the return showed 'NIL' liability. Those seized materials and enquiries by the investigating officer constituted sufficient material falling within the expanded concept of "asset" and entries in books of account, enabling the Assessing Officer, with prior sanction, to invoke the extended ten-year period. On this basis the Court concluded that the Assessing Officer did not act beyond limitation or jurisdiction in issuing notices under Section 148 for A.Y. 2013-14. [Paras 8, 9, 11, 13]The notices under Section 148 for A.Y. 2013-14 are not time-barred and the Assessing Officer was justified in reopening the assessments.Deeming provision for information where search or survey conducted (Explanation 2 to Section 148) - interplay between Section 153C and Section 153A - assessment of a third person on account of seized documents - A survey (or seizure of documents from a searched person) that yields documents relating to a third person permits assessment of that third person in the same manner as under Section 153A, and the extended ten-year period is applicable. - HELD THAT: - The Court held that Section 153C(2) mandates that where documents or assets seized/requisitioned in respect of one person pertain to another person, the Assessing Officer having jurisdiction over that other person shall issue notice and assess/reassess in the manner provided under Section 153A. The statutory scheme treats the assessment of such other person as governed by the same conditions (including the extended period for years beyond six up to ten where assets/incriminating material revealing escaped income of the requisite magnitude exist). Therefore, the fact that Devika Constructions was subject to survey (and the seized documents at the searched premises related to it) does not negate application of the extended limitation; the Assessing Officer was right to proceed under Section 148 read with the relevant deeming and proviso provisions. [Paras 12, 13]Difference between search and survey does not preclude invocation of the extended period; assessment proceedings against the third party (Devika Constructions) were competently initiated.Final Conclusion: Writ petitions challenging the Section 148 notices for A.Y. 2013-14 were dismissed. The Court held that, on the material seized and in view of the amended reassessment provisions and their interaction with Sections 153A/153C and Explanation 2 to Section 148, the reopening for ten years was within jurisdiction; therefore no interference with the show-cause notices was warranted.

2023 (12) TMI 72 - BOMBAY HIGH COURT GST

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Issues involved:
The issues involved in the judgment are related to the demand of inadmissible input tax credit under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act), imposition of penalties, dropping of demands, and the statutory remedy of appeal available to the petitioner.

Demand of Inadmissible Input Tax Credit:
The adjudicating officer passed an order dropping the demand against the petitioner for inadmissible input tax credit amounting to Rs. 20,63,46,994 under Section 74 of the CGST Act. The penalty under Section 74 was also dropped, but a penalty of the same amount was imposed under Section 122(1)(vii) of the CGST Act. The order directed the appropriation of the penalty amount from the total amount paid by the petitioner.

Statutory Remedy of Appeal:
Both counsels agreed that the petitioner has the statutory remedy of an appeal under Section 107 of the CGST Act to challenge the order-in-original. The petitioner intended to challenge the penalty imposed by the adjudicating officer. The High Court decided that further adjudication was not necessary, and the petitioner was permitted to file an appeal within four weeks from the date of the judgment.

Order of the High Court:
The High Court ordered that the respondents should not take any coercive action for four weeks based on the adjudicating officer's order. The respondents were directed to refund appropriate amounts to the petitioner after retaining 10% of the penalty amount for filing the statutory appeal. The refund was to be made within four weeks, and the petitioner was not required to make any further deposit. The High Court also allowed the petitioner to claim interest on the deposit of input tax credit in the appellate proceedings.

Conclusion:
The High Court disposed of the petition by allowing the petitioner to file an appeal against the order-in-original. The respondents were directed to refund the appropriate amounts to the petitioner, retaining a portion for the statutory appeal. The High Court kept all contentions of the parties on the appellate proceedings open and permitted the petitioner to claim interest on the deposit of input tax credit in the appeal. No costs were awarded in this matter.

Tax Credit Appeal Allowed: Petitioner Granted Four-Week Window to Challenge Penalty Under Section 107 of CGST Act
HC resolved tax credit dispute by permitting petitioner to file appeal under Section 107 of CGST Act within four weeks. Respondents directed to refund amounts while retaining 10% penalty, with no coercive action allowed. The court preserved petitioner's right to challenge penalty and claim interest on input tax credit deposit in appellate proceedings.

Availability of statutory appeal - stay of coercive action pending filing of appeal - refund of amounts subject to retention as pre-deposit - appropriation and retention of deposited amounts as pre-deposit for appeal - claim for interest on deposited amounts to be urged in appealAvailability of statutory appeal - stay of coercive action pending filing of appeal - Petitioner permitted to file statutory appeal against the order-in-original dated 17 November, 2023 and respondents restrained from taking coercive action for a limited period to enable filing of the appeal. - HELD THAT: - The Court noted that a statutory remedy by way of appeal under the CGST Act is available to the petitioner against the adjudicating officer's order dated 17 November, 2023 and accepted the petitioner's statement that he intends to file such an appeal within four weeks. In view of this, further adjudication of the writ petition was not called for and, to enable the petitioner to avail the statutory remedy, the respondents were directed not to take any coercive action for four weeks from the date of the order. The direction is interlocutory and strictly time limited to allow commencement of appellate proceedings. [Paras 3, 4]Petitioner granted four weeks to file the statutory appeal; respondents restrained from taking coercive action for that period.Refund of amounts subject to retention as pre-deposit - appropriation and retention of deposited amounts as pre-deposit for appeal - Respondents directed to refund amounts to the petitioner pursuant to the adjudicating officer's order, after retaining a specified portion as pre-deposit for the appeal, and to refund in the manner of original deposit within a specified time. - HELD THAT: - The Court observed that consequential refunds arise from the adjudicating officer's order dropping the demand under Section 74 and that the petitioner should be permitted to receive those refunds while ensuring maintainability of the appeal. Accordingly, the respondents were directed to refund appropriate amounts after retaining 10% of the specified sum towards pre-deposit for filing the statutory appeal. The Court further directed that, because that amount is being retained for the appeal, no further deposit would be required from the petitioner, subject to any appropriate order the Additional Commissioner may pass. The refunds were ordered to be made within four weeks and in the manner in which the amounts were originally deposited. [Paras 4]Respondents to refund appropriate amounts within four weeks after retaining 10% as pre-deposit; no further deposit required from petitioner for appeal maintainability, subject to any further order by the Additional Commissioner.Claim for interest on deposited amounts - availability of appellate remedies for ancillary claims - Petitioner permitted to pursue claim for interest on the deposit of input tax credit in the appellate proceedings; the question of interest is not adjudicated in the writ petition. - HELD THAT: - The Court recorded the petitioner's stated intention to assert a claim for interest on the deposited input tax credit and expressly permitted the petitioner to urge that claim before the appellate forum. The Court did not decide the entitlement to interest on the deposit and left all contentions regarding appellate proceedings open for determination in the appeal. [Paras 4, 5]Petitioner may raise claim for interest in the appeal; the writ court did not decide the entitlement to interest.Final Conclusion: Writ petition disposed of by permitting the petitioner to file the statutory appeal within four weeks; respondents restrained from coercive action for that period and directed to refund appropriate amounts within four weeks after retaining 10% as pre-deposit for the appeal; entitlement to interest and other appellate contentions left open for the appellate forum.

2023 (12) TMI 71 - BOMBAY HIGH COURT GST

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Issues Involved:
The petition under Article 226 of the Constitution of India assails the order dated 26 July, 2023 passed by the State Tax Officer, Nodal Division-12, Mumbai directing the petitioner to pay tax, interest, and penalty.

Issue 1: Breach of Principles of Natural Justice

The petitioner contended that the impugned order was illegal due to a breach of natural justice as no hearing was granted. The petitioner had requested a personal hearing in the reply submitted but was only informed of the hearing two days in advance. Despite intending to attend, the petitioner could not appear, and the State Tax Officer proceeded to pass the order without granting a final opportunity.

Issue 2: Jurisdiction of State Tax Officer

The petitioner argued that the State Tax Officer lacked jurisdiction to levy demands under the IGST Act. The petitioner sought to have the impugned order quashed and set aside, requesting a proper hearing and a lawful decision by the State Tax Officer.

Judgment:

After hearing arguments from both parties and reviewing the record, the court found merit in the petitioner's contentions. It was noted that the petitioner had requested a personal hearing, and the failure to appear on one occasion should not have led to the assumption of disinterest without a valid reason. The court observed that no written notice was issued adjourning the proceedings, and the impugned order did not consider the petitioner's case adequately.

In light of the above, the court decided to quash and set aside the impugned order dated 26 July, 2023. The proceedings were remanded to the State Tax Officer for a decision in accordance with the law after granting the petitioner a proper opportunity for a personal hearing. The petitioner was directed to appear before the authority on 8 December, 2023, and the State Tax Officer would set a suitable date for the hearing. The court emphasized that if the petitioner failed to appear despite notice, the State Tax Officer could proceed and pass an appropriate order. All contentions of the parties were expressly kept open, and the matter was disposed of with no costs incurred.

Tax Order Quashed: Procedural Flaws Invalidate State Tax Officer's Decision, Ensuring Fair Hearing for Petitioner
HC allowed the petition challenging a tax order due to procedural irregularities. The court quashed the State Tax Officer's order for violating natural justice principles, specifically the lack of adequate hearing opportunity. The case was remanded for a fresh hearing, directing the petitioner to appear on 8 December, 2023, with all legal contentions preserved and no cost imposed.

Principles of natural justice - opportunity of personal hearing - quash and remand - State Tax Officer's duty to pass appropriate order after hearingPrinciples of natural justice - opportunity of personal hearing - Impugned demand order violated principles of natural justice by not affording a personal hearing to the petitioner. - HELD THAT: - The Court found that the petitioner had clearly indicated an option for personal hearing in Form GST DRC-06 and was informed by telephone of an intended hearing date. In these circumstances, the mere non-appearance on the tentative date without any written notice or adjournment could not be treated as a waiver of the right to be heard. The impugned order also failed to consider the petitioner's reply to the show cause notice. For these reasons the order was held to be in breach of natural justice and unsustainable. [Paras 5]Impugned order quashed and set aside for non-compliance with principles of natural justice.Quash and remand - State Tax Officer's duty to pass appropriate order after hearing - Whether the matter should be remanded for fresh consideration after affording a personal hearing and consequent directions. - HELD THAT: - In the interest of justice the Court remanded the proceedings to the State Tax Officer with directions to grant the petitioner a personal hearing and then pass an appropriate order in accordance with law. The Court directed the petitioner to appear initially on a specified date and required the officer to fix a hearing date thereafter, obtain the petitioner's acknowledgement of attendance, and proceed to decide the matter. The Court also recorded that if the petitioner, despite notice or undertaking, fails to appear, the officer may proceed further and pass an order in accordance with law. All contentions were kept open for fresh adjudication. [Paras 6]Proceedings remanded to the State Tax Officer for fresh decision after affording a personal hearing; procedural directions issued regarding appearance and further course.Final Conclusion: The petition is disposed by quashing the demand order for breach of natural justice and remanding the matter to the State Tax Officer to decide afresh after granting a personal hearing in accordance with the directions issued; all contentions reserved.

2023 (12) TMI 47 - CESTAT MUMBAI Service Tax

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Issues involved: Classification of services under taxable categories, eligibility of Cenvat Credit on manufactured goods used for services, ownership of goods supplied, denial of Cenvat benefit.

Classification of services under taxable categories: The appellants entered into agreements with Municipalities/Municipal Corporations for energy conservation measures and maintenance services, classified under "Scientific and Technical Consultancy Services" and "Maintenance and Repair Service". The audit wing observed the appellants manufactured LED Lights, leading to a dispute over Cenvat Credit eligibility.

Eligibility of Cenvat Credit on manufactured goods: The department objected to the appellants availing Cenvat Credit on LED Lights manufactured by them, arguing they cannot claim credit on their own finished goods as inputs for taxable services. The department also contended that since the ownership of the goods remained with the Municipality/Corporation, the appellants could not benefit from the service tax or Central Excise duty paid on those goods.

Ownership of goods supplied: The department held that the appellants' manufactured goods could not be considered as inputs for their services as ownership transferred to the Municipality/Corporation after the contract period. This led to the denial of Cenvat Credit on the LED lightings and fixtures by the department.

Denial of Cenvat benefit: The appellants argued that since they were registered for manufacturing excisable goods and providing taxable services, availing Cenvat Credit on manufactured goods used for services was justified. They contended that the denial of Cenvat benefit on LED lights, fixtures, and control panels by the department was unwarranted.

The Tribunal examined whether the disputed goods should be considered as inputs for Cenvat Credit eligibility based on Rule 2(k) of the CENVAT Credit Rules, 2004. The definition of "input" includes goods used for providing any output service. The disputed goods, LED lightings, fixtures, and control panels, were used by the appellants for providing taxable services to the Municipality/Municipal Corporation. Ownership was deemed irrelevant in determining Cenvat Credit eligibility, as long as the goods were used for providing the output service and taxes were duly paid. The Tribunal concluded that the impugned orders denying Cenvat Credit on the manufactured goods for services were not sustainable. Therefore, the appeals were allowed in favor of the appellants, with consequential benefits as per law.

CENVAT credit allowed on LED lights and fixtures used for taxable output services under Rule 2(k)
CESTAT Mumbai allowed the appeal regarding CENVAT credit on LED lights, fixtures and control panels. The department denied credit claiming these finished goods couldn't be treated as inputs for taxable output services. The tribunal held that under Rule 2(k) of CENVAT Credit Rules, 2004, all goods used by service providers for output services qualify as inputs. Since disputed goods were used for providing taxable services to municipalities and service tax was discharged, they constituted valid inputs. Ownership criteria is irrelevant for determining CENVAT eligibility as no statutory restriction exists requiring ownership establishment for goods used in output services.

Input as defined under Rule 2(k) of the CENVAT Credit Rules, 2004 - goods used for providing any output service - usage-test for eligibility of Cenvat credit - ownership of goods not determinative for Cenvat eligibilityInput as defined under Rule 2(k) of the CENVAT Credit Rules, 2004 - goods used for providing any output service - ownership of goods not determinative for Cenvat eligibility - usage-test for eligibility of Cenvat credit - Whether goods manufactured and cleared by the appellants and used in providing taxable services qualify as 'inputs' for availing Cenvat credit and whether ownership of such goods is a determinative criterion for eligibility. - HELD THAT: - The Tribunal noted that Rule 2(k) of the CENVAT Credit Rules, 2004 defines 'input' to include all goods used for providing any output service. The admitted facts establish that the appellants manufactured LED lights, fixtures and control panels, paid appropriate Central Excise duty on clearance, and used those goods in supplying the taxable output services (Scientific and Technical Consultancy Services and Maintenance and Repair Service) to Municipalities/Municipal Corporations. Applying the statutory definition, the Tribunal held that goods used by a service provider in furnishing the output service fall within the scope of 'input' and are thus eligible for Cenvat credit, provided the goods were liable to tax or duty. The Tribunal further rejected the Revenue's contention that ownership of the goods on expiry of the contract precludes credit, observing that the CENVAT statute requires only that goods be used for provision of the output service and be subject to tax or duty; there is no statutory embargo requiring the service provider to retain ownership. The determinative criterion is the usage of the goods in the provision of the service (the usage-test), not legal ownership. [Paras 7, 8]The impugned orders denying Cenvat credit were set aside and the appeals allowed, holding that the disputed goods used in provision of the taxable services qualify as 'inputs' and ownership is not a bar to availment of Cenvat credit.Final Conclusion: Appeals allowed; Cenvat credit admissible on LED lights, fixtures and control panels manufactured and used by the appellants for providing taxable output services, ownership of the goods not a disqualifying factor.

2023 (12) TMI 40 - CESTAT KOLKATA Central Excise

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ISSUES PRESENTED AND CONSIDERED

1. Whether the demand for duty on goods allegedly removed without payment of duty after availing CENVAT credit is sustainable in view of the discrepancies in supporting documents and the appellant's challenges to quantities and valuation.

2. Whether the Commissioner (Appeals) properly exercised appellate scrutiny in accepting certain discrepancies and recalculating the duty demand accordingly.

3. Whether the appellant is entitled to reduction of penalty and, if so, on what conditions and quantum.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of the duty demand for goods removed without payment of duty after availing CENVAT credit

Legal framework: The proceedings arise from an assessment/demand for duty where goods were alleged to have been removed without payment of duty after availing CENVAT credit; the adjudicatory process involved issuance of a show cause notice, confirmation of duty and penalty in original adjudication, and appellate revision.

Precedent Treatment: No prior judicial authorities or precedents were invoked or considered in the impugned order or the Tribunal's order reproduced in the record.

Interpretation and reasoning: The Commissioner (Appeals) examined the appellant's submissions and documentary material (working sheet and road challans). The Commissioner (Appeals) accepted the appellant's challenge to specific additions in the adjudicating authority's Annexure (disparities in numbers for certain picture tubes) and excluded those figures from the computation. The Commissioner (Appeals) retained the rest of the Annexure calculations because the appellant did not dispute the valuation used; thus the valuation figures were treated as accepted. The Tribunal observed that the Commissioner (Appeals) had "already considered all the disparities pointed out by the Appellant" and that the appellant no longer disputed valuation.

Ratio vs. Obiter: Ratio - the demand is sustainable to the extent that it is supported by accepted figures and undisputed valuation; where specific item counts were successfully disputed and lacked supporting basis, those items were excluded from the demand. Obiter - none additional on evidentiary standards beyond application to the facts.

Conclusions: The Tribunal upheld the reduced duty demand as computed by the Commissioner (Appeals), finding no infirmity in the appellate order's treatment of discrepancies and valuation. The duty demand confirmed in the impugned order is sustained.

Issue 2: Adequacy of appellate scrutiny and acceptance of documentary discrepancies

Legal framework: Appellate authority's duty is to re-examine the evidence and computations of the original adjudicating authority and to modify demand where the original computation is unsupported by documents or is otherwise erroneous.

Precedent Treatment: No precedents cited or applied.

Interpretation and reasoning: The Commissioner (Appeals) scrutinized annexures and working sheets provided by the appellant and specifically accepted that there was "no supporting documents for adding" certain quantities in Annexure-A2. By amending Annexure-A1 and providing an adjusted table reflecting accepted quantities and values, the Commissioner (Appeals) demonstrated itemized appellate consideration rather than blanket reversal or affirmation. The Tribunal endorsed this approach, noting that the appellate authority "has already dealt with all the issues in the impugned order."

Ratio vs. Obiter: Ratio - where an appellant successfully demonstrates lack of documentary basis for specific additions, the appellate authority may exclude those additions and recompute demand; such targeted scrutiny is sufficient to remedy over-assessment. Obiter - none beyond the factual application.

Conclusions: The appellate scrutiny was adequate and properly resulted in modification of the demand. The Tribunal found no grounds to interfere with the Commissioner (Appeals)'s fact-specific adjustments.

Issue 3: Entitlement to reduction of penalty and conditionality of reduced penalty

Legal framework: Post-adjudication, penalty may be reduced by the authority on specified grounds; the Tribunal applied a conditional reduction mechanism linked to prompt payment of the confirmed duty and interest.

Precedent Treatment: No precedents cited or applied regarding penalty reduction.

Interpretation and reasoning: The Tribunal held that the appellant is entitled to a reduced penalty of 25% of the duty confirmed, conditional upon payment of the demand (duty plus interest) by a specified date (on or before 31.12.2023). The Tribunal expressly provided that failure to pay by that date will result in the penalty reverting to the full amount (Rs.1,08,182/- as stated). This operates as an incentive-linked mitigation rather than an unconditional waiver.

Ratio vs. Obiter: Ratio - penalty may be mitigated to 25% of the confirmed duty where the appellant pays the duty and interest by the specified deadline; non-compliance restores the full penalty. Obiter - procedural or equitable considerations underpinning the choice of 25% but not elaborated in reasoning.

Conclusions: The Tribunal upheld the conditional reduction of penalty to 25% subject to timely payment of duty and interest; non-compliance will result in imposition of the original penalty amount.

Cross-References and Integrated Conclusions

1. The Tribunal's upholding of the amended duty demand is directly linked to the Commissioner (Appeals)'s factual findings excluding unsupported additions and accepting undisputed valuation; see Issue 1 and Issue 2 above.

2. The penalty conclusion (Issue 3) is contingent on the appellant's compliance with the duty payment affirmed under Issue 1; the Tribunal's order integrates assessment outcome and penalty mitigation into a single operative directive.

Appeal Reduces Duty Demand and Lowers Penalty; Appellant Has Deadline to Pay Reduced Penalty by 31.12.2023.
The appeal resulted in a reduction of the duty demand from Rs.2,39,986 to Rs.1,08,182 by the Commissioner (Appeals), who found no need for further interference. The valuation aspect was not contested by the Appellant, leading to the modification of the demand. Additionally, the Appellant was granted a reduced penalty of 25% of the confirmed duty if paid by 31.12.2023. Failure to meet this deadline would result in the penalty amounting to Rs.1,08,182. The appeal was resolved on these terms, with the decision pronounced in open court.

Duty demand for removal of goods without payment of duty after availing CENVAT credit - valuation accepted by the appellant - upholding assessment on appeal - reduction of penalty on payment within prescribed timeDuty demand for removal of goods without payment of duty after availing CENVAT credit - valuation accepted by the appellant - upholding assessment on appeal - Whether the Commissioner (Appeals) order reducing the duty demand to the amended figures should be upheld. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) examined the discrepancies pointed out by the appellant, accepted certain disputed quantities as incorrect and amended Annexure A1 accordingly. The Commissioner (Appeals) found that the appellant did not dispute the valuation used in Annexure A2, and calculated the demand on the remaining accepted figures, thereby reducing the demand to the amount in the impugned order. The appellant accepted that valuation is not in dispute. On this basis the Tribunal found no infirmity in the impugned order and upheld the demand confirmed by the Commissioner (Appeals). [Paras 2, 3]Impugned order reducing the demand as per amended Annexure A1 is upheld.Reduction of penalty on payment within prescribed time - Whether the appellant is entitled to a reduced penalty and on what terms. - HELD THAT: - The Tribunal held that the appellant is entitled to a reduced penalty of 25% of the duty confirmed provided the appellant pays the duty confirmed along with interest on or before the date specified by the Tribunal. The order specifies that if the appellant makes payment with interest by that date, the reduced penalty of 25% shall apply; failure to comply will result in the penalty of the full amount as confirmed. [Paras 4]Appellant entitled to reduced penalty of 25% of the confirmed demand if duty with interest is paid by the specified date; otherwise the full penalty confirmed shall stand.Final Conclusion: The appeal is disposed of by upholding the Commissioner (Appeals) order reducing and confirming the duty demand as amended; the appellant may avail reduced penalty of 25% by paying the confirmed duty with interest on or before the date specified, failing which the full penalty as confirmed will apply.

2023 (12) TMI 38 - SECURITIES APPELLATE TRIBUNAL, MUMBAI SEBI

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Board can appoint independent director above 75 without prior shareholder approval under Regulation 17(1A)
The Securities Appellate Tribunal, Mumbai held that a board of directors can appoint a person above 75 years as additional non-executive independent director without prior shareholder approval through special resolution. The appointment must be subsequently approved by shareholders within three months or by the next AGM, whichever is earlier. The Tribunal ruled that Regulation 17(1A) of LODR Regulations should be read harmoniously with Companies Act provisions, allowing board appointment subject to later shareholder ratification. BSE and NSE penalties for alleged regulatory violation were deemed improper as the company complied by obtaining shareholder approval within the prescribed timeframe.

Appointment of an additional director - special resolution for persons above seventy-five years - prior approval versus subsequent ratification - Regulation 17(1A) of the LODR Regulations - Regulation 17(1C) of the LODR Regulations - Section 161(1) of the Companies Act, 2013 - Section 152(2) of the Companies Act, 2013 - conjoint reading/harmonious construction of company law and listing regulationsAppointment of an additional director - special resolution for persons above seventy-five years - prior approval versus subsequent ratification - Regulation 17(1A) of the LODR Regulations - Regulation 17(1C) of the LODR Regulations - Section 161(1) of the Companies Act, 2013 - Section 152(2) of the Companies Act, 2013 - conjoint reading/harmonious construction of company law and listing regulations - Appointment of a person aged over seventy-five as a non-executive director by the board as an additional director is permissible if subsequently approved by members by a special resolution within the period prescribed by Regulation 17(1C); penalty for non-compliance quashed. - HELD THAT: - The Tribunal observed that Section 152(2) contemplates appointment of directors by the company in general meeting whereas Section 161(1) permits the board to appoint an additional director who holds office up to the next annual general meeting. Regulation 17(1A) prescribes that appointment or continuance of a non-executive director who has attained the age of seventy-five years requires a special resolution and an explanatory statement. Regulation 17(1C) requires shareholder approval for appointment to be taken at the next general meeting or within three months from the date of appointment, whichever is earlier. Reading these provisions harmoniously, Regulation 17(1A) does not convert the special resolution requirement into a condition precedent to any board appointment; instead, a board may appoint an additional director (including a person above seventy-five) whose appointment must be approved by members by way of special resolution within the period specified by Regulation 17(1C). In the present case the board appointed the person as an additional director and the members approved the appointment by special resolution within three months, hence the appointment complied with the statutory scheme and the fines levied by the stock exchanges for alleged breach of Regulation 17(1A) could not be sustained. [Paras 18, 19, 22, 23, 24]Impugned orders imposing fines for alleged violation of Regulation 17(1A) quashed; appointment valid as ratified within prescribed period.Final Conclusion: The appeals are allowed; the orders of BSE and NSE imposing fines for alleged breach of Regulation 17(1A) are quashed as the board appointment was validly ratified by a special resolution within the period mandated by Regulation 17(1C); no order as to costs.

2023 (12) TMI 31 - ITAT RAIPUR Income Tax

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Revenue's appeal dismissed on construction expenses, deemed dividend timing, derivative transactions, and documentation requirements
ITAT Raipur dismissed revenue's appeal on multiple grounds. The tribunal upheld CIT(A)'s deletion of construction expense provision addition, finding AO misread the provision date as FY 2013-14 instead of actual FY 2014-15. Regarding deemed dividend under section 2(22)(e), ITAT confirmed directors' advances constituted deemed dividend but ruled section 40(a)(ia) disallowance inapplicable for AY 2014-15 as amendment expanding scope to "any sum" became effective from AY 2015-16. The tribunal held commodity derivative transactions were business transactions, not speculative, being conducted through recognized stock exchange. Project completion method was approved as valid accounting method. Addition under section 68 was deleted as assessee provided required documentation and AO failed to pursue proper inquiries before making assumptions.

Deemed dividend under section 2(22)(e) - disallowance under section 40(a)(ia) - percentage completion method (AS-7) versus project/completed contract method (AS-9 / project completion method) - speculative transaction versus business loss under section 43(5)(e) and section 73 - cash credit / unexplained credit under section 68 - onus of proof under section 68: identity, creditworthiness and genuinenessProvision for construction expenses - Deletion of addition of Rs. 5,00,000 made by AO by disallowing provision for construction expenses - HELD THAT: - The Tribunal accepted the appellate authority's finding that the provision of Rs. 5,00,000 was created in the subsequent year (31/03/2015) and not in the year under consideration; the assessing officer had misread the ledger and made the disallowance on incorrect facts. On the record (ledger entries) and in absence of any contrary material, the deletion by the CIT(A) is correct and requires no interference. [Paras 9]Addition deleted; revenue's ground rejected.Deemed dividend under section 2(22)(e) - disallowance under section 40(a)(ia) - Deletion of addition of Rs. 1,34,83,176 made by AO for non-deduction of tax on alleged deemed dividend and related disallowance under section 40(a)(ia) - HELD THAT: - The Tribunal upheld the approach of the CIT(A). Although the AO treated certain balances with directors as loans/advances attracting section 2(22)(e), the appellate forum concluded that the assessing officer had not established the legal foundation to sustain the disallowance under section 40(a)(ia) for the year (the widened phrase 'any sum' became applicable only from 01.04.2015). Following precedents and on literal reading of the amendment, the Tribunal agreed that disallowance under section 40(a)(ia) could not be invoked for the relevant year and the AO's action in invoking that provision was beyond mandate of law; consequently the revenue's challenge was dismissed. [Paras 20, 21, 22]Deletion by CIT(A) sustained; revenue's ground dismissed.Speculative transaction versus business loss under section 43(5)(e) - application of section 73 - Deletion of addition of Rs. 56,15,450 treating loss on currency derivatives as speculative (AO had disallowed as speculative loss / bogus claim) - HELD THAT: - The Tribunal concurred with the CIT(A) that the assessee's derivative transactions were executed through an authorised broker on a recognised exchange and contract notes and transaction evidence were on record. In view of section 43(5)(e) (eligible transactions on a recognised exchange) and consistent judicial authorities, such transactions are not to be treated as speculative; absent cogent material to dislodge the contemporaneous documentary evidence and where AO's adverse inference rested on non-response to third party notices without further corroboration, the CIT(A)'s deletion of the addition was proper. [Paras 29]Addition deleted; revenue's challenge rejected.Cash credit / unexplained credit under section 68 - onus of proof under section 68: identity, creditworthiness and genuineness - Deletion of addition of Rs. 2,11,21,389 treated by AO as unexplained credit under section 68 - HELD THAT: - The Tribunal agreed with the CIT(A) that the assessee had discharged the primary onus by producing PAN/ITRs, bank statements, ledger confirmations, audited accounts and evidence of receipt and repayment through banking channels. The assessing officer did not undertake independent enquiries (for example under sections 133(6)/131) or produce corroborative material to rebut those documents. On settled law, once the assessee discharges its initial burden, the burden shifts to the Revenue to bring contrary material; in absence of such material and given the AO's reliance on inapposite precedents and mere surmise, the addition under section 68 could not be sustained. [Paras 8, 41, 42]Addition deleted; revenue's ground dismissed.Percentage completion method (AS-7) versus project/completed contract method (AS-9 / project completion method) - Deletion of addition made by AO by applying AS-7 (percentage completion method) to recognise revenue instead of the project completion method followed by the assessee - HELD THAT: - The Tribunal endorsed the CIT(A)'s conclusion that project completion method (one of the recognised accounting methods) had been consistently followed by the assessee and accepted by the department in earlier years. AS-7 permits both percentage completion and completed contract (project completion) approaches in appropriate circumstances; absent prohibition in the Income-tax Act and without any cogent material showing that the chosen method was erroneous or produced non-neutral results, the AO was not justified in substituting the assessee's accepted accounting policy. The AO's estimate lacked application of the certified percentage-completion calculations and was revenue neutral over project life; the CIT(A)'s deletion of the addition was sustained. [Paras 33, 34, 35, 37]Addition deleted; revenue's ground dismissed.Final Conclusion: Both departmental appeals are dismissed. The Tribunal affirms the orders of the CIT(A) deleting the additions/disallowances challenged by the Revenue: (i) deletion of provision for construction expenses; (ii) deletion of addition relating to alleged deemed dividend/non-deduction and related invocation of section 40(a)(ia) for the year; (iii) deletion of the disputed derivative loss treated as speculative; (iv) deletion of unexplained credit under section 68; and (v) rejection of AO's application of AS-7 in place of the assessee's consistently followed project completion method.

2023 (12) TMI 30 - ITAT BANGALORE Income Tax

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AO cannot apply section 69A after accepting business income calculated on total turnover from same books
The ITAT Bangalore held that the AO incorrectly applied section 69A to treat reported sales as unexplained money after accepting the business income calculated on total turnover. The assessee, a gold and silver trader, had cash seized by police, which was claimed as personal savings and loans. The AO found minor defects in sales bills but accepted the books of accounts and business income. The tribunal ruled that once the AO accepted the returned income based on total turnover, the same turnover cannot be treated as unexplained money under section 69A without rejecting the books of accounts.

Estimation of sales - Application of provisions of section 69A read with section 115BBE - Treatment of seized cash as unexplained money - Acceptance of return and impermissibility of double taxation by recharacterising same turnover as unexplained money - Rejection of books of account and applicability of section 145(3) - Admissibility of additional evidence and procedure under Rule 46A of the Income tax RulesEstimation of sales - Treatment of seized cash as unexplained money - Application of provisions of section 69A read with section 115BBE - Acceptance of return and impermissibility of double taxation by recharacterising same turnover as unexplained money - Rejection of books of account and applicability of section 145(3) - Whether the Assessing Officer was justified in treating a portion of the cash seized as unexplained money and bringing it to tax under section 69A/115BBE after estimating genuine sales at a lower figure while simultaneously accepting the assessee's return based on the declared turnover. - HELD THAT: - The Tribunal recorded that cash of Rs. 1.48 crores was seized and that the assessee produced books, registers and returns during investigation and assessment. The AO accepted the return under section 139(1) and the business income computed by the assessee based on total turnover, yet in the same assessment treated a part of the turnover as not genuine and assessed it u/s 69A, without rejecting the books of account and without invoking section 145(3). The Tribunal held that once the AO accepted the returned income calculated on the basis of total turnover, it was not open to him to treat that same turnover as unexplained money under section 69A. The AO's mechanical re characterisation of sales as unexplained money despite acceptance of accounts was found to be incorrect. The Tribunal also noted that the AO had not applied section 145(3) before making estimates. Relying on the principle that unexplained investment cannot be made out where books and turnover are accepted, and following the reasoning in Mahesh Kumar Gupta v. ACIT as relied on in the order, the Tribunal concluded that section 69A did not apply and the entire sales declared by the assessee constituted business sales. Because the Tribunal determined that entire sales were business receipts, it did not require adjudication of the remaining grounds raised in the appeals. [Paras 16, 17, 18]The addition under section 69A (and consequent charging under section 115BBE) is not sustainable; the entire sales declared by the assessee are held to be business sales and section 69A will not apply.Final Conclusion: The revenue appeal is dismissed; the assessee's cross objection is partly allowed by holding that the entire cash corresponds to business sales for AY 2021-22 and that the AO could not treat the accepted turnover as unexplained money under section 69A.

2023 (12) TMI 19 - DELHI HIGH COURT Customs

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Petition for Transport & Marketing Assistance Scheme to be decided by DGFT in 12 weeks; additional docs allowed in 3 weeks.
The HC directed that the petition seeking incentives under the Transport and Marketing Assistance Scheme be treated as a representation to be decided by the DGFT within twelve weeks. The Petitioner was allowed to submit additional documents within three weeks. The Court did not express any opinion on the merits, leaving all parties' rights and contentions open. The writ petition was disposed of with these directions and liberties granted.

2023 (11) TMI 1194 - ITAT MUMBAI Income Tax

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Issues Involved:
1. Deletion of disallowance of interest paid on non-convertible debentures.
2. Deletion of disallowance of deduction claimed under section 80G for Corporate Social Responsibility (CSR) expenses.

Summary:

1. Deletion of Disallowance of Interest Paid on Non-Convertible Debentures:
The Revenue challenged the deletion of disallowance of Rs. 26,53,85,916/- interest expenses on non-convertible debentures (NCDs) by the learned Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee had issued unsecured redeemable cumulative NCDs at an interest rate of 21.3%, which was higher than the market rate for secured loans (14.1%). The Assessing Officer (AO) restricted the interest expense to 14.1%, disallowing the excess interest claimed. The CIT(A) held that the interest rate on secured loans cannot be compared with unsecured NCDs due to various factors like risk, credit, and security. The Tribunal restored the issue to the AO for de novo adjudication to determine the arm's length interest rate for unsecured NCDs and to make proportionate disallowance if the interest rate was found higher than the arm's length rate. The Tribunal also directed the AO to examine the aspect of tax evasion as per CBDT Circular No. 6P dated 07/06/1968.

2. Deletion of Disallowance of Deduction Claimed under Section 80G for CSR Expenses:
The Revenue also challenged the deletion of disallowance of deduction under section 80G of the Income Tax Act for CSR expenses. The AO disallowed the deduction on the grounds that CSR expenses are mandatory under section 135 of the Companies Act, 2013, and not voluntary donations. The CIT(A) allowed the deduction, following judicial precedents that CSR expenses, although not allowed under section 37, are allowable under section 80G. The Tribunal upheld the CIT(A)'s decision, noting that there is no specific restriction for claiming deduction under section 80G for CSR expenses and that the coordinate benches of the Tribunal have consistently ruled in favor of allowing such deductions.

Conclusion:
The Tribunal partly allowed the Revenue's appeal for statistical purposes, restoring the issue of interest disallowance on NCDs to the AO for fresh adjudication and upholding the CIT(A)'s decision on allowing the deduction under section 80G for CSR expenses.

ITAT rules comparing secured loan rates with unsecured debentures erroneous, CSR expenses qualify for section 80G deduction despite section 37 disallowance
The ITAT Mumbai held that comparing interest rates on secured loans with unsecured non-convertible debentures is erroneous due to different risk factors. The matter was remanded to AO for determining arm's length interest rate on unsecured debentures, with directions that any disallowance should be proportionate to interest debited to profit and loss account only. Regarding CSR expenses, the Tribunal upheld CIT(A)'s decision allowing deduction under section 80G despite disallowance under section 37, following consistent precedent that CSR expenses qualify for 80G deduction.

Comparability of interest rates between secured loans and unsecured non-convertible debentures - Determination of arm's length interest rate for unsecured inter-company non-convertible debentures - Proportionate disallowance of excess interest limited to interest debited to profit and loss account - Deduction under section 80G for corporate social responsibility (CSR) contributions - Applicability of the principle of consistency across assessment yearsComparability of interest rates between secured loans and unsecured non-convertible debentures - Determination of arm's length interest rate for unsecured inter-company non-convertible debentures - Proportionate disallowance of excess interest limited to interest debited to profit and loss account - Deletion of disallowance of interest on unsecured redeemable cumulative non-convertible debentures and whether AO correctly restricted interest to secured loan rate. - HELD THAT: - The Tribunal held that comparing the interest rate on secured term loans with the interest rate on unsecured non-convertible debentures is incorrect because different risk factors (credit risk, liquidity risk, security, pledge, quantum and tenure) affect pricing of unsecured instruments. The correctness of the interest rate paid on the debentures must be tested by determining the arm's length interest rate prevailing for unsecured non-convertible debentures at the relevant time. The Tribunal found that the question of allowability in earlier years did not constitute a precedent entitling the assessee to automatic application of the principle of consistency because in earlier years the interest was either capitalised or not debited to profit and loss account; hence those years did not decide the same claim. Consequently, the Tribunal set aside the CIT(A) order to the extent it deleted the disallowance and restored the issue to the file of the AO for de novo adjudication to determine the arm's length interest rate. The Tribunal further directed that any disallowance, if found necessary, must be proportionate to the interest actually debited to the profit and loss account (and not on the entire contractual interest), and instructed the AO to examine the relevance of the CBDT Circular relied upon by the assessee while conducting the de novo adjudication. [Paras 12, 13]Issue restored to the AO for de novo determination of the arm's length interest rate; disallowance, if any, to be proportionate to interest charged to P&L; CIT(A) order set aside to this extent; grounds 1 and 2 allowed for statistical purposes.Deduction under section 80G for corporate social responsibility (CSR) contributions - Applicability of the principle of consistency across assessment years - Deletion of disallowance of deduction claimed under section 80G in respect of CSR expenditure that was mandatorily incurred under the Companies Act, 2013. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that CSR expenditures, although mandated under section 135 of the Companies Act, may still be eligible for deduction under section 80G subject to satisfaction of the conditions for that deduction. The Tribunal noted precedents of coordinate benches supporting the view that the existence of a statutory obligation does not ipso facto exclude entitlement to section 80G deduction where the statutory conditions for section 80G are otherwise met. The AO had not examined whether the conditions for claiming deduction under section 80G were satisfied and had treated the payments as non-voluntary without dealing with the statutory conditions for section 80G; the CIT(A) applied the consistent line of Tribunal decisions and deleted the disallowance. [Paras 17, 18]CIT(A)'s deletion of the disallowance and allowance of deduction under section 80G in respect of the CSR expenditure is upheld; ground 3 dismissed.Final Conclusion: The revenue appeal is partly allowed: Grounds 1 and 2 are set aside and remitted to the AO for de novo determination of the arm's length interest rate for the unsecured debentures, with any disallowance to be proportionate to interest charged to the profit and loss account; Ground 3 (CSR/section 80G deduction) is dismissed and the CIT(A)'s order on that issue is upheld.

2023 (11) TMI 1193 - ITAT BANGALORE Income Tax

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Issues Involved:
The appeal filed by the assessee against the order of the CIT(Appeals) regarding the assessment year 2018-19 raised various grounds including estimation of income from contract business, disallowance of deemed expenditure, denial of opportunity of hearing, and challenge to the interest levied under sections 234A, 234B, and 234C of the Income Tax Act.

Estimation of Income from Contract Business:
The assessee, a proprietor of a business, declared income under different heads for the assessment year 2018-19. The AO disallowed the claimed expenditure under section 57 as the assessee failed to provide supporting documents. The assessee contended that the AO should have estimated the income under the head Profits & gains of business or profession instead of disallowing the entire expenditure. The Tribunal held that the income received should be considered under Profits & gains of business or profession, and based on past trends, a Net Profit rate of 8.5% was deemed appropriate for the balance turnover.

Denial of Opportunity of Hearing:
The assessee argued that the CIT(A) failed to provide an opportunity of hearing despite a specific request, violating principles of natural justice. However, the Tribunal did not find merit in this ground as detailed written submissions were made before the CIT(A), and the appeal was duly considered before dismissal.

Interest Levied under Sections 234A, 234B, and 234C:
The appellant contested the liability to pay interest under the mentioned sections, claiming that there was no additional tax liability. The Tribunal observed that the interest levied was not in accordance with the law and lacked clarity in terms of rate, period, and quantum. Consequently, the interest levied was deemed unjustified and deserving of cancellation based on the facts and circumstances of the case.

Conclusion:
The Tribunal partially allowed the appeal by the assessee, emphasizing the proper categorization of income from contract business, addressing the denial of a hearing opportunity, and canceling the interest levied under sections 234A, 234B, and 234C due to lack of clarity and compliance with legal provisions. The decision was pronounced on November 28, 2023.

Contractor's entire turnover treated as business income under section 44AD, not income from other sources
The ITAT Bangalore addressed income estimation for a contractor who split turnover between business income (declaring 6% profit under section 44AD) and income from other sources. The contractor received payments from Mysore City Corporation with TDS deducted under section 194C. The AO accepted the 6% profit rate on part turnover but disputed the classification of remaining income. The tribunal held that all amounts should be treated as business income under Chapter IV Part D, not income from other sources. For the balance turnover of Rs. 3,09,23,045, the tribunal adopted 8.5% net profit rate as offered by the assessee's representative, considering past trends and absence of books/audit. The appeal was partly allowed.

Classification of receipts as business income - Estimation of income in absence of books of account - Application of presumptive taxation rates under section 44AD as guidance - Disallowance of unsubstantiated deductions claimed under income from other sources - Adoption of reasonable net profit rate for estimationClassification of receipts as business income - Re-allocation of income between heads - Disallowance of unsubstantiated deductions claimed under income from other sources - Estimation of income in absence of books of account - Adoption of reasonable net profit rate for estimation - Whether amounts received from Mysore City Corporation are to be treated as business receipts and whether net profit at 8.5% should be adopted on the portion treated as business income in absence of books and substantiation of claimed deductions - HELD THAT: - The Tribunal found that the payments received from Mysore City Corporation are receipts of a contractor and therefore fall under Chapter IV - Part D - Profits & gains of business or profession, noting that the AO himself treated the receipts as business income by splitting them between heads. The assessee had declared part of the receipts under section 44AD at 6% and treated the balance as income from other sources with large deemed expenditures claimed under section 57 but failed to produce supporting documents. In view of the absence of books of account and audit, and considering the AO accepted business-character of the receipts, the balance turnover ought to have been assessed as business income. Having regard to the assessee's past returns (earlier years showing profits around 8%) and the assessee's own fair offer during hearing, the Tribunal held that adopting a net profit rate of 8.5% on the balance turnover of Rs. 3,09,23,045 is appropriate in the peculiar facts of the case, rather than disallowing all claimed expenditures which lacked substantiation. [Paras 10, 11]The receipts from Mysore City Corporation are business receipts and net profit at 8.5% is to be adopted on the balance turnover; appeal is partly allowed.Final Conclusion: The Tribunal held that the amounts received from Mysore City Corporation are business receipts assessable under profits and gains of business or profession; in the absence of books and substantiation for deductions claimed under income from other sources, the balance turnover is to be taxed as business income adopting a net profit rate of 8.5%, and the appeal is partly allowed.

2023 (11) TMI 1157 - ALLAHABAD HIGH COURT GST

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GST input tax credit dispute on alleged bogus purchases upheld where physical movement and genuineness not proved
Proceedings under the GST regime challenged on grounds of alleged bogus purchases were upheld because the assessee failed to discharge the burden of proof regarding the genuineness of transactions and actual physical movement of goods; documentary evidence (invoices, e-way bill, weighment receipts, bilty) was discredited as counter-parties and signatories were non-existent, thereby justifying initiation of recovery and penal proceedings under the statute. The inability to establish transactional reality and transport corroboration resulted in denial of contested input tax credit and dismissal of the petition.

Burden of proving ITC claim - genuineness of transactions - actual physical movement of goods - disallowance of Input Tax Credit for bogus purchases - proceedings under section 74 of the GST Act - insufficiency of invoices and bank payments without corroborative evidenceBurden of proving ITC claim - actual physical movement of goods - genuineness of transactions - insufficiency of invoices and bank payments without corroborative evidence - proceedings under section 74 of the GST Act - Whether the petitioner discharged the burden to prove the genuineness of purchases and actual physical movement of goods so as to sustain the claim of Input Tax Credit and defeat proceedings under section 74 of the GST Act. - HELD THAT: - The Court found on the record that the petitioner relied on tax invoices, e-way bills, weighment receipts and bilty to claim ITC for purchases from M/s Krishna Trading Company, Mathura, but on inquiry the selling concern and the persons issuing the transport/weighment documents were found non-existent. In these circumstances the authorities doubted the basis for asserted movement of goods. Applying the principle that the burden to prove correctness of an ITC claim lies on the purchasing dealer and that mere production of invoices or payment through bank does not discharge that burden, the Court held the petitioner failed to establish actual physical movement of goods and genuineness of transactions. The Court expressly relied on the Apex Court's statement of law that additional corroborative particulars (such as seller's address, vehicle and delivery details, freight/payment particulars and acknowledgement of delivery) are required to prove ITC claims and that absence thereof justifies disallowance and initiation of recovery proceedings. Given the failure to furnish such corroborative proof, the initiation of proceedings under section 74 of the GST Act and the impugned appellate order rejecting the petitioner's appeal were held to be justified. [Paras 8, 9, 12, 13]Petitioner failed to discharge the burden to prove genuineness and physical movement of goods; the proceedings under section 74 of the GST Act and the impugned order for the periods in question are upheld.Final Conclusion: The writ petition is dismissed for failure of the petitioner to prove and establish beyond doubt the actual transactions and physical movement of goods; no interference is called for with the impugned order.

2023 (11) TMI 1137 - CESTAT CHENNAI Customs

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Issues involved: Appeal against conversion of shipping bills from free to drawback shipping bills within a specified period, adherence to Customs Act provisions and CBEC Circulars, jurisdiction of the Tribunal and the High Court in challenging orders.

Summary:

Issue 1: Conversion of shipping bills
The appeal was filed by the Department challenging the conversion of free shipping bills to drawback shipping bills within a specific period as allowed by the Tribunal. The respondent had requested for this conversion for exports made between 2013-14 to 2016-17. The Tribunal directed the adjudicating authority to verify and allow the conversion of shipping bills falling within three years from the date of application. The Department contended that the conversion was not permitted under Section 149 of the Customs Act, 1962 and CBEC Circular No.36/2010. The Commissioner was supposed to examine the request within three months from the Let Export Order (LEO) as per CBEC Circular No.6/2002. The Department argued that the examination norms were not followed, and the appeal should be allowed.

Issue 2: Jurisdiction to challenge orders
The Department challenged the final order of the Tribunal dated 30.09.2021, which directed the adjudicating authority to verify and allow the conversion of shipping bills. The respondent argued that the Department should have appealed to the High Court against the Tribunal's final order instead of challenging the Principal Commissioner's decision. The respondent emphasized that the Commissioner correctly followed the Tribunal's direction, and the appeal should be dismissed.

Judgment:
The Tribunal found that the Department's appeal was challenging the Tribunal's final order, and the appropriate remedy would have been to appeal to the High Court. Since the Tribunal had already considered relevant circulars and decisions, and the Commissioner had correctly followed the Tribunal's direction, the appeal was dismissed. The Tribunal noted that the matter fell within the new Litigation Policy for Customs cases due to the absence of duty, penalty, fine, or confiscation of goods, and the appeal was within the monetary limits of the policy. The appeal filed by the Department was therefore dismissed.

Tribunal Rejects Department's Appeal on Shipping Bill Conversion, Citing New Litigation Policy and Monetary Limits.
The Tribunal dismissed the Department's appeal, which challenged the conversion of free shipping bills to drawback shipping bills as directed by the Tribunal. The Tribunal held that the Department should have appealed to the HC against the Tribunal's final order instead of challenging the Principal Commissioner's decision. The Tribunal confirmed that the Commissioner correctly followed its directives and noted that the case fell within the new Litigation Policy for Customs cases, with no duty, penalty, fine, or confiscation involved, and within the monetary limits. Consequently, the Department's appeal was dismissed.

Conversion of Free Shipping Bills to Drawback Shipping Bills - limitation period of three years computed from the date of application - conversion between schemes involving different levels of examination not permitted - Commissioner's power to examine conversion requests within three months of Let Export Order - adherence to CBEC examination norms for conversion of shipping billsConversion of Free Shipping Bills to Drawback Shipping Bills - limitation period of three years computed from the date of application - adherence to CBEC examination norms for conversion of shipping bills - Validity of the Principal Commissioner's order allowing conversion of specified free shipping bills pursuant to the Tribunal's direction. - HELD THAT: - The Tribunal had earlier passed a final order directing that requests for conversion of shipping bills falling within three years when computed from the date of application be allowed and that the adjudicating authority verify whether any shipping bill falls beyond that limitation. Pursuant to that direction the Principal Commissioner allowed conversion of 342 free shipping bills falling within the three-year period. The Department's grounds challenging that action essentially assailed the Tribunal's earlier final order and contended that statutory and Board norms (including the requirement that conversion between schemes involving different levels of examination is not permitted and the three month rule from Let Export Order for Commissioner's examination) were not complied with. The Tribunal in the present proceeding recorded that the Final Order had already considered the Board's circulars and relevant decisions and that the Commissioner had followed the Tribunal's direction in allowing conversion. Having regard to the Tribunal's earlier adjudication on the limitation question and the Commissioner's compliance with that direction, there was no basis to interfere with the impugned order allowing conversion of those shipping bills. [Paras 7]The Principal Commissioner's order allowing conversion of the shipping bills (within three years from date of application) is sustained.Conversion of Free Shipping Bills to Drawback Shipping Bills - limitation period of three years computed from the date of application - Maintainability of the Department's appeal before the Tribunal challenging the adjudicating authority's compliance with the Tribunal's earlier final order. - HELD THAT: - The Department's present appeal challenges the Principal Commissioner's order which was passed in compliance with the Tribunal's final order of 30.09.2021. The Review Committee's grounds in the present appeal in substance attack the earlier final order of the Tribunal. The Tribunal observed that when its final order had set aside the departmental denial and directed conversion subject to verification, the proper remedy for the Department to challenge that final order was to seek appropriate relief before a higher forum (the High Court). Absent an appeal to the High Court against the Tribunal's final order, the Department could not re-open that issue by assailing the adjudicating authority's consequential compliance before the Tribunal. [Paras 7]The Department's appeal is not maintainable as a collateral challenge to the Tribunal's final order; the proper remedy was to appeal to the High Court.Litigation policy monetary limit - Applicability of the litigation policy threshold to the appeal. - HELD THAT: - On perusal of records the matter did not involve duty, penalty, fine or confiscation and the value fell below the monetary threshold specified under the new Litigation Policy for Customs cases; accordingly the appeal lies within those limits. [Paras 8]The appeal falls within the monetary limits of the Litigation Policy.Final Conclusion: The departmental appeal is dismissed; the Principal Commissioner's order allowing conversion of the shipping bills in compliance with the Tribunal's earlier final order is upheld, and the Department's proper remedy to challenge the Tribunal's final order was by appeal to the High Court.

2023 (11) TMI 1130 - CESTAT CHANDIGARH Service Tax

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Issues involved:
The issues involved in this case include confirmation of demand, imposition of penalties under various sections, applicability of service tax, interpretation of business auxiliary service, invocation of extended period, and justification of penalties.

Confirmation of demand and imposition of penalties:
The appeal was filed against an order confirming a demand of Rs. 1,70,589/- along with interest and penalties under sections 76, 78, and 77. The appellant operated a BPCL filling station and was responsible for accountal of petroleum products and other operational aspects. The Commissioner (Appeals) upheld the demand and penalties, leading to this appeal.

Applicability of service tax and business auxiliary service:
The appellant also ran a Health Club & Fitness Centre and paid service tax until its closure. A show cause notice alleged provision of services on behalf of BPCL, invoking service tax liability under business auxiliary service. The demand was confirmed under Section 73 of the Finance Act, along with interest and penalties. The appellant argued for exemption under Notification 6/2005-ST due to the value of services not exceeding Rs. 4 lakhs.

Invocation of extended period and penalties justification:
The extended period was invoked for demanding service tax under Health Club and Fitness Centre services. The appellant contested the imposition of penalties under sections 76 & 78, citing lack of intention to evade and changes in the definition of business auxiliary service over time. The appellant had also deposited a significant amount before the issuance of the show cause notice.

Judgment and reasoning:
After considering submissions and evidence, the Tribunal found that the appellant operated the filling station on a reimbursement basis for expenses. Citing the precedent of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal held that reimbursable expenditures are not included in taxable value. The Tribunal also noted the early deposit made by the appellant before the show cause notice, questioning its issuance. Additionally, the imposition of penalties under sections 76 & 78 was deemed untenable, referencing a judgment of the Punjab and Haryana High Court.

Conclusion:
Based on the findings, the Tribunal concluded that the impugned order was not sustainable in law. Therefore, the appeal was allowed, and the order was set aside. The judgment was pronounced in open court on 28.11.2023.

Tribunal Overturns Order, Cancels Tax Demand and Penalties for BPCL Station; Questions Validity of Show Cause Notice.
The Tribunal allowed the appeal, setting aside the impugned order that confirmed a demand of Rs. 1,70,589/- along with interest and penalties under sections 76, 78, and 77. It found that the appellant operated a BPCL filling station on a reimbursement basis, excluding such expenditures from taxable value. The Tribunal also questioned the issuance of the show cause notice due to the appellant's early deposit and deemed the imposition of penalties untenable, referencing a Punjab and Haryana HC judgment. The decision was pronounced on 28.11.2023.

Taxability of business auxiliary services - valuation - reimbursable expenditure not includable in taxable value - invocation of extended period - intention to evade - penalty under Section 76 and Section 78 - concurrent imposition - pre-deposit made prior to issuance of show cause notice - exemption for health club services where aggregate value does not exceed thresholdTaxability of business auxiliary services - valuation - reimbursable expenditure not includable in taxable value - Whether the appellant's activities at the COCO petrol outlet attracted service tax as business auxiliary services and whether reimbursed expenditures form part of taxable value. - HELD THAT: - The Tribunal found on the material on record that the appellant functioned only as the operator of a company-owned company-operated (COCO) BPCL filling station and received monthwise reimbursements for expenses such as salary/wages for manpower, conveyance and other operating expenses, supported by monthly statements and a chartered accountant certificate. Applying the Apex Court's decision in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal held that reimbursable expenditure is not includable in the taxable value for the period under consideration. Given that the amounts were reimbursable and evidenced, the activity did not give rise to a taxable value that could sustain the demand as framed. [Paras 5, 9, 10]The demand insofar as it rested on inclusion of reimbursed expenditures in taxable value and on treating the appellant's operations as liable service was not sustainable.Pre-deposit made prior to issuance of show cause notice - Effect of the appellant having deposited amounts before issuance of the show cause notice on the validity of the proceedings. - HELD THAT: - The Tribunal noted that the appellant had deposited amounts by two TR-6 challans dated 31.05.2007 prior to issuance of the show cause notice and that this fact was recorded in the show cause notice itself. On this factual foundation the Tribunal concluded that issuance of the show cause notice in the circumstances was improper and militated against sustaining the demand. [Paras 10]The fact of deposit prior to issuance of the show cause notice vitiated the impugned demand and weighed against its confirmation.Invocation of extended period - intention to evade - Whether invocation of the extended period of limitation was justified in the absence of intention to evade tax. - HELD THAT: - The Tribunal observed that there was no finding or material establishing an intention to evade tax by the appellant. The record showed reimbursement arrangements and changing definitions over time. In absence of evidence of deliberate evasion, the Tribunal found the invocation of the extended period to be unjustified. [Paras 6, 10]Extended period of limitation could not be validly invoked against the appellant in the facts of the case.Penalty under Section 76 and Section 78 - concurrent imposition - Sustainability of penalties imposed under Section 76 and Section 78 (and penalty under Section 77). - HELD THAT: - Having held that the demand was not sustainable on account of the non-includability of reimbursed expenses and the pre-deposit, the Tribunal further relied on the Punjab & Haryana High Court decision in Commissioner of Central Excise v. Pannu Property Dealers to conclude that imposing penalties under both Sections 76 and 78 was not tenable. On the combined factual and legal basis the Tribunal found the penalties unsustainable. [Paras 7, 10]The penalties imposed under Sections 76 and 78 (and the penalty under Section 77) were not tenable and could not be sustained.Exemption for health club services where aggregate value does not exceed threshold - Applicability of exemption for health club services where aggregate value of services did not exceed the notified threshold. - HELD THAT: - The appellant's health club was registered and later surrendered; submissions were made that services of the health club fell within the exemption notification because aggregate value did not exceed the statutory threshold. The Tribunal's findings on the primary valuation and reimbursement issues and on limitation obviated the need to sustain any demand under the health club head, and the appellant's contention regarding the exemption supported the conclusion that no taxable liability survived. [Paras 3, 6, 10]The contention that the health club services were exempt on account of aggregate value falling below the threshold reinforced that no demand could be sustained.Final Conclusion: The appeal is allowed; the impugned order confirming the service tax demand and imposing penalties is set aside.

2023 (11) TMI 1128 - CESTAT HYDERABAD Central Excise

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CESTAT allows CENVAT credit for steel materials used in factory production, sets aside demand for alleged clandestine clearance
CESTAT Hyderabad held that demands for alleged clandestine production and clearance were vague and not based on proper prescribed norms, following SC precedent in RA Castings case. The tribunal found appellant maintained sufficient records and furnished regular returns that were not untrue. Regarding CENVAT credit, the tribunal allowed credit for MS angles, bars, coils, beams, plates, and channels used in factory production, including EOT crane fabrication, furnace repair, and materials consumed during steel production process. The impugned order was set aside and appeal allowed.

Clandestine removal and production estimation by reference to power consumption and theoretical charge-mix - maintenance of statutory records and production registers - admissibility of Cenvat credit for inputs used in fabrication, repair and consumption in manufacture - onus on Revenue to prove clandestine removal with positive evidence - penalty invalidity where substantive demand is unsustainableMaintenance of statutory records and production registers - regular returns and prescribed forms - Sufficiency of records maintained by the appellants for the periods under dispute - HELD THAT: - The Tribunal found that the appellants had maintained sufficient records of transactions and production and had furnished regular returns and prescribed forms which were not shown to be false or incorrect. The allegation of non-maintenance of statutory records was rejected in view of the records produced and regular ER-1 returns and 57AE statements filed with the range officer. [Paras 25]Appellants maintained sufficient records; allegation of non-maintenance is rejected.Clandestine removal and production estimation by reference to power consumption and theoretical charge-mix - onus on Revenue to prove clandestine removal with positive evidence - Validity of demand based on estimated production/clandestine removal derived from power-consumption analysis and theoretical charge-mix - HELD THAT: - The Tribunal held that the demand for alleged clandestine production and clearance, grounded on theoretical studies and pro rata yield derived from power-consumption without reliable prescribed norms or corroborative tests, was vague and unsustainable. Reliance on a behind the scene report and on general industry standards, without test production or positive evidence such as buyer statements or incriminating documents, rendered the estimation and consequent demand infirm. The Tribunal also noted that the approach was contrary to the legal standards as applied in RA Castings and related authorities, and that the Revenue failed to discharge the burden of proof for clandestine removal. [Paras 25]Demand founded on production estimated from power-consumption/theoretical charge-mix is unsustainable and set aside.Admissibility of Cenvat credit for inputs used in fabrication, repair and consumption in manufacture - inputs becoming part of manufacture by melting or repair consumption - Lawfulness of disallowance of Cenvat credit on MS angles, bars, coils, beams, plates and channels - HELD THAT: - The Tribunal found that the impugned items were used within the factory for fabrication of capital items (for example EOT crane for material handling), periodic repair/lining of the furnace and as bars which get melted and become part of the molten metal; hence such items were legitimately used in manufacture or were consumed in the manufacturing process. On these factual and legal conclusions, the disallowance of Cenvat credit in respect of those items was held to be incorrect. [Paras 26]Disallowance of Cenvat credit in respect of the specified items is set aside; credit is allowable.Penalty invalidity where substantive demand is unsustainable - consequential relief upon setting aside demand - Sustainability of penalties imposed consequent to the confirmed demands - HELD THAT: - Having set aside the substantive demands founded on estimation and having allowed the Cenvat credit, the Tribunal also held that the penalties imposed under the rules and statute were not sustainable. The penalties were set aside as consequential relief in view of the primary findings on demand and credit. [Paras 27]All penalties imposed are set aside.Final Conclusion: The appeals are allowed: the Tribunal set aside the demand based on production estimates and clandestine removals, allowed contested Cenvat credit on items used in fabrication/repair/consumption, and quashed the consequential penalties for the tax periods 2004-05 to 2007-08; appeals disposed with consequential benefits in accordance with law.

2023 (11) TMI 1268 - ITAT CUTTACK Income Tax

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Appeal Dismissed Due to 1253-Day Delay; Vakalatnama Did Not Authorize Advocate to File Condonation Application.
The ITAT dismissed the assessee's appeal against the CIT(Exemptions), Hyderabad's order dated 20.9.2019 for the assessment year 2020-2021, due to a 1253-day delay. The assessee's condonation application, citing administrative changes, the COVID-19 pandemic, and renovation dislocations, was invalidated as the Vakalatnama did not authorize the advocate to file it. Consequently, the appeal was unadmitted and dismissed on 28/11/2023.

2023 (11) TMI 1260 - SC Order Money Laundering

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Withdrawal of Special Leave Petition accepted after reservations on maintainability; challenge terminated without merits adjudication.
The Supreme Court noted reservations about entertaining the Special Leave Petition, after which the petitioner sought permission to withdraw it. Permission was granted, and the petition was dismissed as withdrawn. The order records no adjudication on the merits and reflects only the procedural termination of the challenge at the petitioner's request.

2023 (11) TMI 1254 - SC Order Income Tax

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Mandatory prior approval under Section 153D must reflect application of mind; mechanical approval can vitiate search assessments.
Prior approval of the superior officer under Section 153D is a mandatory safeguard before assessment or reassessment orders made after a search, and the approval must reflect application of mind rather than mechanical endorsement. The text states that the ITAT treated this requirement as essential and found that the Additional CIT granted approval mechanically, without proper consideration, which vitiated the assessment orders. The Supreme Court declined to interfere and dismissed the Special Leave Petition, leaving that legal position undisturbed.

2023 (11) TMI 1251 - MADRAS HIGH COURT Money Laundering

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PMLA authorities cannot prosecute on notional basis without registered scheduled offence with jurisdictional police
The HC granted interim stay of summons issued to District Collectors in money laundering proceedings. The court held that PMLA authorities cannot prosecute on notional basis or assumption that scheduled offence was committed unless registered with jurisdictional police and pending enquiry/trial. Following SC precedent in Vijay Madanlal Choudhary, the court ruled that proceeds of crime under Section 2(1)(u) PMLA must exist before authorities can initiate prosecution. Mere existence of undisclosed income cannot establish proceeds of crime unless property derived from criminal activity relating to scheduled offence. The court found the enquiry contemplated by impugned summons exceeded respondent's jurisdiction, being merely an attempt to investigate possibility of identifying proceeds of crime from unregistered criminal activity.

Offence of money-laundering - proceeds of crime - inquiry under Section 50(2) of the PMLA, 2002 - obligation under Section 66(2) of the PMLA, 2002 to share information - jurisdiction to investigate without State consent - federalism and separation of powers - prima facie maintainability of writ by the State - fishing expeditionPrima facie maintainability of writ by the State - jurisdiction to investigate without State consent - The writ petitions by the State Government and the District Collectors are prima facie maintainable to challenge the summons and the respondent's exercise of powers. - HELD THAT: - The Court observed that the State, by alleging invasion of its domain and usurpation of powers of State instrumentalities, suffers legal injury and is entitled to be heard. A distinction was noted between a State suing as an individual aggrieved person and a State challenging encroachment on federal competence; on the admitted facts and for the limited purpose of interim relief the Court is prima facie satisfied of maintainability. The District Collectors, being directly summoned, also possess locus to contest the process. This prima facie view is confined to deciding interim relief and is subject to final adjudication after pleadings. [Paras 8]Prima facie maintainable; State and District Collectors entitled to contest the impugned summons for interim relief.Offence of money-laundering - proceeds of crime - inquiry under Section 50(2) of the PMLA, 2002 - obligation under Section 66(2) of the PMLA, 2002 to share information - fishing expedition - Whether the impugned summons issued under Section 50(2) falls within the jurisdiction of the respondent under the PMLA or amounts to an impermissible attempt to investigate predicate offences and to 'fish out' proceeds of crime without their prior identification. - HELD THAT: - Relying on the Supreme Court's exposition that prosecution under Section 3 of the PMLA requires existence of 'proceeds of crime' as defined and that authorities under the Act cannot proceed on a notional basis, the Court examined the nature and annexure to the summons. The annexure sought detailed particulars of quarry sites and administrative records to ascertain whether scheduled offences had been committed. The Court found that the respondent's enquiry, as manifested by the summons, is directed at discovering whether a scheduled offence exists (and thereby discovering proceeds), rather than enquiring into identified proceeds of crime. In that manner the summons prima facie seeks to enable a fishing expedition to detect commission of scheduled offences and infer proceeds of crime, instead of acting upon established proceeds. The Court noted that if the respondent uncovers material pointing to offences, Section 66(2) requires sharing information with the concerned agency, and only upon existence of scheduled offences could further PMLA action be justified. [Paras 11, 14, 17]Prima facie, the summons exceed the respondent's jurisdiction under the PMLA by attempting to investigate predicate offences and identify proceeds of crime without prior establishment of proceeds; the enquiry appears to be a fishing expedition.Inquiry under Section 50(2) of the PMLA, 2002 - interim stay - Whether interim relief in the form of stay of operation of the impugned summons is warranted. - HELD THAT: - Having found a prima facie case that the summons seek an impermissible investigation into predicate offences and that balance of convenience favors the petitioners, the Court concluded that interim protection is appropriate. The Court clarified that the interim observations are for grant of relief only and that final disposal on merits will be uninfluenced by these interim conclusions. The parties were directed to complete pleadings and return for final hearing. [Paras 17, 18, 20]Interim stay granted on operation of the impugned summons in W.P. Nos. 33459, 33460, 33461, 33462 and 33467 of 2023; matter posted for further hearing.Final Conclusion: For the limited purpose of interim relief the High Court (Madras) prima facie held the writ petitions maintainable, concluded that the summons under Section 50(2) as framed appear to exceed the respondent's PMLA jurisdiction by seeking to investigate predicate offences and identify proceeds of crime without prior establishment of proceeds (thus amounting to a fishing expedition), and accordingly granted interim stay of operation of the impugned summons in the five specified writ petitions while directing completion of pleadings and listing the matters for final hearing.

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