Issues: Whether deletion of the addition under Section 69A, based on uncorroborated search and survey material and a retracted statement, gave rise to a substantial question of law.

Analysis: Although technical rules of evidence do not strictly govern income-tax proceedings, additions must rest on relevant material and cannot be founded on suspicion, conjecture or surmise. The underlying evidentiary principles and principles of natural justice require corroborative evidence for an adverse inference. The material obtained in the brokers' search related to a period preceding the relevant financial year; the prompt retraction of the survey statement was not displaced by independent evidence; and the alleged cash-loan entries were unsupported by statements of the identified brokers or other material establishing investment or interest income. The factual finding that the documentary material did not corroborate the alleged unexplained money was neither irregular nor perverse.

Conclusion: No substantial question of law arose, and the deletion of the Section 69A addition was sustained.

Issues: Whether the Tribunal's deletion of the addition under Section 68 in respect of unlisted-share sale proceeds gave rise to a substantial question of law under Section 260A.

Analysis: Section 260A permits interference only on a substantial question of law and does not authorise reassessment of evidence or substitution of a plausible factual view reached by the Tribunal. A factual finding is open to interference only where it is perverse, based on no evidence, ignores material evidence, or rests on inadmissible material. The Tribunal evaluated the disclosed investments, sale and purchase documents, bank records, purchaser confirmations, financial statements, income-tax returns and replies to notices under Section 133(6). The Revenue did not establish that this material was unreliable or that the sale proceeds represented the respondent's undisclosed money. Although surrounding circumstances and the test of human probabilities are relevant to a Section 68 inquiry, they cannot sustain an addition founded only on suspicion or general allegations. Earlier acceptance of investments was not treated as an estoppel, but as relevant evidentiary material along with the entire record.

Conclusion: No substantial question of law arose; the deletion of the Section 68 addition stood affirmed, in favour of the assessee.

Issues: Whether refund of customs duty paid twice can be denied for non-production of the first challan, where the challan was not generated because of a system failure, and whether statutory interest is payable on the delayed refund.

Analysis: Section 27 of the Customs Act, 1962 and Public Notice No. 62/2012 treat a double or multiple duty payment, after acceptance in the system, as a deposit refundable through the prescribed procedure. The Public Notice requires the importer to furnish banking and transaction documents, while verification through PAO/e-PAO and the ICEGATE challan inquiry is assigned to departmental officers. The documentary record established both payments against the same bill of entry and confirmed that the first payment was never reversed. Requiring production of a challan that the ICEGATE system itself failed to generate imposed an impossible condition and was not a requirement under the Public Notice. Interest on an eligible refund is governed by Section 27A of the Customs Act, 1962 where payment is not made within the statutory period.

Conclusion: The importer is entitled to refund of the unadjusted first payment of customs duty with applicable statutory interest.

Issues: (i) Whether the monitoring committee was a person aggrieved entitled to maintain the appeal and whether the appellate forum could consider the Supreme Court judgment not placed before the adjudicating authority; (ii) What legal effect the Supreme Court judgment had on the landholding special-purpose company, its leasehold land and the project; (iii) Whether a distinct subsisting default existed on the admission date to support a separate corporate insolvency resolution process and whether the earlier threshold ruling precluded that inquiry; and (iv) Whether continuing that process was compatible with the restored resolution plan and the Code.

Issue (i): Whether the monitoring committee was a person aggrieved entitled to maintain the appeal and whether the appellate forum could consider the Supreme Court judgment not placed before the adjudicating authority.

Analysis: Section 61(1) of the Insolvency and Bankruptcy Code, 2016 permits an appeal by any person whose legal rights or interests are prejudicially affected. The monitoring committee was constituted to supervise and implement the restored plan, while admission of the landholding entity to insolvency placed the project land under the interim resolution professional and the statutory moratorium. The binding Supreme Court judgment pre-dated the admission order and directly concerned the same project. Its binding force under Articles 141 and 144 of the Constitution of India required the appellate forum to give effect to it, notwithstanding that it had not been placed before the adjudicating authority.

Conclusion: The monitoring committee had standing as a person aggrieved, and the binding Supreme Court judgment was required to be considered.

Issue (ii): What legal effect the Supreme Court judgment had on the landholding special-purpose company, its leasehold land and the project.

Analysis: The Supreme Court had lifted the corporate veil on the finding that the holding company was the real driving force behind development and the landholding special-purpose company was only a front. The restored resolution plan was directed to proceed for completion of the project from the stipulated date. Lifting the corporate veil required the holding company and landholding entity to be treated as one economic entity for project resolution, thereby bringing the leasehold land and project within the restored plan.

Conclusion: The leasehold land and project stood comprehended within, and were required to be dealt with under, the restored resolution plan.

Issue (iii): Whether a distinct subsisting default existed on the admission date to support a separate corporate insolvency resolution process and whether the earlier threshold ruling precluded that inquiry.

Analysis: Admission under Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 requires a financial debt and a default; under Section 3(12), the debt must be due and payable and remain unpaid. Section 31(1) makes an approved resolution plan binding on creditors and stakeholders. The allottees' claims arose from the same project and were addressed through the restored plan, which provided for project completion and delivery of units. Following corporate veil lifting, no separate claim against the landholding entity survived independently of the claim resolved under that plan. The earlier ruling addressed only the threshold condition for filing under the second proviso to Section 7(1) and expressly left merits, including subsisting default at admission, open.

Conclusion: No distinct debt of the landholding entity was due and payable on the admission date, and thus no separate default existed to found another insolvency process; the earlier threshold ruling did not bar that determination.

Issue (iv): Whether continuing that process was compatible with the restored resolution plan and the Code.

Analysis: Admission triggered the moratorium under Section 14(1)(b), vested management and control of the landholding entity in the interim resolution professional, and would lead to an independent resolution process over the same land. This conflicted directly with the binding direction for implementation of the restored plan over that very land. Enforcement of the restored plan and remedies for non-compliance lie before the adjudicating authority in the existing insolvency process under Section 60(5), rather than through a parallel process that fragments resolution of the same real-estate project.

Conclusion: Continuation of the separate insolvency process was incompatible with the restored resolution plan and could not be permitted.

Final Conclusion: The project, its leasehold land, and the allottees' claims are to be resolved under the restored plan as a consolidated insolvency resolution; remedies of allottees lie in enforcement of that plan within the existing insolvency process.

Ratio Decidendi: Where a binding restored resolution plan, after lifting the corporate veil, comprehends the project land and allottee claims, no distinct default remains for a separate insolvency process against the landholding entity, and a parallel process that impedes implementation of the plan is impermissible.

Issues: Whether the alleged personal land transactions of the company's directors could prima facie be attributed to the company for proceedings concerning money-laundering.

Analysis: The order noted that liability of a company requires material connecting the company itself with the alleged activity under Section 3 of the Prevention of Money-laundering Act, 2002. Personal acts of directors are not automatically attributable to the company merely by reason of their office. Further consideration was found necessary on whether the requisite evidentiary connection existed on the stated facts.

Outcome: Notice was issued and the impugned order and consequential proceedings were stayed, insofar as they concern the petitioner, until the next hearing. No final adjudication has taken place.

Issues: (i) Whether the extended-period service-tax demand was sustainable where the assessee failed to pay tax after amendment of the exemption notification due to claimed ignorance of that amendment; (ii) Whether an equal penalty under section 78 was sustainable for the post-2015 period despite the claimed absence of intent to evade tax.

Issue (i): Whether the extended-period service-tax demand was sustainable where the assessee failed to pay tax after amendment of the exemption notification due to claimed ignorance of that amendment.

Analysis: The services were exempt only up to the relevant pre-amendment period, and the lower authorities had already granted the available exemption and abatement while confining the demand to taxable services. Under the proviso to section 73(1) of the Finance Act, 1994, ignorance of a change in an exemption notification could not excuse non-payment. A registered service provider claiming an exemption was required to keep track of amendments affecting its availability.

Conclusion: The extended-period service-tax demand was sustainable; against the assessee.

Issue (ii): Whether an equal penalty under section 78 was sustainable for the post-2015 period despite the claimed absence of intent to evade tax.

Analysis: The reasonable-cause protection under section 80 of the Finance Act, 1994 was unavailable for the disputed post-2015 period. The claimed ignorance of the amended exemption could not displace the statutory consequence under section 78.

Conclusion: The equal penalty under section 78 was mandatory and sustainable; against the assessee.

Final Conclusion: The surviving service-tax liability, interest and equal penalty, after giving effect to available exemption and abatement, remain enforceable.

Ratio Decidendi: Ignorance of an amendment to an exemption notification does not excuse non-payment of service tax or preclude the extended period and statutory penalty where the reasonable-cause protection is unavailable.

Issues: Whether additional documentary evidence may be brought on record after closure of the complainant's evidence under Section 311 of the Code of Criminal Procedure, 1973.

Analysis: Section 311 of the Code of Criminal Procedure, 1973 confers broad power to permit evidence at any stage where it is essential to a just decision. The controlling consideration is the materiality and necessity of the evidence, rather than the stage of the proceedings. The proposed invoice and related payment records bore a direct nexus to the payment relied upon in the defence and were relevant to explain whether that payment related to the liability in issue. Producing such material to explain a fact arising from defence evidence is distinct from impermissibly filling a lacuna in the original case. Closure of evidence does not by itself bar material evidence, particularly where the opposing party is afforded an opportunity to contest it.

Conclusion: The additional documents were permitted to be placed on record, with full opportunity to the respondent to contest their admissibility, authenticity and evidentiary value.

Outcome: Applications for condonation of delay and the special leave petition were dismissed.

Issues: Whether the landowner's unilateral revocation of the joint development agreement and power of attorney warranted exclusion of the subject land from the corporate insolvency resolution process, and whether interim preservation of the land was warranted pending disposal of the appeal.

Analysis: The joint development agreement and power of attorney prima facie created irrevocable and non-determinable development rights in favour of the corporate debtor. The contractual period for construction was reckoned from the approvals and the subsequent agreement, and had not expired when termination was asserted. The purported termination was not accepted; the alleged no-objection communication was conditional upon repayment of the proportionate project loan and amounted to a counter-offer. Existing mortgage rights and possible third-party rights could not be conclusively ruled out at this stage.

Outcome: The landowner was permitted to intervene, exclusion of the subject land from the corporate insolvency resolution process was not granted at this stage, and the parties were directed to maintain status quo pending hearing of the appeals.

Outcome: The special leave petition was disposed of as premature, with liberty to seek adjournment before the Adjudicating Authority.

Outcome: Special Leave Petitions dismissed and pending applications disposed of.

Issues: Whether the applicant should be granted regular bail pending trial for alleged fraudulent availment and utilisation of input tax credit.

Analysis: The charge-sheet had been filed, the applicant had remained in custody since 20.07.2026, and the sole criminal antecedent was from 2018. The alleged offences under Sections 132(1)(b) and 132(1)(c) of the Central Goods and Services Tax Act, 2017 were noted to be non-bailable but compoundable. No opinion on the merits of the prosecution case was expressed.

Outcome: Regular bail was granted on execution of the prescribed bond and compliance with the stipulated conditions.

Issues: (i) Whether a shareholder and personal guarantor, who was not a party to the proceedings relating to implementation of the approved resolution plan, had standing to seek recall; and (ii) Whether excluding the delay in handing over possession from the implementation period and extending the time for balance payment constituted an impermissible modification of the approved resolution plan warranting recall.

Issue (i): Whether a shareholder and personal guarantor, who was not a party to the proceedings relating to implementation of the approved resolution plan, had standing to seek recall.

Analysis: Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 was invoked for recall. The applicant was neither a financial creditor nor an operational creditor, was not impleaded in the underlying implementation proceedings, and had not been permitted to intervene. The procedural rights of the suspended management remain subservient to the objectives of the insolvency process after the Committee of Creditors has exercised its commercial wisdom. No legal injury from the extension was established.

Conclusion: The applicant lacked standing to seek recall of the order concerning implementation of the resolution plan.

Issue (ii): Whether excluding the delay in handing over possession from the implementation period and extending the time for balance payment constituted an impermissible modification of the approved resolution plan warranting recall.

Analysis: The successful resolution applicant had made the entire upfront payment, but possession of the subject asset had not been handed over because of continued unauthorised occupation. Handing over possession upon receipt of the upfront amount was an obligation arising under the approved plan. An exclusion of time caused by failure to hand over possession was consistent with implementation of the plan. Extension or exclusion of time for performance of financial obligations in these circumstances does not alter the substantive terms of an approved resolution plan.

Conclusion: The exclusion of delay and consequential extension did not amount to modification of the approved resolution plan and did not warrant recall.

Final Conclusion: The approved resolution plan remains enforceable with appropriate exclusion of time for delay in handing over possession not attributable to the successful resolution applicant.

Ratio Decidendi: Extension or exclusion of time for performance under an approved resolution plan, where implementation is impeded by failure to hand over possession despite timely upfront payment by the successful resolution applicant, does not constitute modification of the plan.

Issues: (i) Whether service tax was chargeable on the termination amount claimed upon premature cancellation of the lease; (ii) Whether service tax on lease rent for April 2013 to August 2014 was to exclude August 2014 and account for the small-service-provider exemption and tax already paid; (iii) Whether the service tax demand based on monthly rent of Rs. 2.90 lakhs received from the subsequent tenant was sustainable.

Issue (i): Whether service tax was chargeable on the termination amount claimed upon premature cancellation of the lease.

Analysis: The termination claim was not received under the eventual compromise. The amount stipulated upon premature vacation was compensatory for reneging on the lease and could not retain the character of rent after the premises had been vacated.

Conclusion: The service tax demand on the termination claim was set aside, in favour of the assessee.

Issue (ii): Whether service tax on lease rent for April 2013 to August 2014 was to exclude August 2014 and account for the small-service-provider exemption and tax already paid.

Analysis: There was no evidence of rent having been paid for August 2014 after vacation of the premises. The small-service-provider exemption, if available, could not be denied, and the tax liability required recomputation after giving credit for tax already deposited.

Conclusion: The demand was partly sustained only after excluding rent for August 2014, allowing the applicable exemption, and appropriating tax already paid, in favour of the assessee.

Issue (iii): Whether the service tax demand based on monthly rent of Rs. 2.90 lakhs received from the subsequent tenant was sustainable.

Analysis: The agreement recording monthly rent of Rs. 2.90 lakhs was corroborated by the tenant's confirmation and was found more credible than the later agreement recording substantially lower rent.

Conclusion: The service tax demand computed on monthly rent of Rs. 2.90 lakhs was upheld, against the assessee.

Final Conclusion: Unreceived compensatory termination amounts were excluded from the taxable value, while the liability on actual lease rent was confined to a recomputed amount and the higher evidenced rent from the subsequent tenancy remained taxable.

Ratio Decidendi: A compensatory amount stipulated for breach of a lease, which is not received and is not rent for continued occupation, is not liable to service tax as consideration for renting.

Issues: (i) Whether taxability and classification are determined by the physical form of goods at the time of sale or by their later end product or end use; (ii) Whether GRD Powder and GRD Mix are classifiable as non-alcoholic drinks and beverages or under the residuary entry.

Issue (i): Whether taxability and classification are determined by the physical form of goods at the time of sale or by their later end product or end use.

Analysis: Taxing statutes require strict construction, and the taxable event is the sale or supply of goods in the form in which they are supplied. A consumer's subsequent choice to mix a powder with milk or water, or to use it in a solid preparation, does not alter the taxable identity of the goods. Common-parlance, functional-character, or basic-nature tests cannot be used to import an end-use criterion where the statutory entry classifies goods by their physical form.

Conclusion: Tax liability and classification are determined by the form in which the goods are sold, not by their possible later end use.

Issue (ii): Whether GRD Powder and GRD Mix are classifiable as non-alcoholic drinks and beverages or under the residuary entry.

Analysis: Entry 20(ii) associates beverages with syrups, cordials, distilled juices, ark and essences, which constitute a class of liquid goods. Applying ejusdem generis, the expression "beverages" takes its meaning from those associated liquid preparations. The expression "including" does not extend the entry to goods of a materially different physical form, and the entry contains no deeming inclusion of powders, concentrates or biscuits used to prepare drinks.

Conclusion: GRD Powder and GRD Mix, being sold as powder and biscuit, are not non-alcoholic drinks or beverages and fall under the residuary entry.

Final Conclusion: Products sold in powder or biscuit form remain subject to the residuary classification notwithstanding their possible subsequent preparation as drinks.

Ratio Decidendi: For fiscal classification, the taxable identity of goods is determined by their physical form at the time of sale, and a later consumer end use cannot convert a powder or solid product into a beverage where the specific entry contextually covers liquid goods.

Issues: (i) Whether acquittal in a separate prosecution for criminal breach of trust and cheating extinguishes the independently acknowledged legally enforceable debt supporting the cheque-dishonour prosecution; (ii) Whether the drawer rebutted the statutory presumptions by a probable defence based on an uncorroborated claim that the cheque leaf was snatched; (iii) Whether the statutory demand-notice requirements were met despite the drawer's plea of non-service; and (iv) Whether the concurrent findings warranted interference in revisional jurisdiction.

Issue (i): Whether acquittal in a separate prosecution for criminal breach of trust and cheating extinguishes the independently acknowledged legally enforceable debt supporting the cheque-dishonour prosecution.

Analysis: A prosecution for cheque dishonour is founded upon the independently enforceable monetary liability underlying the cheque. The written declaration and notarized agreement acknowledging liability supplied an independent basis for the debt. An acquittal in the separate criminal prosecution because of deficiencies in proof of its distinct penal ingredients did not negate that written acknowledgment or the monetary liability.

Conclusion: The separate acquittal did not extinguish the legally enforceable debt underlying the cheque. The issue is decided against the petitioner.

Issue (ii): Whether the drawer rebutted the statutory presumptions by a probable defence based on an uncorroborated claim that the cheque leaf was snatched.

Analysis: Upon proof of drawing, presentation and dishonour of the cheque, the statutory presumption of consideration and liability arose. Although the reverse onus could be discharged on a preponderance of probabilities, a bare statement under Section 313, unsupported by defence evidence, a contemporaneous police report or intimation to the bank, did not amount to a probable defence.

Conclusion: The statutory presumptions remained unrebutted, as the snatched-cheque defence was not probable. The issue is decided against the petitioner.

Issue (iii): Whether the statutory demand-notice requirements were met despite the drawer's plea of non-service.

Analysis: Dispatch of the notice by registered post to the drawer's admitted correct address attracted the presumption of due service. No reliable material established incarceration at the relevant delivery time. Further, receipt of court summons with the complaint afforded an opportunity to pay the cheque amount within fifteen days; failure to do so precluded reliance on an alleged defect in notice service.

Conclusion: The statutory notice requirements were satisfied. The issue is decided against the petitioner.

Issue (iv): Whether the concurrent findings warranted interference in revisional jurisdiction.

Analysis: Revisional jurisdiction is not a second appellate review and is exercisable only where concurrent findings are perverse, unsupported by evidence, or affected by gross illegality or procedural miscarriage. The findings rested on the cheque, dishonour memo, notice materials, written acknowledgment and the unrebutted statutory presumptions, without any demonstrated patent perversity or legal infirmity.

Conclusion: No ground for revisional interference was established. The issue is decided against the petitioner.

Final Conclusion: The independently acknowledged liability, unrebutted statutory presumptions and valid notice process sustain the conviction and sentence for dishonour of cheque.

Issues: (i) Whether dates appearing in Forms GST DRC-01 and GST DRC-07 govern limitation for issuance of show cause notices and adjudication orders under Sections 74(2) and 74(10) of the Central Goods and Services Tax Act, 2017; (ii) Whether challenges to the invocation of Section 74 and the evidentiary basis of the demand should be entertained in writ jurisdiction despite an available statutory appeal.

Issue (i): Whether dates appearing in Forms GST DRC-01 and GST DRC-07 govern limitation for issuance of show cause notices and adjudication orders under Sections 74(2) and 74(10) of the Central Goods and Services Tax Act, 2017.

Analysis: Section 74(2) requires issuance of the substantive notice under Section 74(1), while Section 74(10) requires issuance of the substantive order under Section 74(9) within the stipulated periods. Rule 142(1)(a) treats Form GST DRC-01 as an electronic summary accompanying the notice, and Rule 142(5) treats Form GST DRC-07 as an electronic summary of the order. The substantive notices and orders bore dates preceding the asserted limitation cut-off dates; the later dates on the electronic summaries could not replace or alter the dates of the substantive instruments.

Conclusion: Forms GST DRC-01 and GST DRC-07 do not determine limitation under Sections 74(2) and 74(10), and their later dates do not render the substantive notices or orders time-barred.

Issue (ii): Whether challenges to the invocation of Section 74 and the evidentiary basis of the demand should be entertained in writ jurisdiction despite an available statutory appeal.

Analysis: The objections concerning fraud, wilful misstatement, suppression, knowledge or collusion, admissibility of input tax credit, computation, penalty, and sufficiency of departmental material require factual examination and appreciation of evidence. Section 107 provides an efficacious appellate remedy competent to address those questions of law and fact. No denial of hearing or patent jurisdictional defect was established, and the limitation objection did not justify bypassing that remedy.

Conclusion: The merits challenges are not to be entertained in writ jurisdiction and may be urged before the statutory Appellate Authority under Section 107.

Final Conclusion: Timely substantive notices and adjudication orders are not invalidated by subsequent electronic summaries, and factual challenges to the demand must be pursued through the statutory appellate mechanism.

Ratio Decidendi: For limitation under Section 74 of the Central Goods and Services Tax Act, 2017, the relevant dates are those of the substantive show cause notice and adjudication order; Forms GST DRC-01 and GST DRC-07 are consequential electronic summaries and do not substitute those instruments.

Issues: (i) Whether the computer printouts and private or third-party records were admissible and sufficiently linked to the assessee to establish clandestine manufacture and under-invoicing; (ii) Whether abnormal electricity consumption and alleged theft of electricity established unaccounted manufacture and clearance; (iii) Whether the alleged clandestine production was sustainable in view of the installed furnace capacity; (iv) Whether statements relied upon for the demand could be admitted without compliance with the prescribed procedure.

Issue (i): Whether the computer printouts and private or third-party records were admissible and sufficiently linked to the assessee to establish clandestine manufacture and under-invoicing.

Analysis: Electronic records require compliance with the safeguards under Section 36B, including the prescribed certification concerning their production and device. The separately captioned computer folder, records not bearing the assessee's name, and documents recovered from dealer premises lacked independent verification linking the transactions to the assessee. There was also no tangible corroboration through raw-material consumption, transport, buyers, financial flow-back, or actual excess production.

Conclusion: The computer printouts and private or third-party records were inadmissible or insufficient to establish clandestine manufacture or under-invoicing, in favour of the assessee.

Issue (ii): Whether abnormal electricity consumption and alleged theft of electricity established unaccounted manufacture and clearance.

Analysis: Electricity consumption may vary because of operational and technical factors. Without a scientifically established plant-specific consumption norm and independent evidence linking consumption to quantified unaccounted production and clearance, electricity data and an allegation of electricity theft could not substantiate excise evasion.

Conclusion: Abnormal electricity consumption and alleged theft of electricity did not establish unaccounted manufacture or clearance, in favour of the assessee.

Issue (iii): Whether the alleged clandestine production was sustainable in view of the installed furnace capacity.

Analysis: A charge of clandestine manufacture must be tested against the physical capacity of the plant. The alleged production was not shown to be achievable even with both operational furnaces, and no undisclosed manufacturing facility was established.

Conclusion: The alleged clandestine production was not sustainable in view of the unaddressed capacity constraint, in favour of the assessee.

Issue (iv): Whether statements relied upon for the demand could be admitted without compliance with the prescribed procedure.

Analysis: Statements recorded during investigation cannot prove the truth of their contents unless the mandatory procedure under Section 9D is followed. The required statutory exercise was not undertaken, and the statements had not been tested in the prescribed manner.

Conclusion: The untested statements could not be read in evidence against the assessee, in favour of the assessee.

Final Conclusion: The cumulative absence of admissible electronic evidence, independently corroborated material, capacity-based proof, and legally usable statements left no sustainable evidentiary basis for excise liability, interest, or penalty.

Ratio Decidendi: A charge of clandestine manufacture, clearance, or under-invoicing cannot rest on uncertified electronic records, unverified private or third-party documents, untested statements, or electricity consumption alone; it requires legally admissible and independently corroborated evidence.

Issues: (i) Whether reassessment initiation based on an alleged deduction of health and education cess was valid when no such deduction had been claimed; and (ii) Whether interest on borrowings used for investment in a subsidiary could justify reassessment under Section 36(1)(iii) of the Income-tax Act, 1961.

Issue (i): Whether reassessment initiation based on an alleged deduction of health and education cess was valid when no such deduction had been claimed.

Analysis: The reassessment notice under Section 148A(1) was founded on an audit objection alleging deduction of health and education cess. The record established that no such deduction had been claimed. The material supplied in response to the assessee's request did not disclose verification of this objection before initiation of proceedings. Reassessment action based on an unverified factual premise reflected non-application of mind.

Conclusion: Reassessment based on the alleged deduction of health and education cess was invalid; the issue was decided in favour of the assessee.

Issue (ii): Whether interest on borrowings used for investment in a subsidiary could justify reassessment under Section 36(1)(iii) of the Income-tax Act, 1961.

Analysis: Interest on borrowed funds used for investment in a subsidiary is allowable where the investment is supported by commercial expediency and bears nexus with the business purpose. The business purpose need not be confined to the assessee's own immediate profit-making activity, and the Revenue cannot substitute its commercial judgment for that of a prudent businessman. No distinguishing circumstance was shown to displace the application of this principle to the investment in the subsidiary.

Conclusion: The proposed disallowance of interest on borrowed funds invested in the subsidiary was unsustainable; the issue was decided in favour of the assessee.

Final Conclusion: Neither audit objection furnished a valid legal foundation for reopening the assessment.

Ratio Decidendi: Reassessment cannot be sustained where the audit-objection basis is factually unverified or fails to disclose a legally sustainable disallowance.