Issues: (i) Whether the assessments were invalid for want of separate and valid approval under section 153D of the Income-tax Act, 1961 for each assessment year; (ii) What rate of commission income should be assessed on the alleged accommodation-entry loan transactions.

Issue (i): Whether the assessments were invalid for want of separate and valid approval under section 153D of the Income-tax Act, 1961 for each assessment year.

Analysis: Section 292BC of the Income-tax Act, 1961, inserted by the Finance Act, 2026 with retrospective effect from 01.04.2021, precludes invalidation of approvals on grounds concerning sufficiency of reasons or defects in the form or manner of authentication. The challenge to the common approval did not therefore invalidate the assessments.

Conclusion: The assessments were valid; the issue is decided against the assessee.

Issue (ii): What rate of commission income should be assessed on the alleged accommodation-entry loan transactions.

Analysis: The differing rates adopted by the Assessing Officer and the uniform 3.6% rate adopted by the appellate authority lacked discussion of relevant market comparables in the accommodation-entry segment. Since the assessee had sought complete deletion rather than offered a commission component, neither of the prior estimations warranted acceptance in full. Exercising jurisdiction under section 254(1) of the Income-tax Act, 1961, a uniform rate was considered appropriate on the peculiar facts without precedential effect.

Conclusion: Commission income on the impugned accommodation entries shall be assessed uniformly at 0.15%; the issue is decided in favour of the assessee.

Final Conclusion: The statutory challenge to the assessments fails, but the taxable commission attributable to the alleged accommodation entries is confined to a uniform 0.15% rate.

Ratio Decidendi: Where section 292BC applies retrospectively, an assessment cannot be invalidated merely because approval under section 153D is alleged to be deficient in reasons, form, or authentication.

Issues: (i) Whether the penalty for under-reporting of income in consequence of misreporting under Section 270A(9) was sustainable where the notice did not specify the applicable charge and the assessment was framed under Section 143(3) following a search; (ii) Whether penalty under Section 271AAD could be levied for omission of professional receipts represented by cash found during search.

Issue (i): Whether the penalty for under-reporting of income in consequence of misreporting under Section 270A(9) was sustainable where the notice did not specify the applicable charge and the assessment was framed under Section 143(3) following a search.

Analysis: Section 270A distinguishes under-reporting from under-reporting resulting from misreporting, while Section 270A(9) identifies distinct categories of misreporting. A notice under Section 274 must therefore identify the precise charge, including the applicable clause of Section 270A(9), so that an effective opportunity to respond is afforded. The undifferentiated notice and assessment-recorded initiation did not identify the relevant statutory limb, demonstrating non-application of mind and violating principles of natural justice.

Analysis: The assessment for the year preceding the search was framed under Section 143(3) on a notice under Section 143(2), without recourse to the procedure under Sections 148 and 149. Its validity could be challenged in the collateral penalty proceeding. Further, the additional professional income disclosed after search was accepted without further addition; its admission and tax payment, without more, did not establish misreporting attracting Section 270A(9).

Conclusion: The penalty under Section 270A(9) was invalid and was directed to be deleted, in favour of the assessee.

Issue (ii): Whether penalty under Section 271AAD could be levied for omission of professional receipts represented by cash found during search.

Analysis: Section 271AAD addresses false entries and omissions in books relevant to computing total income with the object of evading tax. Its legislative purpose is to curb fraudulent documentation and fake invoices, particularly those used to claim inadmissible input tax credit. Unaccounted cash explained and offered as professional income did not fall within that statutory mischief. Independently, the penalty lacked a valid assessment foundation because the assessment itself was jurisdictionally defective.

Conclusion: The penalty under Section 271AAD was unsustainable and was directed to be deleted, in favour of the assessee.

Final Conclusion: The penalty actions lacked both a valid jurisdictional foundation and the statutory conditions required for their imposition.

Ratio Decidendi: A penalty for misreporting under Section 270A(9) cannot rest on a notice that fails to specify the precise statutory charge, since such omission deprives the assessee of a meaningful opportunity to answer the allegation.

Issues: (i) Whether the admission order was vitiated by denial of natural justice through inadequate service of the insolvency petition; (ii) Whether the application under Section 7 was barred by limitation; (iii) Whether a bona fide defence to the existence of financial debt and default was disclosed.

Issue (i): Whether the admission order was vitiated by denial of natural justice through inadequate service of the insolvency petition.

Analysis: Repeated notices were directed through speed post and e-mail over several hearings and months, with further opportunities granted after the initial postal failure. The registered office had admittedly remained closed for years, notwithstanding the continuing obligation to maintain an office capable of receiving communications. Service by e-mail was independently permissible, and no material established failure of that mode or mala fide avoidance of service. The opportunities afforded satisfied the requirement of reasonable opportunity before proceeding ex parte.

Conclusion: The admission order was not vitiated by violation of the principles of natural justice; this issue was decided against the Appellant.

Issue (ii): Whether the application under Section 7 was barred by limitation.

Analysis: The corporate guarantee was payable on demand. The guarantee expressly provided that acknowledgments by the principal borrower would operate as acknowledgments by the corporate guarantor. Written settlement proposals made before expiry of the applicable periods acknowledged the outstanding liability and, under Section 18 of the Limitation Act, successively renewed limitation. The Section 7 application was filed within the renewed limitation period. The absence of established service of the earlier guarantee-invocation notice did not alter that result.

Conclusion: The Section 7 application was within limitation; this issue was decided against the Appellant.

Issue (iii): Whether a bona fide defence to the existence of financial debt and default was disclosed.

Analysis: The sanction and disbursement of the loan, execution of the corporate guarantee, NPA classification, and subsequent written acknowledgments of liability were undisputed. No case of discharge, revocation or unenforceability of the guarantee, or inaccuracy of the claimed amount was raised. The material therefore established financial debt and default for the limited inquiry required under Section 7.

Conclusion: No bona fide defence to financial debt and default was disclosed; this issue was decided against the Appellant.

Final Conclusion: The initiation of the corporate insolvency resolution process on the established debt and default remains legally sustainable.

Ratio Decidendi: A contractual stipulation making a principal borrower's written acknowledgment binding upon a corporate guarantor permits that acknowledgment to extend limitation against the guarantor, provided it is made within the subsisting limitation period.

Issues: Whether an employee can be denied credit for tax deducted at source from salary merely because the employer-deductor failed to deposit it, and subjected to a consequential demand and recovery from refund.

Analysis: Under Section 143(1) of the Income-tax Act, 1961, the intimation disallowed credit for tax deducted from the assessee's salary because the deductor had not deposited it. The deductor's failure to remit the deducted tax could not be attributed to the assessee or deprive the assessee of the legitimate credit for such deduction. The consequential recovery from the assessee's refund lacked legal basis.

Conclusion: Credit for the tax deducted at source by the employer must be granted notwithstanding the employer's non-deposit of that tax; the related demand and recovery from refund are illegal, and the recovered amount is refundable with applicable interest.

Issues: Whether the revenue may withhold the entire determined refund when only a smaller outstanding demand is proposed for adjustment.

Analysis: Under Section 245 of the Income-tax Act, 1961, where adjustment of a refund against an outstanding demand is proposed, only the amount proposed to be adjusted may be retained. The balance of the refund must be remitted immediately, while the parties retain their right to contest whether the proposed adjustment itself is legally sustainable.

Conclusion: The assessee is entitled to release of the refund amount exceeding the proposed adjustment, in favour of the assessee.

Ratio Decidendi: A proposed adjustment of refund against an outstanding demand permits retention only to the extent of the proposed adjustment and not of the entire refund.

Issues: Whether the Tribunal's decision, founded on the erroneous premise that the assessee had pursued the Dispute Resolution Panel route, could be sustained.

Analysis: The Tribunal's reasoning proceeded throughout on the assumption that the assessee had pursued proceedings before the Dispute Resolution Panel, although the assessee had instead elected the appellate route before the Commissioner of Income Tax (Appeals). A decision based on such a materially incorrect factual foundation is perverse. No adjudication was made on the parties' contentions concerning limitation or any other assessment issue.

Conclusion: The Tribunal's findings were perverse and could not be sustained; all issues, including limitation, remain open for fresh adjudication in accordance with law.

Outcome: The departmental appeal was dismissed, with provision for revival after final disposal of the connected Supreme Court appeal.

Issues: (i) Whether fee-based payment and settlement services rendered by a charitable entity attracted the proviso to Section 2(15) and disentitled it to exemption under Sections 11 and 12; (ii) Whether the payment-system activities resulted in application of income for the benefit of specified persons under Section 13(1)(c)(ii) read with Section 13(3).

Issue (i): Whether fee-based payment and settlement services rendered by a charitable entity attracted the proviso to Section 2(15) and disentitled it to exemption under Sections 11 and 12.

Analysis: The entity was incorporated on a non-profit basis to establish and operate secure, efficient and cost-effective national payment and clearing infrastructure under the regulatory framework of the Payment and Settlement Systems Act, 2007. Its surplus could not be distributed to members and was required to be applied towards its objects. The fees collected from participating banks funded technology-intensive operations and had been reduced over time. The payment-system infrastructure was operated for improving clearing mechanisms, expanding secure electronic payments and benefiting the public at large, rather than as a commercial venture. On identical facts for earlier years, the primary and dominant object was found to be charitable; charging fees and generating surplus incidental to that object did not alter that character. No distinguishing facts were shown for the years in question.

Conclusion: The proviso to Section 2(15) did not apply, and the assessee remained entitled to exemption under Sections 11 and 12. The conclusion is in favour of the assessee.

Issue (ii): Whether the payment-system activities resulted in application of income for the benefit of specified persons under Section 13(1)(c)(ii) read with Section 13(3).

Analysis: Payment-system facilities were uniformly available to all users at the same charges, without any concessional treatment to the promoter banks. Subscription to share capital did not by itself establish that the promoter banks were substantial contributors or that the entity's income had been directly or indirectly applied for their benefit.

Conclusion: No violation of Section 13(1)(c)(ii) read with Section 13(3) was established. The conclusion is in favour of the assessee.

Final Conclusion: The charitable character of the payment-system activities and the availability of the statutory exemption were sustained for both assessment years.

Ratio Decidendi: Fees and incidental surplus from activities undertaken to advance a genuine general-public-utility object do not attract the proviso to Section 2(15) where the dominant purpose remains charitable and no income is applied for the benefit of specified persons.

Issues: Whether penalty for concealment of income was sustainable where stock discrepancy was detected in survey and the additional income was disclosed only through a revised return.

Analysis: The original return did not disclose the income represented by the stock discrepancy. The additional income was admitted after the survey detected the discrepancy and was incorporated in the revised return thereafter. An admission that the earlier return was not true or complete obviates the need for further proof of concealment. A revised return filed under compulsion after detection of undisclosed income does not erase the initial concealment. Binding High Court precedent supported sustaining the penalty.

Conclusion: Penalty under Section 271(1)(c) for concealment of income was validly sustained against the assessee.

Issues: Whether a domestic company that had validly exercised the option under section 115BAA through Form No. 10-IC was entitled to the concessional tax rate of 22% for the relevant assessment year.

Analysis: Section 115BAA(5) makes an option validly exercised in the prescribed manner applicable to subsequent assessment years. The acknowledgement of Form No. 10-IC established that the option had been exercised, and the same option had been accepted for an earlier assessment year. Disclosure of the option and its particulars in the return for the relevant year supported the claim. Computation at the normal rate during processing under section 143(1), or absence of documents before the first appellate authority, could not extinguish a subsisting option when compliance with the statutory requirement was demonstrated on record.

Conclusion: The assessee was entitled to the concessional tax rate of 22% under section 115BAA for the relevant assessment year.

Issues: Whether a reassessment notice issued under Section 148 in the name of an assessee who had died before its issuance could validly found reassessment proceedings against the legal heir.

Analysis: Section 159(2)(a) permits continuation against a legal representative only where proceedings were initiated during the deceased person's lifetime. Section 159(2)(b) permits proceedings that could have been initiated against the deceased to be initiated against the legal representative, requiring the jurisdictional notice to be issued to that representative. The notice was issued after the assessee's death in her own name; the legal heir promptly objected and did not submit to the reassessment jurisdiction. A notice to a deceased person is not validated merely because the Revenue was unaware of the death or because the assessment was later framed in the legal heir's name.

Conclusion: The notice issued in the name of the deceased assessee was invalid, and the reassessment founded upon it was legally unsustainable, in favour of the assessee.

Issues: Whether the enhanced 60% tax rate under Section 115BBE applied to unexplained money assessed under Section 69A for assessment year 2017-18.

Analysis: The enhanced rate introduced with effect from 01.04.2017 governed financial year 2017-18 onwards and was applicable only from assessment year 2018-19. For financial year 2016-17, corresponding to assessment year 2017-18, the governing rate under Section 115BBE was 30%.

Conclusion: Tax on the addition for unexplained money for assessment year 2017-18 shall be computed at 30%, and not at 60%.

Issues: Whether penalty for delayed furnishing of the tax audit report could be sustained where the assessee established a reasonable and bona fide cause for the delay.

Analysis: The accountant's illness and treatment prevented timely preparation of accounts for audit. The audit report was nevertheless furnished before scrutiny proceedings commenced. These circumstances established a reasonable and bona fide cause within the protection afforded by Section 273B of the Income-tax Act, 1961.

Conclusion: The penalty under Section 271B of the Income-tax Act, 1961 was not justified and was deleted.

Issues: Whether the entire amount of alleged bogus purchases could be added where sales were accepted, quantitative records were maintained, and the books of account were not rejected.

Analysis: Addition of the entire purchase amount is not warranted merely because the supplier and purchases could not be fully substantiated. Where the assessee has maintained quantitative details, the sales have been accepted, and the books of account have not been rejected, only the profit element embedded in the non-genuine purchases is liable to be brought to tax.

Conclusion: The addition was restricted to 10% of the alleged bogus purchases, namely Rs. 4,59,000, instead of the entire purchase amount of Rs. 45,90,000.

Issues: Whether a society filing its return in the status of an association of persons was liable to tax at the maximum marginal rate under Section 167B.

Analysis: The assessee was registered as a society, filed its return in the status of an association of persons/body of individuals, and declared income below the taxable limit. Its status entitled it to normal rates of tax; application of the maximum marginal rate was therefore unwarranted.

Conclusion: The returned income must be assessed at normal rates, and where the total income is below the taxable limit, the return must be accepted without tax liability. The issue is decided in favour of the assessee.

Issues: (i) Whether the exclusivity fee received upon failure of negotiations for transfer of shares in a proposed joint venture was taxable as business income under Sections 28(iv) or 28(va), including for book-profit computation; (ii) Whether disallowance under Section 14A could be sustained where no exempt income was earned during the relevant year.

Issue (i): Whether the exclusivity fee received upon failure of negotiations for transfer of shares in a proposed joint venture was taxable as business income under Sections 28(iv) or 28(va), including for book-profit computation.

Analysis: Section 28(iv), as applicable for the assessment year, covered non-monetary benefits or perquisites arising from business and did not apply to an amount received in cash. Section 28(va) applies where consideration is received under an agreement for not carrying out an activity in relation to business. The exclusivity commitment only restrained negotiations for sale or transfer of shares in the subsidiary to other parties; it did not restrain the assessee from carrying on any business activity. The proposed transaction concerned transfer of a capital asset, and the fee paid when that transaction did not materialise retained capital character. The facts were distinct from compensation for termination of an ordinary trading agency.

Conclusion: The exclusivity fee was a capital receipt, not chargeable under Sections 28(iv) or 28(va), and could not be included in book profit under Section 115JB. This issue is decided in favour of the assessee.

Issue (ii): Whether disallowance under Section 14A could be sustained where no exempt income was earned during the relevant year.

Analysis: No exempt income was earned in the relevant assessment year. The Explanation inserted in Section 14A by the Finance Act, 2022 applied from assessment year 2022-23 and could not govern the earlier assessment year.

Conclusion: In the absence of exempt income, Section 14A was inapplicable and the disallowance was deleted. This issue is decided in favour of the assessee.

Final Conclusion: The exclusivity payment remains outside the taxable business-income and book-profit computations, and no expenditure disallowance arises in the absence of exempt income.

Ratio Decidendi: Cash compensation for exclusivity in negotiations concerning transfer of shares is a capital receipt where the agreement does not restrict the recipient's business activity; further, Section 14A disallowance cannot arise for an assessment year in which no exempt income is earned.

Issues: (i) Whether the absolute confiscation of the seized gold was sustainable; (ii) Whether the penalties imposed for dealing with the seized gold warranted interference.

Issue (i): Whether the absolute confiscation of the seized gold was sustainable.

Analysis: Gold is a notified item under Section 123 of the Customs Act, 1962, placing the burden on persons in possession to establish its licit procurement. The carriers had no documents evidencing lawful possession or transportation when intercepted. The asserted ownership and supporting documents were produced only in the reply to the show-cause notice, although the alleged owner had not claimed the gold during investigation despite being aware of the seizure. The documents were therefore treated as an afterthought and not accepted as proof of lawful source.

Conclusion: The absolute confiscation of the gold was sustained, against the assessee.

Issue (ii): Whether the penalties imposed for dealing with the seized gold warranted interference.

Analysis: The carriers were found transporting gold of foreign origin without licit documents, supporting the penalties imposed upon them under Section 112(b) of the Customs Act, 1962. As regards the person alleged to have arranged the transaction, the failure to claim ownership during investigation and conduct found to have misled the investigation justified a penalty; however, the quantum originally imposed was considered excessive.

Conclusion: The penalties on the carriers were sustained, against the assessee; the penalty on the other appellant was reduced to Rs. 1,00,000, in favour of the assessee to that extent.

Final Conclusion: The confiscation and the carriers' penalties remain operative, while limited relief is granted through reduction of the penalty imposed on the appellant who subsequently claimed ownership.

Ratio Decidendi: For notified gold, failure to establish lawful source at the time of interception may sustain confiscation, and a belated ownership claim supported by documents treated as an afterthought does not discharge the statutory burden.

Issues: Whether penalty for non-declaration of goods could be sustained where the importer voluntarily reported the supplier's inadvertent omission of an invoice after clearance and sought reassessment and payment of differential duty.

Analysis: The omitted invoice and additional goods were disclosed by the importer shortly after clearance, before any detection by the customs authorities. The contemporaneous request for reassessment and payment of differential duty, supported by the supplier's communication, established that the discrepancy was a bona fide error and not an attempt to evade duty. In the absence of evidence of wilful non-compliance or intent to evade duty, invocation of the residual penalty provision was not justified.

Conclusion: The penalty under Section 117 of the Customs Act, 1962 was unsustainable and was set aside.

Ratio Decidendi: A residual customs penalty cannot be sustained for an inadvertent declaration error voluntarily disclosed and rectified by the importer before departmental detection, absent proof of mens rea or intention to evade duty.

Issues: Whether low-ethoxylated non-ionic fatty alcohol ethoxylates were classifiable as organic surface-active agents under tariff item 3402 1300 or as miscellaneous chemical products under tariff items 3824 9090/3824 9990, and whether the consequential duty demand, confiscation and penalties could be sustained.

Analysis: Classification was governed primarily by the tariff headings and Chapter Note 3 to Chapter 34. For classification as an organic surface-active agent, the goods had cumulatively to give a transparent or translucent liquid or stable emulsion without separation of insoluble matter, and reduce surface tension to the prescribed level. The chemical test reports recorded a translucent liquid with separation into two layers. The goods therefore failed the water-solubility requirement in Chapter Note 3(a), notwithstanding their non-ionic nature and surface activity. The explanatory material also excluded water-insoluble surface-active products from heading 3402 and placed them under heading 3824.

Conclusion: The imported goods are classifiable under tariff items 3824 9090/3824 9990 and not under tariff item 3402 1300; consequently, the proposed differential-duty demand, confiscation, interest and penalties are unsustainable.

Issues: Whether a bank guarantee based on differential customs duty can be required as a condition for provisional release of goods imported for warehousing and authorised operations in an FTWZ within an SEZ.

Analysis: Section 26(1)(a) of the Special Economic Zones Act, 2005 grants customs-duty exemption for goods imported into an SEZ unit for authorised operations. Under Section 30(a), customs duty is attracted when goods are removed from the SEZ to the Domestic Tariff Area, at the rate and valuation applicable on that removal. The goods had not undergone authorised operations or been cleared to the DTA. The deeming fiction governing SEZ-to-DTA removals aligns duty treatment with comparable imports and does not permit assessment of duty on goods still intended for authorised operations within the FTWZ. Consequently, computation of differential duty on the imported goods for insisting upon a bank guarantee was unsustainable, though a bond securing the value of the goods could be retained for provisional release.

Conclusion: The bank-guarantee condition was unsustainable and was set aside; provisional release remains subject to a bond equal to the goods' value, with customs duty to arise on clearance of manufactured goods from the SEZ to the DTA after authorised operations.