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2023 (12) TMI 1135 - KARNATAKA HIGH COURT Income Tax

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Reassessment notice under Section 147 invalid due to full disclosure of facts and impermissible change of opinion
Karnataka HC held that reassessment notice u/s 147 was invalid on multiple grounds. The assessee had fully disclosed primary facts regarding technical services and claimed Section 10A deduction. The AO's failure to draw proper legal inferences during original assessment cannot constitute non-disclosure. The reassessment was based on borrowed satisfaction from AY 2008-09 proceedings and constituted impermissible change of opinion. Additionally, the notice was barred by third proviso to Section 147 due to pending appeals. The court emphasized that once primary facts are disclosed, determining nexus between technical services and STP unit remains AO's responsibility through further investigation.

Failure to disclose fully and truly all material facts necessary for assessment - reason to believe that income has escaped assessment - reopening not permissible on mere change of opinion - tangible material requirement for reopening - borrowed satisfaction - bar under third proviso to Section 147 in relation to pending appeal or revision - Circular No. 1/2013 - nexus between onsite development, MSAs/SOWs and eligibility for deduction under Section 10AFailure to disclose fully and truly all material facts necessary for assessment - Calcutta Discount Company principle on primary facts - Whether the assessee failed to disclose fully and truly all material facts necessary for assessment. - HELD THAT: - The court applied the settled test that the assessee's duty is to disclose primary facts and not to communicate legal inferences drawn therefrom. The assessee had made statutory declarations and furnished primary factual material (including Form-56F/annexures) in relation to claim of deduction under Section 10A. The Assessing Officer in subsequent proceedings (and the Commissioner under Section 263) dealt with exclusion of expenditure incurred for providing technical services abroad; that determination involved drawing legal conclusions about nexus with STP units and classification under Section 10A or Section 80HHE. The court held that once primary facts were disclosed, the obligation of the assessee was satisfied and the Assessing Officer's differing legal view on nexus or entitlement could not be converted into non-disclosure by the assessee. Consequently, the requisite condition of failure to disclose fully and truly all material facts for reopening after four years was not made out.Assessee did not fail to disclose fully and truly all material facts; requirement for reopening under the proviso to Section 147 is not satisfied.Reopening not permissible on mere change of opinion - tangible material requirement for reopening - Kelvinator principle - Whether the reassessment notices were vitiated as being based on a mere change of opinion. - HELD THAT: - Relying on the principle that reassessment cannot be used as a vehicle for review, the court examined whether the materials relied upon for reopening established fresh tangible material distinct from the earlier assessment. The Assessing Officer, pursuant to directions under Section 263, had himself excluded expenditure relating to provision of technical services abroad in fresh assessments for the relevant years; that exercise demonstrated application of mind to the legal conclusion regarding exclusion. The purported new 'tangible material' arising from incomplete MSAs/SOWs/invoices in AY 2008-09 was itself not complete and did not furnish a live link to form an independent reason to believe escapement of income distinct from a change of opinion. The court held that revisiting the same issue on those facts would amount to impermissible change of opinion and review.Reopening was impermissible as it amounted to reassessment based on change of opinion; tangible material relied upon was insufficient.Borrowed satisfaction - reason to believe that income has escaped assessment - Whether the reasons for reopening amounted to borrowed satisfaction by relying on findings recorded in assessment proceedings for AY 2008-2009. - HELD THAT: - The court emphasised that the assessing officer who reopens must himself form a reason to believe; he cannot simply adopt the satisfaction recorded in other proceedings. The reasons communicated for reopening expressly relied upon findings and preliminary computations made in the assessment for AY 2008-09 (including percentages applied to onsite revenues). That amounted to substituting the satisfaction of the officer who handled AY 2008-09 for the requisite independent satisfaction of the officer seeking reopening, which is legally impermissible. Accordingly, the notice suffered from borrowed satisfaction.The reasons for reopening constituted borrowed satisfaction and therefore did not satisfy the jurisdictional requirement under Section 147.Bar under third proviso to Section 147 in relation to pending appeal or revision - Whether the third proviso to Section 147 operated to bar issuance of the Section 148 notices in the present cases. - HELD THAT: - The court recorded the status of pending appeals against the relevant assessment orders as on the dates when Section 148 notices were issued. The third proviso (as in force prior to amendment) prohibits reassessment in respect of income which is the subject matter of any appeal, reference or revision then pending. The tabulated particulars showed subsisting appeals relating to the respective assessment years on the dates the reassessment notices were issued. On that basis the court concluded that the Section 148 notices were hit by the bar of the third proviso.Section 148 notices were barred by the third proviso to Section 147 because appeals in respect of the subject matters were pending when the notices were issued.Final Conclusion: The High Court set aside the reassessment notices issued under Section 147 read with Section 148 and the consequent orders rejecting objections for Assessment Years 2005-2006, 2006-2007 and 2007-2008, holding that (i) the assessee had not failed to disclose primary facts, (ii) reopening amounted to impermissible change of opinion and relied on incomplete tangible material, (iii) the reasons amounted to borrowed satisfaction, and (iv) the notices were barred by the third proviso to Section 147; hence the reassessment proceedings were quashed.

2023 (12) TMI 1100 - MADHYA PRADESH HIGH COURT GST

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Bail travel restriction relaxed where GST proceedings remained pending and parity supported removal of passport surrender condition.
A bail condition requiring surrender of the passport and prior permission to leave India was relaxed where the travel restraint was no longer justified by the stage of the GST proceedings. The court noted that prosecution against the applicant remained pending, that a co-accused had already obtained similar relief from the Supreme Court, and that continued restriction on foreign travel should not operate indefinitely on those facts. The existing condition was therefore modified, and the restraint on leaving India was removed.

Modification of bail conditions - surrender of passport as bail condition - right to travel abroad while on bail - cooperation with investigation - prosecution under the Central Goods and Services Tax law - powers of Enforcement Directorate under the Prevention of Money Laundering ActModification of bail conditions - surrender of passport as bail condition - right to travel abroad while on bail - cooperation with investigation - Relaxation of the condition requiring surrender of passport and prohibition on leaving India imposed while granting bail. - HELD THAT: - The Court examined the continued necessity of Condition No.11(v) of the bail order dated 13.08.2020, which required the applicant to surrender his passport and refrain from leaving India without prior permission. It was noted that in the proceedings under the Central Goods and Services Tax law the GST authorities had not filed a charge-sheet to date, and the adjudication proceedings against the applicant were stayed by this Court. The Court also considered the parallel developments: registration of an ECIR by the Enforcement Directorate under the PML Act and the ED's objection to relaxation, and the fact that a co-accused with similar conditions had been permitted by the Supreme Court to travel abroad without depositing the passport and without requirement of reporting to the Court. Balancing these factors and recognising that the primary dispute in this matter lay between the applicant and the GST authorities where no charge-sheet had been filed, the Court concluded that the restraint of detaining the passport and an absolute bar on foreign travel could not be permitted to continue indefinitely. Accordingly the specific passport-deposit/leave-India condition was relaxed while other bail conditions, including cooperation with investigation, remained in place as applicable. [Paras 9, 10]Condition No.11(v) of the bail order dated 13.08.2020 is relaxed, permitting the applicant to travel abroad subject to remaining bail conditions and cooperation with investigation.Final Conclusion: The application is allowed and the bail condition requiring surrender of passport and prohibition on leaving India is relaxed; the miscellaneous criminal case is disposed of and pending interlocutory applications are disposed.

2023 (12) TMI 1094 - BOMBAY HIGH COURT Income Tax

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Issues Involved:
1. Validity of the income tax return due to mismatch in the company's name and PAN number.
2. Rejection of application for condonation of delay under Section 119 of the Income Tax Act.
3. Consideration of "genuine hardship" in the context of condonation of delay.

Summary:

Issue 1: Validity of Income Tax Return
The Petitioner filed a return of income for AY 2017-2018 under the name "Optra Technologies Private Limited" after the company's name had been changed. The PAN number was correctly mentioned, but due to the name mismatch, the DCIT, CPC, Bangalore, issued a communication on 29th May 2018 asking the Petitioner to rectify the defects within fifteen days. The Petitioner failed to rectify the defects within the prescribed time, leading to the return being declared invalid.

Issue 2: Rejection of Application for Condonation of Delay
To address the invalid return, the Petitioner filed an application under Section 119 of the Income Tax Act before the PCIT, which was rejected by the PCCIT, Pune, on 9th September 2021. The Petitioner then filed a Writ Petition challenging this order, which led to a de-novo consideration by the PCCIT. However, the PCCIT again rejected the application, stating that the company failed to prove any genuine hardship beyond its control.

Issue 3: Consideration of "Genuine Hardship"
The Court found the PCCIT's reason for rejection unsatisfactory. The Petitioner explained that the notices were sent to an email ID of an employee who had left the company, and no physical copy was sent to the registered address. The Court emphasized that the error was not due to deliberate or culpable negligence. It highlighted that the term "genuine hardship" should be construed liberally, as per the law laid down by the Apex Court and other High Courts. The Court cited precedents that the authorities should advance the cause of justice and not reject claims based on technicalities.

Conclusion:
The Court directed the Respondents to allow the Petitioner to correct the name in the returns for AY 2017-2018 from "Optra Technologies Private Limited" to "Optra Health Private Limited." The impugned order dated 23rd December 2022 was quashed and set aside. The required portal was to be opened within two weeks for the Petitioner to make the necessary corrections. The Court clarified that it had not examined the contents of the returns or claims made therein, which would be subject to appropriate assessments/proceedings under the Act. The Petition was disposed of with no order as to costs.

Company Gets Relief for Late Tax Return Filing After Email Notice Mix-Up Under Section 119(2)(b)
Bombay HC allowed petitioner's application for condonation of delay under Section 119(2)(b) of Income Tax Act. The court found delay in responding to Section 139(9) notices was neither deliberate nor due to culpable negligence, as notices were sent to former director's email without physical copies to registered address. Company discovered error during account finalization and took immediate remedial action. HC directed respondents to permit correction of company name in returns from previous name to current name, quashing impugned order dated 23rd December 2022. Portal to be opened within two weeks for necessary corrections.

Condonation of delay - genuine hardship - Section 119(2)(b) of the Income Tax Act, 1961 - invalid return under Section 139(9) - substantial justice over technicality - email as a valid mode of communicationCondonation of delay - genuine hardship - Section 119(2)(b) of the Income Tax Act, 1961 - invalid return under Section 139(9) - substantial justice over technicality - Whether the Principal Chief Commissioner of Income Tax was justified in rejecting the petitioner's application for condonation of delay under Section 119(2)(b) for failing to rectify an invalid return under Section 139(9) and whether relief should be granted to permit correction of the name in the return for AY 2017-2018. - HELD THAT: - The Court found that the delay in responding to notices under Section 139(9) was neither deliberate nor due to culpable negligence or mala fide. Notices were sent to the official email of a responsible officer who either failed in his duties or left the company, and no physical notices were sent to the registered address; other officers had no access to that email. The petitioner otherwise acted as a prudent assessee-filing the return, audit report and related forms on time and depositing advance tax-so the sole error related to using the previous corporate name in the return. The phrase 'genuine hardship' in Section 119(2)(b) must be construed liberally and authorities should consider factors beyond a single ground; refusal to condone delay on a hyper-technical basis can defeat substantial justice. Relying on precedents cited by the Court, the authority should determine only whether a prima facie correct and genuine case exists for consideration on merits and should not prejudge the claim. Applying these principles, the Court concluded that the PCCIT's restrictive approach was not warranted and that relief should be granted to enable correction of the name so the return could be considered on merits. [Paras 6, 11, 12]Impugned order rejecting condonation of delay is quashed and set aside; respondents directed to permit petitioner to correct the company name in the return for AY 2017-2018 and open the portal within two weeks so the petitioner may rectify the invalid return.Final Conclusion: The High Court allowed the petition, quashed the PCCIT's order refusing condonation under Section 119(2)(b), and directed that the petitioner be permitted to correct the name in the income tax return for AY 2017-2018 so the return may be considered on merits; the Court did not examine the contents or claims in the return, which remain subject to appropriate proceedings under the Act.

2023 (12) TMI 1068 - CESTAT KOLKATA Service Tax

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Service tax classification favoured transportation over cargo handling and mining, while separate accounts prevented exempt-service credit reversal liability.
Service tax classification disputes concerned ash evacuation and coal transportation, where transportation was treated as the principal service and loading, unloading or related activities as incidental; demands under Cargo Handling Service and Mining Service were therefore unsustainable. A demand under Supply of Tangible Goods Service remained dropped on limitation. For hired trucks, absence of consignment notes from subcontractors and prior tax payment by recipients meant a further GTA demand would result in double taxation. The requirement to pay on exempt services under the CENVAT Credit Rules did not apply where separate accounts for taxable and exempt services were maintained. The assessee's appeal was allowed and the departmental appeal rejected.

Classification of services: transport versus cargo handling - principal-service rule for composite contracts - Goods Transport Agency reverse-charge liability and consignment note requirement - distinction between mining service and transport of goods by road - limitation and suppression - bar on invoking extended period where same issue earlier litigated (Nizam Sugars principle)Classification of services: transport versus cargo handling - principal-service rule for composite contracts - Evacuation of ash from power-station ash ponds and disposal in abandoned mines is a transportation service and not a cargo-handling service. - HELD THAT: - A scrutiny of the work orders shows that the primary obligation undertaken by the appellant was transportation; loading/unloading were ancillary. Reliance on earlier Tribunal authorities led to the conclusion that excavation/transport to specified disposal areas cannot be treated as a cleaning or cargo-handling primary service where the contract's essential feature is transport. Applying the principle that composite contracts should be characterised by their principal service, the Tribunal held that the transactions are transportation and, consequently, taxable (if at all) under the regime applicable to road transport (with recipients liable under Rule 2(1)(d)(v)). [Paras 10]Demand under the head 'Cargo Handling Service' is not sustainable; the service is transportation.Distinction between mining service and transport of goods by road - principal-service rule for composite contracts - Services rendered for movement of coal were transportation and not 'mining services'. - HELD THAT: - The work orders indicate a composite contract with transportation as the dominant component and other activities incidental. The adjudicating authority did not produce evidence to establish that the appellant performed actual mining. Reliance on the Supreme Court's decision in Singh Transporters supports classification of such activity as 'transport of goods by road' rather than 'mining of mineral'. Therefore the demand framed as 'Mining Service' could not be sustained. [Paras 11, 13]Demand under the head 'Mining Services' is not sustainable; service is transportation.Goods Transport Agency reverse-charge liability and consignment note requirement - double taxation and vivisection of composite service - The appellant is not liable to pay service tax on subcontracted transportation under reverse charge where subcontractors did not issue consignment notes and the recipient has paid tax on the full contract value. - HELD THAT: - The facts show a single transportation service for which the appellant invoiced the client and the recipient discharged service tax on the full value; subcontractors did not issue consignment notes. Applying the Board's clarification that composite transportation contracts should not be broken up and that GTA status (with its consignment-note requirement) determines reverse-charge liability, the Tribunal held that no separate RCM liability can be fastened on the appellant and that taxing the subcontractor in addition would amount to double taxation. [Paras 14, 16]Demand under reverse charge as recipient of GTA service is not sustainable.Limitation and suppression - bar on invoking extended period where same issue earlier litigated (Nizam Sugars principle) - Extended period invocation and penalties for the contested demands were not sustainable; demands were rightly dropped on limitation and no penalty was imposed. - HELD THAT: - The earlier show-cause notices addressed essentially the same controversy (evacuation and disposal of ash) albeit under a different service label. Applying the principle that suppression cannot be re-invoked where the same issue had earlier been the subject matter of notice, and in the absence of evidence to prove suppression, the Tribunal agreed with the adjudicating authority's decision to drop demands on limitation grounds and not to impose penalties under Section 78/Rule 15. [Paras 18]Department's appeal on extended period and penalties is rejected; demands dropped as time-barred and no penalties sustained.Final Conclusion: The Tribunal set aside the impugned order and allowed the appellant's appeal: demands framed under 'Cargo Handling Service', 'Mining Service' and GTA reverse-charge on subcontracted transport were held unsustainable; the department's appeal challenging limitation and penalties was rejected.

2023 (12) TMI 1062 - CESTAT KOLKATA Central Excise

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CENVAT credit allowed on input services for captive mines distributed through ISD invoices under Rule 3
CESTAT Kolkata allowed the appeal, holding that the appellant was entitled to CENVAT credit on input services for captive mines distributed via ISD invoices. The tribunal found that since both mines and manufacturing units belonged to the same legal entity engaged in steel manufacture, and the captive mines served as integral links to steel plants, input services like security, mining, and transportation bore direct nexus with final product manufacturing. Rule 3 of CCR only requires services to be used in relation to manufacture, not necessarily received at manufacturing premises. The demand for reversal of CENVAT credit with interest and penalty was unsustainable.

Availability of CENVAT credit of input services from captive mines - input services used in or in relation to manufacture - Input Service Distributor (ISD) invoices - integration of captive mines and manufacturing unit as a single legal entity - locational requirement under Rule 3 of the CENVAT Credit RulesAvailability of CENVAT credit of input services from captive mines - input services used in or in relation to manufacture - Input Service Distributor (ISD) invoices - integration of captive mines and manufacturing unit as a single legal entity - locational requirement under Rule 3 of the CENVAT Credit Rules - Entitlement of the appellant to avail CENVAT credit of service tax on input services availed at captive mines and distributed to the manufacturing units by ISD invoices. - HELD THAT: - The Tribunal found that the captive mines and the manufacturing units belong to the same legal entity and that the mines were set up primarily to serve the steel plants, supplying essential raw materials. Services availed at the mines (security, mining, transportation, etc.) bear a direct nexus with the appellant's manufacture of final dutiable products and therefore fall within the definition of 'input services'. Rule 3 of the CENVAT Credit Rules does not require that input services be received within the factory premises; it requires that services be used in or in relation to manufacture. Reliance was placed on earlier Tribunal decisions on identical facts, including Usha Martin Ltd. v. CCE, Jamshedpur, 2023 (6) TMI 1153 - CESTAT Kolkata and Hindalco Industries v. CCE & ST., 2018 (10) TMI 1733 - CESTAT ALLAHABAD, and the precedential reasoning drawn from the principle that credit is admissible where mines are captive and the units form an integrated establishment. The Tribunal applied that reasoning to hold that credit distributed by the mines through ISD invoices is admissible to the appellant and that the revenue did not place material to show separate ownership or a severed nexus between services at the mines and manufacture.The appellant is entitled to avail CENVAT credit of input services received at captive mines and distributed via ISD invoices; the demand for reversal confirmed in the impugned order is unsustainable.Final Conclusion: Impugned order confirming reversal of CENVAT credit, interest and penalty set aside; appeal allowed and CENVAT credit availed by the appellant on services at captive mines held admissible.

2023 (12) TMI 1056 - MADHYA PRADESH HIGH COURT Indian Laws

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Appellate deposit in cheque dishonour appeals upheld despite Criminal Procedure Code objection
Section 148 of the Negotiable Instruments Act empowers the appellate court, in an appeal against conviction under Section 138, to require deposit of not less than 20% of the fine or compensation awarded by the trial court during the pendency of the appeal. The provision operates through a non obstante clause and is applied purposively to support speedy recovery in cheque dishonour matters. Section 357(2) of the Code of Criminal Procedure does not override or restrict this appellate power. The appellate court is therefore competent to impose the deposit condition while suspending sentence.

Power of appellate court to direct deposit of a minimum of 20% pending appeal under amended Section 148 of the Negotiable Instruments Act - interaction between amended Section 148 of the Negotiable Instruments Act and Section 357(2) of the Code of Criminal Procedure - suspension of sentence on condition of deposit under Section 389 Cr.P.C. - purposive construction of statutory 'may' to a rule/obligation in the context of restitution and protection of cheque payeesPower of appellate court to direct deposit of a minimum of 20% pending appeal under amended Section 148 of the Negotiable Instruments Act - interaction between amended Section 148 of the Negotiable Instruments Act and Section 357(2) of the Code of Criminal Procedure - suspension of sentence on condition of deposit under Section 389 Cr.P.C. - Validity of the appellate court's imposition of a condition directing deposit of 20% of the compensation while suspending the jail sentence in appeal against conviction under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The High Court held that the first appellate court lawfully imposed the condition to deposit 20% of the compensation while suspending the sentence. The court applied the reasoning in the decision of the Supreme Court in Surinder Singh Deswal, which interprets amended Section 148 of the Negotiable Instruments Act purposively: although the provision uses the word 'may', it is to be construed as imposing a rule that the appellate court can direct the appellant-accused to deposit not less than 20% of the fine or compensation pending appeal. That purposive construction furthers the object of the amendment to prevent delay tactics by accused persons and to protect the payee's right to timely realisation. Consequently, amended Section 148, by its opening phrase "notwithstanding anything contained in the Code of Criminal Procedure", operates notwithstanding Section 357(2) Cr.P.C., and therefore the appellate court's direction to deposit the minimum percentage is not displaced by Section 357(2). Applying that ratio to the facts, the impugned order directing deposit of 20% within the stipulated time was held to be just and proper and not illegal or irregular. [Paras 5, 6, 7, 8, 9]The appellate court correctly exercised its power under amended Section 148 of the Negotiable Instruments Act to direct deposit of 20% of the compensation as a condition for suspension of sentence; the impugned order is affirmed.Final Conclusion: Criminal revision petition dismissed; the order of the first appellate court directing deposit of 20% of the compensation as condition for suspension of sentence is upheld and the applicant is directed to comply within the period specified.

2023 (12) TMI 1046 - CALCUTTA HIGH COURT Income Tax

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Reassessment proceedings under Section 147 upheld for unexplained bank deposits constituting escaped income under Section 149(1)(b)
The Calcutta HC dismissed an appeal challenging reassessment proceedings under Section 147 for AY 2015-16. The appellant contested the limitation period and jurisdiction under the new regime introduced by Finance Act 2021. The court found that unexplained deposits in ICICI bank constituted escaped income under Section 149(1)(b). The authority had properly issued notice under Section 148A(d) after considering the appellant's response dated June 5, 2022. The HC held that principles of natural justice were followed as the appellant was given adequate opportunity to respond. The reassessment order was found to be reasoned and justified, with no procedural defects warranting interference.

Treatment of notices issued after 1-4-2021 as show-cause notices under Section 148A pursuant to Ashish Agarwal - limitation under Section 149(1) of the Income Tax Act, 1961 - jurisdictional fact for reopening assessment - principles of natural justice in re-opening of assessment - CBDT Instruction No. 01/2022 and implementation of Ashish Agarwal directionsTreatment of notices issued after 1-4-2021 as show-cause notices under Section 148A pursuant to Ashish Agarwal - limitation under Section 149(1) of the Income Tax Act, 1961 - CBDT Instruction No. 01/2022 and implementation of Ashish Agarwal directions - jurisdictional fact for reopening assessment - Validity of the reopening proceedings for Assessment Year 2015-2016 in view of Ashish Agarwal, the amended limitation regime under Section 149(1), and related CBDT instructions - HELD THAT: - The Court applied the Supreme Court's directions in Ashish Agarwal treating Section 148 notices issued after April 1, 2021 as show-cause notices under Section 148A and noted that those directions operate pan India and bind the parties. The CBDT Instruction No. 01/2022 implements those directions. On the facts, the notice dated April 30, 2021 (quashed earlier) and subsequent material furnished to the assessee on May 23, 2022 complied with the procedure indicated in Ashish Agarwal; the assessee replied on June 5, 2022 and the authority passed an order under Section 148A(d), thereafter issuing notice under Section 148. The impugned order specifically considered the materials (including unexplained bank deposits) and applied the definition of 'asset' under Clause (b) of Section 149(1) to conclude escapement of income for AY 2015-2016. There is nothing on record to show that the authorities acted beyond the period of limitation prescribed or otherwise exceeded jurisdiction; therefore the finding on limitation and the decision to issue notice were held to be legally sustainable. [Paras 19, 20, 21, 22, 29]Reopening proceedings for Assessment Year 2015-2016 were validly conducted in conformity with Ashish Agarwal and CBDT instructions, and the limitation point under Section 149(1) did not vitiate the impugned order.Principles of natural justice in re-opening of assessment - writ jurisdiction in challenge to jurisdictional fact - Whether the impugned order dated July 28, 2022 under Section 148A(d) was vitiated by breach of principles of natural justice or warranted interference by writ jurisdiction - HELD THAT: - The Court examined whether the assessee was denied an opportunity to be heard or whether the authority failed to consider the assessee's submissions. The impugned order records and reproduces the assessee's reply dated June 5, 2022 and explains why the reply was not found tenable; accordingly the Court found no breach of natural justice. The Court also noted established principles that jurisdictional facts must exist for exercise of power, but on the material before it the authorities had recorded reasons and considered the assessee's response. The Single Judge's discretionary refusal to entertain the writ petition in these circumstances was upheld. [Paras 28, 30, 31]No breach of principles of natural justice is established; the impugned order is not vitiated on procedural grounds and the Single Judge did not err in refusing relief by writ.Final Conclusion: The appeal is dismissed; the High Court's order upholding the assessment proceedings for Assessment Year 2015-2016 (including the order under Section 148A(d) and subsequent notice) is sustained as being in conformity with Ashish Agarwal, CBDT instructions, and not vitiated by limitation or breach of natural justice.

2023 (12) TMI 995 - MADRAS HIGH COURT GST

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Legal Heirs Must Respond to Tax Assessment Notices Within Six Weeks, Original Order Set Aside for Fair Hearing
HC found the assessment order against deceased taxpayer invalid. Legal heirs were directed to respond to notices within six weeks. The court set aside the original order and instructed the revenue authority to provide opportunity for personal hearing after receiving response from legal representatives.

Assessment passed against deceased - Non est in law - Notice to legal heirs - Opportunity of personal hearing - Setting aside assessment and remand for fresh adjudicationAssessment passed against deceased - Non est in law - Validity of the assessment order passed in the name of the deceased M.K. Girish - HELD THAT: - The Court observed that the impugned assessment order dated 01.03.2023 was passed against the deceased M.K. Girish after his death on 25.02.2021 and after intimation of death to the respondent. Proceedings and an assessment issued and concluded in the name of a dead person are non est in law. In view of this legal incapacity, the assessment order cannot stand and must be set aside. The Court therefore quashed the impugned assessment order on this ground. [Paras 4, 8, 9]Impugned assessment order passed against the deceased is set aside as non est in law.Notice to legal heirs - Opportunity of personal hearing - Setting aside assessment and remand for fresh adjudication - Treatment of earlier notices and further procedure to be followed with respect to the legal heirs - HELD THAT: - The respondent acknowledged that notices GST DRC-01A dated 06.07.2022 and GST DRC-01 dated 21.11.2022 were issued in the name of the deceased. The Court directed that the notice dated 06.07.2022 shall be construed as a notice to the petitioners as legal heirs as on date. The petitioners were given six weeks from receipt of certified copy of the order to file their reply. The matter was remitted to the respondent for fresh consideration, with a direction to pass appropriate orders after giving the petitioners opportunity for personal hearing. Thus, the Court set aside the prior assessment and remanded the matter for fresh adjudication in accordance with these directions. [Paras 5, 8]Notice dated 06.07.2022 to be treated as notice to the legal heirs; petitioners to file reply within six weeks; respondent to reconsider and pass fresh orders after personal hearing.Final Conclusion: The assessment order dated 01.03.2023 passed in the name of the deceased is quashed; the notice dated 06.07.2022 is treated as notice to the legal heirs who shall file a reply within six weeks and the respondent is directed to decide the matter afresh after affording personal hearing.

2023 (12) TMI 994 - TELANGANA HIGH COURT GST

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Procedural Defect in Tax Notice Leads to Quashing of Section 73 Show Cause Notice Due to Insufficient Substantive Evidence
HC found the Show Cause Notice under Section 73 of CGST Act defective due to lack of substantial material and vagueness. The Notice failed to provide clear details of suspicious transactions and tax calculations. Court quashed the Notice, allowing the Department to re-issue proceedings in compliance with legal requirements, without imposing costs on the petitioner.

2023 (12) TMI 993 - JAMMU AND KASHMIR AND LADAKH HIGH COURT GST

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Issues: (i) Whether detention and penalty under the GST enactment were justified when the goods were intercepted with only a delivery note and not the prescribed delivery challan. (ii) Whether the petitioner could avoid the tax and penalty order by asserting that the goods were sent on approval basis and that the payment was extracted under duress.

Issue (i): Whether detention and penalty under the GST enactment were justified when the goods were intercepted with only a delivery note and not the prescribed delivery challan.

Analysis: Goods in transit in contravention of the statutory requirements are liable to detention and release is conditioned by the scheme of Section 129. Movement without the prescribed documentation was examined with reference to Rule 55 and Rule 138A, which contemplate a delivery challan as the recognised document for transportation where goods are moved for reasons other than immediate supply. A delivery note was held to be different from a delivery challan and not a prescribed substitute. On the record, the person in charge of the goods produced only a delivery note, and no valid delivery challan was shown at interception.

Conclusion: The detention and levy of tax and penalty were upheld.

Issue (ii): Whether the petitioner could avoid the tax and penalty order by asserting that the goods were sent on approval basis and that the payment was extracted under duress.

Analysis: Goods sent on approval basis may move under a delivery challan and the invoice may follow on delivery, but the necessary supporting document was not produced at interception. The contemporaneous declaration recorded ownership of the goods and willingness to pay tax and penalty, and the later plea of coercion was not accepted. The written acceptance of liability and voluntary payment were treated as inconsistent with the claim of duress, and the plea was also unsupported by the appellate record.

Conclusion: The challenge based on approval basis and alleged coercion was rejected.

Final Conclusion: The impugned orders were found free from infirmity, and the writ petition was dismissed.

Ratio Decidendi: Where goods in transit are not accompanied by the prescribed delivery challan and the owner contemporaneously accepts liability and pays tax and penalty, detention and penalty under the transit provisions are sustainable, and a later plea of coercion will not displace the statutory consequence absent reliable supporting material.

GST transit detention upheld where goods moved without prescribed delivery challan and later coercion plea failed
Goods in transit without the prescribed delivery challan were held liable to detention under the GST transit scheme, as a delivery note is not a recognised substitute under Rule 55 and Rule 138A. The court also rejected the claim that the goods were sent on approval basis because no supporting challan was produced at interception, and the contemporaneous declaration accepting liability and payment of tax and penalty was inconsistent with a later plea of coercion. On that basis, the tax and penalty order was upheld and the writ challenge failed.

Detention, seizure and release of goods in transit under Section 129 - payment of tax and penalty as condition for release of detained goods - difference between delivery note and prescribed delivery challan - requirement of prescribed delivery challan under Rule 55 - e-way bill and documentation obligation for conveyance in transit - voluntariness of declaration and estoppel from challenging paymentDetention, seizure and release of goods in transit under Section 129 - difference between delivery note and prescribed delivery challan - requirement of prescribed delivery challan under Rule 55 - e-way bill and documentation obligation for conveyance in transit - Validity of detention and levy of tax and penalty under Section 129 where goods were accompanied only by a delivery note and not by the prescribed delivery challan - HELD THAT: - The Court examined Section 129 which mandates that goods transported in contravention of the Act and rules may be detained or seized and released on payment of applicable tax and penalty. Rule 55 prescribes the delivery challan as the authorised document for transportation of goods for reasons other than supply (including movement for approval) and Rule 138(A)(1) requires the person in charge to carry the invoice or bill of supply or delivery challan and the e-way bill or its number. The judgment distinguishes a delivery note (a mere accompanying document) from a prescribed delivery challan (a statutorily recognised document affecting inventory and declared as per rule 138). The record showed that at the time of interception the person in charge produced only a delivery note, which is neither prescribed nor a substitute for the delivery challan; the petitioner did not possess the valid delivery challan or the corroborative document (memo dated 30.12.2019) to substantiate movement on approval. The Court further noted that departmental circulars confirm there is no substitute for the prescribed delivery challan. In these circumstances non-possession of the prescribed delivery challan justified invocation of Section 129 and the imposition of tax and penalty as per law. [Paras 14, 17, 18, 20, 21]Detention and seizure and consequent levy of tax and penalty under Section 129 was justified because the goods were accompanied only by an uncertified delivery note and not by the prescribed delivery challan as required under Rule 55 and Rule 138.Payment of tax and penalty as condition for release of detained goods - voluntariness of declaration and estoppel from challenging payment - Whether the petitioner could challenge the levy and contend duress after making a written declaration and voluntarily agreeing to pay tax and penalty for release of goods - HELD THAT: - The record contained a written declaration by the petitioner acknowledging ownership of the goods and expressing readiness to pay tax and penalty. The STO's order and the release process record that the petitioner voluntarily agreed in writing and paid tax and penalty to secure release. The Court found the plea of coercion and signing under protest to be an afterthought not raised before the appellate authority and unsupported by contemporaneous record; accordingly, once the petitioner admitted ownership and accepted liability in writing and effected payment, he was estopped from later disputing the levy on grounds of duress without reasonable justification. [Paras 21, 22]The petitioner, having voluntarily declared ownership and agreed to pay tax and penalty (and having done so), cannot subsequently challenge the levy on the basis of duress and is estopped from doing so.Final Conclusion: The writ petition is dismissed. The High Court upheld the detention, seizure and the levy of tax and penalty under Section 129 because the goods were accompanied only by a delivery note and not the prescribed delivery challan as required by Rule 55/Rule 138, and because the petitioner had voluntarily declared ownership and agreed to pay the tax and penalty, estopping him from challenging the action.

2023 (12) TMI 973 - ITAT MUMBAI Income Tax

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Draft assessment order invalid when issued with demand and penalty notices under sections 156 and 271
The ITAT Mumbai held that a draft assessment order became invalid when the AO issued it alongside a demand notice u/s 156 and penalty notice u/s 274 r.w.s. 271(1)(c), effectively treating it as a final order rather than a draft. Following the precedent in Cisco Systems Services B.V., the tribunal ruled that demand notices create enforceable civil consequences, making the draft order final in nature. Since the error was not curable under s. 292B, both the draft and subsequent final assessment orders were quashed. The tribunal also determined the total income should reflect returned income plus amounts agreed in MAP proceedings.

Draft assessment order accompanied by notice of demand and penalty show cause - invalidity of draft assessment order under Section 144C(1) - rectification under Section 154 not curing substantive defect in draft order - prejudice caused by issuance and circulation of demand notice by CPC - MAP resolution accepted by assessee to be adopted for computation of income Draft assessment order accompanied by notice of demand and penalty show cause - invalidity of draft assessment order under Section 144C(1) - rectification under Section 154 not curing substantive defect in draft order - prejudice caused by issuance and circulation of demand notice by CPC - Validity of the draft assessment order dated 30-11-2018 and consequences for the final assessment order - HELD THAT: - The Tribunal found that the draft assessment order dated 30-11-2018 was issued together with a notice of demand under Section 156 and was followed by a show cause/penalty notice under Section 274 read with section 271(1)(c). Although the Assessing Officer subsequently sought to rectify the issuance of the demand and the penalty notice by orders under Section 154 and by withdrawing the show cause, the Central Processing Centre nevertheless communicated the demand to the assessee and the penalty show cause was issued and later withdrawn. The issue was held to be one of substance and not a curable formal mistake: issuing a demand and initiating penalty proceedings at the draft stage has the practical effect of converting the draft into a final order and causes prejudice to the assessee. Reliance was placed on High Court decisions to the same effect. In these circumstances the draft assessment order was held to be invalid, and the final assessment order founded on that invalid draft was quashed. [Paras 14, 15, 16, 18] Draft assessment order dated 30-11-2018 was invalid because it was accompanied by a demand notice and penalty show cause; the final assessment order based on that draft is quashed. MAP resolution accepted by assessee to be adopted for computation of income - Computation of the assessee's total income in view of withdrawal of transfer pricing grounds and acceptance of MAP resolution - HELD THAT: - The assessee withdrew grounds relating to transfer pricing adjustments and accepted the Mutual Agreement Procedure (MAP) resolution arrived at between the competent authorities. Following the coordinate bench decision referred to by the parties, the Tribunal directed that the total income be determined as the returned income plus the amount of transfer pricing adjustment accepted by the assessee under the MAP. This direction was given notwithstanding the quashing of the assessment order on the ground noted above. [Paras 12, 13, 17] Total income to be taken as the returned income plus the amount agreed under the MAP resolution. Final Conclusion: The draft assessment order dated 30-11-2018, having been accompanied by a demand notice and penalty show cause, is invalid; the final assessment order based on that draft is quashed. The assessee's total income is to be taken as the return of income plus the amount accepted under the MAP resolution; other grounds need not be adjudicated.

2023 (12) TMI 966 - DELHI HIGH COURT Customs

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Civil contempt for breaching a stay order: prosecution based on the same file and facts was treated as wilful disobedience.
A prosecution or complaint founded on the same file and factual matrix covered by an express stay of proceedings amounts to wilful disobedience when pursued in disregard of that restraint. The Delhi HC found that the later criminal complaint and sanction for prosecution traced their basis to the very file and narrative already stayed by the earlier order, and that the respondents could not narrow the effect of the categorical stay by taking a different route. It also noted suppression of material orders passed in the petitioner's favour and an attempt to over-reach the restraint. On those facts, the ingredients of civil contempt were satisfied and the respondents were held guilty.

Civil contempt - wilful disobedience of court directions - stay of proceedings pursuant to the show cause notice - independent criminal prosecution during pendency of adjudication - sanction for prosecution by an authority lacking power under the Act - suppression of judicial orders in criminal complaint - standard of proof in contempt proceedings (quasi criminal, beyond reasonable doubt)Civil contempt - wilful disobedience of court directions - stay of proceedings pursuant to the show cause notice - suppression of judicial orders in criminal complaint - Respondents committed civil contempt by initiating and prosecuting a criminal complaint arising from the same file which had been stayed by this Court and by omitting to place on record prior favourable judicial orders. - HELD THAT: - The order dated 12.04.2021 expressly stayed proceedings pursuant to the Show Cause Notice dated 26.09.2019 arising from file No. F.No. DRI/HQ-GI/338/VI/ENQ-2/INT-NIL/2019. The complaint filed before the learned Chief Metropolitan Magistrate is founded on the very SCN and main file which were subject to the stay. The sanction letter dated 30.01.2023 bears the same file number and the complaint reproduces the narrative of the SCN while deliberately omitting to disclose the orders in favour of the petitioner (including the CESTAT order dated 13.11.2019, the Division Bench judgment dated 01.06.2020 and the review order dated 26.05.2023). Although adjudication and criminal proceedings can, in general, be launched concurrently, the Court distinguished those authorities on the facts: the SCN and the main file were 'under a cloud' by prior orders in favour of the petitioner, and hence the categorical stay could not be so evaded. The pattern of instituting successive proceedings after adverse judicial orders, together with the omission to place material favourable orders before the criminal court, supports the conclusion that respondents deliberately sought to overreach the stay and harass the petitioner. The Court applied the established standard that contempt jurisdiction is quasi criminal and requires proof beyond reasonable doubt, but found on the record sufficient basis to proceed with contempt: the filing of the complaint pursuant to the stayed file and the material non disclosure amounted to a patent breach of the directions dated 12.04.2021. [Paras 26, 27, 28, 32, 34]Respondents are found guilty of committing civil contempt for deliberate breach of the Court's directions dated 12.04.2021; notice issued to respondents to show cause on 14.02.2024 why they should not be punished under the Contempt of Courts Act.Sanction for prosecution by an authority lacking power under the Act - independent criminal prosecution during pendency of adjudication - The sanction for prosecution accorded by respondent appears to be vulnerable because DRI officers are not proper authorities to initiate proceedings under the Customs Act as explained by the Supreme Court in Canon India. - HELD THAT: - The Court noted the Supreme Court's dictum in Canon India that officers of the DRI, not being customs officers, cannot be entrusted with functions of customs officers absent valid statutory power. Having regard to that ratio, the sanction dated 30.01.2023, which emanates from the same main file and was used to institute the complaint, 'appears to be hit' by Canon India. While the Court recognised the general principle that adjudication and criminal proceedings may be independent and simultaneous, it held that the particular sanction relied upon here is suspect in law because it was granted by an authority whose competence to do so is doubtful under the controlling precedent. [Paras 33]The sanction accorded under the impugned process appears to be invalid in view of the Canon India ratio that DRI officers are not proper authorities to initiate proceedings under the Customs Act.Final Conclusion: The Court found that respondents deliberately and repeatedly overreached the stay issued on the SCN arising from the main DRI file, committed civil contempt by instituting a complaint based on the stayed file while suppressing favourable judicial orders, and observed that the sanction underpinning the complaint appears vulnerable in law; notice was issued to the respondents to show cause on 14.02.2024.

2023 (12) TMI 960 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Issues Involved:
1. Whether the Resolution Professional ought to have handed over the affairs of the Corporate Debtor to the directors in view of the stay order passed by the Hon'ble Supreme Court of India on 25 February 2022.
2. Legality of the removal of the Executive Editor by the Resolution Professional.
3. Legality of the appointment of a new Executive Editor by the Resolution Professional.
4. Whether the Adjudicating Authority should have entertained the applications due to the pending Civil Appeal before the Hon'ble Supreme Court.

Summary:

Issue 1: Handing Over Affairs to Directors
The Adjudicating Authority directed the Resolution Professional to hand over the management of the Corporate Debtor to the CEO/Management of the Corporate Debtor, interpreting the Supreme Court's stay of the CIRP as necessitating this transfer. The Tribunal found this interpretation erroneous, noting that the stay of CIRP does not imply the Resolution Professional must hand over control to the ex-management. The Tribunal emphasized that such a handover could lead to misuse of assets, adversely affecting creditors.

Issue 2: Removal of Executive Editor
The Resolution Professional terminated the Executive Editor's contract, citing the expiration of the contract and the executive reaching 60 years of age. The Respondent challenged this, claiming the termination violated the Supreme Court's interim order. The Tribunal noted that the Respondent had approached the Supreme Court for contempt proceedings regarding this termination, and thus, the Adjudicating Authority should not have entertained the application.

Issue 3: Appointment of New Executive Editor
The Tribunal found that the Resolution Professional's actions, including the appointment of a new Executive Editor, were aimed at running the Corporate Debtor as a going concern, which is within his purview, especially given the company's financial losses. The Tribunal held that the Adjudicating Authority's direction to nullify these actions was inappropriate.

Issue 4: Jurisdiction of Adjudicating Authority
The Tribunal held that the Adjudicating Authority should have refrained from issuing directions due to the pending Civil Appeal before the Supreme Court. The Tribunal emphasized that any further orders or directions should be sought from the Supreme Court.

Conclusion:
The Tribunal set aside the Adjudicating Authority's order dated 30.05.2023, which had directed the Resolution Professional to hand over management to the ex-management and nullified actions taken by the Resolution Professional post the Supreme Court's interim order. Both parties were directed to approach the Supreme Court for further orders.

Resolution Professional retains management control after NCLT order set aside during stayed insolvency proceedings
NCLAT set aside NCLT's order directing Resolution Professional to handover corporate debtor's management to CEO/Management. NCLAT held that NCLT erred in entertaining applications and issuing directions while CIRP was stayed by SC and related appeal remained pending before SC. Adjudicating Authority should have stayed proceedings and relegated parties to approach SC for further directions. Resolution Professional retains discretion to manage corporate debtor as going concern without CIRP steps, pending SC's interim order. NCLT committed error by not staying hands from passing orders on CIRP-related applications during pendency of SC appeal.

Effect of stay of Corporate Insolvency Resolution Process - powers and duties of the Resolution Professional during stay - reinstatement of ex-management upon stay of CIRP - jurisdiction of the Adjudicating Authority where matter is pending before higher Court - continuation of day-to-day management as going concernEffect of stay of Corporate Insolvency Resolution Process - reinstatement of ex-management upon stay of CIRP - Whether the Adjudicating Authority was correct in directing the Resolution Professional to hand over management of the Corporate Debtor to the ex-management in view of the interim stay of CIRP by the Hon'ble Supreme Court. - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in treating the interim stay of the CIRP as automatically entitling the ex-management to be handed back the control of the corporate debtor. The judgment in Ashok Kumar Tyagi was examined and does not support a proposition that a stay of CIRP results in restoration of pre-admission management; the stay of admission is distinguishable from quashing of admission. Granting management back to persons against whom CIRP was initiated risks diminution and misuse of assets and would be detrimental to creditors. While the Resolution Professional must refrain from taking further steps in the CIRP during the stay, he remains responsible for managing day-to-day affairs so that the corporate debtor continues as a going concern until the appellate process is finally determined. [Paras 11, 13]Direction to hand over management to the ex-management was unjustified and set aside.Jurisdiction of the Adjudicating Authority where matter is pending before higher Court - powers and duties of the Resolution Professional during stay - continuation of day-to-day management as going concern - Whether the Adjudicating Authority ought to have entertained and decided IA No.2403 of 2023 (and IA No.964 of 2023) while the related civil appeal was pending before the Hon'ble Supreme Court. - HELD THAT: - The Tribunal found that, given the pendency of Civil Appeal No.2662 of 2022 before the Hon'ble Supreme Court which had earlier passed an interim order staying the CIRP, the Adjudicating Authority should have exercised restraint and refrained from issuing directions that effectively dealt with the core consequences of the stay. Although the RP cannot proceed with CIRP steps while the stay subsists, the Adjudicating Authority should not have passed the impugned directions and parties ought to be relegated to seek appropriate relief before the Supreme Court. Meanwhile, the RP, not being discharged, remains the officer to ensure running of the corporate debtor as a going concern in the absence of a lawful management in place. [Paras 14, 16]The applications should not have been entertained; the Adjudicating Authority's order is set aside and the parties are left free to approach the Hon'ble Supreme Court.Final Conclusion: Appeals allowed; order dated 30.05.2023 (IA Nos.2403/2023 and 964/2023) set aside. Parties permitted to seek appropriate relief before the Hon'ble Supreme Court; each party to bear its own costs.

2023 (12) TMI 959 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Resolution plan's employee payment classification based on Rs.10 lakh threshold upheld as non-discriminatory under Section 30(2)
The NCLAT held that the resolution plan's classification of employee payments based on dues up to Rs.10 lakhs versus higher amounts was not discriminatory and fell within the CoC's commercial wisdom, as it did not violate Section 30(2) of the Code. The tribunal set aside the adjudicating authority's direction for CoC to redetermine CIRP costs after plan approval, ruling that no further CoC approval was required since the resolution professional had properly determined costs through audited reports. However, the direction to withhold CIRP cost payments pending avoidance application outcomes was upheld as valid. The appeal was allowed in part.

Priority of insolvency resolution process costs - treatment of operational creditors and related parties under a resolution plan - commercial wisdom of Committee of Creditors - redetermination of CIRP costs - withholding payments pending outcome of avoidance proceedings and appropriation - adjudicating authority's power to direct pursuit of avoidance applications by the CoCTreatment of operational creditors and related parties under a resolution plan - commercial wisdom of Committee of Creditors - Classification in paragraph 3.3.2 of the Resolution Plan discriminating between employees with dues upto Rs.10 lakh and those with dues exceeding Rs.10 lakh is not violative of Section 30(2) and is sustainable. - HELD THAT: - The Tribunal examined admitted employee claims, the admitted liquidation value (stated as 'nil' for employees), and the Resolution Plan clause allocating a capped amount for employee claims with differential treatment for continuing employees whose dues exceed the stated threshold. Reliance on the Supreme Court's reasoning that related parties need not be treated pari passu with other creditors supports the proposition that differential treatment of a related party does not by itself contravene Section 30(2). As the amount to employees under the Plan is not shown to be less than what would be payable on liquidation, and the distinction arises from CoC's commercial decision, the classification falls within CoC's commercial wisdom and cannot be impugned on the ground of discrimination under Section 30(2)(b). [Paras 11, 12, 13, 15]No fault found with the differential treatment of employees/related parties in paragraph 3.3.2; the clause is not violative of Section 30(2)(b).Priority of insolvency resolution process costs - redetermination of CIRP costs - commercial wisdom of Committee of Creditors - Direction in paragraph 6.2 empowering the CoC to redetermine CIRP cost after approval of the Resolution Plan is unsustainable and is set aside. - HELD THAT: - CIRP costs include costs incurred by the RP in running the business as a going concern. Section 28 lists specific actions requiring prior CoC approval; it was not demonstrated that the RP's determination of CIRP cost required CoC approval under Section 28. Where the Plan (and the RP's determination) already addressed CIRP cost and the RP obtained and placed an audit report before the CoC (which later approved an audited figure), there was no legal basis for the Adjudicating Authority to direct a post-approval redetermination by the CoC. Consequently, paragraph 6.2 of the impugned order, directing such redetermination, is set aside. [Paras 16, 18, 19, 20]Paragraph 6.2 set aside; CoC redetermination of CIRP cost after Plan approval is not warranted.Withholding payments pending outcome of avoidance proceedings and appropriation - priority of insolvency resolution process costs - Direction in paragraph 6.5 to withhold amounts payable to promoters/KMPs pending adjudication of avoidance applications is modified to permit RP to keep the determined amount in FDR until avoidance liability is adjudicated. - HELD THAT: - Determination and payment of CIRP cost is conceptually distinct from recovery proceedings against promoters/KMPs under avoidance provisions. The Tribunal held that amounts payable to promoters/KMPs as CIRP cost should be determined by the RP and, rather than outrightly withholding, such amounts may be preserved in a Fixed Deposit Receipt (FDR) in favour of the promoters/KMPs to earn interest. The FDRs are to be released only after adjusting amounts found recoverable by the Adjudicating Authority in avoidance applications. The Adjudicating Authority is also urged to expeditiously decide pending avoidance applications to avoid prolonged withholding. [Paras 21, 22]Paragraph 6.5 modified: RP to keep amounts payable to promoters/KMPs in FDRs; release after adjustment for any amounts found recoverable in avoidance proceedings; Adjudicating Authority to expeditiously decide avoidance applications.Adjudicating authority's power to direct pursuit of avoidance applications by the CoC - withholding payments pending outcome of avoidance proceedings and appropriation - Direction in paragraph 9 that the CoC shall pursue the avoidance application and distribution of recoveries is sustainable and does not warrant interference. - HELD THAT: - Post-approval of a Resolution Plan, the Adjudicating Authority retains power to issue directions regarding the conduct and pursuit of avoidance applications and the appropriation/distribution of recoveries. The Tribunal found that assigning responsibility to the CoC to pursue the pending avoidance application under Sections 43, 45, 49 and 66 and directing distribution of proceeds in accordance with Section 53 is a permissible exercise of the Adjudicating Authority's powers. [Paras 23, 24]Paragraph 9 upheld: CoC may be directed to pursue avoidance applications and proceeds to be distributed as directed by the Adjudicating Authority.Final Conclusion: Appeal partly allowed: paragraph 6.2 of the impugned order set aside; paragraph 6.5 modified to require amounts payable to promoters/KMPs (as determined by the RP) to be kept in FDRs and released after adjustment for any recovery ordered in avoidance proceedings; Adjudicating Authority directed to expeditiously decide pending avoidance applications; paragraph 9 directing CoC to pursue avoidance applications is upheld. Parties to bear their own costs.

2023 (12) TMI 948 - DELHI HIGH COURT Indian Laws

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Additional Director cannot escape cheque dishonour liability under Section 141 without proving non-participation in business affairs
The Delhi HC dismissed a petition seeking dismissal of a cheque dishonour complaint under sections 138 and 141 of the NI Act. The petitioner, who was Additional Director of the accused company, claimed he was not responsible for the company's business affairs and was merely a Regional Sales Manager. The HC held that section 141 creates constructive liability requiring strict construction, but the petitioner failed to provide documentary evidence proving non-participation in business conduct. The court ruled that liability cannot be absolved by merely pleading lack of responsibility for day-to-day affairs, and such matters must be established during trial.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments in complaint to show a person was in charge of and responsible for conduct of company's business - strict construction of penal provisions - power of High Court under Section 482 CrPC to quash criminal complaintVicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments in complaint to show a person was in charge of and responsible for conduct of company's business - power of High Court under Section 482 CrPC to quash criminal complaint - Whether the criminal complaint under Section 138 read with Section 141 of the Negotiable Instruments Act disclosed sufficient averments against the petitioner to sustain issuance of process and thus whether the complaint should be quashed under Section 482 CrPC. - HELD THAT: - The Court applied the settled legal principle that Section 141 creates a constructive/vicarious criminal liability which must be strictly construed and that the complainant bears the primary responsibility to make specific averments showing that the person sought to be prosecuted was, at the time of the offence, in charge of and responsible for the conduct of the company's business. The Court found that the complaint alleged the accused company and that the accused nos. 2, 3, 4 (the petitioner) and 5 were Directors/Additional Directors and made averments that the goods were supplied to the accused and that cheques issued in payment were dishonoured after presentation and notice. Those averments, the Court held, amounted to sufficient allegations that the petitioner was involved in the day to day affairs of the company for the limited purpose of invoking process; legal authorities require specific factual averments but do not preclude issuance of process where the complaint on its face makes such basic allegations. The petitioner's contention that he was only an employee promoted later as an Additional Director and that he did not sign the cheques could not, on the material before the High Court, be accepted to the extent of dismantling the complaint; such factual contentions and any proof that the petitioner was not responsible for the company's affairs are matters to be examined at trial. The Court therefore exercised its jurisdiction under Section 482 CrPC sparingly and declined to quash the complaint insofar as the petitioner was concerned. [Paras 8, 9, 10]The petition to quash the complaint is dismissed and the complaint shall proceed against the petitioner; factual disputes as to the petitioner's role are left for trial.Final Conclusion: The High Court dismissed the Section 482 CrPC petition and declined to quash the complaint under Section 138 read with Section 141 of the Negotiable Instruments Act against the petitioner, holding that the complaint contains sufficient averments to proceed and that factual contentions about the petitioner's non involvement are matters for trial.

2023 (12) TMI 932 - ITAT JODHPUR Income Tax

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Issues Involved:
1. Treatment of receipts as corpus donation and exemption under Section 11(1)(d) of the Income Tax Act.
2. Qualification for exemption under Section 11 of the Income Tax Act.
3. Alleged violation of Section 13(3) of the Income Tax Act.

Summary:

Issue 1: Treatment of Receipts as Corpus Donation and Exemption under Section 11(1)(d)
The revenue contended that the Ld. CIT (Appeals) erred in treating Rs. 7,43,95,029/- as corpus donation and allowing exemption under Section 11(1)(d) without specific directions from the donor. The assessee, a trust registered under Section 12A, received the donation from Dr. Kirti Jain Family Foundation Inc. for the construction and running of a hospital. The AO disallowed the exemption, arguing the funds were used for loan repayment and not for construction. The CIT(A) dismissed this, stating the donation was for the trust's corpus, and the delay in construction was due to a stay order by the High Court. The Tribunal upheld CIT(A)'s decision, noting no violation of Section 11(1)(d) as the donor's intent and the utilization of funds were clear.

Issue 2: Qualification for Exemption under Section 11
The revenue argued that the assessee did not qualify for exemption under Section 11 due to the alleged non-charitable nature of its activities, which were conducted under GBH American Hospital. The AO claimed the activities were not for public benefit and were profit-oriented. The CIT(A) found that the trust's activities were charitable, and the delay in construction was due to legal issues. The Tribunal agreed, stating the trust's expenses were for charitable purposes, and the delay was justified.

Issue 3: Alleged Violation of Section 13(3)
The AO alleged a violation of Section 13(3) as Dr. Kirti Kumar Jain, founder of the trust, was also the managing director of GBH American Hospital. The Tribunal found no evidence of personal benefit to Dr. Jain and no violation of Section 13(3).

Conclusion:
The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s order that the donation was a corpus fund exempt under Section 11(1)(d), the trust's activities were charitable, and there was no violation of Section 13(3). The appeals were dismissed in entirety.

Trust exemption upheld for using corpus donation to repay bank loan for land purchase under section 11(1)(d)
ITAT Jodhpur upheld exemption u/s 11(1)(d) for assessee-trust that utilized corpus donation to repay bank loan taken for land purchase. The trust received foreign donation for hospital construction but used funds for loan repayment due to project delays caused by HC order. ITAT held no violation occurred as donor consented to fund utilization, source was properly explained, and activities remained within charitable objects. Revenue's appeal dismissed as trust's actions were covered under section 11(1)(d) provisions.

Corpus donation - exemption under section 11(1)(d) - application of donation for repayment of loan - FCRA approval and purpose of foreign contribution - registration under section 12A and entitlement to exemption under section 11 - intention and application of fundsCorpus donation - exemption under section 11(1)(d) - FCRA approval and purpose of foreign contribution - application of donation for repayment of loan - Whether the foreign contribution of Rs. 7,43,95,029/- constituted a corpus donation within the meaning of section 11(1)(d) and was eligible for exemption despite being applied to repayment of a loan - HELD THAT: - The Tribunal found that the sum received from Dr. Kirti Jain Family Foundation Inc. was a corpus donation within the meaning of section 11(1)(d). Although the original FCRA approval described the purpose as construction/running of hospital/dispensary/clinic and initial correspondence did not expressly state that the contribution would form part of corpus, subsequent letters dated 06.01.2014 and 18.01.2014 from the donor furnished specific corpus confirmation. The delay in utilising the funds for construction was attributable to pendency of FCRA approval and a court-imposed stay on construction; meanwhile the assessee had taken and repaid a loan for purchase of land, and the repayment out of the received funds was covered by the donor's confirmation and disclosed in FCRA returns. On these facts the Tribunal held that utilisation for loan repayment did not defeat the character of the receipt as corpus donation and there was no contravention of section 11(1)(d). The Tribunal therefore affirmed the CIT(A)'s acceptance of the corpus character and declined to disturb it. [Paras 10, 14]Donation held to be corpus and exemption under section 11(1)(d) allowed; revenue's grounds on this point dismissed.Registration under section 12A and entitlement to exemption under section 11 - intention and application of funds - Whether the assessee-trust qualified for exemption under section 11 given the scope and scale of its charitable activities and the expenditure incurred - HELD THAT: - The Tribunal examined the AO's adverse findings that the trust, though registered, had not carried out charitable activity at a scale or with supporting documentation to justify the claimed application of funds. The Tribunal accepted the assessee's account that activities were delayed due to litigation and FCRA procedural delay, that the trust had undertaken preparatory steps (land acquisition and boundary wall) and had engaged in health camps and educational activities through GBH, and that expenses were directed to charitable objects. On the record the Tribunal found no persuasive basis to sustain the AO's conclusion that the trust was merely seeking exemption without conducting charitable activity, and held that registration under section 12A together with the disclosed application and the donor confirmations sufficed to entitle the assessee to exemption under section 11 for the relevant matters adjudicated. [Paras 10, 14]Assessee held to qualify for exemption under section 11 on the facts; revenue's challenge on this point dismissed.Final Conclusion: The revenue's appeals were dismissed; the ITAT upheld the CIT(A)'s allowance of the corpus character of the foreign donation and the assessee's entitlement to exemption under section 11(1)(d) and section 11, for the matters adjudicated in the appeals.

2023 (12) TMI 931 - ITAT JABALPUR Income Tax

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Issues involved:
The judgment involves an appeal against an order passed under section 263 of the Income Tax Act, 1961 pertaining to assessment year 2018-19. The issues raised by the assessee include the correctness of the assessment order passed under section 143(3) and the applicability of provisions related to the purchase of a disputed property from a relative.

Assessment of Investment in Immovable Property:
During the assessment proceedings, the Assessing Officer raised a query regarding the purchase of land by the assessee for a lower consideration than the stamp duty value. The AO contended that the excess amount should be treated as income from undisclosed sources. However, the assessee explained that the land was rural agricultural land purchased from a relative, supported by a confirmation letter. The AO accepted this explanation and made no addition. The Tribunal held that the AO's approach did not warrant interference under section 263.

Unsecured Loans Issue:
The assessee had taken unsecured loans from 41 lenders during the relevant year and provided necessary documentation, including bank statements. The Assessing Officer accepted the explanation regarding the identity, creditworthiness, and genuineness of the lenders, except for a specific case. The Tribunal noted that the assessee had satisfactorily addressed all queries raised by the AO, and the order passed under section 143(3) did not require revision under section 263.

Judicial Precedent and Legal Interpretation:
Referring to a previous ITAT decision, the Tribunal emphasized that the assessee had fulfilled the onus of proving the legitimacy of the transactions by providing supporting evidence such as confirmation letters, PAN, Aadhar numbers, and bank statements. Additionally, the purchase of the property from a relative was supported by a genealogical tree and had been duly examined by the Assessing Officer. Based on these factors, the Tribunal concluded that the order of the Principal CIT should be set aside, and the appeal of the assessee was allowed.

Conclusion:
The ITAT Jabalpur allowed the appeal of the assessee, quashing the order of the Principal CIT dated 26/03/2023. The Tribunal found that the assessee had adequately addressed the issues related to investment in immovable property and unsecured loans during the assessment proceedings, and the order under section 143(3) did not warrant revision under section 263.

Assessee wins appeal as revision order under Section 263 quashed for property purchase and unsecured loans dispute
ITAT Jabalpur allowed the assessee's appeal against Pr. CIT's revision order u/s 263. The case involved disputed property purchase from relative and increased unsecured loans. AO accepted assessee's explanations that purchased land was rural agricultural property from relative, supported by confirmation letter and genealogical tree. For unsecured loans, assessee provided identity, creditworthiness, and genuineness evidence for 41 lenders through bank statements and documentation. ITAT held AO's approach required no interference u/s 263 as assessee discharged initial burden with satisfactory evidence. Pr. CIT's order was quashed.

Validity of revision under section 263 - Application of section 56(2)(x) to transfer between relatives and rural agricultural land - Tests for genuineness of unsecured loans - identity, creditworthiness and genuinenessValidity of revision under section 263 - Whether the order passed by the Assessing Officer u/s 143(3) was erroneous and prejudicial to the interest of Revenue so as to warrant revision under section 263 - HELD THAT: - The Principal Commissioner observed that certain aspects were not properly examined and cancelled the assessment u/s 263. The Tribunal examined the assessment file and records and found that the Assessing Officer had raised specific queries under limited scrutiny, received explanations and documentary evidence from the assessee, and accepted those explanations without making additions. Having regard to the enquiries made and the materials furnished and accepted by the Assessing Officer during the assessment proceedings, the Tribunal concluded that the Pr. CIT's exercise under section 263 was not justified. The Tribunal therefore held that the Pr. CIT's order cancelling the assessment was unsustainable and warranted quashing. [Paras 3, 6, 10, 11]Order of the Pr. CIT dated 26/03/2023 under section 263 is quashed and the appeal is allowed.Application of section 56(2)(x) to transfer between relatives and rural agricultural land - Whether the differential between stamp duty value and declared purchase consideration attracted income under section 56(2)(x) when the land was purchased from a relative and was rural agricultural land - HELD THAT: - The Assessing Officer queried the large difference between stamp duty value and declared consideration but accepted the assessee's explanation that the land was rural agricultural land situated beyond prescribed distance from the municipality and that the transfer was from a relative; the assessee produced a confirmation from the seller and a genealogical tree. The Tribunal found that the assessee discharged the initial onus and that these facts were examined and accepted by the Assessing Officer in assessment proceedings. In view of the acceptance at assessment and the documentary support produced, the Tribunal held that the Pr. CIT was not justified in treating the assessment as erroneous on this ground. [Paras 7, 10]No addition under section 56(2)(x) justified; assessment on this point stands and the revision is quashed.Tests for genuineness of unsecured loans - identity, creditworthiness and genuineness - Whether the large increase in unsecured loans was chargeable to income or whether the assessee proved the genuineness of the loans - HELD THAT: - The assessee furnished details of 41 lenders, confirmations, PAN and Aadhaar numbers and bank statements. The Assessing Officer examined these documents, accepted the identity, creditworthiness and genuineness of the lenders (except one lender noted separately), and made no addition. The Tribunal referred to precedent and concluded that the assessee had discharged the initial onus by producing corroborative documentary evidence and that the Assessing Officer's acceptance of these materials in assessment proceedings negated the Pr. CIT's view that the assessment was erroneous. [Paras 8, 9, 10]Transactions treated as genuine; no addition warranted and Pr. CIT's revision order on this ground is quashed.Final Conclusion: The Tribunal allowed the appeal, set aside the Principal CIT's order dated 26/03/2023 under section 263, and held that the Assessing Officer had adequately examined and accepted the assessee's explanations and supporting documents on (i) purchase of rural agricultural land from a relative and non-attraction of section 56(2)(x), and (ii) genuineness of unsecured loans; accordingly the assessment order passed u/s 143(3) for Assessment year 2018-19 is restored.

2023 (12) TMI 917 - CESTAT ALLAHABAD Customs

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Statutory adjournment limits and non-appearance can justify dismissal for non-prosecution when no sufficient cause is shown.
Section 35C(1A) of the Central Excise Act permits adjournment only on sufficient cause and not more than three times during hearing of an appeal, while Rule 20 of the CESTAT Procedure Rules allows dismissal for default when the appellant does not appear. Where the appellant repeatedly sought adjournments, remained absent on the last two dates, and made no adjournment request on the hearing date, the Tribunal found no basis to grant any further indulgence and treated the appeal as liable to dismissal for non-prosecution.

Misuse of adjournments - statutory limit on adjournments under Section 35C(1A) of the Central Excise Act, 1944 - dismissal for default / non-prosecution under Rule 20 of CESTAT Procedure Rules, 1982 - duty of advocate and consequence of non appearance - speedy disposal of cases / prejudice from dilatory tacticsStatutory limit on adjournments under Section 35C(1A) of the Central Excise Act, 1944 - misuse of adjournments - Whether further adjournments beyond the statutory maximum may be granted in the present appeal. - HELD THAT: - The Tribunal held that adjournments must be granted only for sufficient cause and that the proviso to Section 35C(1A) bars granting more than three adjournments to a party during the hearing. Reliance was placed on the salutary principle, as expounded by the Supreme Court, condemning mechanical or routine adjournments and emphasising the duty to protect the right to speedy disposal of cases and to prevent dilatory tactics. In the circumstances of this appeal, where multiple adjournments had been sought and granted and the appellant failed to appear on successive dates without seeking today's adjournment, no justification existed to extend the hearing beyond the statutory limit. [Paras 2, 4]No further adjournments were justified and the statutory maximum under Section 35C(1A) precluded further extension.Dismissal for default / non-prosecution under Rule 20 of CESTAT Procedure Rules, 1982 - duty of advocate and consequence of non appearance - speedy disposal of cases / prejudice from dilatory tactics - Whether the appeal should be dismissed for non prosecution for the appellant's repeated non appearance. - HELD THAT: - Applying Rule 20 of the CESTAT Procedure Rules, 1982, which authorises dismissal of an appeal where the appellant does not appear when the appeal is called, the Tribunal concluded that dismissal for default was warranted. The Tribunal noted the appellate authority and Supreme Court pronouncements condemning repeated adjournments and non appearance by parties or their counsel, and observed that the appellant (through counsel) had repeatedly sought adjournments and then failed to appear on recent dates, including today without any request for adjournment. Given the absence of sufficient cause and the need to curb dilatory conduct to protect speedy justice, the appeal was dismissed for non prosecution under Rule 20. [Paras 2, 5]Appeal dismissed for non prosecution in terms of Rule 20 of the CESTAT Procedure Rules, 1982.Final Conclusion: The Tribunal refused further adjournments as barred by the statutory limit and, having regard to repeated non appearances and the need to prevent dilatory tactics, dismissed the appeal for non prosecution under Rule 20 of the CESTAT Procedure Rules, 1982.

2023 (12) TMI 916 - CESTAT MUMBAI Customs

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Gold bars seized under Advance Authorisation Scheme cannot be provisionally released after final adjudication orders
The CESTAT Mumbai dismissed an appeal for provisional release of seized gold bars imported under Advance Authorisation Scheme exemption. The appellants had been issued show cause notices regarding the seized goods. The tribunal held that since the department had already adjudicated the show cause notices and passed final orders, the appeal for provisional release became infructuous. The court noted that Section 110 of Customs Act, 1962 provides for seizure of goods liable to confiscation and mandates show cause notices within six months. CBIC instructions established time limits for adjudication. The appeal was dismissed as it could not be considered after final adjudication.

Provisional release under Section 110A - Seizure under Section 110 - Effect of adjudication of show-cause notices on provisional-release appeal - Infructuous appeal - Time limits for adjudication under Section 110(2) and administrative instructionsProvisional release under Section 110A - Seizure under Section 110 - Effect of adjudication of show-cause notices on provisional-release appeal - Infructuous appeal - Appeal against the conditions of provisional release of seized goods - HELD THAT: - The Tribunal examined whether the appellants' challenge to the Commissioner of Customs' order granting provisional release on execution of bond and security could be entertained while show-cause notices in relation to the seized goods remained pending. The High Court's directions limited the Tribunal's role to deciding the appellants' appeal in respect of provisional release, leaving adjudication of the show-cause notices and claims for IGST refund and MEIS registration to the concerned authorities (para 3). The statutory scheme permits provisional release of seized goods on bond and security pending adjudication (Section 110A), and seizure and time-limits for issuing SCNs are governed by Section 110 and related administrative instructions (para 4-5). During the pendency of the appeal, the adjudicating authority passed final orders on the show-cause notices (Declaration for Mention and office communication noted by the Tribunal) (para 6.2). Given that adjudication of the SCNs had been completed, the Tribunal held that there was no longer any live controversy on provisional release for the appellate forum to decide; the appeal therefore became infructuous (para 6.3). The Tribunal accordingly dismissed the appeal as infructuous (para 7). [Paras 3, 6, 7]Appeal dismissed as infructuous since the show-cause notices in respect of the seized goods were adjudicated, removing the live controversy on provisional release.Final Conclusion: The appeal challenging the Commissioner of Customs' provisional-release order is dismissed as infructuous because the show-cause notices concerning the seized goods were adjudicated during the pendency of the appeal, leaving no live issue for the Tribunal to decide.

2023 (12) TMI 913 - DELHI HIGH COURT Money Laundering

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Issues: (i) whether the petitioners' detention became illegal after filing of the prosecution complaint and before cognizance was taken, in the absence of a fresh remand order; (ii) whether issuance of production warrants and the surrounding procedural record preserved the legality of the petitioners' custody.

Issue (i): whether the petitioners' detention became illegal after filing of the prosecution complaint and before cognizance was taken, in the absence of a fresh remand order.

Analysis: The petitions were founded on the claim that custody after 07.12.2023 was unsupported by a valid judicial order and therefore offended personal liberty. The applicable framework under Article 21 of the Constitution of India, Section 167(2) of the Code of Criminal Procedure, 1973 and Section 309 of the Code of Criminal Procedure, 1973 was examined. It was held that the investigative-stage remand and the post-cognizance remand are distinct, but custody must remain continuous and in accordance with law. Once the prosecution complaint had been filed within time, the accused remained in the custody of court until the next judicial stage, and the absence of an immediate fresh remand order did not by itself create an illegal break where the custody had not lapsed in substance.

Conclusion: The detention did not become illegal merely because cognizance was deferred and no separate remand order was passed on the same day.

Issue (ii): whether issuance of production warrants and the surrounding procedural record preserved the legality of the petitioners' custody.

Analysis: The Court placed emphasis on the fact that the petitioners were represented before the successor court, the complaint had been transferred, the matter was posted for consideration of cognizance, and production warrants were issued for the next date. The Court treated this as maintaining continuity of judicial custody. It rejected the submission that non-production before the court on that date necessarily rendered the custody void, and held that the record showed no gap sufficient to characterise the detention as unlawful.

Conclusion: The issuance of production warrants sustained the legality of custody and negatived the plea of illegal detention.

Final Conclusion: The writ petitions failed because the petitioners remained in lawful custody of the court and no case for habeas corpus relief was made out.

Ratio Decidendi: Where a prosecution complaint is filed in time and the court issues production warrants while the matter is pending for cognizance, custody remains continuous and does not become illegal merely because a fresh remand order is not separately recorded on that date.

Continuous judicial custody remains lawful after timely complaint filing when production warrants preserve custody pending cognizance.
Custody does not become illegal merely because cognizance is deferred and a fresh remand order is not separately recorded on the same day, where the prosecution complaint has been filed in time and judicial custody remains continuous. The Delhi High Court treated investigative remand and post-cognizance remand as distinct, but held that the accused remained in lawful court custody pending the next judicial stage. It also held that production warrants, the transfer of the complaint, and the procedural record preserved continuity of custody and negatived any claim of a break rendering detention unlawful. Habeas corpus relief was therefore not made out.

Continuity of judicial custody - production warrant as validation of custody - custody under Section 167(2) Cr.P.C. - post-cognizance remand under Section 309 Cr.P.C. - invalidity of detention for want of judicial remand - Actus Curiae neminem gravabitCustody under Section 167(2) Cr.P.C. - post-cognizance remand under Section 309 Cr.P.C. - Validity of the petitioners' detention after 07.12.2023 when no fresh written remand order under Section 167(2) Cr.P.C. or Section 309 Cr.P.C. was recorded on that date. - HELD THAT: - The Court analysed the statutory scheme distinguishing investigative-stage remand under Section 167(2) Cr.P.C. and post-cognizance remand under Section 309 Cr.P.C., and reviewed binding authority holding that once a charge-sheet/prosecution complaint is filed within the statutory period the accused remains in custody of a court until cognizance is taken and the trial court assumes custody. The factual matrix showed that on 07.12.2023 the prosecution complaint had been filed, cognizance was deferred for consideration (documents were to be scrutinised) and production warrants were issued for the next hearing; the petitioners were represented by counsel and no bail application was moved. Given these facts and precedents (including Suresh Kumar Bhikamchand Jain and Serious Fraud Investigation Office v. Rahul Modi), the Court held there was no hiatus in custody: an order validly made under Section 167(2) does not necessarily terminate the moment a complaint is filed, and custody remains with 'some court' until cognizance and any subsequent remand are recorded. [Paras 27, 28, 31, 34, 36]Detention of the petitioners after 07.12.2023 was lawful; no illegality of custody was shown on this ground.Production warrant as validation of custody - continuity of judicial custody - invalidity of detention for want of judicial remand - Whether issuance of production warrants and non-production of accused on the date of hearing (with accused represented by counsel) rendered their custody illegal or whether production warrants maintain continuity of judicial custody until next hearing. - HELD THAT: - The Court examined the order dated 07.12.2023 which recorded that the accused were not produced and directed issuance of production warrants and further directed production through video conferencing on the adjourned date. It observed that when an accused has been validly remanded and the court, for reasons recorded, issues production warrants for the next date (with counsel present and without objection or bail application), the custody remains continuous and lawful; a production warrant issued on the date of adjournment for production on the next date does not create a break in custody. The Court drew a distinction between (a) situations where production warrants are issued contemporaneously with adjournment (continuity preserved), and (b) situations where warrants are issued later creating a possible break. On the facts, the warrants were issued on the adjournment date and thus validated custody until 13.12.2023. [Paras 29, 30, 34, 35, 36]Issuance of production warrants on 07.12.2023 validated the petitioners' judicial custody and did not render their detention illegal.Final Conclusion: The writ petitions challenging detention as illegal since 07.12.2023 are dismissed: on the facts the petitioners remained in lawful judicial custody by virtue of a subsisting remand and issuance of production warrants pending cognizance, and no jurisdictional or absolute illegality was made out.

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