TaxTMI Updates e-Newsletter
Jan 01,2022

Detention of goods and conveyance under the CGST regime - confiscation proceedings under the GST law - alternative remedy of appeal under GST adjudication - competence of the officer (mobile squad v. adjudicating authority)

Detention of goods and conveyance under the CGST regime - confiscation proceedings under the GST law - alternative remedy of appeal under GST adjudication - Petition challenging detention and subsequent order of confiscation was not finally adjudicated and no interim relief was granted; notice was issued and the respondents' right to urge availability of alternative remedy retained. - HELD THAT: - The petitioner challenged detention of the vehicle and initiation of confiscation proceedings, seeking quashing of the detention order, the show cause notice and the order of confiscation as well as interim release of goods and conveyance. The State pointed out that appellate remedy lies under the statutory scheme and invited the petitioner to pursue that remedy. The Court did not adjudicate the merits of the detention or confiscation; instead it issued notice and expressly kept open the respondent-State's right to contend the availability and adequacy of alternative statutory remedies. No order was passed for release of goods or conveyance pending adjudication. [Paras 6, 8]

Notice issued; respondents' right to raise alternative remedy preserved; no interim relief granted.

Competence of the officer (mobile squad v. adjudicating authority) - Question whether the impugned adjudication was finally made by a competent adjudicating officer or by a mobile squad officer was left open for determination. - HELD THAT: - On query from the Court, the learned Additional Government Pleader stated uncertainty as to whether the impugned order was a final adjudication by the competent officer or an on-the-spot decision by a mobile squad officer. The Court did not resolve this factual and legal question in the present hearing and therefore required the matter to be addressed in proceedings upon notice. The determination of which officer undertook the adjudication is germane to the availability of remedies and to the competence to pass the impugned orders, and accordingly remains for consideration in the proceedings on returnable date. [Paras 7, 8]

Left open for determination; notice issued to decide competence of the officer who passed the impugned order.

Final Conclusion: The writ petition was not finally adjudicated on merits; the High Court issued notice, reserved for further hearing and directed return on the listed date while preserving the respondents' right to urge alternative statutory remedies and without granting any interim release of goods or conveyance.

Proper officer - show cause notice under Section 74(1) of the CGST Act - assignment of functions by Board circulars - monetary limits for issuance of show cause notices - distinction from Canon India precedent in a different statutory regime

Proper officer - show cause notice under Section 74(1) of the CGST Act - assignment of functions by Board circulars - monetary limits for issuance of show cause notices - Validity of the show cause notice dated 12.04.2021 issued by the Additional Commissioner as a 'proper officer' under Section 74(1) of the CGST Act. - HELD THAT: - The Court examined the statutory definition of 'proper officer' in Section 2(91) of the CGST Act and the Board's administrative assignments in Circular No.3/3/2017-GST dated 05.07.2017 and Circular No.31/05/2018-GST dated 09.02.2018. The Board's tables designate Deputy/Assistant Commissioners and officers up to the rank of Additional/Joint Commissioner as competent 'proper officer' for issuance of show cause notices and orders under relevant sub-sections of Sections 73 and 74, with specified monetary limits. The impugned matter involves amounts above the prescribed monetary threshold of Rs. 2,00,00,000, and the Additional Commissioner is subordinate to the designated officers and expressly assigned functions by the Board's circulars. Consequently, the Court held that there is no basis to conclude that respondent No.4 is not a 'proper officer' competent to issue the impugned show cause notice. The Court distinguished the Supreme Court decision in Canon India Private Limited as addressing a different statutory scheme and fact-situation under the Customs Act, 1962, and therefore not determinative of the present issue under the CGST/IGST regime. The Court expressly refrained from expressing any opinion on the merits of the allegations in the show cause notice and permitted the petitioner three weeks to file a reply, directing the authority to consider any such reply in accordance with law. [Paras 12, 13, 14, 15, 16]

Writ petition dismissed; impugned show cause notice held not invalid for want of issuance by a 'proper officer', petitioner granted three weeks to file reply which shall be considered in accordance with law; merits kept open.

Final Conclusion: The High Court refused to quash the show cause notice dated 12.04.2021 on the ground that the Additional Commissioner was not a 'proper officer', relying on the Board's circulars and applicable monetary limits; petition dismissed while permitting the petitioner three weeks to file reply, and all merits-related contentions left open.

Vouchers are not money in the hands of a third party reseller until redemption - vouchers qualify as movable property and therefore as goods when traded - vouchers are not actionable claims where the voucher is in the claimant's possession - supply of vouchers by a third party reseller is a supply of goods under Section 7 of the CGST Act, 2017 - time of supply for vouchers sold by a non issuer is governed by Section 12(5) of the CGST Act, 2017 - actionable claims other than lottery, betting and gambling are excluded from supply under Schedule III

Vouchers are not money in the hands of a third party reseller until redemption - money as consideration is when instrument is used to settle an obligation - Whether the vouchers purchased and sold by the Appellant constitute 'money' and are therefore outside GST. - HELD THAT: - The Authority held that although the vouchers are payment instruments recognised by RBI, they do not qualify as 'money' in the hands of the Appellant because they do not settle an obligation at the time of the Appellant's purchase and resale. Under the CGST Act, 'money' describes instruments when used as consideration to settle an obligation; that settlement occurs only upon redemption by the beneficiary. Until redemption, the voucher merely creates an obligation and therefore cannot be treated as 'money' exempt from GST treatment. (See para 12.) [Paras 12]

The vouchers in the Appellant's hands are not 'money' for GST purposes.

Vouchers qualify as movable property and therefore as goods when traded - elements of value, ownership and transfer in vouchers - Whether the vouchers traded by the Appellant are 'goods' under the CGST Act. - HELD THAT: - Applying the CGST definition of 'goods' (every kind of movable property other than money and securities) and the General Clauses Act definition of movable property, the Authority found that the vouchers have definable value, are transferable, and ownership passes on sale. The Appellant bought vouchers for consideration and sold them at face value to clients; thus the vouchers are movable property and fall within 'goods' under the CGST Act. The Authority distinguished the Sodexo decision on its facts (issuer authorised by RBI and different statutory context) and therefore did not apply it to the present facts of a third party reseller. (See para 13-15.) [Paras 13, 14]

The vouchers traded by the Appellant are 'goods' for GST purposes.

Vouchers are not actionable claims where the voucher is in the claimant's possession - actionable claims limited to unsecured debt or beneficial interest not in possession - Schedule III carve out for actionable claims other than lottery, betting and gambling - Whether the vouchers amount to 'actionable claims' and thereby fall outside supply under Schedule III. - HELD THAT: - The Authority analysed the two limbs of 'actionable claim' - (i) claim to an unsecured debt and (ii) claim to a beneficial interest in movable property not in the claimant's possession. The vouchers do not constitute a claim to unsecured debt. As to beneficial interest, the vouchers are themselves movable property and are in the possession of the claimant (the holder) at the time of transfer; consequently they do not meet the requirement of being a beneficial interest in movable property not in possession. The Authority further held that lottery tickets (discussed in Sunrise) differ factually since lottery tickets lack innate value; vouchers here have definitive value and therefore are not analogous. Accordingly the vouchers are not actionable claims excluded from supply. (See para 16-18.) [Paras 16, 17, 18]

The vouchers are not 'actionable claims' and are not excluded from supply under Schedule III.

Supply of vouchers by a third party reseller is a supply of goods under Section 7 of the CGST Act, 2017 - time of supply governed by Section 12(5) of the CGST Act, 2017 for non issuers - rate and value for GST treatment of vouchers as per the AAR ruling - Whether the Appellant's sale of vouchers is taxable and, if so, the applicable time of supply and related conclusions. - HELD THAT: - Having concluded that the vouchers are goods and not money or actionable claims, the Authority held that the Appellant's trading in vouchers amounts to 'supply' of goods under Section 7(1)(a) of the CGST Act. Because the Appellant is not the issuer authorised by RBI, the provisions in Sections 12(4) (which apply to the underlying supply identifiable at voucher issue by the issuer) do not apply; instead the time of supply for the Appellant's transaction is governed by Section 12(5). The Authority agreed with the lower Authority's conclusions on value, rate of tax and time of supply and therefore upheld the impugned advance ruling. (See para 19.) [Paras 19]

The Appellant's sale of vouchers is taxable as supply of goods; time of supply for the Appellant is determined under Section 12(5), and the AAR's findings on rate and value are upheld.

Final Conclusion: The AAAR upheld the Advance Ruling No. KAR ADRG 37/2021: vouchers traded by the Appellant are not 'money' or 'actionable claims' but are movable property constituting 'goods'; the sale of such vouchers by a non issuer is a taxable supply of goods under Section 7 and the time of supply for the Appellant is governed by Section 12(5). The appeal is dismissed.

Mixed supply - Composite supply - Principal supply - Place of supply of goods - Place of supply of services - Transaction value - Input Tax Credit eligibility

Mixed supply - Tax rate determination for mixed supply - Whether the lump sum supply of coaching together with uniforms, study material and other goods is a supply of goods or a supply of services - HELD THAT: - The applicant supplies coaching services together with goods (printed material, test papers, uniforms, bags etc.) for a single consolidated consideration. Each component can be supplied separately and is not dependent on the other. Such a package therefore falls within the definition of a mixed supply. For tax liability on a mixed supply, the supply is treated as that particular supply which attracts the highest rate of tax. Applying this principle to the facts, the mixed supply attracts the highest rate applicable to its components, namely 18% (9% CGST + 9% SGST or IGST 18%).

The supply is a mixed supply of goods and services and is taxable at the highest rate of 18%.

Composite supply - Mixed supply - Principal supply - Whether the supply qualifies as a composite supply and, if so, what is the principal supply - HELD THAT: - The question requires distinguishing between composite supply and mixed supply. A composite supply consists of supplies that are naturally bundled and where one is the principal supply. Here the goods and services (coaching and various goods) are independently supplyable and are supplied for a single price; they are not shown to be naturally bundled such that one component is principal. Accordingly, the supply qualifies as a mixed supply rather than a composite supply, and tax is determined by the highest rate among the components.

The supply is a mixed supply (not a composite supply) and attracts tax at the highest applicable rate (18%).

Place of supply of goods - Place of supply of services - Determination of supplier - Whether the applicant or the network partner is the supplier to the student and how place of supply is determined - HELD THAT: - The contractual arrangement shows the applicant issues the invoice to students for the consolidated consideration; network partners conduct courses and invoice the applicant for their services. Therefore, the applicant is the supplier of the mixed supply to the students and the network partner is the supplier of services to the applicant. Place of supply of goods is determined by the location of the goods when movement terminates for delivery to the recipient (place of supply of goods rule). Place of supply of services is determined under the relevant rule for services: for supplies to registered persons the location of the recipient; for supplies to unregistered persons, the location on record or otherwise the location of the supplier (place of supply of services rule).

Applicant is supplier of mixed supply to students; network partner is supplier of service to applicant; place of supply to be determined under the respective IGST provisions for goods and services.

Transaction value - Value of supply - What is the value of the supply by the applicant to students and by the network partner to the applicant - HELD THAT: - Sectional principles governing transaction value apply: where supplier and recipient are not related and price is the sole consideration, the transaction value is the price paid or payable. The applicant charges a consolidated lump sum to students that includes both goods and services and incurs the cost of goods and services supplied. Accordingly, the consolidated amount invoiced by the applicant to the student represents the value of the applicant's mixed supply. The network partner's value to the applicant will be determined under the same transaction value principles for the services it invoices to the applicant.

The total consolidated amount charged and invoiced by the applicant to the student is the value of the mixed supply; the network partner's invoice to the applicant constitutes the transaction value of its services.

Input Tax Credit eligibility - Use in the course or furtherance of business - Whether the applicant is eligible to claim Input Tax Credit for taxes paid on supplies - HELD THAT: - Eligibility to claim ITC is governed by entitlement where goods or services are used or intended to be used in the course or furtherance of business and subject to conditions and restrictions under the GST law. Applying these principles, the applicant is eligible to avail ITC of GST paid on inputs and input services used or intended to be used in the course or furtherance of its business, subject to the conditions and limitations prescribed in Section 16 read with Section 17 and other applicable provisions.

The applicant is eligible to claim Input Tax Credit subject to the conditions and restrictions of the GST law.

Final Conclusion: The Authority rules that the applicant's consolidated supply of coaching together with goods is a mixed supply taxable at the highest rate of 18%; the supply is not to be treated as a composite supply. The applicant is the supplier to the students, the network partner supplies services to the applicant, values are to be determined by transaction value principles (consolidated invoice amount representing applicant's supply), and the applicant may avail ITC subject to statutory conditions.

Bail under section 439 Cr.P.C. - Offence under Section 132(1)(b) of the CGST Act, 2017 - issuance of fake GST invoices and evasion of tax - Reason to believe / prima facie case based on ADVAIT data-analytics and inspection - Economic offences and gravity as determinative factor in bail considerations - Arrest under section 69 of the CGST Act and procedural compliance with Section 57 Cr.P.C. - Risk of tampering with evidence / interfering with investigation

Reason to believe / prima facie case based on ADVAIT data-analytics and inspection - Offence under Section 132(1)(b) of the CGST Act, 2017 - issuance of fake GST invoices and evasion of tax - Economic offences and gravity as determinative factor in bail considerations - Whether the applicants were entitled to bail in view of the seriousness of the alleged economic offence and existence of a prima facie case. - HELD THAT: - The court held that verification initiated on the basis of ADVAIT analytics and an inspection disclosed an anomalous high turnover in April, 2021 immediately after registration and absence of physical stocks or records at the registered premises. Voluntary statements attributed creation and use of paper transactions and admission of liability for evaded tax, supporting formation of a conspiracy for issuance of bogus invoices. Given the magnitude of alleged evasion and the material gathered, the court concluded there existed reasons to believe that offences under Section 132(1)(b) CGST were made out prima facie and that the gravity of the economic offence weighed against grant of bail. [Paras 14, 17, 18]

Bail refused on merits due to prima facie case and serious economic offence.

Arrest under section 69 of the CGST Act and procedural compliance with Section 57 Cr.P.C. - Risk of tampering with evidence / interfering with investigation - Whether the arrests and related procedural steps were vitiated and whether custody should be curtailed on the ground of procedural irregularity or delayed arrest. - HELD THAT: - The court examined arrest memos, remand report and voluntary statements and found the arrest dated 09.10.2021 supported by contemporaneous documents. A typographical omission in the summons schedule (and initial absence of DIN) was noted but treated as not fatally vitiating the proceedings given the urgency and subsequent investigative steps. The prosecution's contention that the investigation was at a crucial stage and there existed a real risk of evidence tampering or witness interference was accepted as a relevant factor opposing bail. [Paras 14, 15, 16]

Arrests found to be procedurally supported and delay/typographical defects not sufficient to grant bail; risk of tampering sustained refusal of bail.

Bail under section 439 Cr.P.C. - Economic offences and gravity as determinative factor in bail considerations - Whether personal circumstances invoked by the applicants (residency, medical condition, role as chartered accountant, readiness to cooperate and offer to deposit amounts) justified granting bail. - HELD THAT: - The applicants' submissions regarding residency, medical conditions, professional role and offers to cooperate or make partial payment were considered. The court found these facts insufficient to outweigh the seriousness of the alleged evasion, admissions in voluntary statements, interconnectedness of entities and breadth of alleged bogus invoicing (thousands of invoices). The potential for flight or interference and the need to protect the investigation were held to outweigh personal circumstances. [Paras 7, 8, 17, 18, 19]

Personal circumstances and offers to cooperate did not justify bail; applications rejected.

Final Conclusion: For reasons of a prima facie case supported by data-analytics and voluntary statements, the serious nature of the alleged economic offence and the risk to the ongoing investigation, the court refused the bail applications and dismissed the petitions accordingly.

Requirement of a speaking order on reopening of assessment - quashing and remand for speaking order - application of GKN Driveshafts principle - remand for consideration of representation/objection - validity of assessment passed within limitation

Requirement of a speaking order on reopening of assessment - application of GKN Driveshafts principle - remand for consideration of representation/objection - Impugned assessment orders passed without a speaking order were quashed and remitted for fresh consideration in accordance with the principle in GKN Driveshafts. - HELD THAT: - The court found that the reasons for reopening were communicated on 06.12.2018 and the impugned assessment orders were passed on 28.12.2018. Although the assessments were completed within statutory time limits, the petitioner had filed a representation/objection on 28.12.2018 and the orders were passed without a speaking order preceding them. Applying the requirement that reopening and assessment orders must be supported by a speaking order as articulated in GKN Driveshafts, the court concluded that the impugned orders cannot stand and must be set aside and remitted for fresh consideration of the objection/representation on merits. [Paras 7, 8, 9, 10]

Impugned assessment orders quashed and matters remitted to the respondent to pass a speaking order and thereafter an appropriate assessment order in accordance with law and the petitioner's representation.

Validity of assessment passed within limitation - Assessment orders passed within the statutory period were not faulted on limitation grounds. - HELD THAT: - The court observed that the reopening and completion of assessments occurred within the time permitted under the Income-tax Act, 1961, and therefore there was no infirmity on the ground of limitation. This finding, however, did not cure the absence of a speaking order, which necessitated quashing and remand for fresh decision on the representation. [Paras 8]

No fault was found with the respondent regarding limitation; the orders were timely but required reconsideration because they lacked a speaking order.

Final Conclusion: Writ petitions allowed to the extent that the impugned assessment orders for Assessment Years 2010-2011 and 2011-2012 are quashed and remitted to the respondent to pass a speaking order in accordance with GKN Driveshafts and to consider the petitioner's representation filed on 28.12.2018; respondent directed to pass the speaking order preferably within 30 days and the assessment order within 30 days thereafter. No costs.

Allowability of employees' provident fund contribution - allowability of employees' contribution to Employees' State Insurance - timeliness of statutory contributions measured against due date of filing return - effect of administrative extension of statutory due date - application of amended scope of section 43B to employees' contributions

Allowability of employees' provident fund contribution - due date for deposit under Provident Fund Act - effect of administrative extension of statutory due date - Whether the employees' provident fund contribution of Rs. 16,87,689/- was payable late and rightly disallowed - HELD THAT: - The Tribunal found that the contribution for December 2016, which was required to be deposited on or before 15 January 2017 under the Provident Fund Act, was deposited on 16 January 2017. The Ministry of Labour and Employment had, by letter dated 12 January 2017, extended the due date for payment for December 2016 up to 20 January 2017 as a special case. Having regard to that administrative extension, the Tribunal concluded there was no delay in deposit of the employees' provident fund contribution and the disallowance confirmed by the CIT(A) was incorrect. [Paras 8]

Disallowance of the provident fund contribution deleted; the confirmed disallowance was set aside.

Allowability of employees' contribution to Employees' State Insurance - timeliness of statutory contributions measured against due date of filing return - application of amended scope of section 43B to employees' contributions - Whether the employees' ESIC contribution of Rs. 3,23,898/- paid after statutory due date but before filing of return was rightly disallowed under section 43B - HELD THAT: - The Tribunal noted that the ESIC contribution, though paid after the statutory due date, was paid before the due date of filing the return of income. Relying on the decision of the jurisdictional High Court (as applied by the Tribunal) and the Supreme Court precedent referred to therein, the Tribunal held that the amended ambit of section 43B covers employees' contributions and that payments made on or before the due date of filing the return are not exigible to disallowance. The CIT(A)'s reliance on a non-jurisdictional High Court decision was therefore inappropriate. [Paras 9]

Disallowance of the ESIC contribution deleted; the assessment is to be revised accordingly.

Final Conclusion: Both disallowances in the assessment for AY 2017-18 - relating to employees' provident fund and ESIC contributions - were deleted and the appeal of the assessee is allowed.

Unexplained expenditure under section 69C - reconciliation of creditor balances - burden on revenue to prove expenditure - business purpose test for loans to employees - allowability of employee advances as business expediency

Unexplained expenditure under section 69C - reconciliation of creditor balances - burden on revenue to prove expenditure - Deletion of addition confirmed under section 69C relating to difference in creditor balance (portion of Rs. 3,22,962). - HELD THAT: - For the creditor M/s Arihant Chemical Corporation the assessing officer noted a difference between the assessee's books and the creditor's records and treated the difference as unexplained expenditure under section 69C. The assessee submitted a reconciliation showing that a substantial part of the variance arose from an opening balance difference and produced supporting bills and ledger accounts. The Tribunal found no evidence that the variance represented an expenditure actually incurred by the assessee during the year or that the creditor had received any sum not recorded in the assessee's books. Absent proof that an expenditure was incurred or an unsatisfactory explanation, the provisions of section 69C cannot be invoked. On that basis the Tribunal reversed the findings of the lower authorities and directed deletion of the addition made under section 69C. [Paras 7, 8]

Addition of Rs. 3,22,962 made under section 69C deleted; ground allowed.

Business purpose test for loans to employees - allowability of employee advances as business expediency - Deletion of disallowance under section 36(1)(iii) in respect of interest on advances made to employees (amount Rs. 5,36,107). - HELD THAT: - The assessee advanced sums to 117 employees for purposes such as festival loans, medical and educational advances and personal loans, largely small in amount and given pursuant to company policy. Considering the company's operations, employee benefit expenses and turnover, the Tribunal concluded these advances were made for business purposes and bore business expediency. There was no evidence from the revenue that the advances were bogus or for non business purposes. Consequently, the disallowance of interest on such advances was unsustainable and required deletion. [Paras 13, 14]

Disallowance of Rs. 5,36,107 in respect of interest on employee advances deleted; grounds allowed.

Final Conclusion: Both appeals are allowed: the addition under section 69C and the disallowance under section 36(1)(iii) are set aside and the assessing officer is directed to delete the respective additions/disallowance.

Disallowance under section 43B - statutory dues not routed through profit and loss account - additions in intimation under section 143(1)(a) - application under section 154

Disallowance under section 43B - statutory dues not routed through profit and loss account - additions in intimation under section 143(1)(a) - application under section 154 - The addition of outstanding GST to the assessee's income and the rejection of the section 154 application were not sustainable where the GST payable was not debited to the profit and loss account. - HELD THAT: - The Tribunal examined the assessee's profit & loss account and the auditor's report, which expressly stated that no Sales Tax/GST or similar indirect tax had been passed through the profit & loss account. On that factual foundation the Tribunal held that section 43B, which disallows deductions for taxes and duties unless actually paid, is attracted only where a deduction has been claimed or the sum has been charged to the profit and loss account. Where the statutory dues remain as liabilities in the balance-sheet but have not been debited to profit & loss and no deduction has been claimed, there is no ground for an "add-back" under section 43B or for making an addition in the intimation under section 143(1)(a). The Tribunal relied on precedents in which courts have affirmed that absence of a charge in the profit & loss account precludes disallowance under section 43B and consequent addition, and applied that principle to set aside the addition and to find that the section 154 relief ought to have been allowed insofar as it sought correction of the intimation which made the impermissible addition.

The addition of the outstanding GST was deleted and the appeal allowed; the rejection of the application under section 154 could not sustain the addition.

Final Conclusion: The Tribunal allowed the appeal, holding that GST liabilities not routed through the profit & loss account could not be disallowed under section 43B nor added to income in the intimation under section 143(1)(a); the impugned addition was therefore set aside.

Deduction under section 80IA for infrastructure facilities - Concept of 'new' undertaking under section 80IA(4) - Separate undertaking test for multiple units - Treatment of interest and other income for computing eligible profits under section 80IA - Allowability of provisions for post-closure care and pit covering expenses - Recognition of advance receipts under mercantile system and accounting standards - Doctrine of consistency in Tribunal decisions

Deduction under section 80IA for infrastructure facilities - Concept of 'new' undertaking under section 80IA(4) - Doctrine of consistency in Tribunal decisions - Allowability of deduction under section 80IA in respect of Land Filling Project-I - HELD THAT: - The Tribunal accepted the assessee's submission that once all conditions of section 80IA(4) were fulfilled and deduction was allowed in the initial year of claim (AY 2002-03 for Land Filling Project-I), the eligibility could not be re-opened in subsequent years merely because the formal agreement with the authority was executed later. Relying on precedents and the view that the word 'new' refers to facilities begun on or after 1 April 1995, and on the principle that deduction once allowed in the initial year should not be withdrawn in subsequent years without disturbing the initial-year order, the Tribunal held that Land Filling Project-I was eligible for deduction and allowed the assessee's ground. Decision reflected that the AO/CIT(A) could not re-examine eligibility for years after the initial allowance where the assessee had fulfilled conditions and claimed the option under section 80IA(2). [Paras 25, 26]

Assessee's ground allowed; deduction under section 80IA in respect of Land Filling Project-I is to be recognised.

Separate undertaking test for multiple units - Deduction under section 80IA for infrastructure facilities - Doctrine of consistency in Tribunal decisions - Whether Land Filling Project-II is a distinct undertaking eligible for separate deduction under section 80IA - HELD THAT: - The Tribunal found on the material that Land Filling Project-II was set up on separately allotted land and that a separate agreement (with retrospective effect) and independent commencement of operations established it as a distinct infrastructure facility. The finding of independent identity of the two landfill units in an earlier appeal (AY 2007-08) was noted and the assessee's contention that Landfill-II is a separate undertaking was accepted. The Tribunal therefore allowed the claim for separate deduction in respect of Land Filling Project-II. [Paras 30, 31]

Assessee's ground allowed; Land Filling Project-II treated as a separate undertaking for section 80IA purposes.

Separate undertaking test for multiple units - Deduction under section 80IA for infrastructure facilities - Doctrine of consistency in Tribunal decisions - Whether Incinerator project is a separate undertaking eligible for deduction under section 80IA - HELD THAT: - The Tribunal recorded that the CIT(A)'s finding that the Incinerator was a new infrastructure facility eligible for deduction from AY 2007-08 was not challenged by Revenue and had therefore attained finality. The Tribunal agreed with the assessee that observations concerning a second incinerator (Incinerator-II) were not relevant to the year under appeal and were unnecessary. Accordingly the Tribunal allowed the assessee's grounds seeking deletion of those observations and upheld the eligibility of the Incinerator (as determined by CIT(A)) for section 80IA deduction. [Paras 35, 36]

Assessee's grounds allowed; Incinerator treated as a separate infrastructure undertaking for section 80IA as per CIT(A)'s unchallenged finding.

Treatment of interest and other income for computing eligible profits under section 80IA - Doctrine of consistency in Tribunal decisions - Inclusion/exclusion of interest earned on fixed deposits and membership fees while computing eligible profits for deduction under section 80IA - HELD THAT: - Applying the Tribunal's earlier coordinate-bench decisions in the assessee's own case for earlier years, the Tribunal invoked the principle of consistency and directed the Assessing Officer to follow the Tribunal's order in AY 2007-08 (which treated identical interest and membership-fee receipts as eligible for section 80IA purposes). Consequently the Assessing Officer was directed to recompute the eligible deduction under section 80IA accordingly. [Paras 40, 41]

Assessee's ground allowed; AO directed to follow Tribunal's earlier order and include the interest/membership receipts as per that decision when computing section 80IA deduction.

Allowability of provisions for post-closure care and pit covering expenses - Doctrine of consistency in Tribunal decisions - Allowability of provisions for post-closure care expenditure and pit covering expenses deducted in the books but disallowed by AO - HELD THAT: - The Tribunal relied on its coordinate-bench decisions in the assessee's earlier years (AY 2007-08 and earlier) where identical provisions had been sustained. Following the principle of consistency, the Tribunal directed deletion of the disallowance of the provision for post-closure care expenditure and of the provision for pit covering expenses and ordered the AO to follow the earlier tribunal orders in recomputing the assessment. As the disallowances were deleted, corresponding book-profit adjustments under section 115JB became academic. [Paras 51, 55, 56, 57, 58]

Assessee's grounds allowed; disallowances of provisions for post-closure care and pit covering expenses deleted and AO directed to follow earlier Tribunal decisions.

Recognition of advance receipts under mercantile system and accounting standards - Doctrine of consistency in Tribunal decisions - Characterisation of advance receipts from customers/members and treatment in computing taxable income and book profits - HELD THAT: - Having regard to the assessee's consistent adoption of mercantile accounting and reliance on accounting standard principles, and following the Tribunal's earlier decision in the assessee's case for AY 2007-08, the Tribunal directed the AO to follow that earlier order. The CIT(A)'s direction to treat the relevant receipts as advances rather than income was supported; the Tribunal observed that allocation/spreading principles may apply and that the revenue's challenge succeeded only for statistical purposes in earlier proceedings but directed adherence to the prior tribunal conclusion in computing income/book profits for the year under appeal. [Paras 62, 66]

Revenue's appeal partly allowed earlier but for the year under appeal AO directed to follow Tribunal's earlier order treating advances in manner consistent with prior decision; matter directed to be recomputed accordingly.

Final Conclusion: Appeal of the assessee allowed: Land Filling Project-I held eligible for section 80IA deduction (consistent with initial-year allowance); Land Filling Project-II and the Incinerator accepted as separate undertakings for section 80IA purposes; interest and membership-fee receipts, and provisions for post-closure care and pit covering expenses, to be treated in accordance with the Tribunal's earlier coordinate-bench decisions and recomputed by the Assessing Officer; revenue's cross-appeal dismissed except insofar as directed to follow earlier Tribunal findings and for statistical consideration in one aspect.

Unexplained cash credits under section 68 - disallowance of interest under section 36(1)(iii) for diversion of interest-bearing funds - capitalization of expenditure versus revenue treatment of repairs and road construction - remand for factual verification of year of introduction of funds and source of advances

Unexplained cash credits under section 68 - remand for factual verification of year of introduction of funds - Addition of Rs. 25,00,000/- treated as unexplained cash credit on account of share capital/share premium received from M/s Nakshtra Electricals & Engineers Pvt. Ltd. - HELD THAT: - The Assessing Officer doubted the genuineness and creditworthiness of the subscriber M/s Nakshtra Electricals & Engineers Pvt. Ltd. because that company's returns showed nil income and its balance sheet recorded the investment as already present on earlier dates while the assessee's bank statement reflected payment during the year under appeal. The Tribunal found that it was not certain whether the share capital related to the earlier assessment year or to AY 2012-13 and therefore the essential factual matrix required verification before adjudicating the claim under section 68. For this reason the Tribunal did not decide the merits on the unexplained cash credit question but remitted the matter to the Assessing Officer to examine and ascertain in which assessment year the share capital was introduced and then proceed to decide the issue in accordance with law. [Paras 8]

Issue remitted to the Assessing Officer for determination of the year of introduction of share capital and fresh adjudication under law.

Disallowance of interest under section 36(1)(iii) for diversion of interest-bearing funds - remand for verification of source of advances - Disallowance of interest of Rs. 12,09,891/- on account of interest-free loan/advance to sister concern P.G. Glass Pvt. Ltd. - HELD THAT: - The Assessing Officer found that interest-bearing bank funds were utilized to give interest-free advances to a related party and disallowed interest proportionate to such diversion under section 36(1)(iii). The CIT(A) affirmed the disallowance on the factual finding of nexus between borrowed funds and the interest-free advances. The Tribunal noted conflicting contentions as to whether the advances were made out of interest-bearing cash credit or from interest-free own funds (share capital, reserves and surplus). Because the factual source of the advances was determinative of whether disallowance under section 36(1)(iii) was warranted, the Tribunal remitted the matter to the Assessing Officer to examine and determine whether the interest-free advances were made out of interest-bearing borrowings or out of own funds, and to proceed in accordance with law. [Paras 12]

Issue remitted to the Assessing Officer for factual verification of the source of advances and fresh adjudication; if advances are found to be out of interest-bearing borrowings, disallowance to be sustained, otherwise not.

Capitalization of expenditure versus revenue treatment of repairs and road construction - Whether certain expenditures on repairs/road works amount to capital expenditure to be capitalized (with depreciation) or are revenue in nature and allowable as current repairs. - HELD THAT: - The Assessing Officer examined bills relating principally to road works and concluded that the expenditures resulted in construction of new roads within the business premises and conferred enduring benefit, therefore requiring capitalization with depreciation being allowed. The CIT(A) accepted that most items constituted capital expenditure for road construction while allowing two items as routine repairs. The Tribunal found the CIT(A)'s reasoning to be recorded and speaking; given the nature and quantum of the works, the characterization as capital expenditure with limited items retained as revenue repairs was held reasonable, and no interference was warranted. [Paras 17]

Tribunal upholds the CIT(A)'s order: majority of the road/repair costs are capitalized (with depreciation allowed) while specified small items remain revenue repairs; appeal dismissed on this ground.

Final Conclusion: Appeal allowed in part: issues concerning unexplained share capital and disallowance of interest are remitted to the Assessing Officer for factual verification and fresh decision in accordance with law; the Tribunal upholds the CIT(A)'s treatment of road/repair expenditures as largely capital in nature except for specified items allowed as revenue repairs.

Transfer within the meaning of section 2(47) (relinquishment and extinguishment of rights) - agreement to sell versus deed of conveyance - effect under Transfer of Property Act, 1882 (section 54) - chargeability of capital gains on execution of sale agreement - protective assessment and taxation in subsequent assessment years - penalty under section 271AAB - applicability only where search under section 132 - incidental assessments under section 153C - scope and limits

Transfer within the meaning of section 2(47) (relinquishment and extinguishment of rights) - agreement to sell versus deed of conveyance - effect under Transfer of Property Act, 1882 (section 54) - Short-term capital gains assessed for AY 2012-13 on account of the agreement to sell dated 21/02/2012. - HELD THAT: - The Tribunal examined whether entering into an unregistered agreement to sell on 21/02/2012 amounted to 'relinquishment' or 'extinguishment of rights' under section 2(47) so as to attract capital gains in AY 2012-13. Reliance was placed on the legal distinction that an agreement to sell, by itself, does not create or transfer any interest in immovable property under section 54 of the Transfer of Property Act; ownership passes only on execution of a deed of conveyance. The agreement here contained vendor protective clauses (including termination on default and forfeiture of advance) and the assessee had not received possession; further, registered sale deeds were executed only in subsequent years. On these facts the assessee retained rights in the property and there was no relinquishment or extinguishment of rights in the year under consideration. The Tribunal accordingly held that the AO's invocation of section 2(47)(ii) was erroneous and allowed the assessee's appeal on merits for AY 2012-13. [Paras 30]

Assessment for AY 2012-13 holding short-term capital gains on the basis of the agreement to sell is set aside; appeal allowed on merits.

Protective assessment and taxation in subsequent assessment years - Validity of protective assessments and related appeals for AY 2013-14 and AY 2014-15. - HELD THAT: - Having allowed the assessee's appeal for AY 2012-13 on merits (no chargeability in that year), the Tribunal observed that the transaction could correctly be taxed in the subsequent years when registered sale deeds and possession were given. Consequently, the Revenue's protective appeals for AY 2013-14 and AY 2014-15 were allowed to the extent of upholding taxation in those later years. [Paras 32]

Revenue's appeals in respect of protective assessments for AY 2013-14 and AY 2014-15 are allowed.

Penalty under section 271AAB - applicability only where search under section 132 - incidental assessments under section 153C - scope and limits - Sustainability of penalty under section 271AAB for AY 2013-14 and AY 2014-15 where search was not conducted on the assessee under section 132. - HELD THAT: - The Tribunal considered whether section 271AAB could be invoked where the assessee himself was not the subject of a search under section 132. Section 271AAB is expressly linked to detection of undisclosed income 'as a result of search under section 132' and contemplates admission under section 132(4). Coordinate bench precedents were followed holding that in absence of a search on the assessee, levy of penalty under section 271AAB is not sustainable merely because incidental or consequential assessments were initiated under section 153C. Applying that principle to the facts, the Tribunal deleted the penalty for the two assessment years. [Paras 41]

Penalties under section 271AAB for AY 2013-14 and AY 2014-15 are deleted.

Final Conclusion: The assessee's quantum appeal for AY 2012-13 is allowed (no short term capital gains attributable to the agreement to sell in that year). Revenue's protective appeals for AY 2013-14 and AY 2014-15 are allowed to the extent of sustaining taxation in the subsequent years. Penalties under section 271AAB for AY 2013-14 and AY 2014-15 are deleted.

Deduction for employees' contribution to PF/ESI - Section 36(1)(va) - Section 43B - due date for furnishing return under section 139(1) - retrospective application of legislative amendment - interest under sections 234A, 234B and 234C

Deduction for employees' contribution to PF/ESI - Section 36(1)(va) - Section 43B - due date for furnishing return under section 139(1) - Allowability of employee's contribution to PF/ESI paid after the statutory due date under the relevant labour enactments but on or before the due date for furnishing the return under section 139(1) - HELD THAT: - The Tribunal found that where the employer remitted employees' contributions to PF/ESI after the time prescribed under the PF/ESI enactments but deposited the same on or before the due date for filing the return under section 139(1), the payment falls within the extended timeline recognised for tax deduction purposes. The Tribunal applied the principle in Essae Teraoka (P.) Ltd. and decisions of the Karnataka High Court (including Sabari Enterprises), holding that Section 36(1)(va) read with the scheme of Section 43B permits the deduction if contribution is paid on or before the due date for furnishing the return under section 139(1), irrespective of the consequences under the PF/ESI statutes for late deposit. Relying on these precedents and the legislative history discussed therein, the Tribunal concluded that the disallowance made by the assessing authority and confirmed by the CIT(A) was unwarranted for the year under consideration.

The disallowance of employees' contribution to PF/ESI was set aside and the amount allowed as deduction since it was paid on or before the due date for filing the return under section 139(1).

Retrospective application of legislative amendment - Section 36(1)(va) - Section 43B - Applicability of amendments (Finance Act, 2021) inserting explanations to Section 36(1)(va) and Section 43B to the assessment year before 1/4/2021 - HELD THAT: - The Tribunal held that the explanations to Section 36(1)(va) and Section 43B introduced by the Finance Act, 2021 operate with effect from 1/4/2021 and cannot be applied retrospectively to assessments for earlier years. Consequently, the amended provisions could not be invoked to sustain the disallowance for the assessment year in issue. The Tribunal rejected the revenue's contention that the 2021 explanations should govern pending matters, noting that the amendments do not expressly have retrospective effect and therefore do not alter the legal position applicable to the year under adjudication.

The 2021 amendments to Section 36(1)(va) and Section 43B were not applied to the assessment year in dispute; the disallowance could not be sustained on the basis of those amendments.

Interest under sections 234A, 234B and 234C - Levy of interest under sections 234A, 234B and 234C consequent to the disallowance - HELD THAT: - The Tribunal treated the levy of interest under sections 234A, 234B and 234C as consequential to the primary disallowance. Having allowed the assessee's appeal on the substantive question of deduction, the Tribunal recorded that interest computed on the basis of the disallowance is likewise consequential and must be addressed in conformity with the principal relief granted.

Interest under sections 234A, 234B and 234C is consequential and addressed in accordance with the allowance of the disallowed amount.

Final Conclusion: The appeal is allowed: the assessee's payment of employees' contribution to PF/ESI, though made after the statutory due date under the labour enactments, is allowable as deduction because it was deposited on or before the due date for furnishing the return under section 139(1); the Finance Act, 2021 explanations do not apply retrospectively to the assessment year in issue; interest charged consequentially is correspondingly addressed.

Admission of additional ground - deduction under section 80P(2)(a)(i) of the Income Tax Act - remand for verification of claim - appeal allowed for statistical purposes

Admission of additional ground - Admission of the additional ground raised by the assessee challenging the disallowance of interest income. - HELD THAT: - The Tribunal examined whether the assessee's additional ground disputing a disallowance, which the assessee contended had not been claimed as a deduction, should be admitted. All material facts relevant to this contention were already on record and no further inquiry was necessary. Applying the principle in National Thermal Power Company Ltd. v. CIT (as relied upon by the Tribunal), the additional ground was admitted as a pure legal issue based on existing record. The Tribunal therefore permitted the additional ground to be taken on record. [Paras 5]

Additional ground admitted.

Remand for verification of claim - deduction under section 80P(2)(a)(i) of the Income Tax Act - Whether the Assessing Officer had correctly disallowed interest income alleged to be non-cooperative-society interest when the assessee contends no deduction was claimed. - HELD THAT: - The Tribunal noted that the Assessing Officer recorded disallowances aggregating the disputed interest income although the assessee maintained it had not claimed a corresponding deduction under the provision relied upon. The Tribunal found the factual question of whether the assessee had claimed the deduction required verification by the Assessing Officer. Consequently, the matter was remitted to the Assessing Officer to examine the claim: if it is found that no deduction was claimed by the assessee, no addition/disallowance should be made. The remand was limited to verification of the existence of the claim; the Tribunal did not decide the substantive correctness of any disallowance on merits. [Paras 5]

Matter remitted to the Assessing Officer for verification whether the deduction was claimed; if not claimed, the disallowance should not be sustained.

Appeal allowed for statistical purposes - Consequences of admitting the additional ground on the other grounds of appeal. - HELD THAT: - Having admitted the additional ground and remitted the verification to the Assessing Officer, the Tribunal treated the appeal as allowed for statistical purposes. The Tribunal recorded that other grounds which depended on the merits were rendered infructuous and therefore were not adjudicated. [Paras 6]

Appeal allowed for statistical purposes; other grounds left unadjudicated as infructuous.

Final Conclusion: The Tribunal admitted the assessee's additional ground, remitted to the Assessing Officer the limited factual question whether the deduction was claimed in respect of the disputed interest (with instruction that no addition be made if no claim existed), and allowed the appeal for statistical purposes while leaving other substantive grounds unadjudicated.

Rejection of books of account under section 145(3) - estimation of income by way of application of gross profit ratio - comparability of gross profit margins and judicial restraint in interference with appellate discretion - admission of additional grounds and procedural default - principles of natural justice

Rejection of books of account under section 145(3) - estimation of income by way of application of gross profit ratio - comparability of gross profit margins and judicial restraint in interference with appellate discretion - Validity of the addition made by the AO by estimating gross profit at 3% of turnover and the correctness of the CIT(A)'s reduction of that estimate to 1% of turnover. - HELD THAT: - The AO invoked the provision for rejection of books where verifiable details of purchases, sales, vouchers and transport documents were not furnished and, on that basis, estimated profit at 3% of turnover. On appeal the CIT(A) reviewed the nature of the business, noted extremely low declared gross profit margins, observed that the AO had not disputed the veracity of transactions but that associated concerns showed no physical transfer and low expenses, and-on comparison with available material-considered 1% of turnover to be a fair and reasonable imputation. The Tribunal recorded that the assessee failed to produce any documentary evidence before the authorities or the Tribunal (no books, comparables or audited accounts were placed on record despite opportunities and long pendency), and that the CIT(A)'s exercise of discretion in restricting the addition to 1% was reasonable in the facts. Given the absence of supporting evidence and the appellate authority's comparative assessment, there was no justification to disturb the CIT(A)'s order. [Paras 9, 10, 11]

The CIT(A)'s reduction of the AO's estimate to 1% of turnover is affirmed and the AO's 3% estimate is not restored.

Admission of additional grounds - principles of natural justice - Whether the additional grounds alleging denial of opportunity and prevention from producing evidence should be admitted and decided. - HELD THAT: - The assessee filed additional grounds contending lack of opportunity and prevention from producing evidence, but at the hearing did not press these grounds or make any supporting submissions or place any materials before the Tribunal. The Tribunal therefore treated the additional grounds as not pressed and dismissed them. The record shows no contemporaneous production of evidence or request for admission which would compel admission of those grounds. [Paras 2, 8]

Additional grounds asserting denial of opportunity and prevention from producing evidence are treated as not pressed and are dismissed.

Final Conclusion: All appeals by the assessees are dismissed and the orders of the CIT(A) sustaining addition at 1% of turnover are affirmed; cross appeals by the revenue seeking restoration of the AO's 3% estimate are dismissed.

Revisional jurisdiction under section 263 - condition precedent of being "erroneous insofar as prejudicial to the revenue" - role of Assessing Officer as investigator and adjudicator - plausible view / unsustainable view test - doctrine of merger in revisional proceedings - onus under section 68 - identity, genuineness and creditworthiness - prospective operation of amendments to section 68 and section 56(2)(viib) - Explanation 2(c) to section 263 - non compliance with Board directions under section 119

Revisional jurisdiction under section 263 - condition precedent of being "erroneous insofar as prejudicial to the revenue" - plausible view / unsustainable view test - Validity of exercise of revisional jurisdiction by the second Principal Commissioner of Income-tax under section 263 in respect of the reassessment order dated 08.06.2016. - HELD THAT: - The Tribunal examined whether the Second Pr. CIT satisfied the statutory condition precedent in section 263 - namely that the AO's order was "erroneous insofar as prejudicial to the revenue" - applying the twin condition test in Malabar Industries: (i) the order must be erroneous and (ii) prejudicial to revenue. The factual record shows that after the First Pr. CIT set aside the original assessment for de novo consideration, the Second AO issued notices, called for documents, and verified material (including ITRs, audited accounts, bank statements, Form 2/5, and replies to section 133(6) notices from the share subscribers). The AO recorded specific findings accepting identity, genuineness and creditworthiness of the shareholders and accepted that transactions were through banking channels; he therefore accepted share capital and premium and made only a limited addition under section 14A. The Tribunal found that (a) the Second AO had acted as investigator and adjudicator in the de novo proceedings and (b) the AO's satisfaction was a plausible view supported by contemporaneous material and consistent judicial precedents holding that where identity, genuineness and creditworthiness are established, an AO's acceptance is sustainable. The Second Pr. CIT's conclusion of "lack of enquiry" was held to be vague and unsupported: he did not point to specific defects in the AO's inquiry, nor did he bring material to show the AO's view was unsustainable in law. Consequently the condition precedent for invoking section 263 was not satisfied and the Second Pr. CIT's order was held to be without jurisdiction. [Paras 22, 23, 49, 50, 51]

The Second Pr. CIT failed to satisfy the condition precedent in section 263; his exercise of revisional jurisdiction in respect of the reassessment dated 08.06.2016 was without jurisdiction and is quashed.

Doctrine of merger in revisional proceedings - role of Assessing Officer as investigator and adjudicator - onusal burden under section 68 - identity, genuineness and creditworthiness - Whether, after de novo assessment pursuant to the First Pr. CIT's section 263 direction, the Second Pr. CIT could again set aside the reassessment on the same subject matter (share capital and premium). - HELD THAT: - The Tribunal analysed the effect of the First Pr. CIT's directive for de novo assessment and the subsequent conduct of proceedings by the Second AO. The First Pr. CIT had set aside the original assessment and directed a fresh enquiry; the Second AO carried out the de novo assessment by issuing section 142(1) notices, examining documents in the assessment folder (including replies to earlier section 133(6) notices), and recording findings accepting identity, creditworthiness and genuineness of the share subscribers. The Tribunal held that where the AO, in de novo proceedings, conducts the requisite inquiries and arrives at a plausible view supported by material, the successor revisional authority cannot substitute the predecessor's direction by re opening the same subject matter absent demonstration that the AO's inquiry was flawed or that the AO adopted an unsustainable view in law. The Second Pr. CIT did not identify specific omissions or adduce material to show the AO's enquiry was defective; nor did he explain how Explanation 2(c) applied by reference to any Board direction under section 119. In those circumstances the attempt by the Second Pr. CIT to set aside the reassessment effectively substituted his view for that of the First Pr. CIT and the AO, which the Tribunal held was impermissible. [Paras 43, 49, 50, 51, 53]

The Second Pr. CIT could not validly re open and set aside the reassessment made pursuant to the First Pr. CIT's de novo direction absent specific demonstration that the AO's inquiry was flawed or the AO's view was unsustainable; the second revisional order substituted the earlier revisional direction and was therefore void.

Prospective operation of amendments to section 68 and section 56(2)(viib) - onusal burden under section 68 - identity, genuineness and creditworthiness - Applicability of post 2013 amendments (proviso to section 68 and section 56(2)(viib)) to AY 2012 13 and effect on the AO's enquiry regarding share premium. - HELD THAT: - The Tribunal noted that the proviso to section 68 and the amendment to section 2(24)/insertion of section 56(2)(viib) were effective from 01.04.2013 (AY 2013 14) and therefore did not apply to AY 2012 13. For AY 2012 13 the assessee's burden under section 68 was limited to proving identity, genuineness and creditworthiness of the shareholders (the 'first source'); there was no statutory requirement in that year to prove 'source of the source' as mandated by later amendments. The records showed that the assessee and the shareholders had furnished PAN, audited accounts, bank statements, ITRs and replies to section 133(6) notices; the AO examined these materials and accepted the transactions. In the absence of any material discrediting those documents, the AO's acceptance was a permissible view under pre amendment law. [Paras 27, 29, 30, 46, 47]

Amendments effective from 01.04.2013 were not applicable to AY 2012 13; on the law applicable for AY 2012 13 the assessee discharged its onus and the AO's acceptance of share capital/premium was sustainable.

Explanation 2(c) to section 263 - non compliance with Board directions under section 119 - Whether the Second Pr. CIT legitimately invoked Explanation 2(c) to section 263 to treat the AO's order as erroneous for not following Board directions. - HELD THAT: - The Second Pr. CIT invoked Explanation 2(c) asserting the AO's order was not in accordance with any Board order/direction under section 119. The Tribunal found that the impugned order did not explain how any specific Board direction had been breached; the Second Pr. CIT made only a bald assertion without identifying the particular directive or showing non compliance that rendered the AO's order erroneous. The Tribunal held that the deeming fiction in Explanation 2(c) cannot be deployed without meaningful application of mind and specific findings demonstrating non compliance. [Paras 52, 53]

Explanation 2(c) was not established by the Second Pr. CIT; his invocation of that deeming provision was unsupported and hence invalid.

Final Conclusion: The appeal is allowed. The Tribunal quashed the Second Principal Commissioner's revisional order dated 15.03.2019 under section 263 for AY 2012 13 on the grounds that the condition precedent for invoking section 263 was not satisfied, the Assessing Officer had conducted the de novo enquiries directed by the First Pr. CIT and arrived at a plausible view supported by material, and the successor revisional authority could not substitute that process without specific, demonstrable defects; accordingly the impugned revisional order is null and void.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Requirement of specific finding/charge in penalty notice - Explanation 5 to section 271(1)(c) - Defective show-cause notice vitiates penalty - Penalty under section 271AAB - discretionary character and procedural requirements - Undisclosed income as defined for section 271AAB - Requirement of application of mind by the Assessing Officer

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Requirement of specific finding/charge in penalty notice - Explanation 5 to section 271(1)(c) - Defective show-cause notice vitiates penalty - Validity of penalty levied under section 271(1)(c) for A.Y. 2014-15 - HELD THAT: - The Tribunal found that the assessing officer did not record a clear finding whether penalty was being initiated for concealment of particulars of income or for furnishing inaccurate particulars, nor did he indicate invocation of Explanation 5 to section 271(1)(c). The assessment order and final show-cause notice used a printed form referring generally to concealment or furnishing inaccurate particulars without striking off inapplicable language or specifying the charge. Reliance was placed on authorities holding that where the AO fails to specify the exact charge and the basis for penalty, the penalty order is vitiated. Given this absence of a specific finding and the defective notice, the penalty under section 271(1)(c) could not be sustained and was directed to be deleted. [Paras 10, 11, 12]

Penalty under section 271(1)(c) for A.Y. 2014-15 quashed and deleted for want of a specific finding/charge and for issuance of a defective notice.

Penalty under section 271AAB - discretionary character and procedural requirements - Undisclosed income as defined for section 271AAB - Requirement of application of mind by the Assessing Officer - Defective show-cause notice vitiates penalty - Validity of penalty levied under section 271AAB for A.Y.2015-16 - HELD THAT: - The Tribunal observed that the AO's show-cause notice merely mentioned section 271AAB and stated a 10% rate but failed to specify the conditions or charge required by the provision; the penalty ultimately imposed at 30% demonstrated non-application of mind. The Tribunal reviewed authorities holding that section 271AAB is to be interpreted strictly, that the notion of 'undisclosed income' is specially defined, and that procedural requirements (including a proper notice and application of mind) are essential. Because the notice was casual and deficient in spelling out the specific charge/conditions under section 271AAB and the AO did not apply his mind to the statutory parameters or the correct rate, the penalty was held to be bad in law and was quashed. [Paras 13, 14, 16]

Penalty under section 271AAB for A.Y.2015-16 quashed and deleted for issuance of a defective notice and failure of the AO to apply his mind to the statutory conditions and rate.

Final Conclusion: Both appeals are allowed: the penalty imposed under section 271(1)(c) for A.Y. 2014-15 and the penalty imposed under section 271AAB for A.Y. 2015-16 are quashed and deleted on the grounds stated above.

Fair Market Value - Deeming provision under section 56(2)(viib) regarding allotment/receipt of consideration for issuance of shares - Rule 11UA valuation of unquoted shares - Definition of 'balance-sheet' in Rule 11U - Valuation date for shares (date of allotment/transfer)

Fair Market Value - Rule 11UA valuation of unquoted shares - Definition of 'balance-sheet' in Rule 11U - Valuation date for shares (date of allotment/transfer) - Whether the balance sheet drawn up as on 31/03/2013 (audited and approved after the allotment) could be used to determine the FMV under Rule 11UA for shares allotted on 15/07/2013, instead of using the balance sheet as on 31/03/2012. - HELD THAT: - The Tribunal held that the valuation date was the date of allotment, 15/07/2013. Where a balance sheet is not drawn up on the valuation date, Clause (b)(i) of Rule 11U requires use of the balance sheet "drawn up as on a date immediately preceding the valuation date" which has been approved and adopted in the AGM. The provision does not require that such immediately preceding balance sheet must have been audited, approved or adopted before the valuation date. A balance sheet drawn up as on the date immediately preceding the valuation date (here 31/03/2013) is therefore the appropriate basis for valuation even if audit/approval occurred after the allotment. The Tribunal found it neither fair nor proper to insist on use of the earlier 31/03/2012 balance sheet when a balance sheet immediately preceding the valuation date existed, and accordingly upheld the use of the 31/03/2013 balance sheet by the Assessing Officer and the CIT(A) for determining FMV under Rule 11UA. [Paras 7, 8]

The balance sheet as on 31/03/2013 was correctly used for valuation under Rule 11UA and the addition confirmed.

Final Conclusion: Appeal dismissed; the addition made under section 56(2)(viib) read with Rule 11UA was upheld by the Tribunal.

Undisclosed income - penalty under section 271AAB - search and seizure under section 132 - declaration under section 132(4) - books of account and other documents

Undisclosed income - penalty under section 271AAB - books of account and other documents - declaration under section 132(4) - Whether penalty under section 271AAB is leviable on the profit from commodity trading which was recorded in a seized 'other document' (marked SA/1) but not in the regular books of account at the time of search. - HELD THAT: - The Tribunal examined the definition of "undisclosed income" for the purpose of section 271AAB and the factual matrix that the search under section 132 was conducted on 13.12.2012 and the commodity trading profit was recorded in an "other document" seized and marked as SA/1. The assessee declared the amount under section 132(4) and filed a return under section 153A which included the commodity profit; the assessing officer accepted the return and assessed the income. The statutory definition confines "undisclosed income" to amounts not recorded on or before the date of search in the books of account or other documents maintained in the normal course or otherwise not disclosed before the date of search. Since the profit was recorded in the seized document (SA/1) and was declared at the time of search and thereafter included in the return accepted by the AO, the Tribunal held that the amount could not be characterised as "undisclosed income" within the meaning of section 271AAB. On that basis the imposition of penalty under section 271AAB was not sustainable.

Penalty under section 271AAB cancelled as the commodity trading profit recorded in the seized 'other document' and declared under section 132(4) did not qualify as 'undisclosed income'.

Final Conclusion: The appeal is allowed: the penalty imposed under section 271AAB is cancelled because the impugned profit was recorded in a seized 'other document' and declared at the time of search, and thus does not fall within the statutory definition of 'undisclosed income'.

Deductibility of employees' contribution to provident fund and ESI - due date for crediting employees' contribution for claiming deduction - application of Section 43B to employee contribution - prospective operation of tax amendment versus retrospective/clarificatory amendment - legislative intent as discerned from Notes on Clauses

Deductibility of employees' contribution to provident fund and ESI - due date for crediting employees' contribution for claiming deduction - application of Section 43B to employee contribution - prospective operation of tax amendment versus retrospective/clarificatory amendment - legislative intent as discerned from Notes on Clauses - Whether employees' contributions to PF/ESI remitted by the employer before filing of the return are allowable deductions for the assessment years under consideration and whether the amendment by Finance Act, 2021 altering the applicability of Section 43B is retrospective or prospective. - HELD THAT: - The Tribunal held that the Finance Act, 2021 inserted an Explanation to clause (va) of section 36(1) and an Explanation to section 43B to clarify that Section 43B does not apply to employee contributions and that these amendments "will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years" as set out in the Notes on Clauses. Applying the test of legislative intent endorsed by the Supreme Court in Vatika Township and Snowtex, the Notes on Clauses demonstrate Parliament's clear intention that the amendment operate prospectively. Consequently, for assessment years prior to AY 2021-22 the pre-existing position as declared by binding decisions of the jurisdictional High Court and followed by this Tribunal - that employee contributions actually remitted before the due date of filing the return under section 139(1) are allowable - remains applicable. The Tribunal therefore followed its earlier decision in Lumino Industries and set aside the CIT(A)'s reliance on the Explanation as retrospective, directing deletion of the addition and allowance of the deduction for employee contributions paid before filing the return for the AYs in issue. [Paras 4, 5]

Amendment by Finance Act, 2021 is prospective (effective 01.04.2021) and does not apply to AYs 2014-15, 2017-18 and 2019-20; the assessee's payments of employees' contributions made before filing the return are allowable and the additions are deleted.

Final Conclusion: Appeals allowed; the Tribunal held that the Finance Act, 2021 amendment is prospective with effect from 01.04.2021 and directed deletion of disallowances so that employee contributions remitted before filing of the return for AYs 2014-15, 2017-18 and 2019-20 are allowable.

Extended period of limitation under Section 28(4) of the Customs Act, 1962 - wilful misstatement or suppression of facts with intent to evade duty - Certificate of Origin and Regional Value Content (RVC) compliance under preferential trade agreement rules - exhaustion of statutory remedy by appeal under Section 128 of the Customs Act, 1962 - pre deposit requirement for entertaining statutory appeal

Wilful misstatement or suppression of facts with intent to evade duty - extended period of limitation under Section 28(4) of the Customs Act, 1962 - Whether invocation of the extended period under Section 28(4) was sustainable in writ jurisdiction or required determination by the statutory authorities - HELD THAT: - The Court held that whether suppression of facts or wilful misstatement with intent to evade payment of duty is established is essentially a question of fact for the hierarchy of authorities under the Customs Act, 1962. The determination whether the proviso/extended period applies cannot be correctly undertaken in writ jurisdiction where a statutory appellate forum exists; such factual findings are to be considered and decided by the appellate authorities under the Act. [Paras 15]

Invocation of the extended period under Section 28(4) depends on factual findings of wilful misstatement or suppression and is to be determined by the statutory authorities; writ interference is not appropriate on that ground.

Exhaustion of statutory remedy by appeal under Section 128 of the Customs Act, 1962 - availability of writ jurisdiction vis a vis alternative remedy - Whether the writ petition was maintainable when an alternative statutory appeal under Section 128 was available - HELD THAT: - Applying the principle that where a statutory hierarchy of remedies exists, those remedies must ordinarily be exhausted before invoking writ jurisdiction, the Court found that the petitioner has an alternative and efficacious remedy by way of appeal to the Appellate Commissioner under Section 128. Reliance was placed on prior decisions establishing the requirement to exhaust statutory remedies. Consequently, the High Court declined to entertain the challenge on merits in writ proceedings. [Paras 11, 15, 16]

Writ petition dismissed for failure to exhaust the statutory remedy; petitioner directed to prefer appeal under Section 128.

Pre deposit requirement for entertaining statutory appeal - Conditions and directions for filing the statutory appeal before the Appellate Commissioner - HELD THAT: - The Court granted liberty to the petitioner to file an appeal under Section 128 within 30 days from receipt of the order and directed that the Appellate Commissioner shall entertain and decide the appeal on merits in accordance with law subject to the petitioner making the statutory pre deposit. The required pre deposit percentage specified by the Act was applied as a condition for adjudication of the appeal. [Paras 16]

Petitioner permitted to approach the Appellate Commissioner within 30 days; appeal to be heard on merits provided the petitioner pre deposits the statutory amount (7.5%).

Remedy under the Sale of Goods Act - Availability of a civil remedy against the seller for recovery of amounts if the statutory authorities confirm duty - HELD THAT: - The Court noted that, independent of the customs appellate process, if the statutory authorities ultimately require recovery from the petitioner, the petitioner may have a separate remedy to seek recovery from the seller (MMTC) in accordance with the Sale of Goods Act, 1930. This was recorded as an available course of action but the factual determination on customs liability remains for the statutory authorities. [Paras 15]

Petitioner may pursue recovery from the seller under the Sale of Goods Act if so advised; this does not supplant the statutory appellate process under the Customs Act.

Final Conclusion: Writ petition dismissed for lack of merit and for failure to exhaust the statutory remedy; petitioner granted liberty to file an appeal under Section 128 within 30 days, the Appellate Commissioner to decide the appeal on merits subject to the statutory pre deposit, and petitioner retains civil recourse against the seller under the Sale of Goods Act.

Rectification of register of members - ultra vires enrolment of members against Articles of Association - authority of the general meeting to authorize increase of members - limitations on Board's power to admit members under Articles - principles of natural justice in removal of members

Principles of natural justice in removal of members - rectification of register of members - Appellant's membership was valid and he is entitled to maintain the petition for rectification of the register of members. - HELD THAT: - The Tribunal accepted the NCLT finding that the appellant's removal without show-cause or adherence to principles of natural justice was null and void; consequently the appellant continues to be a member of the Company and is qualified to seek rectification of the register. The Tribunal relied on the earlier adjudication that removals effected without complying with Clause 40(b) of the AOA and without fair hearing were void, and therefore the appellant's membership stands restored for purposes of this proceeding. [Paras 24]

Appellant is a member of the Company and entitled to seek rectification of the register of members.

Authority of the general meeting to authorize increase of members - ultra vires enrolment of members against Articles of Association - limitations on Board's power to admit members under Articles - Enrolment of Respondent Nos. 2 to 20 was in violation of the Articles of Association and they are to be removed from the Register of Members. - HELD THAT: - The Tribunal examined Articles 1-5 of the AOA and the minutes of general meetings from 01.01.2013 to 05.11.2018 and found no record of any general meeting authorising the Board to enlist additional members as required by Article 2. The Tribunal agreed with the Administrator's concession that the Board lacked power to enroll new members without such sanction, and observed that the impugned Board resolutions do not record any prior authorisation by the general body. In view of the AOA's scheme limiting admissions and requiring general meeting approval for increasing membership, the admissions by Board resolutions were held to be contrary to the AOA and therefore invalid; accordingly the Register must be rectified and Respondent Nos.2-20 removed. [Paras 26, 28, 29, 31, 32]

Enrolment of R2-R20 violated the Articles of Association; they are directed to be removed from the Register of Members and the Register rectified.

Final Conclusion: The appeal is allowed: the appellant is recognised as a member entitled to seek rectification, and the admissions of Respondent Nos.2-20 are declared contrary to the Articles of Association; the Register of Members shall be rectified and the names of Respondent Nos.2-20 removed, with necessary filings to the Registrar of Companies.

Sanction of scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - Reasonableness, bona fides and statutory majority as evidence of scheme's fairness - Vesting of undertakings, assets and liabilities in transferee company as a going concern - Continuity of employment on terms not less favourable - Obligation to comply with stamp duty and other statutory charges - Regulatory compliance - service on and notices to statutory authorities and filing with Registrar of Companies

Sanction of scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - Reasonableness, bona fides and statutory majority as evidence of scheme's fairness - Approval and sanction of the proposed Scheme of Amalgamation between the three Transferor Companies and the Transferee Company. - HELD THAT: - The Tribunal examined the salient features, rationale and objects of the proposed scheme and applied the settled principle that while it may examine the reasonableness of a scheme, approval by the statutory majority is strong evidence of its reasonableness. Having considered the materials on record, including consents and statutory compliances, the Tribunal found that all statutory requirements under Sections 230-232 were satisfied, the scheme appeared genuine and bona fide, and was in the interest of shareholders and creditors. On this basis the petition for sanction of the scheme was allowed. [Paras 12, 13, 14]

The proposed Scheme of Amalgamation is sanctioned and allowed.

Vesting of undertakings, assets and liabilities in transferee company as a going concern - Continuity of employment on terms not less favourable - Continuation of pending proceedings - Consequences of sanction: transfer and vesting of property, assets, liabilities and employees; and continuation of proceedings. - HELD THAT: - Pursuant to the sanctioned scheme, the Tribunal ordered that the whole of the undertaking and business of the Transferor Companies including all assets, liabilities, agreements and records shall stand transferred to and vest in the Transferee Company as a going concern without further act or deed. All liabilities, including taxes and charges, would stand transferred and become liabilities of the Transferee Company subject to compliance with law. Employees of the Transferor Companies in employment as on the effective date shall become employees of the Transferee Company without break and on terms not less favourable. Proceedings pending by or against the Transferor Companies, if any, shall be continued by or against the Transferee Company. [Paras 10, 14]

Assets, liabilities, contracts and employees of the Transferor Companies are vested in the Transferee Company and pending proceedings shall continue against or by the Transferee Company.

Regulatory compliance - service on and notices to statutory authorities and filing with Registrar of Companies - Obligation to comply with stamp duty and other statutory charges - Directions as to compliance with statutory formalities following sanction of the scheme. - HELD THAT: - The Tribunal directed the petitioner companies to lodge and serve the order and scheme with concerned authorities and to comply with statutory formalities. Specifically, the petitioners were directed to file a certified copy of the order and the schedule of immovable assets with the Superintendent of Stamps for adjudication of stamp duty within 60 days, and to file the order and scheme electronically with the Registrar of Companies along with Form INC-28 within 30 days of issuance of the certified copy. The Tribunal also clarified that this sanction does not exempt payment of stamp duty, taxes or other charges and that such payments must be made in accordance with law. [Paras 14, 17, 18, 19]

Petitioners must comply with directions regarding stamping, filing with ROC (Form INC-28) and service on statutory authorities; sanction does not exempt payment of stamp duty or taxes.

Quantification of fees and costs payable in consequence of the scheme - Payment to Official Liquidator and Regional Director - Payment of legal fees and expenses to the Office of the Official Liquidator and the Regional Director. - HELD THAT: - The Tribunal quantified the legal fees and expenses payable in respect of the transferor/petitioner companies: the fee to the Office of the Official Liquidator is quantified and ordered to be paid by the Transferee Company within four weeks of issuance of the certified copy of the order; similarly the fee to the Regional Director is quantified and directed to be paid by the Transferee Company within the same timeframe. These directions form part of the conditions attendant on sanctioning the scheme. [Paras 15, 16]

Transferee Company to pay quantified fees to the Official Liquidator and the Regional Director within four weeks of issuance of certified copy of the order.

Final Conclusion: The joint Company Petition is allowed; the Scheme of Amalgamation is sanctioned subject to the Tribunal's directions regarding vesting of assets and liabilities, continuity of employees and proceedings, payment of prescribed fees, compliance with stamp duty and filing requirements, and other statutory formalities, and the petition stands disposed of.

Restoration of name of company - striking off of company - restoration under Section 252(3) of the Companies Act, 2013 - reasonable cause to believe company not carrying on business - filing of pending statutory documents and payment of additional fee - publication in the Official Gazette - Companies Fresh Start Scheme, 2020

Restoration under Section 252(3) of the Companies Act, 2013 - standing of shareholder to file appeal - The maintainability of the company appeal filed by the shareholder and director under Section 252(3) for restoration of the company's name. - HELD THAT: - The Tribunal examined the nature of the present petition and the status of the petitioner as both shareholder and director of the deregistered company. The record established that the appellant was eligible to institute the appeal under the statutory provision empowering the Tribunal to restore struck off companies. On that basis the Tribunal held the appeal to be maintainable. [Paras 21]

The appeal is maintainable as filed by the shareholder/director under Section 252(3).

Striking off of company - limitation for restoration - Whether the appeal for restoration was filed within the prescribed limitation period. - HELD THAT: - The Tribunal noted the company's name was struck off on 09.06.2017 and the present appeal was filed on 18.11.2020. The record therefore showed the appeal was lodged within the statutory time permitted for seeking restoration, and the Tribunal so recorded. [Paras 22]

The appeal was filed within limitation and is not time-barred.

Restoration of name of company - reasonable cause to believe company not carrying on business - filing of pending statutory documents and payment of additional fee - publication in the Official Gazette - Whether it was just and equitable to restore the name of M/s Akansha Tea Plantation & Trading Company Private Limited and on what terms such restoration should be effected. - HELD THAT: - The Tribunal considered the ROC report and the materials on record showing non-filing of statutory returns after 2011-12 and striking off on 09.06.2017. The petitioner attributed non-filing to inadvertence and lack of professional expertise and sought restoration; reliance was also placed on the availability of the CFSS, 2020 as a one-time relief to defaulting companies. Balancing these aspects, the Tribunal concluded that restoration would be just and equitable. However, restoration was granted conditionally: the company must file all pending statutory documents (annual accounts and annual returns for specified financial years) with prescribed/additional fees; deliver a certified copy of the Tribunal order to the ROC; pay a specified cost for revival by online payment; and upon compliance the ROC was directed to change the company's status to 'Active' and publish the order in the Official Gazette. The Tribunal also clarified that the order was confined to violations that led to striking off and would not preclude the ROC from initiating proceedings for any other violations or offences discovered. [Paras 24, 25, 26]

The appeal is partly and conditionally allowed; the ROC is directed to restore the company's name as if not struck off subject to the filing of pending returns and compliance with the conditions specified by the Tribunal, payment of the stated cost, delivery of certified order and Gazette publication.

Final Conclusion: The Tribunal held the appeal maintainable and timely, and in exercise of its power under Section 252(3) allowed restoration of the company's name on the Register subject to specified conditions including filing of all pending statutory documents with additional fees, payment of the revival cost, delivery of a certified copy of the order and publication by the ROC; the order is confined to the violations that led to striking off and does not bar the ROC from taking action for other offences if found.

Restoration of company name after striking off under Section 248 and restoration under Section 252(3) of the Companies Act, 2013 - requirement of filing outstanding statutory documents as condition for restoration - procedure and notice obligations under Section 248(1) leading to striking off - disqualification and deactivation of directors' DIN under Section 164(2) and its non-automatic cure on restoration - exercise of discretion by the Tribunal to revive a struck-off company in the interest of justice

Restoration of company name after striking off under Section 248 and restoration under Section 252(3) of the Companies Act, 2013 - exercise of discretion by the Tribunal to revive a struck-off company in the interest of justice - The appeal for restoration of the company's name in the Register was maintainable, within limitation, and, on merits, partly and conditionally allowed. - HELD THAT: - The Tribunal found the appellant eligible to prefer the petition as shareholder and director and recorded that the appeal was filed within the statutory limitation. On merits, after considering the record and submissions that the non-filing of statutory returns was unintentional and that the company was carrying on business, the Tribunal exercised its power under Section 252(3) to restore the company's name. The Tribunal concluded that, in the facts of the case and in the interest of justice, it was just and equitable to revive the company and ordered restoration subject to specified conditions. [Paras 16, 17, 18, 19, 20]

The appeal is partly and conditionally allowed and the Registrar of Companies is directed to restore the company's status to 'Active' as if its name had not been struck off, subject to compliance with the Tribunal's conditions.

Requirement of filing outstanding statutory documents as condition for restoration - payment of prescribed fees, additional fees and costs as condition for restoration - Restoration was made conditional upon filing all pending statutory documents and payment of fees and costs specified by the Tribunal and ROC. - HELD THAT: - The Tribunal imposed specific compliance conditions as an integral part of restoration. The petitioner was directed to file all outstanding annual accounts, annual returns for the financial years specified, income tax returns, and to pay prescribed fees/additional fee/fine as decided by the Registrar. The Tribunal further required delivery of a certified copy of the order to the Registrar, publication in the Official Gazette by the ROC, and payment of a specified online cost for revival. The order emphasises that failure to comply may lead to re-striking off without further notice. [Paras 20]

Restoration is subject to filing all pending statutory returns and payment of prescribed fees/additional fee/fine and costs, delivery of certified order to the ROC and publication in the Official Gazette.

Disqualification and deactivation of directors' DIN under Section 164(2) and its non-automatic cure on restoration - scope of Tribunal's restoration order vis-a -vis other violations or proceedings - Restoration of the company's name does not automatically entitle activation of deactivated DINs or preclude the ROC from taking appropriate action for other violations. - HELD THAT: - The Tribunal noted the ROC's report about directors being disqualified and DINs deactivated under Section 164(2) for the relevant period. The order expressly confines restoration to the violations that led to striking off and clarifies that the ROC remains competent to take lawful action for any other violations or offences committed by the company or its directors before or during the period the name remained struck off. The Tribunal did not direct activation of DINs. [Paras 20]

Restoration of the company's name will not operate as a direction to activate deactivated DINs and will not prevent the ROC from initiating or continuing appropriate actions for other violations.

Final Conclusion: The Tribunal allowed the application for restoration of M/s Elangbam Infrastructures & Construction Private Limited to the Register of Companies as if its name had not been struck off, subject to conditions requiring filing of all pending statutory documents, payment of prescribed fees and costs, delivery of certified order to the ROC and publication in the Official Gazette; restoration does not automatically remedy directors' disqualification or preclude further action by the Registrar for other violations.

Transaction Audit Report - Appointment and remuneration of Transaction Auditor - Power under Section 60(5) of the IBC to issue directions - Non-cooperation of suspended management - Duty to furnish books of accounts for completion of CIRP - Payment of professional fees by the Committee of Creditors

Transaction Audit Report - Non-cooperation of suspended management - Duty to furnish books of accounts for completion of CIRP - Whether the Transaction Audit Report submitted by the applicant was complete and whether non-cooperation of the suspended management affected completion of the report. - HELD THAT: - The Tribunal found that the suspended management/directors did not fully cooperate and failed to provide complete books of accounts and other records despite repeated opportunities. On the material before it, including the status of documents provided and the RP's directions, the Tribunal concluded that the Transaction Audit Report submitted by the applicant was not complete because essential information and supporting records remained unavailable. The finding rests on the lack of production of consolidated tally data and other specified financial records required for a complete transaction audit, and the RP's account that only limited information was supplied by the suspended management. [Paras 9]

The Transaction Audit Report is not complete due to non-cooperation and non-supply of complete books of account by the suspended management.

Payment of professional fees by the Committee of Creditors - Appointment and remuneration of Transaction Auditor - Whether and what amount the Committee of Creditors should pay to the Transaction Auditor for the work undertaken. - HELD THAT: - Having considered the nature of the work performed, the fact that the Corporate Debtor is a coaching institute, and notwithstanding that the report was incomplete for reasons attributable to non-cooperation by the suspended management, the Tribunal exercised its discretion to fix a reasonable fee payable by the CoC for the work done. The Tribunal evaluated submissions from the applicant and the RP about the scope and quantum of work and directed a payment that reflects the work undertaken while leaving open future negotiation for any additional work necessary to complete the report. [Paras 12]

The CoC is directed to pay the Transaction Auditor Rs. 3,00,000 plus applicable GST within 7 days.

Power under Section 60(5) of the IBC to issue directions - Remand or direction to file affidavits/submissions - Whether the suspended management and the Resolution Professional should be directed to file responses to the reported irregularities and the Transaction Audit Report. - HELD THAT: - The Tribunal directed that, in view of the matters reported in the Transaction Audit Report and the incompleteness of records, the suspended management must file a reply-affidavit addressing the reported irregularities and explaining reasons for non-cooperation and non-supply of books of account. The RP was also directed to file submissions on the points raised in the Transaction Audit Report and the Additional Report. These directions are procedural and intended to enable further adjudication and verification of the reported transactions. [Paras 10, 11]

Suspended management to file reply-affidavit within 10 days; RP to file submissions on the Transaction Audit Report/Additional Report within 10 days.

Appointment and remuneration of Transaction Auditor - Payment of professional fees by the Committee of Creditors - Whether the RP may utilize the services of the applicant to complete the Transaction Audit Report and on what terms such engagement should proceed. - HELD THAT: - The Tribunal observed that since the present applicant prepared the existing (albeit incomplete) report, the RP may in future utilize the applicant's services to complete the Transaction Audit Report. The Tribunal left terms and fees for any such future engagement to be negotiated separately between the parties, thereby allowing flexibility to remunerate additional work as required. [Paras 12]

RP may engage the applicant for completion of the report in future on separate fees to be negotiated at that time.

Final Conclusion: The application is disposed of with directions: the suspended management to file a reply-affidavit and the RP to file submissions within 10 days; the Transaction Audit Report is held to be incomplete; the CoC is directed to pay the Transaction Auditor Rs. 3,00,000 plus applicable GST within 7 days; and the RP may engage the applicant for completion of the report on separate, negotiable terms.

Ownership and inclusion of assets in the liquidation estate - realisation of security interest in liquidation - relinquishment of security interest to the liquidation estate - verification of security interest by the liquidator - priority of distribution under the liquidation waterfall - claims by financial creditors under the liquidation process

Ownership and inclusion of assets in the liquidation estate - Whether the vehicle in question is an asset of the Corporate Debtor and thereby forms part of the liquidation estate. - HELD THAT: - The Tribunal examined the Certificate of Registration and related records and found the RC issued in the name of the suspended Director with the address shown as M/s. Adhils Builders and Developers Pvt. Ltd. The Tribunal held that, under the facts on record, the vehicle was purchased in the name of the suspended Managing Director for the Corporate Debtor and is recorded in the asset memorandum as a tangible fixed asset of the Corporate Debtor. The finding gives effect to the registered ownership entries which, in the context of Part II of the Code, determine the Corporate Debtor's ownership rights over the asset and thereby its inclusion in the liquidation estate. [Paras 22, 23]

The vehicle is an asset of the Corporate Debtor and forms part of the liquidation estate.

Realisation of security interest in liquidation - relinquishment of security interest to the liquidation estate - priority of distribution under the liquidation waterfall - verification of security interest by the liquidator - claims by financial creditors under the liquidation process - Legal consequences and procedure applicable to a secured creditor who claims a security interest in an asset that is part of the liquidation estate. - HELD THAT: - The Tribunal analysed the options under the liquidation framework: a secured creditor may either relinquish its security interest to the liquidation estate and claim under the distribution priority, or realise its security interest in the manner provided by law. Section 52 requires the secured creditor to inform the liquidator, identify the asset, and submit proof of existence of the security interest; the liquidator must verify such security interest before permitting realisation. Section 53 prescribes the distribution waterfall and has overriding effect. The Tribunal held that a respondent who has submitted Form D and thereby admitted a claim as a financial creditor is bound to follow the statutory procedures in the Code and the Liquidation Process Regulations; if it opts to realise its security interest it must comply with Section 52 and the prescribed verification and cost obligations, including deduction/transfer of CIRP and liquidation costs as applicable, and if it relinquishes the security it will rank for distribution under Section 53. [Paras 27, 28, 29, 31, 32]

The respondent, having submitted a claim under Form D, is a financial/secured creditor obliged to follow the procedures under Section 52 and the Liquidation Process Regulations; relinquishment or realisation of security interest attracts the respective consequences under Sections 52 and 53.

Verification of security interest by the liquidator - claims by financial creditors under the liquidation process - liquidator's duty to follow liquidation regulations - Whether the liquidator must further act on the respondent's claim and the course to be followed by the liquidator. - HELD THAT: - The Tribunal observed that the relief sought by the Liquidator in the IA was vague and that the records show the respondent had filed Form D and sought either release or realization of its security interest. The Tribunal directed that the Liquidator must follow the procedures prescribed in the applicable Regulations (including verification of the security interest and dealing with claims submitted under Regulation 18/Form D) and give an appropriate reply to the respondent. This direction requires the Liquidator to verify the existence and particulars of the secured interest and to proceed in accordance with Sections 52-53 and the Liquidation Process Regulations rather than pronouncing a final adjudication on competing contentions. [Paras 31, 32, 34]

The Liquidator is directed to follow the prescribed liquidation procedure, verify the respondent's claim and security interest, and give an appropriate reply; the matter is left to the Liquidator for compliance with the Code and Regulations.

Final Conclusion: The Tribunal held that the vehicle is an asset of the Corporate Debtor and forms part of the liquidation estate; the respondent, having filed Form D, is a financial/secured creditor required to follow the procedures under Section 52 and the Liquidation Process Regulations (with the consequences of relinquishment or realisation governed by Sections 52-53); the Liquidator was directed to verify and deal with the respondent's claim in accordance with the Code and Regulations and to communicate an appropriate response. The IA is disposed of with that direction.

Liquidator's remuneration - entitlement to remuneration where assets cannot be liquidated due to appellate restraint - stakeholders' consultation committee liability to meet liquidator's fees - fee proportion to liquidation estate under Regulation 4(2) of IBBI (Liquidation Process) Regulations, 2016

Liquidator's remuneration - entitlement to remuneration where assets cannot be liquidated due to appellate restraint - stakeholders' consultation committee liability to meet liquidator's fees - Whether the erstwhile liquidator is entitled to remuneration for the period 06.01.2020 to 06.01.2021 and the manner of its payment. - HELD THAT: - The Tribunal found that the applicant duly functioned as liquidator from 06.01.2020 to 06.01.2021 and incurred and was reimbursed certain expenses. The liquidation order of this Tribunal had specified that a company liquidator is entitled to charge fees in proportion to the value of liquidation estate assets as provided under Regulation 4(2) of the IBBI (Liquidation Process) Regulations, 2016. The applicant further demonstrated that an appellate restraint prevented liquidation or sale of assets during the pendency of appeal, which impeded realisation of the estate. On these facts and having regard to the directions in the liquidation order and the restraint on asset realisation, the Tribunal accepted that the applicant could not be denied legitimate fees for the period he functioned as liquidator. Exercising its discretion under the peculiar facts, the Tribunal directed that respondents who are members of the Stakeholders Consultation Committee should pay a monthly sum to the erstwhile liquidator for the period in question, and that such payments would form part of the overall liquidator's remuneration payable under the applicable rules. [Paras 4, 6]

Application allowed; respondents 1 to 5 directed to pay Rs. 75,000 per month to the erstwhile liquidator for the period 06.01.2020 to 06.01.2021, and such sums shall form part of the overall liquidator's remuneration.

Final Conclusion: Application by the erstwhile liquidator allowed; directed payment of Rs. 75,000 per month by respondents 1-5 for the period 06.01.2020-06.01.2021, such payments to be consolidated into the liquidator's overall remuneration.

Admission of claim in CIRP - verification of proof of claim by Resolution Professional - duty of Resolution Professional to protect interests of other creditors - adjustment of payments by a creditor against dues of a third party - forensic audit and investigation into affairs of the corporate debtor - allegations of fraud and consequences under Section 68 of the IBC - invocation of investigative powers under Section 213 of the Companies Act, 2013 - moratorium under Section 14 of the IBC

Admission of claim in CIRP - verification of proof of claim by Resolution Professional - duty of Resolution Professional to protect interests of other creditors - adjustment of payments by a creditor against dues of a third party - Whether the Resolution Professional was justified in rejecting a portion of the Applicant's proof of claim and admitting only the amount reflected in the corporate debtor's books and audited financial statements. - HELD THAT: - The Tribunal examined the records, payments reflected in the books of the corporate debtor and the audited financial statements, and the materials placed before the Resolution Professional. The RP had provisionally admitted a claim sum for verification and thereafter, on scrutiny, observed that certain amounts claimed by the Applicant had already been received from the corporate debtor and were reflected in the debtor's books as amounts paid; the Applicant had adjusted some receipts against dues of a third party. The RP concluded that acceptance of amounts already recorded as paid would be contrary to the Code and detrimental to the interests of other creditors. The Tribunal noted that the Applicant did not dispute receipt of such payments and that the RP had followed verification procedures including appointment of forensic auditor. On these findings the Tribunal found no reason to interfere with the RP's decision to admit only the claim as reflected in the corporate debtor's audited accounts and rejected the challenge to the rejection of the excess claim. [Paras 21, 22]

Application challenging the RP's rejection of part of the claim is dismissed; the RP's decision to admit the claim as per the corporate debtor's books/audited accounts is sustained.

Forensic audit and investigation into affairs of the corporate debtor - allegations of fraud and consequences under Section 68 of the IBC - invocation of investigative powers under Section 213 of the Companies Act, 2013 - Whether the Tribunal should direct a forensic audit, initiate action under Section 68 of the IBC, or direct an SFIO investigation under Section 213 of the Companies Act on the basis of the Applicant's allegations of fraud and manipulation of accounts. - HELD THAT: - The Applicant sought emergent reliefs including a forensic audit, initiation of proceedings for alleged concealment/falsification under Section 68 and an SFIO investigation under Section 213. The Tribunal considered the submissions, the RP's independent conclusion that a forensic audit was carried out, and the material on record. The Tribunal observed that the Applicant's allegations formed part of the broader dispute over claim amounts and that the RP and other professionals had undertaken verification steps. In the absence of persuasive material warranting exercise of the Tribunal's extraordinary powers, and given that the claim dispute had been addressed through verification and audit processes, the Tribunal declined to accede to the prayer for fresh investigation or to initiate action under Section 68 or Section 213 based on the present material. [Paras 7, 12, 15, 21, 22]

Prayer for forensic audit/SFIO investigation and initiation of action for alleged fraud is declined; no directions for further investigation or action under Section 68/Section 213 are issued.

Final Conclusion: The IA seeking admission of the entire claimed amount, directions for forensic/SFIO investigation and initiation of fraud proceedings was dismissed; the Tribunal declined to interfere with the RP's verification and admission of the claim as reflected in the corporate debtor's books and audited statements and refused the applicant's requests for further investigatory action.

Admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - corporate insolvency resolution process - financial debt and default - date of default and limitation - minimum threshold for allottees under the proviso to section 7 - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Financial debt and default - admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the petition under section 7 establishes debt and default and is liable to be admitted. - HELD THAT: - The Tribunal found that amounts of Rs. 90,00,000 and Rs. 5,00,000 were advanced on 11.01.2016 for a lock-in period of three years at an agreed rate of interest, with repayment due on 11.01.2019. The Financial Creditor issued a default notice and produced record of default from an Information Utility. Applying the settled principle that once 'debt' and 'default' are proved under Section 7 the Adjudicating Authority is bound to admit the petition, the Tribunal held the application to be complete and that the debt and default stood established. The Tribunal therefore admitted the section 7 petition and ordered initiation of the CIRP. [Paras 22, 23, 25, 26]

The Company Petition under section 7 is admitted as debt and default are established and CIRP is ordered to be initiated.

Date of default and limitation - Whether the petition is barred by limitation. - HELD THAT: - The Tribunal accepted the Financial Creditor's position that the loan was for a three year period commencing 11.01.2016 and became due on 11.01.2019. On that basis the Tribunal held the petition to be within limitation. The Tribunal also noted that, even if the date of default were taken as the date of cheque bouncing, the application would still be within limitation. [Paras 22]

The petition is not barred by limitation.

Minimum threshold for allottees under the proviso to section 7 - Whether the Financial Creditor is to be treated as an allottee requiring the minimum threshold of joint applicants under the proviso to section 7. - HELD THAT: - The Tribunal considered the Corporate Debtor's contention that the Financial Creditor was an allottee and therefore the petition required joint filing by the minimum prescribed number of allottees. The Tribunal accepted the Financial Creditor's case that the amounts were advanced as a loan and that the letter of mortgage and letter of allotment were executed to secure the loan; the petition was filed in the capacity of a financial creditor claiming a secured loan and not as an allottee seeking invocation of the proviso. On this basis the Tribunal did not apply the minimum-threshold proviso for allottees. [Paras 19, 22, 25]

The Financial Creditor is treated as a financial creditor claiming a secured loan and the proviso requiring joint filing by allottees is not attracted.

Appointment of Interim Resolution Professional - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Reliefs and incidental orders consequent to admission: appointment of IRP, moratorium, public announcement and related directions. - HELD THAT: - On admission the Tribunal directed the constitutionally established consequences of initiation of CIRP. It noted the Financial Creditor's proposal and the proposed Interim Resolution Professional's written consent and registration details, and appointed him as IRP. The Tribunal ordered the statutory moratorium to operate from the date of the order, directed immediate public announcement, required the IRP to assume management and perform duties under the IBC, and issued directions as to deposit for CIRP expenses and communication to Registrar of Companies. [Paras 24, 26]

Mr. Prakul Thadi is appointed as Interim Resolution Professional; moratorium, public announcement and related directions are ordered to follow as part of the CIRP.

Final Conclusion: The Tribunal admitted the section 7 petition, holding that the Financial Creditor established financial debt and default (with date of default 11.01.2019), rejected limitation and the contention that the petitioner is an allottee requiring the proviso threshold, and ordered initiation of CIRP with appointment of an Interim Resolution Professional and imposition of the statutory moratorium.

Voluntary liquidation - dissolution under Section 59(8) of the Insolvency and Bankruptcy Code, 2016 - declaration of solvency - compliance with Voluntary Liquidation Process Regulations - treatment of unclaimed/undistributed liquidation proceeds

Voluntary liquidation - dissolution under Section 59(8) of the Insolvency and Bankruptcy Code, 2016 - declaration of solvency - compliance with Voluntary Liquidation Process Regulations - Application for dissolution of Guwahati Real Estate Limited in voluntary liquidation was allowed. - HELD THAT: - The Tribunal examined the corporate records, board and members' resolutions authorising voluntary liquidation, the Declaration of Solvency supported by audited financial statements, the public announcements, submission of the Preliminary and Final Reports, filing of FORM G and e FORM GNL 2, closure of bank accounts after distribution of proceeds, and the auditors' report stating absence of liabilities affecting the financial position. The Tribunal observed there were no creditors and no pending litigation affecting financial position, and that the liquidation steps were carried out in accordance with the VLP Regulations. On those findings the Tribunal concluded that the conditions for voluntary dissolution were satisfied and exercised its power under Section 59(8) to dissolve the company. [Paras 36, 37]

The petition for dissolution is allowed and the company is dissolved with effect from 30.11.2021.

Treatment of unclaimed/undistributed liquidation proceeds - compliance with Voluntary Liquidation Process Regulations - The liquidator's treatment of unclaimed/undistributed proceeds pursuant to IBBI circular applicable to voluntary liquidation was accepted. - HELD THAT: - The ROC had reported that undistributed funds were held locally and sought transfer to the IBBI Corporate Liquidation Account at New Delhi. The liquidator replied that the relevant circular for voluntary liquidation is IBBI/VL/028/2020 dated 20.01.2020 (distinct from a circular applicable to liquidation under a different regime) and stated that unclaimed amounts were transferred to the IBBI Corporate Voluntary Liquidation Account as per that circular and FORM G. The Tribunal noted the transfer of proceeds of untraceable shareholders to the IBBI Corporate Voluntary Liquidation Account and accepted that the liquidator had complied with the requirements for voluntary liquidation. [Paras 35, 36]

The liquidator's handling and transfer of unclaimed/undistributed proceeds in accordance with the IBBI circular for voluntary liquidation is accepted.

Final Conclusion: The Tribunal allowed the company petition, ordered dissolution of Guwahati Real Estate Limited with effect from 30.11.2021, and directed the liquidator to communicate the order to the Registrar of Companies, IBBI and other concerned authorities.

Deposit of certain percentage of duty demanded or penalty imposed before filing appeal - Mandatory pre-deposit requirement for entertaining appeals - Rejection of appeal in limine for non-compliance with pre-deposit condition - Remand for compliance with statutory pre-deposit and adjudication on merits

Deposit of certain percentage of duty demanded or penalty imposed before filing appeal - Mandatory pre-deposit requirement for entertaining appeals - Rejection of appeal in limine for non-compliance with pre-deposit condition - Remand for compliance with statutory pre-deposit and adjudication on merits - Effect of non-compliance with the statutory pre-deposit provision and the appropriate remedy where appeal was rejected under section 35F. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) rejected the appellant's appeal solely on the ground of non-compliance with the statutory pre-deposit requirement contained in section 35F. The provision imposes a mandatory condition that a specified percentage of the duty demanded or penalty must be deposited before an appeal is entertained; failure to comply results in rejection of the appeal in limine. Having noted the appellant's inadvertent non-compliance and the Department's willingness to permit adjudication on merits subject to the requisite pre-deposit, the Tribunal exercised its remedial discretion. Rather than uphold the summary rejection, the Tribunal remanded the matter to the Commissioner (Appeals) directing that the appellant be permitted to make the required pre-deposit and, upon such compliance, the Commissioner (Appeals) shall adjudicate the appeal on its merits. [Paras 5, 6]

The appeal is allowed by way of remand; the appellant shall make the statutory pre-deposit as required by section 35F and the Commissioner (Appeals) shall decide the appeal on merits thereafter.

Final Conclusion: The Tribunal accepted that section 35F prescribes a mandatory pre-deposit and, in the interest of justice, remanded the appeal to the Commissioner (Appeals) with directions to allow the appellant to make the required pre-deposit and to adjudicate the appeal on merits thereafter.

Extended period of limitation - Limitation - bona fide belief and divergent judicial views - Liability of sub-contractor for service tax - Payment of service tax by main contractor - Requirement of mens rea / wilful evasion for invoking extended period

Extended period of limitation - Limitation - bona fide belief and divergent judicial views - Requirement of mens rea / wilful evasion for invoking extended period - Impugned show cause notice invoking the extended period is barred by limitation. - HELD THAT: - The Tribunal found that the appellant had a bona fide belief, arising from a then-prevailing body of inconsistent decisions and departmental practice, that the sub-contractor was not liable to pay Service Tax where the main contractor had discharged tax on the entire value. In that factual and legal context there was no evidence of conscious, intentional evasion, suppression or mis-statement by the appellant. The onus lay on the Department to prove that the short payment (if any) was made with intent to evade tax. Reliance was placed on precedent that where the assessee acted under a bona fide belief or where judicial views were divergent, the extended five-year limitation cannot be invoked. Applying these principles to the facts of the case, the Tribunal held the show cause notice time-barred and unsustainable. [Paras 5, 6]

Extended period could not be invoked; the show cause notice is barred by limitation.

Liability of sub-contractor for service tax - Payment of service tax by main contractor - Effect of later authoritative pronouncement clarifying sub-contractor's liability does not cure earlier bona fide uncertainty nor supply mens rea for invoking extended limitation. - HELD THAT: - The Tribunal noted that earlier decisions and departmental views had held that sub-contractors were not liable where the main contractor paid Service Tax, but a Larger Bench decision subsequently clarified that sub-contractors are individually liable. However, at the time the events occurred and when the show cause notice period arose, there existed genuine uncertainty. In such circumstances, the mere availability of a later ruling altering prior positions does not establish that the appellant wilfully avoided tax or had fraudulent intent. Because the tax for the amount in dispute had been discharged to the Government by the main contractor and no positive evidence of evasion existed against the appellant, the extended limitation could not be invoked retrospectively. [Paras 5, 6]

Later clarification of law does not retrospectively convert the appellant's conduct into intentional evasion; liability assessment cannot be sustained in limitation.

Final Conclusion: The appeal is allowed; the impugned show cause notice is held to be barred by limitation and the order under challenge is set aside.