TaxTMI Updates e-Newsletter
Jan 03,2020

Classification under Heading 1518 of the Customs Tariff - Inedible mixtures or preparations of vegetable fats or oils - Preferential application of specific tariff entries over general entries (GIR Rule 3(a)) - HSN Explanatory Notes as aid to classification - Applicability of Schedule I and Schedule II of GST rate Notification to HSN 1518 - Binding effect and limited precedential value of an Advance Ruling

Classification under Heading 1518 of the Customs Tariff - Inedible mixtures or preparations of vegetable fats or oils - HSN Explanatory Notes as aid to classification - Pooja Oil is classifiable as an inedible mixture under sub heading 1518 00 40 of the Customs Tariff. - HELD THAT: - The product is a blend of five vegetable oils (rice bran, sesame, coconut, castor and mahua) mixed in agreed proportions and subsequently blended with fragrance; the appellant admitted the resultant product is inedible and used for lighting diyas/lamps. The HSN structure and Explanatory Notes show Heading 15.18 contains (a) vegetable/animal oils chemically modified by listed processes and (b) inedible mixtures or preparations of animal or vegetable fats or oils not elsewhere specified. The Appellant did not prove that the oils were subjected to any of the chemical modification processes set out in Heading 15.18 and therefore the product cannot be classified under sub heading 1518 00 39 (other than edible grade oils obtained by such processes). Given that the Pooja Oil is an inedible mixture of vegetable oils not otherwise specified in Chapter 15, it falls within the second category of Heading 15.18 and is classifiable under sub heading 1518 00 40. [Paras 16, 17]

Pooja Oil is classifiable under sub heading 1518 00 40 as an inedible mixture or preparation of vegetable oils.

Applicability of Schedule I and Schedule II of GST rate Notification to HSN 1518 - Preferential application of specific tariff entries over general entries (GIR Rule 3(a)) - Pooja Oil is taxable under Schedule II (entry Sl. No. 27) of the GST rate Notification and not under Schedule I (entry Sl. No. 90). - HELD THAT: - Having held that Pooja Oil is classifiable under sub heading 1518 00 40 (inedible mixtures), the Appellate Authority examined the rate schedules. Entry Sl. No. 90 of Schedule I covers vegetable fats and oils which have been subjected to the specified processes (boiled, oxidised, dehydrated, sulphurised, blown, polymerised or otherwise chemically modified), and includes edible and other than edible grades obtained by such processes. Entry Sl. No. 27 of Schedule II includes inedible mixtures or preparations of animal or vegetable fats or oils not elsewhere specified. Since Pooja Oil is an inedible mixture not resulting from the listed chemical modification processes, it is not covered by Schedule I and is more appropriately covered by Schedule II. The appellant's reliance on the principle of preferring a specific description (GIR Rule 3(a)) and on entries in Schedule I fails because the factual prerequisite for Schedule I (product having been subjected to the specified processes) is not satisfied. [Paras 19, 20, 21]

Pooja Oil falls under Schedule II (Sl. No. 27) and is therefore taxable at the rate specified therein (6% CGST + 6% KGST; 12% IGST as applicable).

Binding effect and limited precedential value of an Advance Ruling - The Andhra Pradesh AAR ruling relied upon by the appellant is not persuasive and an Advance Ruling is binding only on the applicant and the concerned officer in respect of that applicant. - HELD THAT: - The Appellant referred to an advance ruling of the Andhra Pradesh AAR classifying a vegetable oil product under Schedule I. The Appellate Authority noted that advance rulings are binding only on the applicant and the jurisdictional officer concerning that applicant. Further, the Andhra Pradesh ruling did not set out the manufacturing details or whether the product had undergone the chemical processes required by the Schedule I entry; accordingly its factual proximity and persuasive value to the instant case is limited. For these reasons the earlier ruling was not followed. [Paras 22]

The Andhra Pradesh AAR decision is not persuasive in the present facts; reliance on it is rejected and does not affect the classification reached.

Final Conclusion: The appeal is dismissed and the Advance Ruling No KAR ADRG 49/2019 dated 18.09.2019 is upheld. Pooja Oil is classifiable under sub heading 1518 00 40 as an inedible mixture of vegetable oils and is taxable under Schedule II of the GST rate Notification (6% CGST + 6% KGST; 12% IGST as applicable).

Input tax credit - Supply between distinct persons treated as supply under Schedule I - Deemed payment for supplies made without consideration under proviso to Rule 37 of the CGST Rules - Payment of amount towards value of supply within 180 days under proviso to Section 16(2) - Tax invoice and valuation under GST - Book adjustment / netting off as mode of payment

Input tax credit - Supply between distinct persons treated as supply under Schedule I - Deemed payment for supplies made without consideration under proviso to Rule 37 of the CGST Rules - Book adjustment / netting off as mode of payment - Tax invoice and valuation under GST - Eligibility of the appellant to avail full input tax credit of tax paid by SML Head Office on lease/hire of cranes supplied to the appellant (a distinct person) for furtherance of business. - HELD THAT: - The transactions fall within Schedule I as supplies between distinct persons and are therefore taxable. The appellant is in possession of tax invoices, the goods/services were received for furtherance of business, tax has been paid by the Head Office and returns are filed. Although the Lower Authority restricted ITC relying on the fact that consideration is specified and payment was not made in cash, the Appellate Authority found that the consideration has been paid in substance either by receipt of payment from the ultimate customer into the Head Office account or by legitimate book adjustments (netting off receivables and payables) permitted by the commercial arrangement embodied in the MOU and recognised in accounting principles. The proviso to Rule 37 (deeming payment for supplies without consideration) need not be the only route to permit ITC; where value and tax have in substance been discharged through the mechanisms adopted (tax invoice, payment to Head Office account or lawful set off between receivable and payable), there is no justification to restrict ITC under Section 16(2). Applying these principles to the material before it, the Appellate Authority found no reason to deny or proportionately restrict the credit and therefore held that the appellant is entitled to claim full ITC subject to other conditions of Section 16 being met. [Paras 6, 8, 9]

The appellant is eligible to avail full input tax credit of the tax paid by SML Head Office on the lease/hire of cranes to the appellant for furtherance of business, subject to the other conditions of Section 16 of the CGST/TNGST Act, 2017.

Final Conclusion: The Appellate Authority modified the Original AAR and held that, on the facts and documents produced, the appellant may claim full input tax credit of the tax paid by the Head Office on lease/hire of cranes to the appellant, subject to compliance with the other statutory conditions for availment of credit.

Value of supply between distinct persons - open market value - invoice value deemed open market value - eligibility for full input tax credit - option to adopt ninety percent proviso for "as such" supplies - construction and independent operation of provisos to Rule 28

Construction and independent operation of provisos to Rule 28 - open market value - invoice value deemed open market value - option to adopt ninety percent proviso for "as such" supplies - eligibility for full input tax credit - Interpretation and application of the provisos to Rule 28 for valuation of supplies between distinct persons and the right of the supplier to adopt invoice value when recipient is eligible for full input tax credit. - HELD THAT: - Rule 28(a)-(c) prescribe the basic sequence for valuing supplies between distinct or related persons, with sub-rules (b) and (c) applying only where an "open market value" under (a) is not available. The first proviso grants the supplier an option, in cases where the goods are intended to be supplied "as such" by the recipient, to adopt an amount equivalent to ninety percent of the price charged by the recipient to unrelated customers. The second proviso separately provides that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the "open market value." A plain reading of Rule 28 shows no textual requirement that the provisos be applied seriatim or that the second proviso be subordinate to the first. The first proviso is an elective valuation method limited to "as such" supplies; the second proviso independently addresses the situation where full input tax credit is available to the recipient and treats the invoice value as the open market value. Consequently, when the recipient distinct person is eligible for full input tax credit, the supplier may adopt the invoice value under the second proviso as the open market value for the initial inter-branch transfer. [Paras 7, 8]

The second proviso to Rule 28 operates independently and, where the recipient is eligible for full input tax credit, the invoice value shall be deemed to be the open market value; the supplier may therefore adopt the invoice value for valuation of supply to the distinct person.

Final Conclusion: The order of the Authority for Advance Ruling is set aside and the appellant is permitted to adopt the value under the second proviso to Rule 28 of the CGST/TNGST Rules 2017 (i.e., treat the invoice value as the open market value) in respect of supplies to distinct persons who are eligible for full input tax credit.

Refund of input tax credit - electronic mode versus manual processing of refund applications - application of Circular No.94/13/2019-GST - continuation of prior processing for refund applications filed before 26/09/2019 - administrative direction to consider refund application in terms of a Ministry of Finance circular

Refund of input tax credit - electronic mode versus manual processing of refund applications - application of Circular No.94/13/2019-GST - continuation of prior processing for refund applications filed before 26/09/2019 - Whether the petitioner's application for refund of input tax credit for the specified periods is to be considered and processed in accordance with the Ministry of Finance circulars permitting manual processing of refund applications filed before 26/09/2019. - HELD THAT: - The Court noted that Circular No.125/44/2019-GST dated 18/11/2019 instructs that the provisions of Circular No.94/13/2019-GST dated 28/03/2019 continue to apply to refund applications filed on the common portal before 26/09/2019, and that such applications shall continue to be processed manually as prior to deployment of the new system. Applying that administrative instruction to the petitioner's pleaded claim for refund for the stated periods, the Court found that the reliefs sought are redressed by the continuation of the prior processing regime and directed respondent No.2 to consider the petitioner's refund application in terms of the said circular. The order does not formulate further legal principle beyond directing consideration of the application in accordance with the Ministry of Finance circulars identified.

The respondent No.2 is directed to consider the petitioner's application for refund of input tax credits in terms of Circular No.125/44/2019-GST and the earlier Circular No.94/13/2019-GST so that applications filed before 26/09/2019 are processed as previously (including manual processing where applicable).

Final Conclusion: Writ petition disposed of by directing respondent No.2 to consider the petitioner's refund application for the stated periods in accordance with the Ministry of Finance circulars which preserve manual processing for refund applications filed before 26/09/2019.

Excessive surety as denial of bail - Modification of bail conditions under Section 482 Cr.P.C. - Fixing of sureties not to be onerous or punitive - Spirit of a bail order

Excessive surety as denial of bail - Fixing of sureties not to be onerous or punitive - Modification of bail conditions under Section 482 Cr.P.C. - Whether the surety bonds of Rs. 2 Crores each, fixed by the Special Chief Judicial Magistrate for the applicant's release, were excessive and required modification. - HELD THAT: - The High Court examined the order of the Special Chief Judicial Magistrate which fixed surety bonds of Rs. 2 Crores each pursuant to a bail order of this Court. Noting that the applicant had been in custody for a prolonged period and that his accounts were under seizure, the Court held that imposing extraordinary or exorbitant sureties can effectively deny the benefit of bail. While the underlying matter involved substantial tax-evasion allegations, the Court emphasised that bail conditions must not be so onerous as to frustrate the spirit of the bail order. Exercising the supervisory jurisdiction under Section 482 Cr.P.C., the Court found the amount fixed by the Magistrate disproportionate and in consequence modified the surety requirement to a lesser sum to ensure the bail order's effective operation without prejudging the merits of the underlying criminal proceedings.

Surety bonds of Rs. 2 Crores each were modified to Rs. 50 Lacs each to the satisfaction of the Magistrate concerned.

Final Conclusion: Application under Section 482 Cr.P.C. allowed; the High Court reduced the surety amounts fixed by the Magistrate from Rs. 2 Crores each to Rs. 50 Lacs each, holding that excessive sureties would amount to denial of bail and must be moderated to give effect to the bail order.

Article 21 - Bail - release on personal bond with sureties - Compoundable offence - Section 132(1)(b) of the Central Goods and Services Tax, 2017 - Non-tampering condition for bail - Obligation to cooperate in trial as bail condition - Cancellation of bail on breach of conditions - Verification of identity and sureties before acceptance of bond

Article 21 - Bail - release on personal bond with sureties - Compoundable offence - Section 132(1)(b) of the Central Goods and Services Tax, 2017 - Applicant entitled to bail despite allegations under Section 132(1)(b) CGST, having regard to Article 21 and the facts and circumstances of the case. - HELD THAT: - The court considered the competing submissions and the material on record, observed that many invoices were signed by the company directors and noted that the alleged offence is compoundable with a maximum punishment of five years. The applicant, a first-time accused, has been in custody since 02.12.2018 and there is no criminal antecedent or likelihood of absconding shown. Applying the mandate of Article 21 and without expressing any opinion on the merits, the court concluded that release on bail is appropriate. Bail was ordered to be granted on the applicant furnishing a personal bond with two sureties to the satisfaction of the trial court, subject to conditions imposed in the interest of justice. The conditions include prohibition on tampering with prosecution evidence or intimidating witnesses, an obligation to cooperate in the trial without seeking adjournments, and a prohibition on engaging in further criminal activity; breach of any condition would justify cancellation of bail. The court also directed verification of identity, status and residence proof of the applicant and sureties before acceptance of the bonds.

Applicant Mohit Gupta released on bail in Case Crime No. 01 of 2018 under Section 132(1)(b) CGST, on furnishing personal bond with two sureties, subject to specified conditions including non-tampering, cooperation in trial, prohibition on criminal activity, and verification of identity and sureties; breach to invite cancellation of bail.

Final Conclusion: Bail granted to the applicant on furnishing personal bond with two sureties, subject to conditions intended to protect the integrity of the prosecution and ensure trial participation; identity and sureties to be verified by the trial court, and breach of conditions to warrant cancellation of bail.

Assessment of income for non-banking financial company, treatment of waiver of principal component of deposits and debentures as taxable revenue receipt - Appeals disposed of in favour of the assessee as the waiver of principal component of deposits and debentures for AYs 2007-08 and 2008-09 is treated as a capital receipt and not taxable by HC [2018 (12) TMI 1758 - KARNATAKA HIGH COURT]

HELD THAT:- Special leave petitions are dismissed leaving questions of pending application(s), if any, stands disposed of.

Disposal of stay application and appeal - stay application under Section 246 of the Income Tax Act, 1961 - order passed under Section 220(6) of the Income Tax Act, 1961 - interim restraint on coercive action - seizure and attachment of bank account

Disposal of stay application and appeal - stay application under Section 246 of the Income Tax Act, 1961 - Direction to the Commissioner of Income Tax (Appeals) to dispose of the petitioner's stay application and appeal within a fixed time - HELD THAT: - The High Court noted that the petitioner had filed a stay application and an appeal before the Commissioner of Income Tax (Appeals), XV, under the statutory provision governing appeals. Having considered the materials placed before it, including the fact that a part payment had already been made pursuant to an order under the Income Tax Act, the Court held that it was just and proper to command expedition. The Commissioner (Appeals) was directed to dispose of the stay application and the appeal within three weeks from the date of the order, thereby mandating a reasoned decision within the specified period.

The Commissioner of Income Tax (Appeals), XV is directed to decide the petitioner's stay application and appeal under Section 246 within three weeks from the date of the order.

Interim restraint on coercive action - seizure and attachment of bank account - order passed under Section 220(6) of the Income Tax Act, 1961 - Interim prohibition on coercive measures by the Income Tax Authority pending disposal of the appeal and stay application - HELD THAT: - In view of the petitioner's representation that a portion of the tax demand had been paid while further payment was inhibited by the petitioner's bank account being seized and attached, the Court exercised its supervisory jurisdiction to preserve the status quo. The Court ordered that no coercive steps shall be taken by the Income Tax Authority against the petitioner until the Appellate Authority passes a reasoned order on the stay application and appeal, thereby affording the appellant protection during the limited period afforded for adjudication.

No coercive action shall be taken by the Income Tax Authority against the petitioner until the Appellate Authority passes its reasoned order on the stay application and appeal.

Final Conclusion: Writ petition disposed by directing the Commissioner (Appeals) to decide the stay application and appeal within three weeks and by restraining the Income Tax Authority from taking coercive steps against the petitioner until such decision; no costs ordered.

Reopening of assessment - reasons for reopening - supply of reasons - jurisdiction to reopen - reassessment invalid if reasons communicated only after completion of assessment - notice under section 148

Reopening of assessment - reasons for reopening - supply of reasons - jurisdiction to reopen - notice under section 148 - Whether the reassessment under section 147/notice under section 148 was invalid because the reasons recorded for reopening were not supplied to the assessee despite repeated requests and were supplied only after completion of the reassessment proceedings. - HELD THAT: - The Tribunal and the Commissioner found on the materials that the assessee had repeatedly requested copy of the reasons for reopening but the Assessing Officer did not supply them during the assessment proceedings; the reasons were disclosed only later during remand proceedings. The Court accepted the concurrent finding that reasons were not communicated to the assessee despite requests, and that the reassessment order does not record that reasons had been supplied. Relying on the established principle (as applied by the Division Bench in Commissioner of Income-Tax v. Videsh Sanchar Nigam Ltd.), where reasons for reopening are not furnished to the assessee though repeatedly asked and are disclosed only after completion of assessment, the reopening lacks jurisdictional validity. Applying that principle to the present facts, the reassessment was held to be without jurisdiction and therefore invalid.

Reopening was invalid for want of supply of reasons; reassessment set aside.

Final Conclusion: The appeal is dismissed; the concurrent findings that reasons for reopening were not supplied to the assessee render the reassessment invalid and the Tribunal's order upholding that view is affirmed.

Proviso to Section 147 - failure to disclose fully and truly all material facts - reason to believe and tangible material - change of opinion - deduction of tax at source (TDS) on External Development Charges (EDC) - Section 40(a)(ia) disallowance - use of incorrect statutory provision in reasons

Proviso to Section 147 - failure to disclose fully and truly all material facts - reason to believe and tangible material - change of opinion - Validity of reopening assessments after four years under the proviso to Section 147 on the ground of alleged failure to disclose material facts - HELD THAT: - After the expiry of four years, invocation of Section 147 requires satisfaction of the proviso that any escapement of income must be occasioned by the assessee's failure to make a return or to disclose fully and truly all material facts. The Court examined the assessment record, questionnaires and the information furnished during the original scrutiny and held that the details of EDC and TDS had been brought to the AO's notice during the original proceedings. The AO had not identified what specific material fact was withheld nor demonstrated a live link between any fresh tangible material and the belief that income had escaped assessment. The reopening therefore amounted to a change of opinion rather than the discovery of new tangible material or a failure by the assessee to disclose material facts. Reopening on that basis is impermissible under the proviso to Section 147. [Paras 22, 23, 24, 25]

Reopening under Section 147/148 was not justified as the proviso to Section 147 was not satisfied and the action reflected a change of opinion.

Deduction of tax at source (TDS) on External Development Charges (EDC) - Section 40(a)(ia) disallowance - use of incorrect statutory provision in reasons - Sufficiency and validity of the reasons recorded by the AO that treated EDC as subject to TDS and invoked Section 40(a)(ia) - HELD THAT: - The recorded reasons asserted that EDC had income character and was subject to withholding under a provision expressly cited in the reasons, but the AO did not explain the legal or factual basis for treating EDC as falling within the quoted provision. The reasons neither specified the nature of any default nor explained the rationale connecting the material on record to the formation of belief. The Revenue's subsequent contentions (for example, that EDC is akin to rent) were not articulated in the recorded reasons and cannot be used to cure the absence of reasoning. The statutory reasons must stand on what is recorded; supplementation by affidavit or later explanations is impermissible. Given the absence of any cogent rationale that EDC attracted TDS or that the recipient had not been assessed, the invocation of Section 40(a)(ia) and the reliance on an incorrect or unexplained statutory provision rendered the recorded reasons unsustainable. [Paras 26, 27, 28, 29, 30]

The reasons for reopening that treated EDC as subject to TDS and invoked Section 40(a)(ia) were irrational and inadequate; they did not furnish a valid basis for reassessment.

Final Conclusion: Writ petitions allowed; notices dated 02.11.2018 under Section 148 for AY 2012-13 and AY 2013-14 and consequential proceedings are quashed.

Addition to income on unexplained entries in seized books - Duty of assessee to explain documents seized from his premises - Relevance of proof of handwriting to obligation to explain - Acceptance of seized documents and estoppel from denial - Tribunal's finding of fact on application of gross profit rate

Addition to income on unexplained entries in seized books - Duty of assessee to explain documents seized from his premises - Relevance of proof of handwriting to obligation to explain - Acceptance of seized documents and estoppel from denial - Whether amounts shown as entries in books/diary seized from the assessee, which the assessee had owned and undertaken to explain but subsequently did not explain, could be added to his income despite contention that handwriting was not proved to be his. - HELD THAT: - The Court held that once the assessee accepted that the documents were seized from his premises and expressly owned the entries and undertook to explain them in the subsequent year but failed to furnish any explanation, the Assessing Officer was justified in treating the amounts as the assessee's income and making additions. The Tribunal rightly observed that the obligation to explain the figures attached to the seized diary could not be negatived merely because formal proof of the handwriting was not produced; the initial admission and undertaking by the assessee precluded him from avoiding explanation and from disputing the relevance of the entries. The Court found the Commissioner's contrary reasoning perverse and concurred with the Tribunal's conclusion that the amounts were properly added to other income of the assessee.

Additions sustained: amounts in seized entries, which the assessee had accepted and failed to explain, were rightly added to his income; Tribunal's view upheld and Commissioner's deletion set aside.

Tribunal's finding of fact on application of gross profit rate - Appellate interference limited where finding is factual - Whether the application of the gross profit rate to the discrepancy in stock (difference in physical stock as per stock register) should be disturbed by the High Court. - HELD THAT: - The Court recorded that the Tribunal's conclusion on the issue of applying the gross profit rate to the stock difference was purely a finding of fact. No sufficient cause was shown to justify interference with that factual finding. Consequently, the appellate court declined to reverse the Tribunal's determination on the gross profit rate issue.

Tribunal's factual finding on application of gross profit rate to stock discrepancy confirmed; no interference.

Final Conclusion: The High Court dismissed the appeal: additions based on seized entries were sustained as rightly made by the Assessing Officer and upheld by the Tribunal; the Tribunal's factual finding on the gross profit rate was confirmed and not disturbed.

Interpretation of the proviso to Section 54F(4) regarding partial utilisation - Chargeability of unutilized capital gains under Section 45 - Withdrawal from Capital Gains Account Scheme subject to deduction of tax - Application of Section 54F(4) deposit and proviso in case of part utilisation

Interpretation of the proviso to Section 54F(4) regarding partial utilisation - Chargeability of unutilized capital gains under Section 45 - Withdrawal from Capital Gains Account Scheme subject to deduction of tax - Whether the unutilized amount deposited under Section 54F(4), when only part of the deposit is utilized for purchase/construction within the specified period, is chargeable to tax under Section 45 upon expiry of three years and whether the assessee is entitled to withdraw the unutilized amount subject to tax deduction. - HELD THAT: - The Court examined sub-section (4) of Section 54F and its proviso and held that the proviso contemplates two contingencies: complete utilisation and partial utilisation of the amount deposited in the Capital Gains Account Scheme. Where only part of the deposited amount is utilized within the period specified, the proviso mandates that the excess (the amount by which the capital gain not charged under Section 45 on the basis of the cost of the new asset exceeds the amount that would not have been so charged had the actually utilized amount been the cost) shall be charged under Section 45 as income of the previous year in which three years from the date of transfer of the original asset expires. Consequent to this chargeability, the proviso separately entitles the assessee to withdraw the unutilized amount in accordance with the notified scheme. The learned Single Judge's conclusion that partial utilisation results in taxation of the unutilized portion under Section 45 and that withdrawal is permissible subject to deduction of applicable tax is consistent with the plain language of the provision and was upheld. [Paras 4, 8, 9, 10]

The proviso to Section 54F(4) requires that where only part of the deposited amount is utilized, the unutilized portion becomes chargeable under Section 45 after three years, and the assessee may withdraw the unutilized amount subject to deduction of tax; the Single Judge's view is upheld.

Final Conclusion: Writ appeal dismissed; the High Court affirms that partial utilisation of deposits under Section 54F(4) triggers chargeability of the unutilized portion under Section 45 after three years, and permits withdrawal from the Capital Gains Account Scheme subject to applicable tax deduction.

Prosecution for failure to remit tax deducted at source - show-cause notice to principal officer - order under section 201(1) and 201(1A) determining assessee in default - sanction for prosecution and application of mind - proof of remittance to avoid criminal prosecution - prosecution of juristic persons where prescribed punishment includes imprisonment and fine - doctrine of impossibility of performance (lex non cogit ad impossibilia)

Show-cause notice to principal officer - order under section 201(1) and 201(1A) determining assessee in default - Validity of the show-cause notice and whether issuance to multiple companies rendered prosecution bad in law - HELD THAT: - The Court found that the document relied on by petitioners (Annexure-'B') was an intimation treating the Managing Director as Principal Officer and not a show-cause notice initiating adjudication or prosecution. The order under section 201(1) and 201(1A) (Annexure-'E') demonstrated that the assessment/adjudication was made against the petitioner company specifically and not as a composite action against all group companies. Petitioners did not rely on the actual show-cause notice stated in the complaint, and the material before the Court did not establish that a joint/composite show-cause vitiated the proceedings.

The plea that the show-cause notice was improperly issued to multiple companies and that prosecution is therefore legally untenable is rejected.

Sanction for prosecution and application of mind - proof of remittance to avoid criminal prosecution - Whether the sanction for prosecution was vitiated by non-application of mind because tax was allegedly remitted prior to sanction - HELD THAT: - The sanctioning authority's order records the factual and legal foundation for initiating prosecution and specifically refers to show-cause notices issued to the deductor. The Court observed that if remittance had been made in response to those notices, the assessee could have produced proof to avert prosecution. Documents produced by petitioners showed remittances by a different group company which did not relate to the defaults in question. There was therefore no material on record to demonstrate that the sanctioning authority failed to apply its mind or that the sanction was issued despite the department being aware of relevant remittances.

The challenge to the sanction order for want of application of mind is dismissed.

Prosecution of juristic persons where prescribed punishment includes imprisonment and fine - doctrine of impossibility of performance (lex non cogit ad impossibilia) - Whether a company enjoys immunity from prosecution because the offence prescribes imprisonment and fine - HELD THAT: - The Court held that where a statute prescribes imprisonment and fine, the impossibility of imposing imprisonment on a juristic person means the court may impose the prescribed fine on the company. The principle that law does not compel performance of the impossible supports reading the sentencing provision so as to permit imposition of fine on a company while dispensing with imprisonment. Consequently, the contention that companies cannot be prosecuted for offences attracting mandatory imprisonment and fine was rejected in light of this principle.

The contention that the company is immune from prosecution because imprisonment is a prescribed punishment is repelled; prosecution may be sustained and fine imposed on the company.

Final Conclusion: All challenges to the prosecution and sanction were rejected and the petition is dismissed.

Cessation of liability under section 41(1) of the Income-tax Act - expiry of limitation under the Limitation Act does not extinguish debt - unilateral book entry not amounting to remission or cessation of liability - disallowance of unsupported advertisement and marketing expenses - cash payment restrictions under section 40A(3) of the Income-tax Act and admissibility of internal vouchers

Cessation of liability under section 41(1) of the Income-tax Act - expiry of limitation under the Limitation Act does not extinguish debt - unilateral book entry not amounting to remission or cessation of liability - Addition of Rs. 4,17,252 treating long-outstanding sundry creditors as cessation of liability and taxable under section 41(1) was unwarranted. - HELD THAT: - The Tribunal applied the principle in CIT v. Sugauli Sugar Works that for section 41(1) to operate there must be an actual benefit obtained by the assessee by way of remission or cessation; mere unilateral entries in books do not establish such remission. The expiry of the period of limitation only bars enforcement by the creditor but does not extinguish the debt; therefore creditors remaining outstanding for more than three years does not, by itself, prove that the liability has ceased or that the assessee obtained a benefit attracting section 41(1). On this basis the addition made by the Assessing Officer was held to be without warrant and was directed to be deleted. [Paras 10, 11]

Addition of Rs. 4,17,252 under section 41(1) deleted.

Disallowance of unsupported advertisement and marketing expenses - cash payment restrictions under section 40A(3) of the Income-tax Act and admissibility of internal vouchers - Addition of Rs. 3,00,000 from advertisement and marketing expenses reduced in view of absence of contravention of section 40A(3) and availability of internal vouchers. - HELD THAT: - The Assessing Officer disallowed a portion of advertisement and marketing expenses on account of cash payments and lack of proper bills. The Tribunal observed that there was no finding of violation of section 40A(3) and that some expenses were supported by internal vouchers. Exercising its discretion to meet the ends of justice, the Tribunal concluded that a reduced disallowance would be appropriate and restricted the disallowance to Rs. 1,00,000, thereby allowing part of the assessee's claim. [Paras 14, 16, 18]

Disallowance restricted to Rs. 1,00,000; balance of the addition of Rs. 3,00,000 deleted.

Final Conclusion: Appeal partly allowed: addition of Rs. 4,17,252 under section 41(1) deleted; advertisement expense disallowance reduced to Rs. 1,00,000 for assessment year 2012-13.

Addition under unexplained cash - Stridhan as explanation for cash - inference of joint possession - bank withdrawals as source of cash

Addition under unexplained cash - Stridhan as explanation for cash - bank withdrawals as source of cash - inference of joint possession - Whether the cash found during search could be explained by the wife's claim of Stridhan and by bank withdrawals so as to render the additions made by the Assessing Officer unsustainable. - HELD THAT: - The Tribunal noted that at the time of search the assessee furnished a break-up of cash found in the residential premises in the names of family members and that the cash was discovered from the bedroom of the appellant, permitting an inference of joint possession with his wife. The wife's claim that a substantial portion of the cash constituted Stridhan was supported by details of savings and cash withdrawals. The first appellate authority accepted only part of the explanation, but ignored bank withdrawals aggregating Rs. 3 lakhs on two occasions and the specific claim of Stridhan of Rs. 4,28,391. Viewing these facts in totality, and having regard to social customs that may support possession of Stridhan by the wife, the Tribunal found the Assessing Officer's conclusion to be without merit and held that the explained sources-Stridhan together with bank withdrawals-adequately accounted for the cash found, warranting deletion of the additions. [Paras 10, 11, 24]

The additions sustained by the authorities are deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2013-14, directing deletion of the impugned additions on the finding that the cash was satisfactorily explained by the wife's Stridhan and by bank withdrawals.

Section 14A - Rule 8D - Assessing Officer's satisfaction - disallowance under Rule 8D(2)(iii) - application of Maxopp principle - Section 115JB - provision for diminution in value of investments

Section 14A - Rule 8D - Assessing Officer's satisfaction - Whether the Assessing Officer validly invoked Rule 8D after recording dissatisfaction with the assessee's suo moto disallowance under Section 14A. - HELD THAT: - The Tribunal found that the Assessing Officer had recorded his dissatisfaction with the assessee's explanation and the absence of supporting workings for the suo moto disallowance. The AO had raised queries, considered the assessee's response and specifically recorded that he was not satisfied with the explanation and the correctness of the claim. On that basis the AO lawfully proceeded to compute the disallowance under Rule 8D. The assessee's contention that the AO was required to follow a particular format or demonstrate satisfaction in a prescribed manner was rejected as untenable on the facts of this case. [Paras 6]

AO's invocation of Rule 8D after recording dissatisfaction was valid; the assessee's challenge on this ground is dismissed.

Application of Maxopp principle - disallowance under Rule 8D - disallowance of interest on borrowed funds for acquisition of shares - Whether the CIT(A) was correct in deleting the addition under Section 14A on the basis of Rajeev Lochan Kanoria, in circumstances where Maxopp has overruled that view. - HELD THAT: - The Tribunal held that the view relied upon by the CIT(A) (Rajeev Lochan Kanoria) is no longer good law in light of the Supreme Court's decision in Maxopp Investment Ltd. Consequently the CIT(A)'s reliance on the earlier jurisdictional High Court decision to negate disallowance where shares were acquired with borrowed funds could not be sustained. The Tribunal reversed that part of the CIT(A)'s order and allowed the revenue's ground insofar as it depended on the superseded precedent. [Paras 6]

CIT(A)'s deletion of the addition based on Rajeev Lochan Kanoria is reversed; Maxopp governs and the revenue's ground on this aspect is allowed.

Rule 8D(2)(iii) - disallowance computation - Validity of the disallowance computed under Rule 8D(2)(iii) and whether the revenue's challenge to the tribunal's earlier view should succeed. - HELD THAT: - Relying on earlier Tribunal precedents (including REI Agro Ltd. and ACIT vs. Vireet Investments (P.) Ltd.), the Bench noted that the issue is not res integra and that the ratio of a contrary decision (Ratanlal Gaggar) did not apply on facts where the AO had applied his mind. Applying these authorities, the Tribunal dismissed the revenue's ground challenging the computation under Rule 8D(2)(iii). [Paras 7, 8]

Revenue's ground on Rule 8D(2)(iii) is dismissed.

Application of Maxopp principle - exempt dividend income - Whether the assessee's cross-objection grounds contending exemption for strategic/promoter investments and non-consideration of investments not yielding exempt income should succeed. - HELD THAT: - The Tribunal applied the Supreme Court's Maxopp decision to dismiss the cross-objection grounds that sought to exclude strategic/promoter investments from consideration under Section 14A/Rule 8D and related contentions. The Bench recorded that Grounds Nos. 1 and 2 of the cross-objection are dismissed in view of Maxopp. Separate cross-objection grounds (3 and 4) dealing with other aspects were considered against the revenue by reference to Vireet Investments (P.) Ltd. [Paras 10, 11]

Cross-objection Grounds Nos. 1 and 2 dismissed (in view of Maxopp); Grounds Nos. 3 and 4 sustained in favour of the assessee as covered by Vireet Investments.

Section 115JB - provision for diminution in value of investments - Whether the provision for diminution in value of investments debited to profit and loss account and netted off against investments in the balance sheet should be added back in computing book profit under Section 115JB. - HELD THAT: - The Tribunal followed the reasoning of the Kolkata Bench in Philips Carbon Black and the Supreme Court's approach in Vijaya Bank: where a provision for diminution has been set off against the gross value of investments so that the balance-sheet shows investments net of such provision, the provision effectively operates as a write-off and is not required to be added back for computing book profits under Section 115JB. Applying that principle to the facts on record, the Tribunal accepted the assessee's contention that the diminution had been netted off in the balance sheet and therefore should not be added back. [Paras 16, 17]

Assessee's additional grounds on exclusion of the provision for diminution from book profit are allowed; the amount shall not be added back under Section 115JB.

Final Conclusion: The appeal by the revenue and the cross-objection by the assessee are allowed in part: the AO's invocation of Rule 8D was held valid; the CIT(A)'s deletion based on Rajeev Lochan Kanoria was reversed in light of Maxopp; the revenue's challenge to the Rule 8D(2)(iii) computation was dismissed; certain cross-objection grounds were dismissed (others sustained by reference to Vireet); and the assessee's plea to exclude provision for diminution in value of investments from book profit under Section 115JB was allowed.

Explanations under section 68 - unexplained cash credit - Proof of creditworthiness of creditor - Summons and compliance under section 133(6) - Remand for production of creditor and fresh adjudication on facts and law - Ground not pressed - dismissal as not pressed

Explanations under section 68 - unexplained cash credit - Proof of creditworthiness of creditor - Summons and compliance under section 133(6) - Remand for production of creditor and fresh adjudication on facts and law - Addition of Rs. 27 lakhs treated as unexplained credit under section 68 remitted for fresh consideration. - HELD THAT: - The AO made an addition under section 68 on the ground that the assessee failed to establish the creditworthiness and genuineness of advances said to be received from M/s Ram Alloy Casting Pvt. Ltd.; summons under section 133(6) were issued but the creditor did not appear and the AO doubted the veracity of the confirmations relied upon by the assessee. The CIT(A) sustained the addition. The assessee sought an opportunity to produce the creditor and documentary evidence to substantiate the transaction. Considering the totality of facts and in the interest of justice, the Tribunal found it appropriate to restore the matter to the file of the AO and direct a final opportunity to the assessee to produce the creditor and relevant documents; the AO is to decide the issue on facts and law while keeping in view the authorities relied upon by the Revenue. The Tribunal therefore did not adjudicate the addition finally on merits but remitted the question for fresh adjudication after compliance and opportunity. [Paras 7]

Matter remitted to the AO with direction to give one final opportunity to produce the creditor and documents and to decide the question of applicability of section 68 in accordance with fact and law; first ground allowed for statistical purposes.

Ground not pressed - dismissal as not pressed - Disallowance relating to purchases (2% vs 5%) not pressed by assessee. - HELD THAT: - The assessee did not press the second ground concerning disallowance of purchases and the Tribunal recorded that the ground was not pressed due to the smallness of the amount. No adjudication on merits was required. [Paras 7]

Second ground dismissed as not pressed.

Final Conclusion: Appeal partly allowed for statistical purposes: issue of addition under section 68 remitted to the AO for fresh consideration after one final opportunity to produce the creditor and supporting evidence; the ground on purchases was dismissed as not pressed.

Revisionary jurisdiction under section 263 of the Income Tax Act - tax deduction at source under section 194H of the Income Tax Act - disallowance under section 40(a)(ia) of the Income Tax Act - treatment of employee incentives as salary under section 192 of the Income Tax Act - principal-to-principal relationship - sales promotion expenses versus commission or brokerage - inadequate enquiry as distinct from lack of enquiry

Revisionary jurisdiction under section 263 of the Income Tax Act - inadequate enquiry as distinct from lack of enquiry - Validity of the Pr.CIT's revision under section 263 on the ground that the assessment was erroneous and prejudicial for alleged non enquiry into incentives and TDS compliance. - HELD THAT: - The Tribunal found that the Assessing Officer had examined the issue of incentives and TDS during the assessment proceedings, had called for ledger details and replies and completed assessment taking one of the possible views. Mere inadequacy of the enquiry, where the AO has made and recorded an examination and reached a permissible conclusion, does not render the assessment order erroneous and prejudicial to revenue so as to justify exercise of revisionary jurisdiction under section 263. The Tribunal relied on precedent holding that lack of enquiry may justify revision but inadequacy of enquiry does not. On this basis the Pr.CIT's order revising the assessment was held unsustainable and was set aside.

Pr.CIT's section 263 revision order set aside; assessment order restored as not erroneous or prejudicial on the ground of inadequate enquiry.

Tax deduction at source under section 194H of the Income Tax Act - sales promotion expenses versus commission or brokerage - principal-to-principal relationship - disallowance under section 40(a)(ia) of the Income Tax Act - Whether incentives passed on by the wholesale distributor to retailers constitute commission/brokerage attracting TDS under section 194H and consequent disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal held that the incentives passed to retailers were discounts/sales promotion incentives given on meeting sales targets and arose in the course of principal-to-principal purchase and sale transactions. No principal agent relationship or services rendered by retailers to the assessee were established. Following earlier decisions of coordinate benches and High Courts, such payments are sales promotion expenses/discounts and not commission or brokerage within the meaning of the Explanation to section 194H; accordingly section 194H does not apply and invocation of section 40(a)(ia) on that ground is not warranted.

Incentives to dealers held to be sales promotion/discounts and not commission; section 194H not attracted and section 40(a)(ia) invocation is invalid.

Treatment of employee incentives as salary under section 192 of the Income Tax Act - disallowance under section 40(a)(ia) of the Income Tax Act - Characterisation of incentives paid to employees and whether such payments attract disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal accepted the assessee's position that incentives paid to employees constitute remuneration assessable as salary and fall within the scope of taxability under the head salaries and TDS provisions under section 192. As such, these payments do not give rise to disallowance under section 40(a)(ia) as invoked by the Pr.CIT in the revision order.

Employee incentives treated as salary; no disallowance under section 40(a)(ia) is warranted.

Final Conclusion: The revision order of the Principal Commissioner of Income Tax under section 263 is set aside; the assessing officer's order for A.Y. 2014-15 is restored. Appeal of the assessee is allowed.

Validity of notice under section 143(2) - Assessment under section 143(3) read with section 147 - Non-acceptance of electronically filed return (failure to furnish signed ITR-V / e-verification) - Requirement of a valid return as precondition for issuance of notice under section 143(2) - Hotel Blue Moon principle on mandatory issue of notice under section 143(2)

Validity of notice under section 143(2) - Requirement of a valid return as precondition for issuance of notice under section 143(2) - Non-acceptance of electronically filed return (failure to furnish signed ITR-V / e-verification) - Whether the assessment completed under section 143(3) (read with section 147) was invalid because notice under section 143(2) was issued before a valid return was on record and no fresh section 143(2) notice was issued after filing of a valid return. - HELD THAT: - The Tribunal observed that the Assessing Officer issued notice under section 148, in response to which the assessee electronically filed a return on 03.04.2017 but failed to furnish the signed ITR-V or e-verify, and therefore that return was not accepted by the Department and became non-est. A notice under section 143(2) was issued on 10.04.2017 in respect of the non-accepted return and thus became infructuous. The assessee subsequently filed a valid return on 27.06.2017 which was accepted by CPC, but no fresh notice under section 143(2) was issued thereafter. The Tribunal applied the principle in Hotel Blue Moon that issuance of notice under section 143(2) is not a mere procedural formality but a mandatory precondition for assuming jurisdiction to complete an assessment under section 143(3). Section 143(2) notice issued before a valid return does not satisfy the statutory requirement; consequently an assessment completed under section 143(3) without issuance of a section 143(2) notice after the valid return is vitiated. Relying on the cited precedents and the reasoning of the CIT(A), the Tribunal held that in the absence of a section 143(2) notice subsequent to the valid return, the assessment could not be sustained. [Paras 6, 8]

Assessment under section 143(3) read with section 147 is invalid as no valid notice under section 143(2) was issued after the valid return was filed; the CIT(A)'s order cancelling the assessment is upheld.

Final Conclusion: The Revenue's appeal is dismissed and the order of the CIT(A) setting aside the assessment is upheld; the assessee's cross-objections become infructuous and are dismissed.

Admissibility of appeal where return of income not filed and payment of advance tax - application of section 249(4)(b) of the Income Tax Act, 1961 - scope of section 249(4)(a) - appeals to be decided on merits where return filed - remand for fresh adjudication and opportunity of hearing

Admissibility of appeal where return of income not filed and payment of advance tax - application of section 249(4)(b) of the Income Tax Act, 1961 - scope of section 249(4)(a) - appeals to be decided on merits where return filed - remand for fresh adjudication and opportunity of hearing - CIT(A) erred in dismissing the appeal in limine under the mischief of section 249(4)(b) without determining whether the assessee had filed a return and paid tax and without deciding the appeal on merits. - HELD THAT: - The Tribunal examined the form no.35 and the paper book filed before the CIT(A) which included an acknowledgment of return filed on 31/03/2011 for AY 2010-11 and supporting documents. On that basis the Tribunal held that the case prima facie falls within the ambit of section 249(4)(a) (i.e. where a return has been filed) and therefore the CIT(A) should have considered the appeal on merits instead of treating it as barred by section 249(4)(b). The Tribunal observed that the factual claim of filing the return and payment of tax can and ought to be verified and that the CIT(A) should give the assessee a reasonable opportunity of hearing to establish entitlement to admission of the appeal or any exemption from the bar under sub-clause (b). Consequently the matter was remitted to the CIT(A) to decide the admissibility and merits after verification and hearing, and the assessee was directed to comply with notices issued by the CIT(A). [Paras 10, 11, 12]

The order of the CIT(A) dismissing the appeal in limine under section 249(4)(b) is set aside and the matter is remitted to the CIT(A) to decide admissibility and merits after allowing reasonable opportunity of hearing and verifying the filed return and tax payment.

Final Conclusion: Appeal allowed in part; Tribunal set aside CIT(A)'s dismissal in limine and remitted the matter to the CIT(A) for fresh adjudication on admissibility and merits after verification and hearing in respect of AY 2010-11.

Validity of penalty proceedings where notice fails to specify which limb of the offence is invoked - Requirement of recorded satisfaction before initiating penalty proceedings - Notice under Section 274 read with Section 271(1)(c) and its inception - Consequences of a notice being null and void for want of specification of concealment or furnishing inaccurate particulars

Validity of penalty proceedings where notice fails to specify which limb of the offence is invoked - Requirement of recorded satisfaction before initiating penalty proceedings - Notice under Section 274 read with Section 271(1)(c) and its inception - Penalty imposed under Section 271(1)(c) quashed because the notice under Section 274 read with Section 271(1)(c) did not specify whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income and the assessment order did not record requisite satisfaction. - HELD THAT: - The Tribunal examined the assessment and penalty records and found that the assessment order did not record satisfaction as to whether penalty proceedings under Section 271(1)(c) were being initiated for concealment of income or for furnishing inaccurate particulars of income. The show-cause notices relied upon were silent and did not specify which limb of Section 271(1)(c) had been invoked. Reliance was placed on the decision in M/s SSA's Emerald Meadows, as affirmed by the Supreme Court, and on the reasoning of the Delhi High Court in Sahara India Life Insurance, which establish that a notice that fails to specify the limb of Section 271(1)(c) renders the notice invalid and the inception of penalty proceedings null and void. The Tribunal rejected the Revenue's contention that mere non-striking of inappropriate words in the notice is immaterial, holding that where the notice does not indicate the nature of default and the assessment order does not record the satisfaction required to initiate penalty, the penalty cannot be sustained. In these circumstances there was no need to consider the merits of the addition; the defect in initiation of penalty proceedings was fatal. [Paras 6, 7]

Penalty under Section 271(1)(c) deleted as the notice under Section 274 read with Section 271(1)(c) was invalid for not specifying the limb of the provision and the assessment order did not record the necessary satisfaction.

Final Conclusion: Both appeals for A.Y. 2014-15 and A.Y. 2015-16 are allowed and the penalties levied under Section 271(1)(c) are quashed and directed to be deleted.

Redemption in lieu of confiscation under Section 125 of the Customs Act - Owner versus carrier for entitlement to redemption - Discretion to allow redemption in respect of prohibited goods - Judicial review of exercise of quasi-judicial discretion - perversity and non-application of mind

Redemption in lieu of confiscation under Section 125 of the Customs Act - Owner versus carrier for entitlement to redemption - Redemption of seized currency must be granted to the owner of the goods and, if the owner is known, cannot be granted to a mere carrier; where the owner is known, redemption should be permitted to the owner. - HELD THAT: - The Court noted that Section 125 requires the officer to give an option to pay a fine in lieu of confiscation to the owner of the goods or, where the owner is not known, to the person from whose possession the goods were seized. It was undisputed that the owner of the seized currency was Petitioner No. 2 and that both petitioners had been present before the authorities. The Commissioner (Appeals) correctly observed that, since the owner was known, redemption could be granted to the owner. The Revisionary Authority erred in setting aside the Order in Appeal wholesale on the ground that redemption could not have been granted to Petitioner No. 1; the correct ministerial remedy, had that been the perceived error, was to substitute the direction and permit redemption to Petitioner No. 2. The Revisionary Authority's order reflected non application of mind and produced an outcome that rendered the seized currency irredeemable even by the known owner, which was legally unsustainable. [Paras 13, 16, 19]

Redemption shall be permitted to the owner (Petitioner No. 2); the Revisionary Authority's contrary order is unsustainable.

Discretion to allow redemption in respect of prohibited goods - Judicial review of exercise of quasi-judicial discretion - perversity and non-application of mind - Where the adjudicating authority has exercised discretion to allow redemption of seized (including prohibited) goods, interference is warranted only if the exercise is perverse, tainted by patent illegality or non-application of mind; no such vitiating factor existed in the present case. - HELD THAT: - The Court accepted the Commissioner (Appeals)'s legal position that, while redemption is mandatory for goods which are not prohibited, even for prohibited goods the authorities have the discretion to permit redemption under Section 125. The Assistant Commissioner exercised that discretion in favour of allowing redemption on payment of a redemption fine. There was no evidence of perversity, patent illegality or oblique motive in that exercise of discretion. By contrast, the Revisionary Authority reversed the appeal order without addressing the substance of the discretionary exercise, reflecting total non application of mind. The established standard of judicial review requires restraint and permits interference only where discretion is exercised perversely or illegally, which was not shown here. [Paras 18, 19]

The exercise of discretion by the Assistant Commissioner to allow redemption is valid and not open to interference; the Commissioner (Appeals) rightly refused to interfere and that decision is upheld.

Final Conclusion: The writ petition is allowed: the order of the Revisionary Authority setting aside the Order in Appeal is quashed; the decisions of the Assistant Commissioner and the Commissioner (Appeals) are upheld and the seized currency shall be returned to the owner (Petitioner No. 2).

Financial creditor - Financial debt - Default for triggering CIRP under Section 7 - Completeness of Section 7 application (Form I) - Admissibility of oral loan evidence - Pendency of other proceedings not a bar to CIRP - Appointment of Interim Resolution Professional and moratorium - Overriding effect of the Code

Financial creditor - Financial debt - Applicant's status as a "financial creditor" and whether the claim falls within the definition of "financial debt" under the Code. - HELD THAT: - The Tribunal found that the applicant had placed bank statements and other documents showing disbursal of loan amounts to the corporate debtor, and the respondent, while disputing the claim generally, admitted that the loan constituted a long-term borrowing. The Tribunal applied the statutory definitions and reasoning that a loan disbursed against consideration for time value of money, including principal and interest components, falls within the definition of "financial debt" and that the lender thereby qualifies as a "financial creditor". Consequently the material on record established that the claim was a financial debt and that the applicant was a financial creditor entitled to file under Section 7. [Paras 13, 14, 15, 39]

Applicant is a financial creditor and the claim is a financial debt within the meaning of the Code.

Default for triggering CIRP under Section 7 - Completeness of Section 7 application (Form I) - Whether there was a default of the requisite threshold and whether the Section 7 application was complete and compliant for admission. - HELD THAT: - The Tribunal recorded that the claimed financial debt exceeded the statutory threshold (Rupees one lakh) and that the corporate debtor had defaulted in repayment despite demand. The Form 1 filed under Rule 4 was examined and found to contain the requisite particulars, supporting documents and the proposal of an Interim Resolution Professional with necessary disclosures and no pending disciplinary proceedings. Reliance was placed on the summary adjudicatory standard in which the Adjudicating Authority is to be satisfied as to the existence of default and completeness of the application rather than to determine precise quantification of disputed figures. On that basis the requirements of sub section (5)(a) of Section 7 were held to be satisfied. [Paras 21, 34, 35, 36, 37]

Default existed and the Section 7 application was complete and admissible; the petition is liable to be admitted.

Admissibility of oral loan evidence - Effect of absence of written agreement and of oral terms (including asserted seven year repayment) on existence of default and admissibility of the petition. - HELD THAT: - The Tribunal noted that a loan may be evidenced by oral agreement and that disbursal of funds was not disputed. An e mail from the corporate debtor accepting liability and promising payment was treated as an admission of debt and evidence of acknowledgment and intention to repay. The Tribunal found the corporate debtor's plea that repayment was only due after seven years to be baseless in the face of the admission and other material on record. Therefore the absence of a formal written loan agreement did not preclude finding of default for the purpose of admitting the Section 7 application. [Paras 24, 25, 32, 33, 38]

Oral loan agreement and admission by the corporate debtor suffice to establish the debt and default; the seven year repayment contention was rejected.

Pendency of other proceedings not a bar to CIRP - Overriding effect of the Code - Whether pendency of other proceedings between parties (including company law petitions) barred initiation of CIRP under Section 7. - HELD THAT: - The Tribunal observed that pendency of proceedings under other laws, including company law petitions under Sections 241/242, has no nexus with the Section 7 petition and cannot prevent initiation of CIRP once the Section 7 application is complete and default is established. The Tribunal applied the overriding provision of Section 238 of the Code and relied on precedent to hold that pendency of other proceedings is not a ground to deny admission of an otherwise complete Section 7 application. [Paras 27, 28, 29, 30, 31]

Pendency of other proceedings does not bar admission of the Section 7 petition; the Code's provisions prevail.

Appointment of Interim Resolution Professional and moratorium - Consequential orders upon admission: appointment of Interim Resolution Professional, direction for public announcement, deposit for IRP expenses, imposition of moratorium and related directions. - HELD THAT: - Having admitted the Section 7 petition, the Tribunal appointed the proposed Interim Resolution Professional who had submitted Form 2 and made requisite disclosures, directed immediate public announcement in terms of Section 13(2) and the IBBI Regulations, directed the financial creditor to deposit funds towards IRP expenses within three days, imposed the statutory moratorium under Section 14 and set out attendant prohibitions and obligations of the IRP and the ex management to cooperate and preserve assets. The directions also included communication of the order to relevant parties and Registrar of Companies for updating the public record. [Paras 44, 45, 46, 47, 48]

Section 7 petition admitted; IRP appointed; public announcement, deposit for IRP expenses, moratorium and related directions issued.

Final Conclusion: The Tribunal admitted the Section 7 application: it held that the applicant is a financial creditor and the claim is a financial debt, that default existed and the application was complete, that oral evidence and the corporate debtor's admissions sufficed to establish the debt and reject the seven year repayment defence, and that pendency of other proceedings did not bar admission. Consequentially an Interim Resolution Professional was appointed, public announcement ordered, costs for the IRP directed to be deposited and the statutory moratorium imposed with ancillary directions.

Existence of debt and default - admission of Section 7 application for initiation of Corporate Insolvency Resolution Process - no pre-Section 8 dispute - appointment of Interim Resolution Professional - declaration of moratorium under the Insolvency and Bankruptcy Code - prohibition on institution or continuation of suits and enforcement actions during moratorium - public announcement of CIRP and communication of order to stakeholders

Existence of debt and default - admission of Section 7 application for initiation of Corporate Insolvency Resolution Process - no pre-Section 8 dispute - Whether the financial creditor proved existence of debt and default and was entitled to admission of the insolvency application. - HELD THAT: - The Tribunal examined the documents relied upon by the Applicant (including debenture issuance acknowledgement, notices of default, invocation of corporate guarantee and correspondence) and found that the Applicant had established the contractual debt and its non-payment. The Bench recorded that the Corporate Debtor had not raised any dispute prior to receipt of the Section 8 notice. On this basis the Tribunal concluded that the statutory threshold for admission of the Section 7 application was met. [Paras 5, 6]

The Section 7 application was admitted on the ground that existence of debt and default was proved and no pre-Section 8 dispute had been raised.

Appointment of Interim Resolution Professional - Appointment of an interim resolution professional to manage the CIRP. - HELD THAT: - Having admitted the application, the Tribunal appointed an individual as Interim Resolution Professional to carry out the functions mandated under the Code. The appointment included reference to the IRP's registration and specified that fees payable to the IRP/RP shall be in compliance with applicable IBBI regulations, circulars and directions. [Paras 5, 6]

Mr. Krishnasamy Vasudevan was appointed as Interim Resolution Professional and fee payment was directed to be in accordance with IBBI regulations.

Declaration of moratorium under the Insolvency and Bankruptcy Code - prohibition on institution or continuation of suits and enforcement actions during moratorium - Scope and effect of the moratorium following admission of the CIRP application. - HELD THAT: - The Tribunal declared the moratorium operative from the date of the order until completion of the CIRP or approval of a resolution plan or liquidation. The moratorium was held to prohibit institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of its assets, actions to enforce security interests (including measures under SARFAESI), and recovery of property by owners or lessors in possession of the corporate debtor. The order also preserved supply of essential goods or services during the moratorium and noted statutory exceptions as prescribed by the Central Government. [Paras 5, 6]

A moratorium was declared with the stated prohibitions and conditions, effective from the date of the order until completion of CIRP or other terminal events.

Public announcement of CIRP and communication of order to stakeholders - Requirement for public announcement of the corporate insolvency resolution process and communication of the order to parties. - HELD THAT: - The Tribunal directed immediate public announcement of the CIRP as specified under the Code and mandated that the Registry communicate the order forthwith to the financial creditor, the corporate debtor and the Interim Resolution Professional by email, to ensure statutory and practical steps for commencement of the resolution process. [Paras 6, 7]

Public announcement of the CIRP was ordered and the Registry was directed to immediately communicate the order to the financial creditor, corporate debtor and IRP.

Final Conclusion: The Tribunal admitted the Section 7 application on proof of debt and default and absence of a pre-Section 8 dispute; appointed an Interim Resolution Professional with fees to be governed by IBBI norms; declared the statutory moratorium with its attendant prohibitions and protections; and directed public announcement of the CIRP and immediate communication of the order to the parties.

Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - withdrawal of company petition by settlement - Joint Memo of Settlement - enforcement of settlement terms - liberty to file fresh petition on breach of settlement

Withdrawal of company petition by settlement - Joint Memo of Settlement - enforcement of settlement terms - liberty to file fresh petition on breach of settlement - Petitioner permitted to withdraw C.P.(IB) No.274/BB/2019 on account of a recorded settlement, subject to strict compliance with the terms of the Joint Memo of Settlement dated 30.08.2019 - HELD THAT: - The Tribunal took on record the Joint Memo of Settlement executed by the parties and noted that the dispute was resolved prior to admission of the Company Petition. Having perused the pleadings and the settlement, the Tribunal exercised its discretion to permit withdrawal of the petition in the interest of justice. The respondent was directed to strictly adhere to the payment schedule and other terms recorded in the Joint Memo; in the event of any failure to honour the cheques or other settlement obligations, the petitioner retains the right to withdraw the settlement and initiate fresh proceedings by filing a new Company Petition or pursue other remedies as may be available under law. No costs were ordered. [Paras 4, 5, 6]

C.P.(IB) No.274/BB/2019 disposed of as withdrawn on the recorded settlement; respondent directed to comply strictly with the Joint Memo of Settlement dated 30.08.2019, failing which petitioner may file a fresh Company Petition.

Final Conclusion: The petition under Section 9 of the IBC, 2016 is disposed of as withdrawn pursuant to the Joint Memo of Settlement dated 30.08.2019; the respondent must strictly comply with its terms, and any breach will entitle the petitioner to revive proceedings or seek other remedies.

Recovery under Section 73 of the Finance Act, 1994 - Best judgment assessment under Section 72 - Limitation for invoking Section 73 - Estoppel against raising jurisdictional objection at appellate stage - Exhaustion of statutory remedy / writ maintainability

Recovery under Section 73 of the Finance Act, 1994 - Best judgment assessment under Section 72 - Whether an order under Section 73(1) could be validly passed without any prior Best judgment assessment under Section 72. - HELD THAT: - The court examined the language and scheme of Sections 72 and 73 as they stood for the relevant period and held that Section 73 provides for recovery where service tax has not been levied or paid, has been short-levied or short-paid, or has been erroneously refunded. The statutory text of Section 73 does not make a prior assessment under Section 72 a condition precedent to invoking Section 73. Accordingly, proceedings under Section 73 are not to be equated with re-assessment requiring a previous assessment order; the authorities may issue notice under Section 73 where tax has not been levied or paid or short paid, subject to limitation. The petitioner's reliance on the decision in Standard Chartered Finance Ltd (concerning re-opening under a different statute where re-assessment presupposed an earlier assessment) was held inapplicable to the present statutory scheme and facts. [Paras 9, 10]

Order under Section 73(1) is not invalid for lack of any prior order under Section 72; Section 72 assessment is not a sine qua non for proceeding under Section 73.

Estoppel against raising jurisdictional objection at appellate stage - Jurisdiction of adjudicating authority - Whether the petitioner could raise for the first time at the appellate/writ stage an objection to the jurisdiction of the officer who issued the notice and passed the adjudication. - HELD THAT: - The Appellate Authority recorded that the petitioner did not raise the jurisdictional objection during the initial proceedings or when replying to the show cause notice, thereby submitting to and acquiescing in the jurisdiction of the departmental officers. The Court relied on the principle, as applied by the Appellate Authority, that a jurisdictional objection not raised at the earliest opportunity and first raised at the appellate stage is barred by estoppel. Consequently, the Appellate Authority's rejection of the jurisdictional plea was upheld as being within its finding that the petitioner had failed to challenge jurisdiction earlier. [Paras 11]

Petitioner is estopped from raising jurisdictional objection at the appellate/writ stage since it was not raised at the earliest opportunity before the adjudicating authority.

Exhaustion of statutory remedy / writ maintainability - Whether the writ petition is maintainable before the High Court when the petitioner has statutory appellate remedies available. - HELD THAT: - The Court noted that the Appellate Authority considered the merits and recorded findings, and that the correct recourse against the Appellate Authority's order is an appeal to the Appellate Tribunal under Section 86 of the Act. The petitioner's failure to exhaust the statutory appellate remedy weighed against entertaining the writ. Accordingly, the Court declined to exercise writ jurisdiction and dismissed the petition while granting liberty to the petitioner to pursue the statutory appeal to the Appellate Tribunal, permitting it to be entertained on merits without objection to limitation if filed within four weeks. [Paras 6, 12]

Writ petition dismissed for non-exhaustion of statutory remedy; petitioner granted liberty to approach the Appellate Tribunal with time relaxation for limitation.

Final Conclusion: Writ petition dismissed: the order under Section 73(1) is not vitiated for lack of any prior order under Section 72; the petitioner is estopped from raising jurisdictional objections belatedly; and the petitioner must pursue the statutory appeal to the Appellate Tribunal, which is permitted to consider the appeal on merits without objection to limitation if filed within four weeks.

Ex parte re-assessment - principles of natural justice - opportunity of hearing - remand for fresh assessment - re-assessment under Section 39[1] of the Karnataka Value Added Tax Act, 2003 - rectification application

Ex parte re-assessment - principles of natural justice - opportunity of hearing - re-assessment under Section 39[1] of the Karnataka Value Added Tax Act, 2003 - Validity of the impugned ex-parte re-assessment, the consequential demand notice and the rectification order where no opportunity of hearing was afforded to the petitioner. - HELD THAT: - The Court found that the reassessment order impugned was passed ex parte. The petitioner asserted that on 06.11.2019 it had sought three weeks' time to file objections and produce documents and had been assured by the Assessing Authority that such time would be granted, but the Assessing Authority proceeded to pass the ex parte re-assessment order on 29.11.2019 without hearing. Applying the principles of natural justice, the Court held that the petitioner ought to have been heard before an ex parte assessment order was passed, even if no formal objections had then been filed. Consequently, the Court set aside the impugned ex parte re-assessment order, the rectification order and the demand notice, and remanded the matter to the Assessing Authority to re-do the assessment after affording the petitioner an opportunity of hearing and after verification of the documents/books of account; the Court directed an expedited conclusion of the reassessment process. [Paras 5, 6, 7]

Impugned ex-parte reassessment order, rectification order and demand notice set aside; matter remanded to Assessing Authority to afford hearing and re-do the assessment in an expedited manner.

Remand for fresh assessment - rectification application - Directions and conditions for the remand including timeline for appearance, filing objections and conclusion of reassessment. - HELD THAT: - The Court directed the petitioner to appear before the Assessing Authority on the specified date without waiting for notice and to file objections along with documents, prohibiting further adjournments. The Assessing Authority was directed to consider the objections/reply, verify records and conclude the reassessment expeditiously, in any event within two weeks after hearing. The decision of the Court thus remands the matter for fresh adjudication subject to these procedural directions. [Paras 7, 8]

Matter remanded with specific directions: petitioner to appear and file objections on the stated date; no further adjournments; Assessing Authority to conclude reassessment within two weeks after hearing.

Final Conclusion: The High Court set aside the ex parte reassessment order, rectification order and demand notice relating to the tax period April 2015 to March 2016 for breach of natural justice, and remanded the matter to the Assessing Authority with directions to afford hearing, permit filing of objections and documents, and to conclude the reassessment expeditiously within the time prescribed by the Court.

Classification of account as non-performing asset (NPA) - condition precedent for invoking the SARFAESI Act - power of secured creditor to issue notice under Section 13(2) and take measures under Section 13(4) - RBI guidelines/IRAC norms for identification and classification of NPAs - availability of alternative remedy under Section 17 of the SARFAESI Act - maintainability of writ jurisdiction under Article 226 where statutory remedy exists

Classification of account as non-performing asset (NPA) - RBI guidelines/IRAC norms for identification and classification of NPAs - condition precedent for invoking the SARFAESI Act - Validity of the Banks' classification of the petitioners' loan account as NPA and consequent applicability of the SARFAESI Act (issuance of notices under Section 13(2) and action under Section 13(4)). - HELD THAT: - The Court found on the material before it that the petitioners did not pay interest or otherwise regularise the account from January 2019 through 30 April 2019. In accordance with Guideline 2.1.2 of the RBI Master Circular and the statutory definition in Section 2(o) of the SARFAESI Act, an account where interest/instalment remains overdue for more than 90 days is a Non-Performing Asset. The Bank classified the account as NPA on 30.4.2019 and issued a demand notice thereafter. The Court held that the respondents acted in conformity with the RBI/IRAC norms and that, on the record before the Court, the condition precedent for invoking powers under Section 13(2) and thereby Section 13(4) was satisfied. The petitioners' contention that the Banks voluntarily blocked the account following GST raids and therefore the account could not be treated as NPA was not accepted in view of the admitted non-payment over the relevant period and the account statements and correspondence recorded by the Bank. [Paras 43, 46, 47, 48]

The classification of the account as NPA and the consequent issuance of notices under Section 13(2) and action under Section 13(4) were held to be valid; the challenge to those acts fails.

Availability of alternative remedy under Section 17 of the SARFAESI Act - maintainability of writ jurisdiction under Article 226 where statutory remedy exists - Whether the writ petition under Article 226 was maintainable in the face of the alternative statutory remedy under Section 17 before the Debt Recovery Tribunal. - HELD THAT: - Relying on binding precedents, the Court reiterated that where an effective statutory remedy exists (Section 17 before the DRT), the High Court should ordinarily not entertain writ petitions under Article 226 in matters concerning recovery under the SARFAESI Act. The Court observed that the petitioners had available the remedy of appeal to the DRT against measures under Section 13(4) and that the settled jurisprudence requires greater restraint by High Courts in such financial recovery matters. In these circumstances, and given that the Bank had proceeded after classification as NPA and after giving the statutory opportunities, the writ petition was not a proper forum for the petitioners' grievances. [Paras 49, 50, 51, 61, 62]

The writ petition was held not maintainable and was dismissed on the ground that the petitioners have an alternative efficacious remedy under Section 17.

Communication of reasons under Section 13(3-A) - effect of rejection of representation on availability of judicial relief - Legal consequence of the Bank's rejection of the petitioners' representation under the demand notice and whether any procedural deficiency in that rejection vitiated the Banks' action. - HELD THAT: - The Court noted that Section 13(3-A) permits the borrower to make representation and obliges the secured creditor to communicate reasons if the representation is not accepted. Even if aspects of communication or the content of reasons are disputed, the statute and precedent make clear that such communication does not itself create an immediate right to challenge before the DRT; the remedy under Section 17 crystallises after measures under Section 13(4) are taken. The petitioners had not successfully demonstrated that any alleged defect in the Bank's handling of their representation would disentitle the Bank from proceeding, particularly given the admitted factual default and classification as NPA. [Paras 53, 60, 61]

The rejection of the petitioners' representation did not, on the record before the Court, afford a basis for relief under Article 226; no interference was warranted in respect of the Bank's communication and consequent action.

RBI guidelines/IRAC norms for identification and classification of NPAs - procedural and factual disputes requiring adjudication - Disposition of disputed factual/contention issues regarding the Banks' adherence to RBI guidelines and other procedural complaints by petitioners. - HELD THAT: - The Court observed that factual disputes exist as to compliance with certain procedural aspects and the petitioners' allegations that the Bank did not follow prescribed norms. However, the Court declined to adjudicate these disputed factual matters in writ jurisdiction, noting that the petitioners have the alternative remedy before the DRT and that contentious facts and disputed compliance issues are appropriately determinable by that forum. The Court therefore left all such contentions open for adjudication before the Debt Recovery Tribunal. [Paras 61, 63, 65]

All disputed factual and procedural contentions as to the Banks' compliance with RBI norms and other complaints were left open for adjudication before the Debt Recovery Tribunal under Section 17.

Final Conclusion: The writ petition was dismissed. The High Court held that the Banks validly classified the loan account as NPA in accordance with RBI/IRAC norms and law, that the SARFAESI notices under Sections 13(2) and 13(4) were lawfully issued, and that the petitioners must pursue their remedies under Section 17 before the Debt Recovery Tribunal; disputed factual or procedural complaints were left for determination by the DRT. The interim order is continued for 45 days to the petitioners' benefit.