TaxTMI Updates e-Newsletter
Jan 05,2021

Alternative efficacious remedy - self-imposed restraint on writ jurisdiction - exceptions to alternative remedy (violation of principles of natural justice, action without jurisdiction or contravention of statutory mandate) - alternative remedy under the GST Act - provisional attachment under section 83

Alternative efficacious remedy - self-imposed restraint on writ jurisdiction - alternative remedy under the GST Act - Whether the writ petition filed under Article 226 is maintainable notwithstanding availability of statutory remedies under the GST Act. - HELD THAT: - The Court held that the writ jurisdiction is discretionary and the High Court ordinarily will not entertain a petition under Article 226 where an effective and efficacious alternative remedy is available under the statute. The judgment applies settled precedents establishing the rule of self restraint by constitutional courts when a statutory machinery for redress exists, while recognising narrow exceptions (total violation of natural justice, action wholly without jurisdiction, or clear contravention of statutory mandate). On the facts, the petitioners did not demonstrate that any such exception applied: the authorities exercising the power to provisionally attach payments were constituted under the Act, and any procedural defects would make an order irregular but not a nullity. The Court further noted prior decisions including the decision in a related petition by M/s GM Powertech, where the relief was denied and the remedy by appeal upheld, reinforcing that the statutory appellate mechanism is available and efficacious. Consequently, the writ petition could not be entertained in the face of the statutory remedy provided by the GST Act. [Paras 5, 9, 10, 11, 12]

Writ petition is not maintainable as an efficacious alternative remedy exists under the GST Act; petition dismissed with liberty to avail statutory appeals and period spent in prosecuting the writ to be excluded for limitation.

Exceptions to alternative remedy (violation of principles of natural justice, action without jurisdiction or contravention of statutory mandate) - provisional attachment under section 83 - Whether any exception to the bar arising from availability of alternative remedy was made out to warrant exercise of writ jurisdiction in this case. - HELD THAT: - The Court examined the contentions invoking recognized exceptions (enforcement of fundamental rights, breach of natural justice, action wholly without jurisdiction, or contravention of statutory provisions) and found them not established. The authorities who issued the provisional attachment were legally constituted under the Act; no contention was made that the statutory forum was ineffective or that the action was a nullity. The Court emphasised that procedural irregularities, if any, do not convert an otherwise competent order into one that can be quashed in writ jurisdiction when an appellate remedy exists. Accordingly, the exceptions to the rule of alternative remedy were not attracted on the material before the Court. [Paras 5, 9, 10]

No exception to the rule of alternative remedy was made out; therefore writ jurisdiction should not be exercised to quash the provisional attachment.

Final Conclusion: The petition is dismissed as not maintainable because effective alternative remedies under the GST Act are available; petitioner is permitted to pursue the prescribed statutory appeals and the time spent in prosecuting the writ shall be excluded for limitation; parties to bear their own costs.

Bail - bogus input tax credit - offences under Section 132 of the OGST Act - assessment and determination as prerequisite to recovery or criminal liability - documentary evidence-based investigations - cooperation with trial and imposed bail conditions

Bail - documentary evidence-based investigations - charge-sheet filed - assessment and determination as prerequisite to recovery or criminal liability - Whether the petitioner accused of claiming and passing on alleged bogus input tax credit should be released on bail pending trial. - HELD THAT: - The Court noted that the prosecution case is largely documentary and that a charge-sheet has already been filed. It emphasised that assessment and determination of excess input tax credit (and resultant recovery) are processes that ordinarily precede final adjudication of liability, and that punishment under the statutory scheme presupposes a determination of committal of the offence; therefore, pre trial custody may not be necessary where antecedents do not require continued detention. The Court also considered authorities showing judicial caution in denying bail in economic offences where investigation is complete and there is no substantial risk of tampering or absconding, and observed the prolonged nature of assessment and trial processes which may render continued incarceration disproportionate. Balancing these factors and having regard to the factual matrix, the Court concluded that bail could be granted subject to conditions to secure trial integrity and attendance. [Paras 7, 8, 9, 11, 12]

Petitioner released on bail on furnishing a bond and surety as directed, subject to specified conditions including cooperation with trial, prohibition on influencing witnesses, surrender of passport and other stipulated conditions; assessment and adjudication of tax liability to proceed unaffected.

Final Conclusion: Bail granted to the petitioner in the proceedings arising from alleged bogus ITC for the periods specified, on furnishing the prescribed bond and surety and subject to enumerated conditions; assessment of tax liability to be carried out expeditiously and uninfluenced by observations made in the bail order.

Opportunity of being heard - confiscation of goods and conveyance - service of show cause notice - Section 130(4) of the Central Goods and Services Act, 2017 - requirement of hearing before confiscation

Opportunity of being heard - confiscation of goods and conveyance - Section 130(4) of the Central Goods and Services Act, 2017 - requirement of hearing before confiscation - Validity of the order of confiscation passed in Form GST MOV-11 without affording the owner of the conveyance an opportunity of being heard. - HELD THAT: - Section 130(4) of the GST Act mandates that no order for confiscation of goods or conveyance shall be issued without giving the person interested an opportunity of being heard. The order of confiscation impugned in the petition confiscates both the goods and the conveyance, but the record does not show that the owner of the conveyance (the petitioner) was served with any notice or afforded an opportunity to be heard. The notice produced on record is addressed to the consignor and not to the transporter/owner of the vehicle. In the absence of service and an opportunity of hearing to the owner of the conveyance, the confiscation order suffers from legal infirmity and cannot be sustained because it was passed in violation of the statutory requirement, resulting in serious civil and financial consequences. [Paras 7]

Impugned order of confiscation is quashed for breach of the mandatory requirement of hearing under Section 130(4) of the GST Act.

Service of show cause notice - opportunity of being heard - Relief to be granted and further course of action following quashing of the confiscation order. - HELD THAT: - Having quashed the confiscation order for failure to afford hearing, the Court remanded the matter to the competent authority to pass a fresh order strictly in accordance with law after affording opportunity of hearing to the parties concerned. The Court expressly refrained from adjudicating on the validity of the detention order or the contents of the show cause notice and left it open to the petitioner to take all objections in response to any show cause notice. The petitioner is expected to cooperate in the proceedings before the authority. [Paras 8, 9]

Matter remanded to the competent authority for fresh consideration after service and affording opportunity of hearing; validity of the notice/detention not decided.

Final Conclusion: The petition is allowed: the confiscation order dated 16.03.2020 is quashed for non-compliance with the statutory requirement of hearing under Section 130(4) of the GST Act, and the matter is remitted to the competent authority to pass a fresh order after affording the parties an opportunity of hearing; the Court did not decide the validity of the detention order or the show cause notice.

Condonation of delay - Deduction under section 35(2AB) - Approval of in house R&D facility by DSIR versus quantification of expenditure - Legal sanctity of Form No.3CL prior to the Income Tax (Tenth Amendment) Rules, 2016 - Effect of amendment to Rule 6(7A) of the Income tax Rules w.e.f. 01.07.2016

Condonation of delay - Whether the delay of 539 days in filing the appeal should be condoned. - HELD THAT: - The Tribunal found that the delay was occasioned by inaction of the then Finance Manager who had informed management but did not follow up, subsequent resignation of that manager, discovery of non filing during statutory audit preparations, and further delay due to the Covid 19 pandemic. The assessee filed affidavits from the earlier and present finance managers corroborating these events. Applying the established principle favouring a liberal and practical exercise of discretion in condonation petitions, and relying on jurisdictional and Supreme Court precedents cited in the order, the Tribunal concluded that there existed reasonable and sufficient cause for the delay and that the appeal should be admitted for adjudication on merits. [Paras 2]

Delay of 539 days is condoned and the appeal is admitted for hearing on merits.

Deduction under section 35(2AB) - Approval of in house R&D facility by DSIR versus quantification of expenditure - Legal sanctity of Form No.3CL prior to the Income Tax (Tenth Amendment) Rules, 2016 - Effect of amendment to Rule 6(7A) of the Income tax Rules w.e.f. 01.07.2016 - Whether the Assessing Officer and CIT(A) were justified in disallowing Rs. 43,12,042 by restricting deduction under section 35(2AB) to the quantum shown in Form No.3CL for AY 2016 17. - HELD THAT: - The Tribunal recorded that the assessee had an in house R&D facility approved by DSIR and claimed expenditure in its books which the AO did not dispute as being scientific research expense. The AO disallowed the excess claim on the ground that Form No.3CL quantified a lower amount. The Tribunal analysed the statutory text of section 35(2AB), noting that the provision requires approval of the R&D facility by the prescribed authority but does not expressly require the prescribed authority to quantify year to year expenditure for the allowance to arise. The Tribunal observed that the IT (Tenth Amendment) Rules, 2016 (w.e.f. 01.07.2016) introduced Part B in Form No.3CL for quantification of expenditure and thereby gave such quantification significance only from that date. For the assessment year 2016 2017 (relating to the previous year beginning 1 April 2016), the Tribunal held that Form No.3CL prior to the amendment had no legal sanctity for restricting the quantum of deduction, and that the deduction must be allowed on the basis of expenditure recorded in the assessee's books if the R&D facility was approved and the nature of expenditure was not disputed. The Tribunal also rejected the CIT(A)'s ancillary finding that expenditures outside the in house facility were claimed, noting there was no such finding in the assessment order. [Paras 3, 8, 9]

Deduction under section 35(2AB) is to be allowed as claimed in the assessee's books for AY 2016 2017 and not restricted to the figure shown in Form No.3CL; the disallowance of Rs. 43,12,042 is reversed.

Final Conclusion: The Tribunal condoned the delay and on merits allowed the appeal: the deduction under section 35(2AB) for AY 2016 2017 is to be granted as per the assessee's books since Form No.3CL prior to the 01.07.2016 amendment did not operate to restrict the quantum of deduction; the disallowance confirmed by the authorities is set aside.

Claim for refund under Chapter XIX of the Income tax Act - mode and limitation for making claim for refund - refund claim to be accompanied by return as prescribed - jurisdiction of High Court under Article 226 to order refund by mandamus - petition solely for refund ordinarily not maintainable - mistaken or excess payment of tax

Claim for refund under Chapter XIX of the Income tax Act - mode and limitation for making claim for refund - refund claim to be accompanied by return as prescribed - Validity of rejection of the application under Section 119(2)(b) seeking refund for Assessment Year 2021-22 on the ground that refund can be claimed only after completion of the previous year in the prescribed manner - HELD THAT: - The Court examined Chapter XIX and Rule 41 of the Income tax Rules and noted that Section 237 entitles a person to refund where tax paid exceeds proper liability, while Section 239 prescribes the form and limitation for claims. Rule 41(2) specifically requires that a claim for refund be accompanied by the return in the form prescribed under Section 139 unless such return has already been filed. In the facts of the case the petitioner had deposited excess advance tax in the previous year 2020 21 and had not completed the previous year; the statutory scheme therefore contemplates filing the claim after completion of the previous year (after 31.3.2021) in the prescribed form. The Court found no provision conferring jurisdiction on the Principal Chief Commissioner to order refund prior to completion of the previous year and held that the PCCIT correctly rejected the application under Section 119(2)(b) which was not the appropriate remedy for a pre mature refund claim. [Paras 6, 7]

Application under Section 119(2)(b) was rightly rejected as the claim for refund required compliance with Chapter XIX and Rule 41 and could be made only after completion of the previous year in the prescribed manner.

Jurisdiction of High Court under Article 226 to order refund by mandamus - petition solely for refund ordinarily not maintainable - mistaken or excess payment of tax - Whether the High Court in exercise of Article 226 may issue a writ of mandamus directing immediate refund of an excess/mistaken tax payment before completion of the previous year - HELD THAT: - The Court considered the petitioner's reliance on earlier decisions recognising the discretionary power of courts to order repayment in appropriate cases. It noted that those authorities do not lay down a universal rule and that the settled position, as explained in Suganmal v. State of M.P., is that a petition under Article 226 solely seeking refund of money is not ordinarily maintainable because a claimant can pursue a suit against the authority or challenge an assessment and, upon its being set aside, seek consequential refund. The present petition did not challenge any illegal assessment nor allege that the tax was illegally collected; it only sought early repayment of an excess deposit made by mistake. Absent a challenge to the validity of any tax demand or an allegation of illegality justifying extraordinary equitable relief, the High Court should not grant mandamus for an immediate refund prior to the statutory procedure being available. [Paras 7, 8, 9]

No writ compelling immediate refund will be issued; a petition solely for refund before statutory procedure and completion of the previous year is not ordinarily maintainable in the absence of a claim of illegality.

Final Conclusion: The petition challenging rejection of the refund application is dismissed: the statutory scheme requires the refund claim to be made after completion of the previous year in the prescribed form and the High Court will not normally issue mandamus to order an early refund in the absence of a challenge to the legality of the tax or other exceptional circumstances.

Recall and restoration of appeal - liberty to move the Tribunal for recall - opportunity of hearing / audi alteram partem - Section 254(2) rectification - application of Board's Circular para 10(c) regarding Revenue Audit objection - actus curiae neminem gravabit

Recall and restoration of appeal - liberty to move the Tribunal for recall - opportunity of hearing / audi alteram partem - Section 254(2) rectification - Validity of the Tribunal's recall and restoration of the Revenue's appeals under the liberty granted in the impugned order and under Section 254(2). - HELD THAT: - The Tribunal's impugned order of 23.08.2019, while dismissing listed appeals as withdrawn under the Board's notification, expressly granted liberty to parties to move the Tribunal whereerrors in identification or exceptions (including those in para 10) applied, and to recall appeals upon being satisfied on merits by a speaking order. The Tribunal found on its record that no proper opportunity had been afforded to the Revenue to raise objections at the hearing and that the impugned order contained no reference to any arguments or to provision of opportunity. Given this absence of adequate hearing and the specific liberty in the impugned order, the applications filed by the Revenue under Section 254(2) were held to be admissible and capable of consideration on merits to determine whether the appeals fell within exceptions to summary dismissal. The High Court endorsed the Tribunal's view that the liberty provided in the earlier order and the failure to afford proper opportunity justified recalling and restoring the appeals for adjudication on merits, rather than treating the rectification power as restricted by the usual strict parameters of Section 254(2). [Paras 2, 4]

Applications to recall and restore the appeals were rightly entertained and the appeals were restored for hearing on merits.

Application of Board's Circular para 10(c) regarding Revenue Audit objection - actus curiae neminem gravabit - Whether the substantial question of law raised by the appellant-that the Tribunal lacked power to recall the appeal when heard in presence of parties-arose for consideration. - HELD THAT: - The Court observed the fundamental principle that an act of the Court shall prejudice no man (actus curiae neminem gravabit). On the facts, the Tribunal had not considered the merits of the Revenue's appeal in ITA No. 225/JAB/2018 (AY 2009-10) and the appeal could not properly have been dismissed as withdrawn if it was covered by para 10(c) of the Board's Circular (accepted Revenue Audit objection). Given the absence of jurisdictional or legal error in the Tribunal's order in light of the lack of opportunity and the specific liberty granted, the substantial question posed did not arise for decision. [Paras 5, 6]

The substantial question of law framed by the appellant does not arise; no jurisdictional error was shown.

Final Conclusion: The High Court dismissed the appeal, upholding the Tribunal's restoration of the Revenue's appeals for adjudication on merits in view of the liberty in the earlier order and the absence of proper opportunity to the Revenue; the substantial question of law raised by the appellant was held not to arise.

Admission of additional evidence under Rule 46A of the Income tax Rules, 1962 - obligation to afford opportunity to the Assessing Officer / rule of natural justice - Section 68 - unexplained cash credit / share application money taxed as income if not satisfactorily explained - remand for verification of documents and factual re examination - treatment of share premium and its evidentiary scrutiny

Admission of additional evidence under Rule 46A of the Income tax Rules, 1962 - obligation to afford opportunity to the Assessing Officer / rule of natural justice - Whether the learned CIT(A) erred in admitting additional documents without giving the Assessing Officer adequate opportunity and in contravention of Rule 46A. - HELD THAT: - The Tribunal examined the record of remand and the proceedings before the learned CIT(A). It noted that the learned CIT(A) admitted additional documents (bank statements, annual report, confirmation and also a share subscription agreement) and forwarded some material to the Assessing Officer for comments but did not receive substantive verification or observations from the Assessing Officer. The Tribunal found that the share subscription agreement referenced in the CIT(A)'s order had not been remanded to the Assessing Officer and that the Assessing Officer was not afforded sufficient time or opportunity to examine and comment on the additional documents. Applying the principle that the rules of natural justice require that both parties, including the revenue, be given proper opportunity to examine and respond to material placed before an appellate authority, the Tribunal held that the learned CIT(A) ought to have provided the Assessing Officer a proper opportunity to verify and comment on the additional evidence before concluding on the merits. The absence of such opportunity and the admission of material not remanded rendered the appellate examination inadequate. [Paras 9, 11, 16]

The learned CIT(A) erred in admitting and acting upon additional documents without giving the Assessing Officer adequate opportunity; the appellate examination on that basis is inadequate.

Section 68 - unexplained cash credit / share application money taxed as income if not satisfactorily explained - remand for verification of documents and factual re examination - treatment of share premium and its evidentiary scrutiny - Whether the addition made under Section 68 can be sustained on the record available before the Assessing Officer and whether the matter should be remitted for fresh factual verification. - HELD THAT: - On facts, the Assessing Officer treated the receipt of share capital and share premium from KMC Constructions Ltd. as unexplained credit after the notice under section 133(6) to the alleged subscriber remained unserved and no satisfactory explanation or financial particulars were produced before him during assessment. The learned CIT(A) accepted additional evidence and deleted the addition, concluding identity and creditworthiness were established. The Tribunal observed that the Assessing Officer had not been given adequate opportunity to verify the additional material and that the CIT(A)'s order relied on documents (including a share subscription agreement) not remanded for verification. Given the settled position that where sums are credited and not satisfactorily explained the assessing authority may treat them as income under Section 68, and because the Assessing Officer must be permitted to test and verify documentary claims (including source of funds and genuine application of share premium), the Tribunal held that factual verification was necessary. In the interest of justice the Tribunal directed remand to the Assessing Officer to examine the veracity of the additional documents, verify identity, genuineness and creditworthiness of the subscriber, consider the manner of accounting for the share premium and then decide afresh after giving the assessee proper opportunity to be heard. The Tribunal also directed the Assessing Officer to take into account the authorities and propositions relied on by the assessee during such verification. [Paras 15, 16, 17, 18]

Issue remitted to the Assessing Officer for factual verification of the documents and fresh adjudication on the addition under Section 68 after affording the assessee and the revenue proper opportunity.

Final Conclusion: The Tribunal found that the learned CIT(A) admitted and acted upon additional material without giving the Assessing Officer adequate opportunity in breach of the rules of natural justice and therefore remitted the matter to the Assessing Officer for verification of the additional documents, factual re examination of the claim under Section 68 (share application money/share premium), and fresh decision after affording proper opportunity to both sides; the appeal by the revenue is allowed for statistical purposes.

Validity of reassessment under section 147/148 - Requirement to supply reasons for reopening and opportunity to object - Four weeks' period to seek legal remedy after rejection of objections - Quashing of reassessment for failure to allow time to avail remedies - Benefit of two views in favour of the assessee

Validity of reassessment under section 147/148 - Requirement to supply reasons for reopening and opportunity to object - Four weeks' period to seek legal remedy after rejection of objections - Quashing of reassessment for failure to allow time to avail remedies - Reassessment order dated 28.12.2017 under section 147 read with section 143(3) quashed for failure to allow the assessee sufficient time after disposal of objections. - HELD THAT: - The Tribunal found that the assessee immediately sought reasons for reopening after receipt of notice and the reasons were supplied only on 21.11.2017. Objections were filed by the assessee on the same day and were disposed of by the Assessing Officer on 05.12.2017. The impugned reassessment order was framed on 28.12.2017, within 23 days of disposal of objections. Applying the principle that an assessee must be allowed four weeks from the date of service of the order rejecting objections to seek legal remedies (as applied in coordinate decisions following the Supreme Court's GKN Driveshaft principle and relevant High Court authority), the Tribunal held that the Assessing Officer failed to afford the requisite period. Where two views are possible, the view favourable to the assessee is to be adopted. Consequently, the reassessment proceedings were held to be invalid and liable to be quashed. The Tribunal further observed that in view of quashing the reassessment, there was no need to decide other substantive additions which thus became academic. [Paras 6, 7]

Reassessment order dated 28.12.2017 quashed; consequential additions deleted and appeal of the assessee allowed.

Final Conclusion: Reassessment proceedings for A.Y. 2010-2011 under section 147/148 were quashed because the Assessing Officer failed to allow the assessee the four-week period to pursue legal remedies after disposal of objections; consequential additions were deleted and the assessee's appeal allowed.

Jurisdictional defect in assessment under section 153A - requirement of incriminating seized material for additions in unabated assessments - addition under section 68 - unabated assessment - addition of commission as consequential to invalid addition

Jurisdictional defect in assessment under section 153A - requirement of incriminating seized material for additions in unabated assessments - unabated assessment - Additions made under section 153A without reference to incriminating material seized in search in respect of assessments which had attained finality (unabated) are not sustainable for the assessment years under appeal. - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Bombay High Court in Continental Warehousing and the Supreme Court's observations in Singhad Technical Education Society to conclude that where an assessment has attained finality (i.e., is unabated), additions in proceedings under section 153A cannot be made unless materials unearthed during search/153A proceedings establish that the earlier reliefs were contrary to such seized material. The tribunal observed that the additions in the present cases were based on loans reflected in the assessee's regular books and on statements obtained on survey/search which did not constitute seized incriminating material linking those loans to the search; the assessments were unabated; and there was no material on record showing a nexus between the seized documents and the loans. On that footing the Tribunal held the assessments to suffer a jurisdictional defect and struck down the additions made under section 153A as not sustainable. [Paras 12, 13, 14, 15, 16]

Additions under section 153A deleted because they were made without reference to incriminating material seized and therefore suffer from jurisdictional defect.

Addition under section 68 - addition of commission as consequential to invalid addition - The additions made under section 68 in respect of alleged unsecured loans and the addition of commission paid for arranging such entries are not sustainable and are to be deleted where the primary addition itself is invalid for lack of seized incriminating material. - HELD THAT: - Having held that the additions effected under section 153A are invalid for want of seized incriminating material, the Tribunal directed deletion of the specific additions under section 68 relating to alleged loans and, consequentially, the addition of commission paid for arranging those entries. The Tribunal treated the adjudication on merits as academic once the jurisdictional defect was established and therefore refrained from determining the substantive correctness of the additions on merit. [Paras 16, 17, 18]

Deletions of additions under section 68 and the commission addition ordered as they are consequential on the primary addition which is held unsustainable.

Final Conclusion: Appeals partly allowed; additions made under section 153A (including the additions under section 68 and the related commission addition) for the assessment years 2008-09, 2009-10 and 2011-12 are deleted on the ground that they were made without reference to incriminating material seized in the search and therefore suffer from a jurisdictional defect.

Validity of assessment framed under section 153A in absence of incriminating seized material - Jurisdictional defect where assessment has attained finality / unabated assessment - Addition under section 68 treating long term capital gain as unexplained cash credit - Reliance on statements recorded under section 132(4) and effect of retraction / need for corroborative seized material - Requirement to prove identity, creditworthiness and genuineness for relief under section 68 - Disallowance under section 69C of interest on loans treated as unexplained expenditure - Admissibility and probative value of information collected at the back of the assessee without opportunity of cross examination - Assessment under section 69 on variation between purchase price and market value

Validity of assessment framed under section 153A in absence of incriminating seized material - Jurisdictional defect where assessment has attained finality / unabated assessment - Assessment framed under section 153A in respect of unabated assessments cannot sustain additions unless incriminating material seized during search pertains to the assessment year - HELD THAT: - The Tribunal held that section 153A abates only pending assessments and does not revive or permit disturbance of assessments which have attained finality unless incriminating material seized in the search establishes the need to revisit the finalized reliefs. Relying on the jurisdictional High Court authority and subsequent Supreme Court exposition on the jurisdictional character of seized material, the Tribunal found no incriminating seized record relied upon by the AO; the Department relied largely on statements and post search investigation material. Where assessments were unabated and no incriminating seized material was produced or relied upon to connect the search records to the assessment years, the assessments suffered from jurisdictional defect and additions under proceedings framed u/s 153A were held unsustainable. [Paras 39, 41, 43, 44, 48]

Appeals on account of jurisdictional defect allowed; specified ITA(s) dismissed for want of jurisdiction to make additions in unabated assessments without incriminating seized material.

Addition under section 68 treating long term capital gain as unexplained cash credit - Reliance on statements recorded under section 132(4) and effect of retraction / need for corroborative seized material - Additions treating long term capital gains from sale of shares as unexplained cash credits under section 68 were unsustainable on merits in absence of corroborative incriminating seized material and where contemporaneous documentary evidence supported the genuineness of transactions - HELD THAT: - On merits the Tribunal found that the AO's case rested on a general thesis of market manipulation, Kolkata investigation inputs and statements obtained during survey/search; no specific incriminating seized document was produced linking the assessee to bogus accommodation entries. The assessee had produced system generated contract notes, Demat statements, bank receipts of sale proceeds through registered brokers and share certificates; no deficiency in those documents was pointed out by the Revenue. Statements relied upon were either general or retracted and no opportunity for cross examination of third parties had been afforded. In these circumstances, and having regard to precedents that documentary proof of identity, source and genuineness discharges the initial burden under section 68, the Tribunal set aside additions made as bogus LTCG. [Paras 49, 50, 51, 54]

Additions of long term capital gains under section 68 deleted.

Requirement to prove identity, creditworthiness and genuineness for relief under section 68 - Addition of commission on capital gain, being consequential to disallowance of LTCG as unexplained, is unsustainable when the LTCG addition is deleted - HELD THAT: - Since the Tribunal deleted the addition treating the sale proceeds as unexplained under section 68 on merits, the consequential 5% commission added by the AO as expenditure related to alleged bogus LTCG had no independent basis and was accordingly deleted. [Paras 55]

Addition of commission on capital gain deleted.

Addition under section 68 in respect of unsecured loans - Admissibility and probative value of information collected at the back of the assessee without opportunity of cross examination - Additions treating unsecured loans as unexplained credits under section 68 were unsustainable where the assessee produced loan confirmations, bank evidence of receipt and repayment, ITRs and financials of lenders and the AO failed to make independent enquiry or produce corroborative seized material - HELD THAT: - The Tribunal noted that the AO merely relied on general investigative reports alleging entry operators in a region, and drew adverse inference from technicalities in documentary dates, without conducting independent inquiries to rebut the documentary evidence tendered by the assessee. The assessee had also repaid the loan, and provided confirmations, bank statements and tax/financial records of the lenders. In absence of concrete enquiry or incriminating seized material linking the lenders to bogus entries, the documentary proof sufficed to discharge the assessee's initial burden under section 68 and the additions were set aside. [Paras 56, 57, 58, 59]

Additions of unsecured loans as unexplained income deleted.

Disallowance under section 69C of interest on loans treated as unexplained expenditure - Disallowance of interest under section 69C, being consequential to the disallowance of the underlying loans, falls when the additions of loans under section 68 are deleted - HELD THAT: - Having deleted the additions of the loans on the basis that the assessee had discharged the onus and no incriminating seized material was produced, the Tribunal held that the consequential disallowance of interest under section 69C could not survive and must be deleted. [Paras 60]

Addition of interest under section 69C deleted.

Assessment under section 69 on variation between purchase price and market value - Jurisdictional defect where assessment has attained finality / unabated assessment - Addition under section 69 on account of alleged under reporting of property value was unsustainable both for want of incriminating seized material in an unabated assessment and on merits as the CIT(A)'s deletion was reasonable - HELD THAT: - The Tribunal observed that the assessment for the year in question was framed under section 153A in an unabated assessment and no incriminating seized material connected to the assessment was placed on record; accordingly the addition could not be sustained for jurisdictional reasons. Independently, the CIT(A) had correctly applied reasoning that a speculative application of comparables to make an undisclosed investment addition under section 69 was without basis; further provisions that might have applied (section 56 in later years) were not applicable for the AY in question. For both reasons the revenue's appeal failed. [Paras 62, 64, 65]

Revenue's appeal dismissed; addition under section 69 deleted.

Final Conclusion: The Tribunal allowed the assessees' appeals and dismissed the revenue appeal: additions made in proceedings under section 153A in unabated assessments were set aside for want of incriminating seized material; on merits the additions treating LTCG and unsecured loans as unexplained credits (section 68), the consequential commission and disallowance of interest (section 69C), and the revenue's property valuation addition (section 69) were deleted.

Disallowance under section 14A - Applicability of section 14A to share of profit from partnership firm - Computation under Rule 8D(2)(ii) - net interest adjustment - Computation under Rule 8D(2)(iii) - 0.5% of average value of investments - Allocation of common expenditure on systematic basis where separate books are not maintained

Disallowance under section 14A - Applicability of section 14A to share of profit from partnership firm - Section 14A read with Rule 8D applies to exempt income in the form of share of profit from a partnership firm. - HELD THAT: - The Tribunal held that insofar as the assessee earned exempt income being share of profit from a partnership firm exempt under section 10(2A), that exempt income obliged application of section 14A and computation in accordance with Rule 8D. The contention that share of profit of a firm is not akin to exempt dividend and therefore outside section 14A was rejected. The authorities' application of the statutory scheme post-2008-09 and reliance on the Rule 8D mechanism to determine disallowance was accepted as correct. [Paras 7]

Section 14A is applicable to the exempt share of profit from the partnership firm and disallowance must be determined under Rule 8D.

Computation under Rule 8D(2)(ii) - net interest adjustment - Computation under Rule 8D(2)(ii) - net interest adjustment - Whether interest disallowance under Rule 8D(2)(ii) is to be computed after adjusting taxable interest income (net interest) for the relevant year. - HELD THAT: - The Tribunal followed the settled principle (including the decision of the Gujarat High Court in PCIT v. Nirma Credit & Capital P. Ltd.) that, prior to the amendment w.e.f. 02.06.2016, interest expenditure for the purpose of Rule 8D(2)(ii) is to be taken as interest paid less taxable interest earned during the financial year. Applying that principle to the facts, the assessee's interest paid was less than its interest income for the year; accordingly no disallowance under Rule 8D(2)(ii) was warranted. The Tribunal directed deletion of the addition made on account of interest under Rule 8D(2)(ii). [Paras 7]

Delete the disallowance made under Rule 8D(2)(ii) because net interest (interest paid less taxable interest earned) is non positive for the year.

Computation under Rule 8D(2)(iii) - 0.5% of average value of investments - Allocation of common expenditure on systematic basis where separate books are not maintained - Whether the disallowance under Rule 8D(2)(iii) @ 0.5% of the average value of investments is maintainable where the assessee has not maintained separate books for investment and business activities. - HELD THAT: - The Tribunal observed that when separate books of account for investment activity and business are not maintained, common expenditure relatable to investment and business must be allocated on a systematic basis as prescribed by Rule 8D. The Assessing Officer applied the method under Rule 8D(2)(iii) by computing 0.5% of the average value of investments to determine other expenditure attributable to exempt income. The Tribunal found no error in the authorities below in following the prescribed formula and therefore upheld the disallowance under Rule 8D(2)(iii). [Paras 7]

Uphold the disallowance under Rule 8D(2)(iii) computed at 0.5% of the average value of investments.

Final Conclusion: The appeal is partly allowed: the disallowance computed under Rule 8D(2)(ii) in respect of interest is deleted (net interest being non positive), while the disallowance under Rule 8D(2)(iii) @ 0.5% of average investments is upheld; section 14A applies to the exempt share of profit from the partnership firm and Rule 8D must be used for computation.

Choice of valuation method under Rule 11UA - Assessing Officer's power to change valuation method - Discounted Cash Flow (DCF) as prescribed method for valuation of shares - valuation under net asset value method versus DCF - verification of valuation and supporting documents by the Assessing Officer - treatment of excess consideration under section 56(2)(viib)

Choice of valuation method under Rule 11UA - Assessing Officer's power to change valuation method - Discounted Cash Flow (DCF) as prescribed method for valuation of shares - valuation under net asset value method versus DCF - verification of valuation and supporting documents by the Assessing Officer - treatment of excess consideration under section 56(2)(viib) - Assessing Officer erred in rejecting the assessee's DCF valuation and adopting net asset/book value method, and the consequent addition under section 56(2)(viib) was not sustainable. - HELD THAT: - The Tribunal held that Rule 11UA prescribes both net asset value and Discounted Cash Flow (DCF) as recognised methods for valuing unquoted equity shares and that the assessee is permitted to choose any one of the prescribed methods. While the Assessing Officer may verify the method and supporting documents, the statute does not empower the Assessing Officer to discard the method selected by the assessee and substitute a different prescribed method. The Assessing Officer's objection - that DCF is inappropriate because the company had no intangible assets or that projections differed from actual results - was insufficient, since DCF necessarily relies on projected future cash flows and the Assessing Officer did not point to any specific discrepancy or inconsistency in the projections to justify rejection. The Tribunal noted that the assessee's DCF valuation was supported by a valuation report and that, even on net asset considerations applying guidance/stamp-duty values, the per-share value was near the DCF figure. Reliance was placed on precedent recognising that an Assessing Officer cannot change the method adopted by the assessee. On these bases the Tribunal concluded that the Assessing Officer erred in adopting book/net asset value and that the addition under section 56(2)(viib) for excess consideration was not sustainable. [Paras 5, 8, 9, 10]

The CIT(A)'s deletion of the addition under section 56(2)(viib) was upheld; the Assessing Officer erred in rejecting the DCF method and adopting net asset/book value, and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s order deleting the addition under section 56(2)(viib), holding that the assessee's DCF valuation-being a method prescribed under Rule 11UA and supported by the valuation report-could not be supplanted by the Assessing Officer's adoption of net asset/book value in the absence of demonstrable defects in the projections or valuation.

Assessment under section 153C read with section 153A - requirement of incriminating material seized during search - assumption of jurisdiction under section 153C - enhancement under section 251(1)(b) by the Commissioner (CIT(A)) - condonation of delay - remand for verification of sources and reconciliation

Condonation of delay - Whether delay in filing the appeals should be condoned - HELD THAT: - The Tribunal examined the assessee's petition and affidavit explaining a 14-day delay caused by appeal papers being mixed up with other papers received from the tax consultant. After hearing the parties, the Tribunal found the reasons to constitute a reasonable cause within the meaning of the statute and, in the interest of substantial justice, exercised its discretion to condone the delay and admit the appeals for adjudication. [Paras 5]

Delay in filing the appeals is condoned and the appeals are admitted for adjudication.

Assessment under section 153C read with section 153A - requirement of incriminating material seized during search - assumption of jurisdiction under section 153C - Validity of enhancements made by CIT(A) in assessments framed under section 153C/153A where no specific seized material was invoked by the assessee at earlier stages - HELD THAT: - The Tribunal considered the assessee's contention that additions/enhancements cannot be sustained in assessments under section 153C/153A in the absence of incriminating material seized during search. It noted the settled principle that, where relevant, incriminating seized material is necessary for framing assessment under section 153C. However, on facts the Tribunal found that the additions under challenge related to entries in the same bank account which had already been the basis for the large peak-credit addition of Rs.8,90,00,000/-. The assessee had not specifically raised before the Assessing Officer or CIT(A) the jurisdictional complaint that the enhancements lacked foundation in seized material. Given that the contested enhancements arose from the same bank account considered by the AO, the Tribunal held the present jurisdictional objection could not be entertained at this stage and rejected the plea that the enhancements were void for want of seized incriminating material. [Paras 11]

The ground challenging the enhancements as made without seized incriminating material is rejected.

Remand for verification of sources and reconciliation - Whether the additions of three small cash credits and interest on fixed deposits require further verification - HELD THAT: - The Tribunal examined the Assessing Officer's remand report and records. For the three cash credits (totaling the amount added by CIT(A)) the AO had recorded that the assessee's claimed source (receipts from a related party) was not adequately supported by the assessee's account statement, although a statement of the payor was produced. The Tribunal found the facts regarding source were unclear and directed a fresh examination by the AO in light of the account statements filed by the assessee. Similarly, with respect to interest on fixed deposits, the AO observed the interest was credited to the bank account but not offered to tax in the return; the Tribunal directed verification against the return filed and that if the interest was not offered to tax, the enhancement would survive. These matters were therefore remanded for verification and appropriate decision by the AO. [Paras 12]

Matters relating to the three cash credits and interest on fixed deposits are remanded to the Assessing Officer for verification and decision in accordance with law.

Remand for verification of sources and reconciliation - Whether unexplained differences and reconciliations in accounts for AY 2013-14 require fresh examination - HELD THAT: - With respect to assessment year 2013-14 the Tribunal noted factual contradictions between the assessee's claim of having reconciled amounts (including differences credited to a related party and amounts received from another party) and the CIT(A)'s finding that certain balances remained unexplained. Given these contradictory factual claims and the availability of reconciliation documents alleged to have been filed by the assessee, the Tribunal concluded that the Assessing Officer should re-examine the reconciliation and documentary support and decide the matter afresh in accordance with law. [Paras 14]

The issues in respect of reconciliations and unexplained differences for AY 2013-14 are remanded to the Assessing Officer for fresh examination and decision.

Final Conclusion: The appeals are admitted (delay condoned), the jurisdictional attack on the enhancements as being made without seized incriminating material is rejected on the present facts, but specific factual aspects - the three cash credits and interest for AY 2007-08 and the reconciliations/differences for AY 2013-14 - are remanded to the Assessing Officer for verification and decision in accordance with law; appeals are treated as allowed for statistical purposes.

Revenue nature of foreign exchange fluctuation loss and allowability under section 37(1) - Non-applicability of section 43A to acquisition of indigenous assets and its effect on treatment of exchange differences - Recognition of exchange differences under accounting standard AS-11 and conformity with mandatory accounting standards/CBDT notification - Power of appellate authority to admit claims not made in original return where relevant material is on record

Revenue nature of foreign exchange fluctuation loss and allowability under section 37(1) - Non-applicability of section 43A to acquisition of indigenous assets and its effect on treatment of exchange differences - Recognition of exchange differences under accounting standard AS-11 and conformity with mandatory accounting standards/CBDT notification - Foreign exchange fluctuation loss on restatement of external commercial borrowings taken for acquisition of domestic assets is revenue in nature and allowable under section 37(1) and is not required to be added to the cost of the asset under section 43A. - HELD THAT: - The Tribunal held that section 43A, by its non obstante language, applies only where an asset is acquired from outside India and contemplates adjustments at the time of payment; it does not apply to acquisition of indigenous assets. In absence of any other provision requiring addition of exchange loss to asset cost, the question of characterisation must be tested by generally accepted accounting principles. AS 11 (as mandatory accounting standard), section 145 of the Income tax Act and section 211 of the Companies Act oblige recognition of exchange differences in the profit & loss account. The Tribunal followed and applied the reasoning of the coordinate Benches and Supreme Court precedents, observing that conversion of loans and resultant exchange difference was driven by revenue considerations (saving interest costs, hedging), that the loss recognized under AS 11 is an accrued and subsisting liability (not merely contingent or notional), and that loans and cost of assets are independent transactions so that subsequent exchange variation does not alter the actual cost of the asset. Reliance was placed on the coordinate Bench decision in Cooper Corporation and the Tribunal's decision in M/s. Hyundai Motor Company Ltd. as well as the Supreme Court in CIT vs. Tata Iron & Steel Co. Ltd. and Woodward Governor India P. Ltd. to conclude the loss is revenue and allowable under section 37(1). [Paras 9, 10, 11]

Disallowance of the exchange fluctuation loss was deleted; the loss is revenue in nature and deductible under section 37(1) for AYs 2012 13 and 2013 14.

Power of appellate authority to admit claims not made in original return where relevant material is on record - An appellate authority may admit and consider a claim not incorporated in the original return where the relevant material is on the record; consequently the additional claim for interest (voluntarily included in the assessee's total income) was admitted and remitted to the Assessing Officer for verification. - HELD THAT: - Although the Assessing Officer cannot entertain a fresh claim in the absence of a revised return as held in M/s. Goetz (India) Ltd. , that restriction does not bind appellate authorities. The Tribunal observed that where facts and materials necessary to decide the claim are available on record, appellate authorities have power to admit the claim; this view is supported by the Madras High Court in CIT vs. Abhinitha Foundation Pvt. Ltd. and by Tribunal precedents (R. Natarajan). On the facts, the assessee had notified the mistake during assessment proceedings and placed material on record; the CIT(A) rightly admitted the claim and remitted it to the AO to verify and decide in accordance with law. [Paras 11, 14]

The additional claim for interest deduction was admitted by the appellate authority and the matter was remitted to the Assessing Officer for verification and decision in accordance with law.

Final Conclusion: The Revenue's appeals for AYs 2012 13 and 2013 14 are dismissed: the exchange fluctuation losses on ECBs used to acquire indigenous assets were held revenue in nature and allowable under section 37(1), and the appellate authority permissibly admitted the assessee's additional claim for interest and remitted it to the Assessing Officer for verification.

Allowability of business expenditure and nexus test - onus of proof on the assessee - temporary lull in business and continuity of expenditure - treatment of salary where no business operations

Allowability of business expenditure and nexus test - temporary lull in business and continuity of expenditure - Allowability of various expenses (depreciation, interest on vehicle loan, miscellaneous expenses, repairs & maintenance and similar revenue expenditures) where the assessee did not carry on manufacturing activity in the year and derived only house property, interest and dividend income. - HELD THAT: - The Tribunal held that although expenditure incurred during a temporary lull in business may be allowable if incurred wholly and exclusively for the purpose of business, the onus is on the assessee to prove nexus between the expenditure debited to profit and loss account and the income of the year. On the material on record the Assessing Officer and the CIT(A) found that the assessee had not carried on manufacturing activity in the year and had leased out factory premises, earning rental, interest and dividend income. The assessee did not furnish evidence to establish that the disputed expenses had a direct nexus with the income of the year or that they were incurred for continuing the business activity during the lull. Consequently, the Tribunal agreed with the authorities below that the questioned revenue expenditures could not be allowed as deductions in the absence of proof of nexus with the income of the year. [Paras 8]

Disallowance of the listed expenses was upheld for lack of demonstrated nexus with the year's income.

Treatment of salary where no business operations - onuse of proof on the assessee - Extent of allowance of salary paid when main business operations were not carried on during the year. - HELD THAT: - The Tribunal noted that payment of salary to maintain records and preserve the company's affairs can justify some allowance even when main business operations are suspended. The Assessing Officer had disallowed salaries except 25% (i.e., allowed 75% disallowance), while the CIT(A) considered that 50% disallowance was more appropriate. The assessee failed to produce evidence to rebut the factual finding that manufacturing was not carried on and that salaries bore insufficient nexus to the income of the year. Having regard to the factual findings and the approach of the authorities below, the Tribunal found no error in the CIT(A)'s reduction of the disallowance to 50%. [Paras 5, 8]

CIT(A)'s direction to disallow 50% of salary expense was upheld.

Onus of proof on the assessee - Responsibility for proving nexus between claimed deductions and income earned during the assessment year. - HELD THAT: - The Tribunal reaffirmed that the burden lies on the assessee to demonstrate that expenditures debited to the profit and loss account are incurred wholly and exclusively for the purpose of business and have nexus with the income of the relevant year. Where the assessee fails to adduce evidence establishing such nexus, disallowance of the expenditures is justified. Applying this principle to the facts, the Tribunal found the assessee had not met that onus and therefore upheld disallowances. [Paras 8]

Onus placed on the assessee to prove nexus was reiterated and applied; in absence of proof disallowances sustained.

Final Conclusion: Appeal dismissed; the Tribunal upheld the disallowance of various revenue expenditures for AY 2016-17 for want of nexus with the income of the year and affirmed the CIT(A)'s direction to disallow 50% of salary expenses.

Revisional jurisdiction under Section 263 - scope of Clause (c) to Explanation 1 of Section 263(1) - merger of assessment order with appellate order - disallowance under Section 14A read with Rule 8D

Revisional jurisdiction under Section 263 - scope of Clause (c) to Explanation 1 of Section 263(1) - merger of assessment order with appellate order - disallowance under Section 14A read with Rule 8D - Whether the Principal Commissioner of Income Tax could exercise revisional powers under Section 263 to revise the assessment in relation to disallowance under Section 14A read with Rule 8D when the same issue was the subject matter of an appeal before the first and second appellate authorities. - HELD THAT: - The Tribunal examined Clause (c) to Explanation (1) of Section 263(1) which permits the Principal Commissioner to revise only those matters that had not been considered and decided in an appeal. The assessment records show that disallowance under Section 14A r.w. Rule 8D was considered by the Assessing Officer and upheld by the CIT(A), and the assessee had further appealed to the ITAT where the matter remained pending. Once an issue is before the appellate authority the assessment order stands merged with the appellate order and the appellate authority has jurisdiction, including power of enhancement. Allowing PCIT to exercise revisional jurisdiction in respect of an issue already subject to appeal would permit parallel or multiple proceedings, contrary to the statutory scheme. Applying these principles and following the decision of the High Court in CIT v. Sera Sera Productions Ltd., the Tribunal concluded that the PCIT erred in invoking Section 263 on the issue which was subject to appeal. [Paras 7, 8]

The revisional exercise by the PCIT under Section 263 in relation to the disallowance under Section 14A read with Rule 8D was unauthorized; the Section 263 order is quashed and the assessment order passed under Section 143(3) is restored.

Final Conclusion: The appeal is allowed: the order passed by the Principal Commissioner of Income Tax under Section 263 is quashed and the assessment order under Section 143(3) for AY 2013-14 is restored.

Applicability of TNMM to absorb notional interest on overdue receivables - Receivables as international transactions under transfer pricing

Receivables as international transactions under transfer pricing - Receivables (deferred payments / overdue receivables) fall within the definition of international transactions and are subject to transfer pricing scrutiny. - HELD THAT: - The Tribunal noted that section 92B was amended to include receivables within the scope of international transactions and observed there was no merit in the assessee's contention that receivables are not international transactions. The view recorded by the Transfer Pricing Officer and sustained by the Dispute Resolution Panel that non-charging or undercharging of interest on excess credit allowed to an associated enterprise amounts to an international transaction was accepted. Accordingly, the legislative inclusion of receivables within the definition of international transactions was treated as applicable to the facts of the year under consideration. [Paras 7]

The contention that receivables are not international transactions was rejected.

Applicability of TNMM to absorb notional interest on overdue receivables - Whether a separate transfer-pricing adjustment for notional interest on overdue receivables is permissible where the Transactional Net Margin Method (TNMM) has been applied as the most appropriate method. - HELD THAT: - Applying the Tribunal's earlier reasoning in the assessee's own co ordinate bench decision for the preceding year, the Bench held that when TNMM is adopted as the most appropriate method the net margin so determined can and does take into account notional finance-related costs, including any imputed interest on delayed receipts. The Tribunal emphasised that complete uniformity in not charging interest from all parties (AEs and non-AEs) precludes selective imputation of notional interest against only AE receivables, and commercial realities (including instances of early receipts) must be considered. Consequently, a separate upward adjustment on account of overdue receivables was held to be unnecessary and impermissible where TNMM has been applied. [Paras 7, 8]

When TNMM is the most appropriate method, separate arm's-length price adjustments for notional interest on overdue receivables are not warranted; the upward adjustment is to be deleted.

Final Conclusion: The Tribunal held that receivables are includible within the definition of international transactions but, applying TNMM as the most appropriate method, deleted the separate upward transfer-pricing adjustment for notional interest on overdue receivables and allowed the assessee's appeal.

Validity of reassessment proceedings - Reasons recorded for reopening assessment - Borrowed satisfaction / non application of mind - Sanction under section 151 - requirement of subjective satisfaction - Quashing of reopening where reasons rest on wrong facts or non existent provision - Consequential deletion of additions where reassessment is quashed

Validity of reassessment proceedings - Reasons recorded for reopening assessment - Borrowed satisfaction / non application of mind - Sanction under section 151 - requirement of subjective satisfaction - Quashing of reopening where reasons rest on wrong facts or non existent provision - Consequential deletion of additions where reassessment is quashed - Reopening of assessment under section 147/148 is invalid and is to be quashed, with consequent deletion of additions. - HELD THAT: - The Tribunal examined the reasons recorded for initiating proceedings u/s 147/148 and the accompanying approval under section 151. The recorded reasons referred to a non existent provision (stating 147(b)), contained incorrect facts and reproduced investigation wing material without any independent application of mind by the Assessing Officer. The sanctioning authority's approval was in the form of a brief mechanistic endorsement ("Yes, I am satisfied") and did not demonstrate subjective satisfaction on the material; relevant Annexures and materials relied upon were not furnished to the assessee for opportunity to meet them. In these circumstances the formation of reasons was held to be based on borrowed satisfaction and mechanical approval, which is legally inadequate. The Tribunal followed earlier precedents dealing with identical defects and concluded that the initiation of reassessment was invalid ab initio. Because reassessment was quashed on this preliminary legal ground, the additions made under section 68 and section 69C were deleted as consequential relief and the merits of those additions were not adjudicated. [Paras 6]

Reopening under section 147/148 quashed; sanction under section 151 held invalid for want of application of mind; consequent additions deleted.

Final Conclusion: The Tribunal set aside the orders of the authorities below, quashed the reassessment proceedings initiated under section 147/148 for A.Y. 2009-10 on grounds of borrowed satisfaction, incorrect reasons and mechanical sanction, and deleted the additions made; other grounds were left academic.

Interpretation of the expression "for use" as meaning "intended for use" - strict interpretation of exemption notifications - burden of proof on the assessee to show applicability of exemption - absence of condition of actual end use in an exemption entry

Interpretation of the expression "for use" as meaning "intended for use" - absence of condition of actual end use in an exemption entry - Whether Entry 252A of Notification No.21/2002 confers exemption where goods are capable of use in the plantation sector without proof of actual end use - HELD THAT: - The court held that the expression 'for use' in Entry 252A must be read as 'intended for use', following the principle in State of Haryana v. Dalmia Dadri Cement Ltd., and that the Notification does not impose a condition of actual end use. The Finance Ministry's Circular of 11.01.2005 supports that general purpose machinery capable of use in the specified industry is eligible for concession. Where a Notification expressly intends to confine benefit to goods 'only', 'exclusively' or 'entirely' used, it uses such qualifying words; their absence in Entry 252A indicates no requirement of proof of actual use. Consequently, the tribunal erred in importing an unexpressed condition of actual use to deny the benefit. [Paras 11]

Entry 252A grants concessional duty to machinery 'for use' in the plantation sector meaning intended or capable of use therein; no condition of proof of actual end use is required and the tribunal's contrary finding is set aside.

Burden of proof on the assessee to show applicability of exemption - strict interpretation of exemption notifications - Whether the appellant suppressed facts or failed to discharge the burden of proving entitlement to the exemption - HELD THAT: - The court examined the record and found documentary material before the authorities - communications from the Joint Agricultural Director, Andhra Pradesh State Agro Industries Development Corporation Limited and dealers' statements - indicating supply and use in tea, coffee and rubber plantation sectors. The tribunal did not record a finding that the goods were in fact used in non plantation sectors, and given that the Notification does not require proof of actual end use, the contention of suppression and failure of proof was rejected. [Paras 12]

The finding of suppression and denial of benefit on that ground is unjustified; the appellant discharged its burden sufficiently for entitlement under the Notification.

Final Conclusion: The substantial questions of law are answered in favour of the appellant: Entry 252A is applicable to machinery capable of use in the tea, coffee and rubber plantation sector without a condition of actual end use; the tribunal's order upholding demand and penalty is quashed and the appeal is allowed.

Provisional release of seized imported goods under Section 110A of the Customs Act, 1962 - Provisional release conditions: bond and bank guarantee as per departmental circular - Requirement of Directorate of Revenue Intelligence report as a pre-condition for deciding provisional release - Application of departmental protocol versus statutory requirement - Duty to pass a speaking order on administrative applications

Provisional release of seized imported goods under Section 110A of the Customs Act, 1962 - Requirement of Directorate of Revenue Intelligence report as a pre-condition for deciding provisional release - Application of departmental protocol versus statutory requirement - Duty to pass a speaking order on administrative applications - Respondents No.2 and 5 must decide the petitioner's application for provisional release of seized goods without insisting on a non statutory report from the Directorate of Revenue Intelligence and by passing a reasoned order on merits. - HELD THAT: - The court examined the relevant departmental circular on provisional release and the parties' submissions. It recorded that there is no statutory provision mandating receipt of a report from the Directorate of Revenue Intelligence as a precondition to deciding an application for provisional release; any such requirement is only a departmental protocol and cannot justify non decision. The Directorate of Revenue Intelligence had already forwarded a report on 20 11 2020; however, even absent that, the competent adjudicating authority is obligated to consider the application and apply the conditions prescribed by the circular (including bond and bank guarantee where appropriate) and other legal requirements. The court required the respondents to decide the application on merits, in accordance with law and the circular, and to pass a speaking order uninfluenced by this court's order.

The respondents are directed to decide the petitioner's application for provisional release of goods within ten days, on merits, and to pass a speaking order in accordance with law.

Final Conclusion: Writ petition allowed; connected petition disposed. Respondents directed to decide the provisional release application within ten days and to pass a reasoned order in accordance with law and the departmental circular.

Provisional attachment under the Prevention of Money Laundering Act, 2002 - Substitution of party and right to be heard in PMLA adjudication - Principles of natural justice in adjudicatory proceedings - Rights of a secured creditor/assignee under SARFAESI Act vis-a -vis PMLA attachment - Reason to believe requirement for attachment under PMLA - Continuation of attachment and maintenance of status quo pending adjudication - Remand for fresh adjudication where procedural infirmity found

Substitution of party and right to be heard in PMLA adjudication - Principles of natural justice in adjudicatory proceedings - Remand for fresh adjudication where procedural infirmity found - Whether the adjudicating authority failed to substitute the appellant in place of the original lender and failed to consider the appellant's reply, oral and written submissions, thereby violating principles of natural justice and requiring remand. - HELD THAT: - The Tribunal found that the appellant (assignee of the original lender) had stepped into the shoes of Bajaj Finance Ltd. prior to the Provisional Attachment Order and had applied for substitution and filed reply, oral arguments and written submissions before the Adjudicating Authority. The impugned order records the assignment but contains no order effecting substitution and does not reflect consideration of the appellant's submissions. The Tribunal held that this amounted to non-compliance with the procedural requirements under the PMLA provisions invoked and a breach of the appellant's right to be heard. As a consequence the Tribunal set aside the adjudicating authority's order insofar as it related to the appellant and the properties concerned and remitted the matter to the Adjudicating Authority for re-adjudication. The appellant was directed to file appropriate application within 30 days and the Adjudicating Authority was directed to decide all legal and factual issues after giving opportunity to both parties within 150 days.

Impugned order set aside qua the appellant and the attached properties; matter remanded for re-adjudication after affording the appellant opportunity to be heard and for the Adjudicating Authority to decide all issues afresh.

Continuation of attachment and maintenance of status quo pending adjudication - Provisional attachment under the Prevention of Money Laundering Act, 2002 - Whether the provisional attachments should remain in force during re-adjudication. - HELD THAT: - While setting aside the impugned order and remitting the matter for fresh adjudication, the Tribunal expressly declined to express any opinion on the merits concerning the source of funds or whether the properties were proceeds of crime. The Tribunal directed that the existing attachments shall continue until completion of proceedings before the Adjudicating Authority and ordered both parties to maintain status quo in respect of the attached properties. No costs were imposed and pending applications were disposed of.

Attachments to continue and parties to maintain status quo in respect of the attached properties pending re-adjudication by the Adjudicating Authority.

Final Conclusion: The appeal is allowed in part: the order of the Adjudicating Authority dated 05.08.2019 is set aside insofar as it concerns the appellant and the specified properties due to failure to effect substitution and breach of natural justice; the matter is remitted for fresh adjudication after giving the appellant an opportunity to be heard, while the provisional attachments shall remain in force and parties shall maintain status quo pending completion of the re-adjudication.

Adjustment of insurance proceeds against tax liabilities under Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 - liberal interpretation of Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 - rejection of appropriation on ground of separate accounting head - timeliness of payment under SVLDRS where delay is attributable to departmental refusal

Adjustment of insurance proceeds against tax liabilities under Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 - rejection of appropriation on ground of separate accounting head - The petitioner is entitled to have the insurance compensation paid by the insurer adjusted towards the crystallised dues under the SVLDRS and the departmental refusal to so adjust was arbitrary. - HELD THAT: - The Court found that the respondents' stand - that amounts received from an insurance company could not be appropriated towards the crystallised liability under the SVLDRS because the scheme required payment under a separate accounting head - is a hyper technical construction contrary to the purpose and intent of the scheme. The scheme's object is to facilitate closure of legacy disputes and enable businesses to make a fresh start; therefore a liberal interpretation is warranted. Having regard to that purpose, refusal to permit adjustment of insurance proceeds against the crystallised dues was arbitrary. The Court accepted the petitioner's contention and the willingness of the insurer to pay, and concluded that adjustment and appropriate remittance of any surplus should be effected as a matter of substance rather than being defeated by formalistic accounting objections.

Respondents' refusal to permit appropriation of the insurance proceeds towards the SVLDRS liability was set aside and the petitioner was entitled to have the insurer's payment adjusted against the crystallised dues.

Timeliness of payment under SVLDRS where delay is attributable to departmental refusal - liberal interpretation of Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 - The benefit of the SVLDRS could not be denied to the petitioner on the ground that payment was not made by the last date where the delay in payment was caused by the departmental refusal to accept adjustment of the insurance proceeds, and the petitioner had made the offer to pay before the deadline. - HELD THAT: - The Court rejected the respondents' contention that the petitioner's failure to effect payment by the extended date disentitled it from the scheme. The delay was attributable to the departmental refusal to accept the insurer's payment by adjustment; the insurer had issued the discharge voucher before the deadline and the petitioner had repeatedly sought appropriation. Given the scheme's remedial purpose and the petitioner's prompt steps to secure payment from the insurer, the Court held that the petitioner's entitlement could not be defeated on that technical ground. Consequently, the Court directed ministerial steps to enable payment and adjustment so that the substantive clearance of liabilities under the scheme could be effected.

Petitioner's entitlement to the scheme was preserved despite the lapse of the payment date, since the delay resulted from the department's refusal to accept adjustment of the insurance proceeds; ministerial directions were issued to facilitate payment and adjustment.

Final Conclusion: Writ petition allowed in part: the Court directed the petitioner and the departmental officer to sign and submit a joint discharge voucher to the insurer, directed the insurer to deposit the compensation with the department, ordered adjustment of the crystallised SVLDRS dues from that payment, and directed remittance of any surplus to the State GST authority and refund of any remaining surplus to the petitioner; pending petitions closed and no order as to costs.

Classification of goods - declared goods - tax levy on goods as they exist at the time of sale - commercially different commodity - residuary taxation - interpretation of scheduled entries

Classification of goods - declared goods - tax levy on goods as they exist at the time of sale - Whether the iron and steel tees, angles and channels sold by the respondent are declared goods taxable at the concessional rate under the Act or are to be treated as unscheduled/residuary goods. - HELD THAT: - The court held that taxability is determined by the character of the goods as they exist at the time of sale, irrespective of their subsequent use by the buyer. The respondent sold steel tees, angles and channels in the same form as purchased and they were not sold as assembled grid systems. Applying the principle that goods which are acquired as declared goods and continue to be declared goods at the time of sale must be taxed as declared goods, the tribunal's conclusion in favour of the respondent was sustainable. The court found no error in the tribunal's legal conclusion that the items were not to be reclassified as residuary/unscheduled goods for higher tax. [Paras 6]

The classification of the disputed items as declared goods was upheld and they are taxable in accordance with their character at the time of sale.

Commercially different commodity - interpretation of scheduled entries - residuary taxation - Whether the tribunal erred in failing to consider the entry under the earlier Karnataka Sales Tax Act, 1957 and in not addressing the first appellate authority's view that the goods became commercially different commodities. - HELD THAT: - The court examined the contention that the tribunal overlooked the first appellate authority's reliance on Entry 7 Part S of the Karnataka Sales Tax Act, 1957 and related classifications. Having reviewed the tribunal's order and the applicable principle that assessment depends on the goods as sold, the court concluded that the tribunal neither decided any question of law erroneously nor failed to decide a question of law. The tribunal's reliance on the factual finding that the goods were sold in the same form as purchased and hence remained declared goods was proper, and the legislative entries relied upon by the petitioner did not demonstrate an error warranting interference. [Paras 6]

No fault was found in the tribunal's treatment of the earlier statutory entry or in its rejection of the view that the goods had become commercially different commodities; the tribunal's decision stands.

Final Conclusion: The petition is dismissed. The tribunal's order allowing the respondent's appeal and treating the disputed tees, angles and channels as declared goods taxable in their existing form is upheld.

Assessment of escaped turnover - Law of Limitation - Maintainability of writ against time-barred assessment revision - Section 16(1)(a) of the Tamilnadu General Sales Tax Act, 1959 - Statutory appeal versus writ jurisdiction where order is time barred or lacks jurisdiction

Assessment of escaped turnover - Law of Limitation - Section 16(1)(a) of the Tamilnadu General Sales Tax Act, 1959 - Maintainability of writ against time-barred assessment revision - Validity of the revision of assessment initiated beyond five years from the date of original assessment and the consequent maintainability of the writ petition seeking quashment of that revision. - HELD THAT: - The Court examined the impugned revision order and the materials on record and noted that the original assessment order was dated 12.06.2009 while the revision notice was issued on 09.04.2018. Section 16(1)(a) permits determination of escaped turnover only within five years from the date of the final assessment. Since the revision proceedings were initiated after the five year period, they are barred by the law of limitation. Reliance on established authority that a writ petition is maintainable where an order is without jurisdiction or barred by limitation was held applicable. The respondent did not meet or answer the petitioner's limitation plea in the counter affidavit, and no ground was shown to bring the revision within any exception; consequently the revision was held legally impermissible and the challenge by writ was proper. [Paras 8, 9, 11, 12, 13]

The revision of assessment proceedings initiated beyond the statutory five year period is barred by limitation; the impugned revision of assessment order dated 21.02.2019 is quashed and the writ petition is allowed.

Final Conclusion: Impugned revision of assessment dated 21.02.2019 for assessment year 2006-2007 quashed as time barred under Section 16(1)(a) of the Tamilnadu General Sales Tax Act, 1959; writ petition allowed.

Principles of natural justice - Mechanical acceptance of audit report - Independent assessment obligation of revisional authority - Revision of assessment under Section 27(2) of the Tamil Nadu Value Added Tax Act, 2006 - Supply of documents relied upon in quasi judicial proceedings - Right to personal hearing - Remand for fresh consideration

Principles of natural justice - Mechanical acceptance of audit report - Independent assessment obligation of revisional authority - Whether the impugned assessment orders were passed in violation of the principles of natural justice by mechanically adopting the Accountant General's audit report without independent assessment or furnishing particulars to the petitioner. - HELD THAT: - The Court found that the petitioner had replied to the notice under Section 27(2) requesting bill and date wise details of alleged unreported purchases said to be from the Spices Board, Cochin, and that the assessment orders record no explanation as to why those particulars or a copy of the audit report were not provided. The revisional authority accepted the audit report as the basis for revision without conducting any independent assessment, without furnishing the audit report or the claimed particulars to the petitioner, and thereby failed to afford a meaningful opportunity to meet the case against it. A quasi judicial authority must disclose the documents it intends to rely upon and afford adequate opportunity, including personal hearing, before recording an adverse revisionary conclusion based on the audit findings. [Paras 9, 10, 11, 12, 13]

Finds violation of the principles of natural justice in the impugned assessment orders and quashes those orders.

Remand for fresh consideration - Supply of documents relied upon in quasi judicial proceedings - Right to personal hearing - Revision of assessment under Section 27(2) of the Tamil Nadu Value Added Tax Act, 2006 - What relief should follow and the manner in which the revisional authority should proceed on reconsideration. - HELD THAT: - Because the orders were quashed for breach of natural justice, the Court directed that the matter be remanded to the second respondent for fresh consideration on merits. The revisional authority must furnish to the petitioner any documents on which it proposes to rely (including the audit report) and grant the petitioner adequate opportunity to place objections and to be heard in person. The Court prescribed a time limit of twelve weeks from receipt of this order for passing the final order on merits and in accordance with law. [Paras 14, 15]

Remands the matter to the second respondent with directions to furnish relied upon documents and to give the petitioner an opportunity of personal hearing; final order to be passed within twelve weeks.

Final Conclusion: The impugned assessment orders dated 16.11.2020 for AYs 2012-2013, 2013-2014 and 2014-2015 are quashed for breach of natural justice; the matter is remitted to the assessing authority to reconsider the assessments on merits after furnishing the documents to be relied upon and after granting the petitioner a personal hearing, with final orders to be passed within twelve weeks.

'C' form - concessional rate of tax on inter state purchases - quashing of departmental circular - direction to implement binding precedent - remand for compliance and fresh decision

'C' form - concessional rate of tax on inter state purchases - quashing of departmental circular - direction to implement binding precedent - Respondents to consider and decide the petitioner's claim for issuance/recognition of 'C' form declarations for inter state purchase of High Speed Diesel and related penalty proceedings in light of the Division Bench decision quashing the impugned circular. - HELD THAT: - The Division Bench of this Court has already quashed the Commissioner's circular dated 31.05.2018 and directed that registered dealers be permitted to use 'C' Forms for inter state purchase of the specified commodities at concessional tax rates, with online downloading being allowed. The respondents' counsel conceded the applicability of that decision to the present facts. Having regard to the binding effect of the Division Bench judgment and the factual claim that the petitioner purchased HSD during July 2017 to September 2017 using 'C' forms, the Court declined to re enter contentious issues already determined by the Division Bench. Instead, the Court directed the respondents to reconsider the petitioner's claim and any consequential proceedings (including any proposed penalty) afresh and in conformity with the Division Bench ruling, providing an opportunity for administrative action consistent with that precedent. [Paras 5]

Respondents directed to consider the petitioner's claim and pass appropriate orders in the light of the Division Bench decision within four weeks; writ petition disposed of.

Final Conclusion: The writ petition is disposed of by directing the respondents to reconsider and decide the petitioner's entitlement to use 'C' forms for inter state purchases of HSD (July 2017 to September 2017) and to deal with related proceedings in accordance with the Division Bench judgment, with orders to be passed within four weeks.

Classification of goods for determination of Central Sales Tax rate - application of local VAT rate to inter State sales - assessment vitiated for non consideration of specific objections - time bar of assessment under the deemed assessment provision of CST Rules - remand for fresh consideration - liberty to file additional objections

Classification of goods for determination of Central Sales Tax rate - application of local VAT rate to inter State sales - assessment vitiated for non consideration of specific objections - remand for fresh consideration - Impugned assessment failed to consider the petitioner's specific contention regarding the applicable rate of tax on inter State sales of mobile phones and was set aside and remitted for fresh consideration. - HELD THAT: - The petitioner specifically objected that inter State sales of mobile phones should attract the local VAT rate of 5% under the relevant Schedule entry and supplied supporting invoices, but the assessing authority passed the Assessment Order without addressing that contention. The respondents' representative acknowledged the omission and agreed that the point should be reconsidered. In these circumstances the Court held that the omission vitiated the assessment order and remitted the matter to the assessing authority to consider the contention on the appropriate rate of tax and pass a fresh assessment in accordance with law. [Paras 6, 9, 10, 12]

Assessment Order set aside and remitted to the first respondent for fresh consideration of the rate of tax contention.

Time bar of assessment under the deemed assessment provision of CST Rules - liberty to file additional objections - remand for fresh consideration - The question of whether the assessment was barred by limitation for the tax period July, 2015 to January, 2016 was directed to be considered afresh by the assessing authority after the petitioner is permitted to raise it by additional objections. - HELD THAT: - The petitioner pleaded that the assessment was time barred for the period July, 2015 to January, 2016 relying on the deemed assessment provision of the CST Rules; the Court granted leave to the petitioner to file additional objections including the plea of limitation within a stipulated time. The matter was remitted so that the assessing authority may examine and decide the limitation plea along with the earlier objections and any other pleas the petitioner chooses to raise, in accordance with law. [Paras 8, 11, 12]

Limitation plea not finally adjudicated by the Court; directed to be considered afresh by the assessing authority after the petitioner files additional objections.

Final Conclusion: The Assessment Order AO No.51883 dated 31.03.2020 is set aside and the matter is remitted to the first respondent for fresh consideration of the petitioner's objections including the rate of tax contention and the plea of time bar for July, 2015 to January, 2016; the petitioner may file additional objections within four weeks and the authority shall pass a fresh assessment in accordance with law within eight weeks; pending miscellaneous petitions closed; no costs.

Amendment of complaint - maintainability of complaint by a proprietorship concern as payee - presumption under Section 139 of the Negotiable Instruments Act - onus to rebut statutory presumption - proof of bank return memo and evidentiary value under Section 146 - conviction and sentencing under Section 138 of the Negotiable Instruments Act

Amendment of complaint - Application to amend the complaint to correct the nature of transaction was allowable. - HELD THAT: - The Trial Court rejected the amendment on the ground of delay and change of nature of complaint despite the amendment being moved before the complainant's witnesses were cross examined. The High Court held that the application for amendment was filed prior to cross examination of the complainant and, having regard to the stage of trial and the fact that the statutory notice correctly described the transaction, the rejection was a material illegality. The order of the Trial Court refusing amendment was set aside and the amendment was permitted.

Amendment of complaint allowed and the Trial Court's order refusing amendment set aside.

Maintainability of complaint by a proprietorship concern as payee - A complaint in respect of a cheque issued in the name of a proprietorship concern is maintainable in the name of the proprietorship (payee) and against the proprietor. - HELD THAT: - The Court analysed the distinction between proprietary concerns and other juristic persons and applied precedents to hold that Section 142 requires the complainant to be the payee. Where the payee is a proprietorship concern, a criminal complaint under Section 138 may be filed in the name of the proprietary concern (i.e., the payee) and the proprietor may be prosecuted. Accordingly, absence of arraignment of the proprietorship firm as a separate accused did not render the complaint against the respondent (the proprietor) non maintainable.

Complaint filed by the payee proprietorship (through its proprietor) and prosecution of the proprietor was held maintainable.

Presumption under Section 139 of the Negotiable Instruments Act - onus to rebut statutory presumption - proof of bank return memo and evidentiary value under Section 146 - The complainant proved issuance of the cheque and dishonour; the statutory presumption under Section 139 was attracted and the respondent failed to rebut it; the bank return memo was admissible and proved. - HELD THAT: - The disputed cheque bore the respondent's signature and was produced along with the bank return memo showing dishonour for insufficient funds and signature discrepancy. The respondent did not dispute his signature on the cheque at trial and offered a defence of theft of blank cheques, but did not produce a police FIR or cogent evidence to support that plea. The Court applied the doctrine that once execution of the instrument is proved or admitted, Section 139 raises a rebuttable presumption that it was issued for discharge of debt; the accused must bring forward evidence to negate that presumption. The return memo, though not bearing a bank seal, carried the signature of a bank officer and was not shown by the bank witness to be inauthentic; Section 146 does not make a seal a precondition to admissibility. On the totality of evidence, the presumption was not rebutted and the cheque was held to have been issued in discharge of a legally enforceable debt.

Presumption under Section 139 attracted; complainant succeeded in proving issuance and dishonour of cheque and respondent failed to rebut the presumption.

Conviction and sentencing under Section 138 of the Negotiable Instruments Act - Respondent convicted under Section 138 and sentenced to imprisonment and ordered to pay compensation. - HELD THAT: - Having found that the cheque was issued for a legally enforceable debt and dishonoured, the High Court set aside the Trial Court's acquittal and convicted the respondent under Section 138. Exercising sentencing discretion within statutory limits, the Court imposed rigorous imprisonment for one year and directed payment of compensation to the complainant, with a conditional extended sentence if compensation was not deposited within the stipulated time. The Court declined to impose imprisonment beyond one year and observed hearing on sentence under Section 143 was unnecessary in view of the sentence imposed.

Acquittal set aside; respondent convicted under Section 138, sentenced to one year RI and directed to pay compensation with conditional default consequences.

Final Conclusion: The High Court allowed the appeal, set aside the Trial Court's refusal to permit amendment of the complaint and its order of acquittal, held the complaint by the proprietorship payee maintainable against the proprietor, found the cheque proved and dishonoured attracting Section 139 presumption which the respondent failed to rebut, convicted the respondent under Section 138, sentenced him to one year rigorous imprisonment and directed payment of compensation to the complainant with conditional consequences for non payment.