TaxTMI Updates e-Newsletter
Jan 15,2019

Reopening of assessment under Section 147 - failure to disclose fully and truly all material facts - Reasons recorded by the Assessing Officer are the only basis for initiation of reassessment - Applicability of Explanation 1 to Section 147 - Claim of exemption under Section 11 and treatment of short term capital gains

Reopening of assessment under Section 147 - failure to disclose fully and truly all material facts - Reasons recorded by the Assessing Officer are the only basis for initiation of reassessment - Whether reassessment for A.Y. 2003-04 was valid in the absence of any recorded allegation that the assessee failed to disclose fully and truly all material facts within the meaning of the first proviso to Section 147. - HELD THAT: - The Court held that where an assessment under Section 143(3) has been completed and reassessment is initiated after the four year period, action under Section 147 is permissible only if the Assessing Officer records that income escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. The reasons recorded by the A.O. for reopening are the sole basis for testing the validity of reopening; they cannot be supplemented, altered or expanded by subsequent averments. In the present case the reasons recorded did not allege any failure to disclose material facts; accordingly the jurisdictional condition in the first proviso to Section 147 was not satisfied. The Tribunal and the CIT(A) therefore correctly sustained the view that there was no justification for reopening the assessment. [Paras 9, 10, 11]

Reassessment was invalid as the reasons recorded did not allege failure to disclose fully and truly all material facts; the ITAT and CIT(A) were rightly upheld.

Applicability of Explanation 1 to Section 147 - Claim of exemption under Section 11 and treatment of short term capital gains - Whether Explanation 1 to Section 147 and the A.O.'s treatment of the transaction as short term capital gain could sustain reopening where the return and annexed note disclosed the sale and its computation. - HELD THAT: - The Court noted the revenue's contention that Explanation 1 applied and that the property transaction should have been taxed as short term capital gain. However, the Assessing Officer's recorded reasons did not assert non disclosure of the facts or computations; the assessee's return and the attached explanatory note and audited balance sheet disclosed the acquisition, sale and proposed utilisation of proceeds. The factual conclusions reached by the CIT(A) and ITAT - that there was full and true disclosure and therefore no ground to invoke Explanation 1 to Section 147 to validate reopening after four years - are findings of fact and were not shown to be perverse. [Paras 5, 6, 12]

Explanation 1 to Section 147 and the A.O.'s classification of the receipt as short term capital gain could not validate reassessment where the return and annexures disclosed the transaction; factual findings upholding disclosure were affirmed.

Final Conclusion: The revenue's appeal is dismissed. The reassessment was invalid for want of recorded reasons alleging failure to disclose fully and truly all material facts as required by the first proviso to Section 147; the orders of the CIT(A) and ITAT upholding that conclusion are affirmed, and there shall be no order as to costs.

Tax Deduction at Source under Section 194C - Disallowance under Section 40(a)(ia) - Contractor versus owner driver distinction for applicability of Section 194C - Scope of disallowance where payment is made - applicability of Section 40(a)(ia) to amounts actually paid - Precedential effect of Supreme Court in Palam Gas Service overruling contrary tribunal view

Tax Deduction at Source under Section 194C - Contractor versus owner driver distinction for applicability of Section 194C - Whether requirement to deduct TDS under Section 194C arose in respect of payments to individual truck owners for transportation services - HELD THAT: - The authorities below found, and this Court agrees, that the assessee had engaged individual truck owners for specific transportation jobs and had not appointed them as contractors or middlemen. There was no contract/sub contract relationship between the payer and payee that would attract the statutory machinery of Section 194C. On the facts of this case the requirement to deduct tax at source under Section 194C did not arise; the concurrent factual conclusion of the Commissioner (Appeals) and Tribunal that the payments were to owner drivers and not to contractors is accepted and no substantial question of law arises from that finding.

Requirement to deduct TDS under Section 194C did not arise on the facts; the concurrent factual findings are upheld and the appeal on this issue fails.

Disallowance under Section 40(a)(ia) - Scope of disallowance where payment is made - applicability of Section 40(a)(ia) to amounts actually paid - Precedential effect of Supreme Court in Palam Gas Service overruling contrary tribunal view - Whether disallowance under Section 40(a)(ia) is confined only to amounts remaining unpaid or also covers amounts already paid when there is breach of TDS obligation - HELD THAT: - The Court recognised that the Commissioner (Appeals) relied on a Special Bench decision in Merilyn Shipping and Transports to hold that Section 40(a)(ia) applies only to amounts unpaid at year end. This Court held that reliance on that ground was erroneous because the Supreme Court in Palam Gas Service has reversed the Merilyn view and accepted that disallowance under Section 40(a)(ia) can extend to amounts already paid if there is a breach of the requirement to deduct tax at source. Although in the present case the point is not determinative because the Tribunal accepted absence of any obligation to deduct under Section 194C, the legal proposition that Merilyn Shipping is erroneous and Palam Gas Service governs was expressly noted.

Merilyn Shipping's restrictive view is incorrect; following the Supreme Court in Palam Gas Service, Section 40(a)(ia) may apply even to amounts paid if a TDS breach is established. However, on the facts of this case no TDS breach was found.

Final Conclusion: The Tax Appeal is dismissed. The Court upholds the concurrent factual finding that payments to individual truck owners did not attract Section 194C TDS; although the tribunal's reliance on Merilyn Shipping was incorrect in law (Palam Gas Service governs the scope of Section 40(a)(ia)), that legal point is not determinative here as no obligation to deduct was found on the facts.

Penalty under Section 271(1)(c) - Explanation 5A to Section 271(1) - Search initiated under Section 132 - Assessment under Section 153A - Deemed concealment notwithstanding return filed after search

Penalty under Section 271(1)(c) - Explanation 5A to Section 271(1) - Validity of imposing penalty under Section 271(1)(c) where income was declared after search and accepted in assessment under Section 153A. - HELD THAT: - Explanation 5A, inserted w.e.f. 1.6.2007, provides that where in the course of a search under Section 132 assets or income based on entries in books/documents are found and the assessee claims those entries represent his income for a previous year, then notwithstanding that such income is declared in any return filed on or after the date of search and even if the assessment under Section 153A accepts the declared income, the assessee shall be deemed to have concealed particulars of income or furnished inaccurate particulars for purposes of penalty under clause (c) of subsection (1) of Section 271. Applying Explanation 5A, the Tribunal found incriminating material which led to detection of concealed income; accordingly the imposition of penalty under Section 271(1)(c) was sustainable despite the acceptance of the return filed after search.

Penalty under Section 271(1)(c) was rightly restored by the Tribunal in view of Explanation 5A and is valid.

Search initiated under Section 132 - Assessment under Section 153A - Deemed concealment notwithstanding return filed after search - Whether absence of additional assessment in the Section 153A assessment or acceptance of post-search return precludes levy of penalty. - HELD THAT: - The court accepted the Tribunal's factual finding that incriminating material related to the escaped income was found during the search. Explanation 5A operates to deem concealment for penalty purposes even where the income is declared in a return furnished on or after the date of search and accepted in assessment proceedings under Section 153A. Consequently, the fact that the assessment did not make an addition or that the declared income was accepted does not preclude imposition of penalty under Section 271(1)(c) where Explanation 5A applies.

Acceptance of the post-search return or absence of an addition in the Section 153A assessment does not prevent levy of penalty when Explanation 5A is attracted.

Final Conclusion: The Tribunal's restoration of penalty under Section 271(1)(c) was upheld as Explanation 5A renders the assessee deemed to have concealed income detected in a search even though the income was declared and accepted in a return filed after the search; the appeals are dismissed and no substantial question of law arises.

Penalty under Section 271(1)(c) - Explanation 5A to Section 271 - Search and seizure and Section 153C - Voluntary filing of return - Liability confined to searched person

Penalty under Section 271(1)(c) - Voluntary filing of return - Search and seizure and Section 153C - Whether penalty under Section 271(1)(c) could be sustained where returns were filed and no additions were made to declared income - HELD THAT: - The Tribunal's deletion of the penalty was upheld. The assessee had filed returns for three assessment years before issuance of notice under Section 153C, and for the remaining two years the Assessing Officer accepted the assessee's declaration that income was below taxable limit. There were no additions to the declared income in any of the assessment years. In these circumstances the imposition of penalty under Section 271(1)(c) was not warranted because there was no concealment or failure to disclose particulars of income inviting penalty. [Paras 4, 5, 6]

Penalty deleted as there were returns filed (some prior to notice) and no additions to declared income

Explanation 5A to Section 271 - Liability confined to searched person - Whether Explanation 5A to Section 271(1)(c) applies to persons other than the searched person - HELD THAT: - Explanation 5A permits levy of penalty even where there is no addition to income declared by the searched person in a return filed pursuant to search; however, the Court held that this Explanation is confined to the searched person. The provision cannot be extended to impose penalty on persons who were not the searched person. Accordingly, Explanation 5A does not support sustaining penalty against the assessee in this case. [Paras 6, 7]

Explanation 5A is confined to the searched person and cannot be applied to others

Final Conclusion: The Tribunal's deletion of the penalty is upheld and all appeals are dismissed.

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Explanation 1(B) to Section 271(1)(c) - requirement of bona fide explanation and full disclosure of facts material to computation of income - Percentage of Completion Method (PoC) and Accounting Standard (AS-7) - recognition of revenue and allocation of contract costs - Guidance Note 2006 (applicability) vis-a -vis later Guidance Note 2012 - Distinction between assessment proceedings (computation of income) and penalty proceedings (bona fides and disclosure) - Effect of voluntary surrender/revision on penalty proceedings

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Explanation 1(B) to Section 271(1)(c) - requirement of bona fide explanation and full disclosure of facts material to computation of income - Percentage of Completion Method (PoC) and Accounting Standard (AS-7) - Guidance Note 2006 (applicability) - Distinction between assessment proceedings and penalty proceedings - Levy of penalty under Section 271(1)(c) in assessment years 2010-11 and 2011-12 was not justified; the assessee established bona fides and adequate disclosure. - HELD THAT: - The Tribunal had affirmed penalty on the grounds that the assessee's claim for indirect project expenses was inconsistent with the Guidance Note 2006 applicable at the time and that reliance on Guidance Note 2012 was not bona fide, invoking Explanation 1(B) to Section 271(1)(c). The High Court examined (i) the PoC principles in AS-7 and the Guidance Note exposition, (ii) the audited accounts and specific disclosures relating to valuation of work-in-progress and method of revenue recognition, (iii) the factual position that the disallowed indirect expenses were allowed in subsequent assessment years and that the assessment consequences were revenue-neutral with minimal tax effect in the years under appeal, and (iv) the distinction that assessment orders (which attained finality) are different from the question of bona fides in penalty proceedings. On these facts the Court held that the assessee had made full disclosures in audited accounts, had acted bona fide in applying PoC/AS-7 principles and related Guidance, and had not made a sham or mala fide claim to evade tax. Consequently, the condition in Explanation 1(B) - that the assessee offers an explanation which it is unable to substantiate and fails to prove that such explanation is bona fide and that all material facts were disclosed - was not satisfied. The Court therefore concluded that imposition of penalty under Section 271(1)(c) was not warranted in the present cases. [Paras 13, 14, 15, 17, 18]

Penalty under Section 271(1)(c) quashed for assessment years 2010-11 and 2011-12; the assessee acted bona fide and made requisite disclosure.

Final Conclusion: The substantial question of law is answered in favour of the appellant-assessee: the High Court set aside the Tribunal's imposition of penalty under Section 271(1)(c) for AYs 2010-11 and 2011-12, holding that the assessee established bona fides and adequate disclosure; no order as to costs.

Exemption under Section 54B - land used for agricultural purposes during two years preceding transfer - Reliance on revenue records (Tehsildar/Patwari/Khasra) as evidence of agricultural use - Credibility and sufficiency of evidence for batai/cultivation arrangement - Rule of consistency/res judicata in tax proceedings - Appellate interference - perversity standard

Exemption under Section 54B - land used for agricultural purposes during two years preceding transfer - Reliance on revenue records (Tehsildar/Patwari/Khasra) as evidence of agricultural use - Credibility and sufficiency of evidence for batai/cultivation arrangement - Whether the appellant was entitled to exemption under Section 54B on sale of the land, having regard to the requirement that the land be used for agricultural purposes by the assessee (or his parent/HUF) during the two years immediately preceding the transfer - HELD THAT: - The Tribunal, affirmed by the High Court, accepted the Assessing Officer's reliance on revenue records from the Tehsildar/Patwari showing that no crops were raised on the land during the relevant period and that the land had been declared non-agricultural in the Khatauni. Although the appellant produced Khasra Girdwari and relied on a bataidar, Amar Pal Singh, the authorities found his statement vague, contradictory and unsupported (inability to identify correct village/khasra number, inconsistent description of crops, absence of sale receipts). The appellant himself did not undertake cultivation, did not produce contemporaneous evidence of agricultural activity or expenditures for cultivation, and the returns for earlier years were processed under section 143(1) without on merit scrutiny. On evaluation of the totality of material, including spot inquiries and the assessor's show cause and opportunity to rebut, the fact finding that the land was not used for agricultural purposes in the two years preceding sale was upheld as based on cogent reasons. [Paras 23, 24, 25, 26, 27]

Benefit of exemption under Section 54B was rightly denied as the precondition of agricultural use in the two years preceding transfer was not satisfied; the factual findings rejecting the appellant's evidence were sustained.

Rule of consistency/res judicata in tax proceedings - Whether the Assessing Officer was precluded by res judicata or the rule of consistency from examining the agricultural income claim in Assessment Year 2009-10 because of earlier processing of returns for Assessment Year 2008-09 - HELD THAT: - The Tribunal held that res judicata does not apply to tax proceedings and that a return processed under section 143(1) (as in the earlier year) did not result in a decision on merits preventing re-examination. The High Court agreed that the AO could take a different view on merits in AY 2009-10 and examine the issue afresh, since the earlier year's processing did not amount to adjudication of the agricultural use question. [Paras 20, 26, 27]

The AO was not precluded from re examining the agricultural use claim in AY 2009-10 despite earlier processing of returns; the plea of res judicata/consistency was not available to the assessee.

Appellate interference - perversity standard - Whether the Tribunal's factual conclusions were perverse and thus liable to be set aside by the High Court - HELD THAT: - The High Court reviewed the material relied upon by the Tribunal, including revenue records, the inspector's on spot inquiries, the assessee's explanations and the bataidar's statement, and found that the Tribunal gave reasonable and cogent reasons for disbelieving the appellant's case. The Court applied the strict test for perversity, observing that even if a different view might be possible, the Tribunal's findings were within the range of permissible conclusions based on the evidence and were not such that no reasonable tribunal could have reached them. [Paras 11, 12]

The Tribunal's conclusions were not perverse; there was no ground for appellate interference and the appeal must be dismissed.

Final Conclusion: The High Court dismissed the appeal: the denial of exemption under Section 54B was upheld on grounds that the land was not shown to have been used for agricultural purposes in the two years preceding transfer, the Assessing Officer was not barred by res judicata from re examining the claim, and the Tribunal's fact finding was not perverse.

Comparability - functional comparability - transfer pricing - arm's length price - exclusion of comparables - substantial question of law

Comparability - functional comparability - exclusion of comparables - arm's length price - The five companies - Aptico Ltd., Cameo Corporate Services, Global Procurement Consultants Ltd., Killik Agencies and Marketing Ltd., and TSR Darashaw Ltd. - are not good comparables for benchmarking the assessee's international transaction of market support services and were to be excluded from the final set of comparables. - HELD THAT: - The Tribunal examined the annual reports and other material for each of the five entities and recorded factual and functional dissimilarities vis-a -vis the assessee - Aptico Ltd. being a government-established high-end consultancy with operations and policy-driven objectives unlike the private market-support services of the assessee; Cameo Corporate Services lacking segmental breakup and having a functional profile akin to TSR Darashaw rather than to market-support providers; Global Procurement Consultants being engaged in procurement and project-based services for international/ government-funded projects with a distinct business model and volatile margins; Killik Agencies operating as an agent for specialised equipment and offering after-sales and export activities rather than market-support services; and TSR Darashaw being chiefly a payroll/registrar-and-transfer and records-management service provider with no relevant segmental disclosures. On these functional and operational grounds, and following coordinate tribunal findings relied upon in the record, the Tribunal directed the TPO to delete these companies from the comparable set and to recompute the arm's length price for the market support services. The High Court found the Tribunal's reasoning factual, recorded, and unrebutted on perversity grounds and accepted the exclusion directions. [Paras 5]

Direction to exclude the five named companies from the final list of comparables and to recompute the arm's length price for the market support services was upheld.

Substantial question of law - appellate jurisdiction under Section 260A - Whether the appeal raised any substantial question of law warranting interference under Section 260A. - HELD THAT: - Having reviewed the Tribunal's detailed factual and functional findings explaining the dissimilarities between the assessee and the five entities, and noting that those findings were neither doubted nor shown to be perverse, the High Court concluded that no substantial question of law arose from the Tribunal's order. The Court thus found no jurisdictional or legal error requiring admission of the appeal under Section 260A and declined to interfere with the Tribunal's factual determinations. [Paras 5]

No substantial question of law was shown to exist; the appeal under Section 260A was dismissed.

Final Conclusion: The Tribunal's exclusion of the five specified companies as comparables for benchmarking the assessee's market support services is affirmed on factual and functional grounds; no substantial question of law is made out and the Revenue's appeal under Section 260A is dismissed.

Unaccounted income from undisclosed source - seized document evidentiary value - explanation of entries on seized document - fixed deposit receipts as evidentiary proof - deletion of addition

Unaccounted income from undisclosed source - seized document evidentiary value - fixed deposit receipts as evidentiary proof - Whether the addition of Rs. 1,70,77,904/- as unaccounted income could be sustained when the assessee produced fixed deposit receipts, bank entries and explanations for the amount shown in a seized document. - HELD THAT: - The Assessing Officer made an addition treating the amount shown on seized page no. 62 of LPS-B1/5 as unaccounted income because the assessee had not explained the entry during search and the AO did not accept the claim that it related to bank fixed deposits. On appeal the CIT(A) examined the seized document, noted that substantial parts of the page were substantiated by bank deposits and tally accounts of group entities and held the page was not a 'dumb document'. The assessee produced copies of two fixed deposit receipts and evidence of premature redemption of another FDR together with bank entries and explained that the total comprised three FDRs and accrued interest. The CIT(A) held that these documents and submissions satisfactorily explained the entry of Rs. 1,70,77,904/- and deleted the addition. The Tribunal, on review of the records including the bank statements and FDR receipts, concurred with the CIT(A)'s view that the amount was duly recorded in the books as fixed deposits and accrued interest and therefore could not be treated as undisclosed/unaccounted income, warranting no interference with the deletion. [Paras 11]

Addition of Rs. 1,70,77,904/- deleted; Revenue's appeal dismissed.

Final Conclusion: The Tribunal upholds the CIT(A)'s deletion of the addition, concluding that the amount shown on the seized document was satisfactorily explained and substantiated by fixed deposit receipts and bank entries and therefore cannot be treated as unaccounted income for AY 2013-14.

Applicability of section 68 to credits not recorded in assessee's books of account - Denial of exemption under section 10(38) for sham share transactions - Distinction between section 68 and section 69 for unexplained cash deposits - Papered-up/patronised transactions as a fac ade to convert unaccounted money

Applicability of section 68 to credits not recorded in assessee's books of account - Distinction between section 68 and section 69 for unexplained cash deposits - Denial of exemption under section 10(38) for sham share transactions - Sustainability of addition made under section 68 by invoking unexplained credits alleged to be sale proceeds of shares where assessee did not maintain books of account and amounts were reflected by bank entries. - HELD THAT: - The Tribunal found that section 68 applies where sums are found credited in the books of account maintained by the assessee. In the present facts the assessee did not maintain books of account in the ordinary course and the alleged credits were deposits reflected in bank passbooks/statements. Following earlier decisions of the Tribunal, the Bench held that bank passbooks/statements maintained by a bank for its customers do not equate to "books of account" of the assessee within the meaning of section 68, and therefore invocation of section 68 on such bank deposits is not sustainable. The Tribunal observed that, on these facts, the proper provision for dealing with unexplained cash deposited in bank accounts would have been section 69 (or allied provisions) rather than section 68, and that the Assessing Officer's application of section 68 was incorrect. Relying on precedent (as set out in the reproduced reasoning), the addition under section 68 was deleted; consequential or other grounds became infructuous. [Paras 6, 7]

Addition made under section 68 is deleted; appeal allowed on this ground.

Final Conclusion: The Tribunal deleted the addition made under section 68 and allowed the appeals of the three assessees (AY 2014-15) on this ground; other grounds were rendered infructuous.

Deduction under section 80P(2)(d) - deduction under section 80P(2)(a)(i) - interest income from deposits with co-operative societies and co-operative banks - income from temporary parking of own surplus funds - distinction between income assessable as income from other sources and income from banking transactions - remand for fresh examination by the Assessing Officer

Deduction under section 80P(2)(d) - interest income from deposits with co-operative societies and co-operative banks - distinction between income assessable as income from other sources and income from banking transactions - Deduction under section 80P(2)(d) is not allowable in respect of the interest income claimed from deposits with co-operative banks in view of the Karnataka High Court decision in PCIT v. Totgars Co-operative Sale Society Ltd. - HELD THAT: - The Tribunal examined the decisions relied upon and observed that the Karnataka High Court in PCIT v. Totgars Co-operative Sale Society Ltd. held that interest earned from schedule banks or co-operative banks is assessable under the head "income from other sources" and therefore does not fall within the scope of clause (d) of section 80P(2). The Tribunal further noted that the earlier line of authority which permitted allowance under clause (d) does not apply in light of that subsequent Karnataka High Court ruling. Applying that principle to the facts, the claim for deduction under section 80P(2)(d) in respect of the interest income in question cannot be allowed. [Paras 7]

Deduction under section 80P(2)(d) is not allowable for the interest income claimed from deposits with co-operative banks/co-operative societies.

Deduction under section 80P(2)(a)(i) - income from temporary parking of own surplus funds - remand for fresh examination by the Assessing Officer - The claim for deduction is to be re-examined by the Assessing Officer for possible allowance under section 80P(2)(a)(i) after factual verification of the nature and source of the interest income. - HELD THAT: - While rejecting the applicability of clause (d), the Tribunal noted that the assessee's case may fall for consideration under section 80P(2)(a)(i) if the interest represents income from temporary investment of the society's own surplus funds and not income arising from the business of banking. The Tribunal held that this factual question was not finally adjudicated and therefore directed that the matter be restored to the Assessing Officer for fresh decision after affording the assessee reasonable opportunity to file evidence and be heard. The Tribunal clarified that examination will be limited to the applicability of section 80P(2)(a)(i) and that deduction under clause (d) is not allowable in view of the Karnataka High Court ruling. [Paras 7, 8]

Issue remanded to the Assessing Officer for fresh adjudication on whether the interest qualifies for deduction under section 80P(2)(a)(i) after factual verification; assessee to be given opportunity to produce evidence.

Final Conclusion: The Tribunal disallowed the claim under section 80P(2)(d) in light of the Karnataka High Court decision, remanded the question of entitlement under section 80P(2)(a)(i) to the Assessing Officer for fresh factual examination after affording opportunity to the assessee, and treated the Revenue appeal as allowed for statistical purposes.

Characterisation of income from transfer of listed shares as business income or short term capital gain - CBDT Circular No. 6/2016 - effect of consistent treatment and limitation on Revenue to take a contrary view - Treatment of shares as stock in trade versus investment - Intention to hold and period of holding as evidentiary factors (not conclusive)

Characterisation of income from transfer of listed shares as business income or short term capital gain - CBDT Circular No. 6/2016 - effect of consistent treatment and limitation on Revenue to take a contrary view - Treatment of shares as stock in trade versus investment - The income arising from the purchase and sale of listed shares for AY 2012-13 is to be treated as short term capital gain and not business income/speculative income. - HELD THAT: - The Tribunal examined the facts that the assessee had consistently shown the shares as investments and declared gains as capital gains in earlier assessment years. In view of CBDT Circular No. 6/2016, where an assessee has consistently treated listed shares as investments (and not as stock in trade), the Revenue is precluded from taking a contrary view in a subsequent assessment year. The Circular, while retaining a fact specific inquiry in general, directs that where the assessee has opted to treat listed shares as stock in trade the income will be business income, and conversely where the assessee holds listed shares as investments and has consistently done so the Assessing Officer shall not dispute capital gain treatment. Applying this principle to the present facts (and following the coordinate bench decision in Mahender Kumar Bader), the Tribunal held that the AO/CIT(A)'s re characterisation of the assessee's declared short term capital gains into business income was not permissible. Although factors such as frequency, volume and holding period are relevant, the CBDT instruction on consistent treatment governs and bars Revenue from adopting a contrary stance for the year under appeal. [Paras 8, 9]

Appeal allowed; profit from sale of shares for AY 2012-13 to be assessed as short term capital gain in accordance with CBDT Circular No. 6/2016 and the assessee's consistent treatment.

Final Conclusion: The Tribunal allowed the appeal, setting aside the revenue's classification of share transaction gains as business income and directing that the gains for AY 2012-13 be treated as short term capital gains in view of the assessee's consistent treatment and CBDT Circular No. 6/2016.

Penalty under section 271(1)(c) - scope of section 153A - incriminating material requirement for reassessment under section 153A - independence of penalty proceedings from quantum proceedings - bona fide mistake

Penalty under section 271(1)(c) - scope of section 153A - incriminating material requirement for reassessment under section 153A - independence of penalty proceedings from quantum proceedings - bona fide mistake - Whether the penalty imposed under section 271(1)(c) is sustainable where no incriminating material was found in the search and the addition in quantum was not challenged - HELD THAT: - The Tribunal examined the scope of section 153A in light of authoritative decisions of higher courts which hold that where a search has taken place the Assessing Officer may assess or reassess the six preceding years but additions for a particular assessment year under section 153A must have nexus with incriminating material found during the search or requisition. Where no incriminating material relating to the assessment year is found and the earlier assessment stood completed, the earlier assessment must be reiterated and additions cannot be made under section 153A. The Tribunal noted that the assessee had admitted the arithmetic mistake in the return resulting in an addition which attained finality in the quantum proceedings. However, the absence of incriminating material unearthed during search and the expiry of the period for initiating assessment under section 143(2) meant that the AO lacked jurisdiction to make the substantive addition under section 153A for that year; if the AO lacked competence to make the addition in quantum, it could not sustain a penalty computed on that addition. The Tribunal also observed that penalty and quantum proceedings are independent, and an assessee may raise a legal defence in penalty proceedings even if the addition was not contested in quantum proceedings. Applying these principles to the facts, and having regard to the judicial precedents cited, the Tribunal concluded that the penalty levied for furnishing inaccurate particulars was unsustainable and was to be deleted. [Paras 6, 8, 9, 10]

Penalty under section 271(1)(c) deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, deleted the penalty imposed under section 271(1)(c) as unsustainable in the absence of incriminating material relating to A.Y. 2008-09 and having regard to the independence of penalty proceedings from quantum proceedings.

Substance over form - voluntary contribution/donation received in kind - application of property received in kind to charitable purposes - inadmissibility of applying circle rate under section 56 to a registered educational trust for AY 2015-16 - acceptance of property in kind not constituting income of the trust under section 2(24) for purposes of section 11

Substance over form - voluntary contribution/donation received in kind - Whether the registered society's purchase transaction was in substance a donation of land to the society. - HELD THAT: - The Tribunal examined surrounding facts beyond the registered sale deed and found that the seller's admitted original intention was to gift the plot, the sale was executed only because statutory permission for gift was not obtained, the post-dated cheques representing consideration were never presented or paid, and the seller did not press any claim thereafter. In these circumstances the transaction, despite formal execution of a sale deed, was held in substance to be a donation of the land to the society and not an ordinary sale. [Paras 8]

Transaction held in substance to be a donation of the plot to the assessee society; ground No.1 rejected by the assessee.

Inadmissibility of applying circle rate under section 56 to a registered educational trust for AY 2015-16 - registration under Section 12AA and exemption for educational institutions - Whether the Assessing Officer could adopt the circle rate and invoke the provisions of section 56 to determine the monetary value of the land as taxable donation in the hands of the registered educational society for A.Y.2015-16. - HELD THAT: - The Tribunal found that the Assessing Officer applied circle rate without reasons and invoked the provision dealing with deemed income/gifts under section 56 in a year when that provision applied only to individuals and HUFs. The enlarged scope to other persons by legislative amendment took effect from 01.04.2017 and is not applicable to A.Y.2015-16; further, the legislative change expressly exempts educational institutions. Consequently the invocation of section 56 and adoption of circle rate against the registered society for the relevant year was unsustainable. [Paras 11]

Ground No.2 allowed; AO wrongly applied circle rate and section 56 to the registered educational society for A.Y.2015-16.

Application of property received in kind to charitable purposes - acceptance of property in kind not constituting income of the trust under section 2(24) for purposes of section 11 - Whether, if the transfer is treated as a donation in kind, the value of the land should be treated as immediately applied for charitable purposes and therefore not taxable for the society. - HELD THAT: - Having held the transfer to be a donation in kind and having disallowed the AO's circle-rate valuation, the Tribunal considered precedent and statutory scheme regarding property received in kind by a charitable institution. The Tribunal concluded that the land received in kind for construction of the educational institution cannot be treated as accumulated or as income of the trust for the year; such property received in kind is to be regarded as applied to the objects of the society and does not fall within the definition of income under section 2(24) so as to be taxable under section 12(1) or considered under section 2(24)(iia) for section 11 purposes. [Paras 14]

Ground No.3 allowed; value of land received in kind treated as applied for charitable purposes and not taxable.

Final Conclusion: The Tribunal held that the transfer of land was in substance a donation to the registered educational society, disallowed the Assessing Officer's application of circle rate and section 56 for A.Y.2015-16, and ruled that the land received in kind was to be treated as applied for the society's objects and not taxable; the appeal is accordingly partly allowed.

Penalty under section 271(1)(b) - Failure to comply with notice under section 142(1) - Maintainability and time bar of appeal - Condonation of delay

Penalty under section 271(1)(b) - Failure to comply with notice under section 142(1) - Whether penalty under section 271(1)(b) was rightly imposed and confirmed for the assessment years 2012-13 and 2013-14 for failure to comply with the notice. - HELD THAT: - The appellate tribunal upheld the finding of the Commissioner (Appeals) that the assessee did not supply any satisfactory explanation for non compliance with the notice issued by the Assessing Officer. The CIT(A) relied on the AO's record of non compliance and rejected the assessee's reliance on a decision which was held to be distinguishable on facts. The Tribunal, after perusal of the record and the submissions, found no merit in the appeals and concluded that the statutory penalty under section 271(1)(b) was attracted for the failure to comply with the notice and was correctly imposed and confirmed for the years in question. [Paras 4, 5]

Penalty under section 271(1)(b) for failure to comply with the notice was sustained for 2012-13 and 2013-14; appeals dismissed on merits.

Maintainability and time bar of appeal - Condonation of delay - Whether the appeal for assessment year 2013-14 was maintainable in view of delay in filing. - HELD THAT: - The Tribunal recorded that the appeal for AY 2013-14 was time barred by 46 days and that a defect memo was issued to the assessee. The assessee neither removed the defect nor filed any application for condonation of delay. In absence of any application or explanation seeking condonation, the appeal stood barred by limitation and was not entertained. [Paras 3]

Appeal in respect of AY 2013-14 was time barred; defect not cured and no condonation sought, hence not maintainable.

Final Conclusion: Both appeals stand dismissed: the penalty under section 271(1)(b) for failure to comply with the notice is confirmed for AYs 2012-13 and 2013-14 on merits, and the appeal for AY 2013-14 is additionally barred by delay with no condonation sought.

Condonation of delay and sufficient cause - Deduction under section 36(1)(ii) as remuneration/bonus - Distinction between remuneration and disguised dividend - Protection against double taxation - Reliance on board resolution and terms of employment to characterise payment

Condonation of delay and sufficient cause - Advancement of substantial justice over technical limitation - Delay of 571 days in filing the appeal was condoned and the appeal admitted for adjudication. - HELD THAT: - The Tribunal examined the explanation that the assessee pursued alternative remedies (filing revised returns for the directors and applications for condonation before the Principal CIT) which resulted in the delay. Documentary evidence of pursuing those remedies was placed on record and the Revenue did not file a counter-affidavit disputing those facts. The Tribunal applied the principle that the expression 'sufficient cause' should be construed so as to advance substantial justice and relied on the view that substantial justice must prevail over technical prejudice where delay is not deliberate. Given that the substantial issue on merits related to allowability of bonus and that relevant High Court decisions favored the assessee, the Tribunal preferred substantial justice and, following Collector of Land Acquisition v. Mst. Katiji, condoned the delay and admitted the appeal. [Paras 5, 6]

Delay of 571 days condoned and appeal admitted.

Deduction under section 36(1)(ii) as remuneration/bonus - Distinction between remuneration and disguised dividend - Reliance on board resolution and terms of employment to characterise payment - Protection against double taxation - Bonus paid to two shareholder-directors characterised as remuneration/bonus payable for services and allowed as deduction while computing the company's income. - HELD THAT: - On the merits the Tribunal scrutinised the factual matrix: the bonus payments were authorised by a board resolution, the two recipients were full-time, qualified and experienced directors who participated in day-to-day management, and the bonus was paid in addition to a fixed salary. Having regard to the board resolution and the terms of appointment, the Tribunal held that the payments were made as a reward for services rendered and not as a sharing of profits by virtue of shareholding. The Tribunal observed that this position is supported by precedent of various High Courts (including Career Launcher, Chryscapital and AMD Metplast) which treat bona fide bonus/commission paid to shareholder-directors in their managerial capacity as deductible remuneration under section 36(1)(ii). On that basis the Tribunal concluded the payments could not be treated as disguised dividends and directed the Assessing Officer to allow the claim. [Paras 15, 16]

Bonus paid to the two director-shareholders is deductible as remuneration; appeal allowed.

Final Conclusion: The Tribunal condoned the 571-day delay in filing the appeal and on the merits allowed the assessee's claim, holding that the bonus payments to two shareholder-directors, authorised by board resolution and made for services rendered, are deductible as remuneration under section 36(1)(ii) and are not disguised dividends.

Summary order. Issue notice in the appeal and in the stay application; matter listed/returnable in four weeks.

Detention of goods - release of detained import consignments - no objection by Directorate of Revenue Intelligence to release upon payment of differential duty - actual beneficiaries - use of dummy Importer Exporter Code and related irregularity - statement recorded under Section 108 of the Customs Act, 1962 - omission to issue detention certificate - liability for demurrage/detention charges against customs authorities

Detention of goods - release of detained import consignments - no objection by Directorate of Revenue Intelligence to release upon payment of differential duty - actual beneficiaries - use of dummy Importer Exporter Code and related irregularity - statement recorded under Section 108 of the Customs Act, 1962 - Whether the detained import consignments should be released to the petitioners who are shown to be the actual beneficiaries where DRI found the goods conform to the declaration and expressed no objection to release subject to payment of differential duty. - HELD THAT: - The Court noted that on examination the goods were not prohibited and conformed to the declaration, as reflected in the Directorate of Revenue Intelligence's letter. The only irregularity reported by the DRI was the alleged importation using a dummy IEC; statements were recorded under Section 108 of the Customs Act, 1962, and the DRI identified the petitioner and another person as the actual beneficiaries. The DRI expressly recorded no objection to release of the goods to the concerned beneficiaries upon payment of any differential duty. Having regard to the prolonged detention (in excess of a year), absence of any other irregularity found by DRI and its no-objection stance, the Court directed release of the goods to the petitioners on deposit of the differential duty, if any, and prescribed that release shall follow within one week of such deposit. [Paras 3, 4]

Goods to be released to the petitioners, who are the actual beneficiaries, upon deposit of the differential duty, with release to occur within one week thereafter.

Omission to issue detention certificate - liability for demurrage/detention charges against customs authorities - Whether, in the circumstances where the customs authorities omitted to issue the detention certificate, any liability for demurrage/detention charges should be borne by the petitioners or the authorities. - HELD THAT: - The Court observed that the respondents/Customs authorities had intentionally appeared to have omitted issuing the detention certificate. It directed that, after consideration of any application for waiver of demurrage/detention charges, any liability that still accrues in the circumstances of the case shall be on account of the customs authorities rather than the petitioners. [Paras 5]

Any demurrage/detention liability remaining after consideration of waiver shall be borne by the customs authorities.

Final Conclusion: Writ petition allowed: detained consignments ordered released to the petitioners on deposit of any differential duty within one week of payment; and any demurrage/detention liability, after considering waiver, to be borne by the customs authorities.

Penalty for contravention of Section 112(a) of the Customs Act - liability of a facilitator for import fraud - weight of statement recorded under Section 108 of the Customs Act - concurrent findings of adjudicating authorities - forfeiture of CHA licence

Liability of a facilitator for import fraud - weight of statement recorded under Section 108 of the Customs Act - Whether the appellant, described as a facilitator and not a registered CHA, could be held liable and be subjected to penalty for facilitating import fraud. - HELD THAT: - The Court accepted the factual findings of the lower authorities that the appellant had introduced the individual who filed forged documents and had assisted in clearance of identical consignments in the past. The appellant admitted that he did not verify fundamental records such as the existence of an authorisation letter. On those conspectus of circumstances the contention that he was merely an informal facilitator operating outside the law and therefore not liable was rejected. The Court also noted that the Commissioner relied upon statements recorded under Section 108; having regard to the admitted conduct and prior assistance in clearance, the concurrent conclusion that the appellant actively facilitated the fraud was sustainable and did not call for interference. [Paras 4, 5]

The appellant was properly held liable as a facilitator for import fraud and the findings imposing liability are upheld.

Penalty for contravention of Section 112(a) of the Customs Act - concurrent findings of adjudicating authorities - forfeiture of CHA licence - Whether the reduction of the penalty by CESTAT to Rs. 5 lakhs was amenable to challenge and whether the concurrent findings of the authorities warranted interference. - HELD THAT: - The Court observed that the Commissioner had initially imposed a higher penalty after an elaborate enquiry and that CESTAT, after analysing the material including the Commissioner's order and statements, exercised its power to reduce the quantum. Given the appellant's admissions and the factual matrix leading to forfeiture of the CHA's licence, the High Court found no illegality or error in the concurrent findings of the authorities or in CESTAT's exercise to moderate the penalty. The Court concluded that no question of law arose warranting interference with the concurrent determinations. [Paras 2, 5]

The reduction of the penalty by CESTAT to Rs. 5 lakhs and the concurrent findings upholding liability are sustained; the appeal fails.

Final Conclusion: The High Court dismissed the appeal, upholding the concurrent findings that the appellant actively facilitated the fraud and sustaining CESTAT's reduction of the penalty to Rs. 5 lakhs; no question of law warranted interference.

Grant of bail - non-bailable offence - Section 135(1)(C) of the Customs Act - exercise of power under Section 436 Cr.P.C. - notice to prosecution - perusal of remand report

Grant of bail - exercise of power under Section 436 Cr.P.C. - perusal of remand report - notice to prosecution - non-bailable offence - Section 135(1)(C) of the Customs Act - Whether the order granting bail to the respondent without notice to the prosecution and without perusing the remand report is sustainable where the remand report records prosecution under Section 135(1)(C) of the Customs Act, a non-bailable offence. - HELD THAT: - The trial Magistrate granted bail under Section 436 Cr.P.C. while proceeding on the impression that the offence was bailable and did so without ordering notice to the prosecution and without perusing the remand report. The remand report, however, recorded that the respondent was implicated under Section 135(1)(C) of the Customs Act, which constitutes a non-bailable offence. When the charge involves a non-bailable offence as reflected in the remand report, issuing notice to the prosecution before exercising bail powers is mandatory. In the absence of perusal of the remand report and without hearing the prosecution, the exercise of bail jurisdiction was unsustainable. For these reasons the Magistrate's order was set aside and the matter directed to proceed in accordance with law. [Paras 6, 7]

Order granting bail dated 14-3-2018 is set aside; matter remitted to prosecution to proceed in accordance with law.

Final Conclusion: The High Court allowed the cancellation petition, set aside the Magistrate's bail order dated 14-3-2018 for want of notice to the prosecution and failure to peruse the remand report which recorded a non-bailable charge under Section 135(1)(C) of the Customs Act, and directed the police to proceed further in accordance with law.

Presumption of service - rebuttable presumption - limitation - right to appeal - provision of certified copy - stay of recovery pending appeal - opportunity to be heard

Presumption of service - rebuttable presumption - opportunity to be heard - Whether the presumption of service of the order sent by registered post is rebuttable and whether the petitioner is entitled to contest the order on merits upon asserting non-receipt. - HELD THAT: - The Court recognised that service by registered post ordinarily gives rise to a presumption of service, but emphasised that this presumption is rebuttable. The petitioner's repeated attempts, after allegedly first learning of the order in 2018, to obtain a certified copy, and the absence of steps taken earlier, were treated as evidencing non-receipt rather than deliberate inaction. In the interests of justice and to ensure the petitioner an effective opportunity to be heard, the Court found that the matter should not be finally foreclosed by the administrative presumption where the petitioner asserts non-receipt and seeks a copy to pursue appellate remedies. [Paras 6, 7]

Presumption of service is rebuttable; petitioner is entitled to have the question adjudicated on merits and to be furnished a certified copy to enable filing an appeal.

Provision of certified copy - limitation - right to appeal - stay of recovery pending appeal - Reliefs and procedural directions to be afforded where non-receipt is asserted: provision of certified copy, allowance to file appeal despite limitation, consideration of stay application and abeyance of recovery, and time-bound disposal of appeal. - HELD THAT: - Having held that the presumption of service was rebuttable and that the petitioner should be permitted to contest the order, the Court directed specific procedural reliefs. The petitioner must be supplied a certified copy on application; the petitioner may file an appeal with a stay application within defined timeframes; the appellate authority is directed not to raise limitation objections and to consider the stay application within a prescribed short period, keeping any recovery proceedings in abeyance until the stay application is decided; finally the appellate authority must decide the appeal by a reasoned and speaking order within three months. These directions secure the petitioner's appellate remedy while balancing administrative interests. [Paras 8]

Certified copy to be furnished; appeal allowed to be filed notwithstanding limitation; appellate authority to consider stay and keep recovery in abeyance pending decision on stay; appeal to be decided within three months by a reasoned order.

Final Conclusion: Writ petition disposed by directing supply of certified copy on application, permitting filing of appeal despite limitation, requiring the appellate authority to consider stay and keep recovery in abeyance pending that decision, and mandating disposal of the appeal by a reasoned order within three months.

Deemed conclusion of proceedings under Section 28(5) and 28(6) of the Customs Act - payment of duty with interest and fifteen per cent penalty as statutory condition for conclusiveness - mis-declaration, collusion, wilful misstatement or suppression as grounds for demand - Circular cannot override or curtail statutory mandate - scope of confiscation vis-a -vis applicability of Section 28

Deemed conclusion of proceedings under Section 28(5) and 28(6) of the Customs Act - payment of duty with interest and fifteen per cent penalty as statutory condition for conclusiveness - mis-declaration, collusion, wilful misstatement or suppression as grounds for demand - Whether payment of the re-determined duty with interest and the statutory penalty made by the importer (even prior to issuance of the Show Cause Notice) satisfies the conditions of Section 28(5) and 28(6) and mandates deeming of the proceedings to be conclusive. - HELD THAT: - The Tribunal held that Sections 28(5) and 28(6) are beneficial provisions intended to curtail litigation where an assessee pays the duty, interest and the prescribed fifteen per cent penalty within the statutory period. The statutory scheme contemplates that once the proper officer determines the amount and the duty with interest and penalty has been paid in full, the proceedings shall be deemed conclusive as to the matters stated in the notice; only where the payment falls short may further notice be issued. The appellants had paid the differential duty, interest and penalty within the applicable period (indeed prior to issuance of the Show Cause Notice) and informed the Department; the authorities therefore erred in issuing and adjudicating the Show Cause Notice instead of treating the matter as concluded under Section 28. Applying the statutory text and legislative intent, the Tribunal set aside the orders below and extended the benefit of deemed conclusion to the appellants. [Paras 7, 8, 9, 10, 12]

Payment of duty with interest and the fifteen per cent penalty by the appellants satisfied the conditions of Section 28(5) and 28(6), and the proceedings are to be deemed conclusive; the orders under challenge are set aside.

Circular cannot override or curtail statutory mandate - scope of confiscation vis-a -vis applicability of Section 28 - Whether Circular No.11/2016 (purporting to exclude certain confiscation cases) precluded application of Sections 28(5) and 28(6) to the present case. - HELD THAT: - The Tribunal found that the departmental Circular relied upon is clarificatory and cannot supplant or narrow the statutory language of Sections 28(5) and 28(6). The Circular's attempt to place confiscation cases outside the scheme could not be allowed to curtail the legislative intent embodied in Section 28. Consequently, the Circular did not operate to deny the benefit of deemed conclusion to the main importer who had complied with the statutory payment conditions. The Tribunal also noted that the Circular was concerned with co-noticees and procedural clarifications and therefore could not override the statute. [Paras 11]

Circular No.11/2016 does not exclude the main importer from the benefit of Sections 28(5) and 28(6); the Circular cannot override the statutory mandate.

Circular cannot override or curtail statutory mandate - deemed conclusion of proceedings under Section 28(5) and 28(6) of the Customs Act - Whether the departmental Circular's characterization affects the entitlement of the co-noticee (proprietor) to benefits under Sections 28(5) and 28(6). - HELD THAT: - The Tribunal held that the Circular, being clarificatory in nature, could not be given effect to the extent that it would widen or alter the statutory scheme; accordingly, it is not applicable even to the co-noticee in a manner that would deny statutory benefit. The settled principle that administrative instructions cannot contradict clear statutory prescription was applied to reject the Department's attempt to displace the operation of Sections 28(5) and 28(6). [Paras 11]

The co-noticee is not excluded from consideration under Sections 28(5) and 28(6) by the Circular; the Circular cannot be used to deny the co-noticee the benefit of the statutory scheme.

Final Conclusion: Appeals allowed. The Tribunal set aside the adjudication orders and extended the benefit of deemed conclusion under Sections 28(5) and 28(6) to the appellants who had paid the duty, interest and statutory penalty within the prescribed period; the departmental Circular relied upon does not operate to defeat that statutory entitlement.

Overvaluation in export for duty drawback - corroboration of foreign invoices - proof of payment in freely convertible foreign exchange - denial of duty drawback and penalty under Section 114 of the Customs Act

Overvaluation in export for duty drawback - corroboration of foreign invoices - Whether the allegation of overvaluation of export consignments, based primarily on a photocopy of an overseas importer's invoice, suffices to deny duty drawback and sustain imposition of penalty. - HELD THAT: - The Appellate Tribunal found that the Revenue relied solely on a photocopy of an invoice filed by one foreign importer which declared a markedly lower value. It is settled that a mere photocopy of an overseas invoice, uncorroborated by material particulars, confessional statements, attestation by customs or consulate, or other supporting evidence, is insufficient to establish mis-declaration of value by the Indian exporter. The record showed receipt of payment in freely convertible foreign exchange, clearance of the goods by Indian Customs after examination, absence of any confessional statement or evidence of connivance, and production by the exporter of voluminous evidence (including banking payments to suppliers and manufacturers) supporting the declared export values. Applying the legal principle that corroboration is required before inferring overvaluation from foreign invoices, the Tribunal held that the allegation of overvaluation was not proved.

Allegation of overvaluation based solely on an uncorroborated photocopy of an overseas invoice is not established; duty drawback denial and penalty are not sustainable.

Final Conclusion: Appeal allowed; impugned order denying duty drawback and imposing penalty set aside with consequential relief.

Winding up petition - Admission of petition - Appointment of provisional liquidator - Maintainability of company petition - Limitation bar - Debit balance confirmation - Service of legal notice

Winding up petition - Admission of petition - Appointment of provisional liquidator - Debit balance confirmation - Service of legal notice - Validity of admission of the winding up petition and appointment of a provisional liquidator. - HELD THAT: - The Single Judge admitted Company Petition No. 896/2015 and appointed a provisional liquidator after noting the facts and issues were similar to those in Company Petition No. 861/2015. The respondent had established the claim by sending a balance confirmation (dated 4th March, 2013) and serving a legal notice (dated 14th August, 2015), to which the appellant did not reply; the petition was therefore held to be maintainable and correctly admitted. The Division Bench applied and adopted the reasons recorded in Company Appeal No. 30/2018, which had already rejected identical contentions raised by the appellant, and found those reasons dispositive of the present challenge. [Paras 5, 6, 7]

The admission of the winding up petition and appointment of a provisional liquidator is upheld; the appeal against the order is dismissed.

Maintainability of company petition - Limitation bar - Whether the company petition was barred by limitation or otherwise not maintainable. - HELD THAT: - The appellant denied issuance of the balance confirmation and contended the petition was barred by limitation. The Court observed that identical grounds were considered and rejected in Company Appeal No. 30/2018 and applied those reasons to this appeal. Having applied the earlier decision, the Court found no merit in the contention that the petition was time-barred or otherwise not maintainable. [Paras 5, 6]

The contention that the petition is barred by limitation or is not maintainable is rejected.

Final Conclusion: The appeal is dismissed with no order as to costs; the High Court affirms the admission of the winding up petition and the appointment of a provisional liquidator, and upholds the finding that the petition is maintainable and not barred by limitation, applying the reasons given in Company Appeal No. 30/2018.

Initiation of corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - effect of a winding up order on maintainability of applications under the Insolvency and Bankruptcy Code - scope of proceedings post winding up and the primacy of insolvency resolution over winding up proceedings - appointment of an Interim Resolution Professional and eligibility

Initiation of corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - appointment of an Interim Resolution Professional and eligibility - Admission of the Section 7 petition and appointment of an Interim Resolution Professional. - HELD THAT: - The petition discloses financial debt and default supported by loan agreements, restructuring documents, notices, CRILC/CRILC-like entries, bankers' books and the corporate debtor's counsel stating no objection to admission. The petition was complete, the petitioner had named an IRP with his consent and the IRP had no disciplinary proceedings pending. On these materials and submissions the Tribunal found the statutory requirements for admission under Section 7 satisfied and that the case was fit for initiation of CIRP. Consequential directions attendant to admission, including declaration of moratorium and public announcement, were issued and the interim resolution professional was appointed in terms of the Code and regulations. [Paras 9, 10]

Section 7 petition admitted; moratorium declared; Mr. Kishan Gopal Somani appointed as Interim Resolution Professional.

Effect of a winding up order on maintainability of applications under the Insolvency and Bankruptcy Code - scope of proceedings post winding up and the primacy of insolvency resolution over winding up proceedings - Maintainability of a Section 7 petition notwithstanding a prior winding up order against the corporate debtor. - HELD THAT: - The Tribunal considered conflicting views of NCLAT and the Bombay High Court and examined Supreme Court authority on the comparable SICA regime. Relying on the principle that a winding up order does not culminate proceedings (dissolution under Section 481 alone culminates), and that moratorium-like protection under the predecessor regime extended to proceedings post winding up, the Tribunal held that a winding up order does not oust the jurisdiction to admit a petition under the Code. The Tribunal further observed that Section 11(d) expressly bars a corporate debtor only after a liquidation order, and that the object and scheme of the Code mandate an opportunity for revival by CIRP prior to dissolution. Given binding High Court precedent on the point within the State and the Supreme Court authorities interpreting the predecessor regime, the Tribunal proceeded to admit the petition despite the existence of a winding up order. [Paras 9, 10]

A prior winding up order does not preclude admission of a Section 7 IBC petition so long as the company has not been finally dissolved; the Section 7 petition is maintainable and may be admitted.

Final Conclusion: The Tribunal admitted the financial creditor's Section 7 petition, declared the moratorium and appointed an Interim Resolution Professional, holding that a prior winding up order does not bar initiation of CIRP under the Code unless the company has been finally dissolved.

Financial debt - default - corporate insolvency resolution process - moratorium - interim resolution professional - debt due and payable - enforceability of pledge despite admission of winding up petition

Financial debt - default - debt due and payable - corporate insolvency resolution process - Petition under Section 7 of the Code admitted on the finding that a financial debt and default were established and the debt was due and payable. - HELD THAT: - The Tribunal examined the loan agreement, addendum, account records and notices, and held that the loan for Rs. 60,00,00,000/- evidenced by the loan agreement carrying interest was a financial debt within the inclusive definition and that default had occurred. The Adjudicating Authority applied the settled principle that upon satisfaction from records that a debt is due and a default has occurred, the Section 7 petition is to be admitted notwithstanding disputes limited to quantification. Contention that amounts were not due because of an MOU or that funds were cycled through related entities was rejected as not bearing on the existence of a financial debt and default for admission purposes. The Tribunal therefore found debt and default established and admitted the petition under Section 7. [Paras 16, 17]

Admission of the Section 7 petition; corporate insolvency resolution process initiated.

Enforceability of pledge despite admission of winding up petition - financial debt - Admission of a winding up petition against the pledgor company (SRUIL) does not extinguish the pledged debentures or affect the Corporate Debtor's liability; the financial creditor may enforce security as per the pledge agreement. - HELD THAT: - The Tribunal accepted the Petitioner's submission that admission of a winding up petition and appointment of a provisional liquidator against SRUIL did not mean SRUIL was in liquidation such that pledged debentures ceased to exist or that the Petitioner could not return or realise them upon repayment. The Debenture Pledge Agreement expressly preserved liability and enforceability despite insolvency or liquidation of a pledgor, and therefore the pendency of winding up proceedings against SRUIL did not negate the Petitioner's status as financial creditor or its contractual rights under the pledge. [Paras 15]

The pendency of winding up proceedings against SRUIL does not affect the Petitioner's rights under the debenture pledge; liability of the Corporate Debtor remains enforceable.

Moratorium - interim resolution professional - Moratorium imposed and Interim Resolution Professional appointed consequent to admission of the petition. - HELD THAT: - On admission, the Tribunal applied the statutory consequences: issuance of moratorium prohibiting specified suits, transfers and enforcement actions, directions regarding supply of essential goods, and public announcement of CIRP. The Bench also appointed the proposed Interim Resolution Professional after noting no disciplinary proceedings against him and treated the application under sub-section (2) of Section 7 as complete. [Paras 17]

Moratorium ordered from 06.12.2018 until completion of CIRP or further order; Mr. Ravi Prakash Ganti appointed as Interim Resolution Professional.

Final Conclusion: The Tribunal admitted the Section 7 petition, holding that a financial debt and default were established; the pendency of winding up proceedings against SRUIL did not affect the pledge or the debtor's liability; moratorium was imposed and an Interim Resolution Professional appointed, and the corporate insolvency resolution process was ordered to commence.

Admission of corporate insolvency application under Section 10 - Compliance with Section 10(3) requirements including books of account, proposed resolution professional and shareholders' special resolution - Financial debt and default - Consent and eligibility of proposed Interim Resolution Professional - Moratorium under Section 14 - Territorial jurisdiction of the Adjudicating Authority

Admission of corporate insolvency application under Section 10 - Financial debt and default - The application filed by the corporate debtor for initiation of corporate insolvency resolution process under Section 10 is complete and is admitted as the corporate debtor has committed default. - HELD THAT: - The corporate applicant filed Form 6 with supporting affidavit and documentary evidence of financial liability, including assignment of the debt to Phoenix ARC and demand notice under SARFAESI, as well as audited and provisional financial statements. The recorded financial position shows loss of net worth and inability to meet liabilities. The financial creditor, though served, did not contest admission. On these materials the Tribunal found that existence of financial debt and default are established and the petition satisfies the requirements for admission under Section 10(4). [Paras 6, 11, 16, 20, 21]

Application under Section 10 is admitted as the corporate debtor has committed default.

Compliance with Section 10(3) requirements including books of account, proposed resolution professional and shareholders' special resolution - Consent and eligibility of proposed Interim Resolution Professional - The petitioner complied with the requirements of Section 10(3) by furnishing books of account and documents, proposing a registered resolution professional with consent and no disciplinary proceedings, and filing the shareholders' special resolution approving the application. - HELD THAT: - For clause (a) the petitioner placed audited financial statements and provisional statements along with documents evidencing amounts due from financial and operational creditors. For clause (b) the proposed Interim Resolution Professional submitted Form No.2 with written consent, particulars and certificate of no disciplinary proceedings, which the Tribunal found in order. For clause (c) the petitioner produced the special resolution of shareholders approving filing of the application. Reliance was placed on appellate precedents cited regarding the need to place the matter before shareholders, and the petitioner complied by filing the special resolution. [Paras 15, 16, 17, 18, 19]

Requirements of Section 10(3)(a), (b) and (c) are satisfied.

Moratorium under Section 14 - A moratorium under Section 14 is declared from the date of the order until completion of the corporate insolvency resolution process, and its statutory scope is applied. - HELD THAT: - Upon admission of the petition the Tribunal declared the moratorium and specified its statutory prohibitions: institution or continuation of suits or proceedings, transfer or disposal of assets, actions to enforce security interests including under SARFAESI, and recovery of leased property in the possession of the corporate applicant. The Tribunal also directed that supply of essential goods or services shall not be terminated during the moratorium, subject to statutory exceptions, and clarified the moratorium's duration until approval of a resolution plan or liquidation under Section 33. [Paras 23, 24, 25]

Moratorium under Section 14 is imposed with the statutory prohibitions and specified exceptions, effective from the date of the order.

Territorial jurisdiction of the Adjudicating Authority - The petition falls within the territorial jurisdiction of this Tribunal. - HELD THAT: - The corporate debtor's registered office is situated in Faridabad, State of Haryana, and the Memorandum and Articles and master data are on record, establishing territorial nexus to this Tribunal. [Paras 2]

The National Company Law Tribunal, Chandigarh has territorial jurisdiction to entertain the petition.

Final Conclusion: The corporate insolvency application filed by the corporate debtor is admitted under Section 10, statutory requirements of Section 10(3) are satisfied, an interim moratorium under Section 14 is declared effective from the date of the order, and the matter is listed for appointment of the Interim Resolution Professional.

Condonation of delay - limitation - quantification of interest - duty of revenue to furnish computation of interest - remand for quantification - penalty under Section 78

Condonation of delay - limitation - The appeal filed before the Commissioner (Appeals) was condoned despite the delay and treated as maintainable. - HELD THAT: - The Appellate Tribunal found that the appeal filed on 23.2.2017 was within the period calculated from the letter dated 6.12.2016 and, although there was delay, it fell within the condonable period. On this basis the Tribunal exercised its discretion to condone the delay and directed that the appeal could be heard on merits rather than being dismissed on limitation.

Delay in filing the appeal is condoned and the appeal is held maintainable.

Quantification of interest - duty of revenue to furnish computation of interest - remand for quantification - The demand for interest in the departmental communication dated 6.12.2016 was without proper quantification and the matter is remanded to the original authority for computation and communication of the interest payable. - HELD THAT: - The Tribunal observed that the letter of 6.12.2016 merely asserted that interest paid by the appellant was less without furnishing the worksheet or method of computation. Citing the appellant's reliance on earlier decisions, the Tribunal held that it is incumbent on the department to provide proper quantification of interest payable. In the interests of justice the matter was remitted to the original authority to quantify the interest payable and communicate the same to the appellant for compliance; the appellant has undertaken to pay the interest as quantified.

The case is remanded to the original authority to quantify the interest payable and communicate the computation to the appellant.

Penalty under Section 78 - The demand of 100% penalty under Section 78 was held not tenable and set aside. - HELD THAT: - After considering the matter, the Tribunal concluded that the imposition of equal (100%) penalty under Section 78 of the Finance Act, 1994 could not be sustained. Accordingly, the Tribunal set aside the demand of equal penalty while leaving the remaining proceedings to be determined after quantification of interest by the original authority.

Demand of equal (100%) penalty under Section 78 is set aside.

Final Conclusion: The appeal is allowed in part: delay in filing the appeal is condoned; the demand of equal penalty under Section 78 is set aside; and the matter is remanded to the original authority solely to quantify and communicate the interest payable, upon which the appellant has undertaken to comply.

Principles of natural justice - right to personal hearing - remand for fresh adjudication - opportunity to be heard before passing order

Principles of natural justice - right to personal hearing - opportunity to be heard before passing order - Whether the impugned order was vitiated for want of personal hearing in breach of the principles of natural justice and whether it should be set aside and remitted for fresh consideration. - HELD THAT: - The impugned order itself records that a personal hearing fixed for 6-3-2018 could not be held for administrative reasons and that although counsel requested a fresh date, the matter was discussed with counsel and, purportedly with his oral consent, taken up for adjudication. The Court found that when the scheduled personal hearing could not be held the authority ought to have afforded the petitioners an opportunity of personal hearing before passing the order; proceeding to adjudicate without providing that opportunity amounted to a clear violation of the principles of natural justice. In view of that breach the Court concluded that the impugned order could not stand and the proper remedy was to set it aside and remit the matter for hearing and fresh adjudication on merits after affording the petitioners a real opportunity to be heard. [Paras 6, 7, 8]

Impugned order set aside and matter remitted to the respondent to proceed from the stage of personal hearing, afford opportunity to the petitioners and pass appropriate orders on merits within eight weeks.

Final Conclusion: The writ petitions are allowed in part: the impugned order dated 28-3-2018 is set aside for breach of the principles of natural justice and the matter is remanded to the first respondent to issue notice for personal hearing and decide the case on merits in accordance with law within eight weeks; no costs.

Cenvat credit on capital goods used for both dutiable and exempt/non-excisable manufacture - Intermediate product doctrine in Cenvat credit - Exclusivity test under Cenvat Credit Rules - Availment of input service credit and burden of substantiation

Cenvat credit on capital goods used for both dutiable and exempt/non-excisable manufacture - Intermediate product doctrine in Cenvat credit - Exclusivity test under Cenvat Credit Rules - Whether denial of Cenvat credit on capital goods used in manufacture of Extra Neutral Alcohol/rectified spirit (exempt/non-excisable) but also employed in the production of dutiable denatured spirit was justified. - HELD THAT: - The Tribunal found as a fact that the storage tanks and capital goods in question were employed in processes where Extra Neutral Alcohol (ENA)/rectified spirit - an intermediate product - was generated and denaturing occurred in the storage tanks as per market requirement. Because denaturing took place in those tanks and ENA was an intermediate input for the dutiable final product (denatured spirit), the capital goods could not be said to have been used exclusively for manufacture of exempt/non-excisable goods. Accordingly, the exclusivity test under the Cenvat Credit Rules for denial of credit was not satisfied. The Tribunal therefore concluded that denial of Cenvat credit on the capital goods was not proper and set aside that part of the adjudication confirming demand. [Paras 6]

Impugned denial of Cenvat credit on the capital goods (Rs. 14,42,000/-) set aside; appeal allowed on this count.

Availment of input service credit and burden of substantiation - Whether Cenvat credit of service tax on construction-related input services could be sustained in absence of specific grounds or substantiation by the appellant. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) recorded that the appellant did not advance any substantive argument or specific grounds in the appeal with respect to the input service credit claimed on construction services. The appellate records likewise did not contain proper substantiation to support the claimed credit. In view of the appellant's failure to substantiate entitlement, the Tribunal declined to interfere with the original order confirming reversal/denial of the input service credit and held the adjudged demand on that count to be sustainable. [Paras 7]

Impugned denial of Cenvat credit on input services (construction) upheld; appeal dismissed on this count.

Final Conclusion: The appeal is partly allowed: the adjudication denying Cenvat credit on capital goods is set aside and the appeal is allowed in that respect, while the adjudicated demand denying input service credit for construction services is sustained.

CENVAT credit on inputs - capital goods versus inputs - immovable property/embedded goods - eligibility of credit at the stage before becoming immovable property - Rule 2(a) and Rule 2(k) of the CENVAT Credit Rules, 2004 - precedential consistency of Tribunal decisions

CENVAT credit on inputs - capital goods versus inputs - immovable property/embedded goods - eligibility of credit at the stage before becoming immovable property - Rule 2(a) and Rule 2(k) of the CENVAT Credit Rules, 2004 - CENVAT credit on MS plates, HR sheets, angles, channels, beams, joists and MS flats used in fabrication of bunkers (which become embedded/immovable) is admissible as input credit and denial of such credit was not sustainable. - HELD THAT: - The Tribunal examined whether iron and steel items used in fabrication and erection of bunkers-although ultimately embedded to earth and non-excisable-could be denied CENVAT credit on the ground that they become immovable and therefore are not capital goods or inputs under the relevant definitions. Having considered the material on record and the binding precedents relied upon by the appellant, the Tribunal applied the established principle that eligibility for credit is to be determined at the stage of use in manufacture/fabrication and not defeated merely because the fabricated structure later becomes part of immovable property. Following the ratios of several earlier decisions where similar items used in fabrication of storage tanks/bunkers were held to be inputs and credit was allowed, the Tribunal held that the impugned order travelled beyond the scope of the show-cause and that denial of credit was inconsistent with those precedents. Consequently the order denying CENVAT credit was set aside and the appellant's appeal allowed.

Impugned order denying CENVAT credit on the specified iron and steel items is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that CENVAT credit on the specified iron and steel items used in fabrication of bunkers for the period 06/2005 to 01/2007 is admissible; the order denying such credit was set aside in view of binding tribunal precedents and the principle that eligibility is determined before the goods become immovable.

Transfer of CENVAT credit under Rule 10 of the Cenvat Credit Rules, 2004 - Requirement of intimation versus prior permission for transfer of credit - Satisfaction of Asstt./Dy. Commissioner as procedural standard under Rule 10(3) - Remand for verification of credit particulars - Penalty consequences under Rule 15 read with Section 11AC

Transfer of CENVAT credit under Rule 10 of the Cenvat Credit Rules, 2004 - Requirement of intimation versus prior permission for transfer of credit - Whether transfer of accumulated unutilized CENVAT credit from the appellant's erstwhile Delhi unit to the new Bhiwadi (Alwar) unit satisfied the requirements of Rule 10. - HELD THAT: - The Tribunal examined Rule 10 and noted that the provision requires intimation of transfer and permits transfer of unutilized CENVAT credit where the factory is shifted, subject to accounting of inputs/capital goods to the satisfaction of the Deputy/Assistant Commissioner. The Rule does not mandate prior permission from the authorities at the previous or new location. It was on record that the appellant had intimated the transfer to both jurisdictions and the credit figures appeared in the ER-I returns of the respective months without discrepancy. The appellants also produced the documents and ER-I returns showing identical credit entries. In these circumstances the procedural requirement prescribed by Rule 10 was complied with and there was no legal basis to treat the transfer as wrongful. [Paras 7, 9, 10]

Transfer of CENVAT credit complied with Rule 10 and was valid; the demand/penalty based on alleged wrongful availment was not sustainable.

Remand for verification of credit particulars - Satisfaction of Asstt./Dy. Commissioner as procedural standard under Rule 10(3) - Whether the matter should be remanded to the Adjudicating Authority for verification of credit particulars. - HELD THAT: - The Revenue sought remand for verification despite the appellant having filed ER-I returns and produced relevant documents. The Tribunal observed that remanding the matter for further verification was not required where statutory compliance under Rule 10 (intimation and accounting reflected in returns) was already established on the record. Further remand would be inconsistent with the Rule and would cause undue hardship to the noticee. Consequently, remand was declined and the adjudicated order was reviewed on merits. [Paras 6, 9]

Remand for verification was not warranted and was rejected.

Final Conclusion: The appeal is allowed; the impugned adjudication confirming demand and penalty is set aside as the transfer of CENVAT credit complied with Rule 10 and remand for verification was unnecessary, with consequential benefits to the appellant.

Penalty under Section 11AC(1)(b) - change of opinion - valuation under Rule 8 of the Valuation Rules - valuation under Rule 4 of the Valuation Rules - related person / interconnected undertakings - suppression of facts

Penalty under Section 11AC(1)(b) - change of opinion - related person / interconnected undertakings - valuation under Rule 8 of the Valuation Rules - valuation under Rule 4 of the Valuation Rules - suppression of facts - Whether the penalty of 50% under Section 11AC(1)(b) was sustainable against the appellant for alleged undervaluation of sponge iron supplied to a related undertaking. - HELD THAT: - The appellant had valued clearances under Rule 8 of the Valuation Rules as it considered the buyer to be an interconnected/related undertaking after takeover. Revenue invoked Rule 4 to demand differential duty and issued a show cause notice proposing penalty under Section 11AC. The Tribunal found that the demand arose from a change of opinion by the Department as to which valuation rule applied (Rule 8 vis-a -vis Rule 4) rather than from any concealment or deliberate suppression of material facts by the appellant. The factual position showed sales at slightly different prices to related and unrelated buyers and limited clearances to unrelated buyers; there was no finding of intentional mis-conduct to evade duty. On these findings the imposition of penalty for suppression/mis-conduct was not justified.

Penalty imposed under Section 11AC(1)(b) set aside for lack of suppression or dishonest conduct; appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal and set aside the penalty imposed under Section 11AC(1)(b), holding the dispute to be a change of opinion on valuation (Rule 8 v. Rule 4) rather than suppression of facts; consequential benefits were granted to the appellant.

SSI exemption - use of brand name registered in director's name - benefit of exemption not to be denied where director registered brand - identity of proprietor/director and company for brand use - demand set aside

SSI exemption - use of brand name registered in director's name - benefit of exemption not to be denied where director registered brand - Entitlement of the appellant company to SSI exemption despite the brand name being registered in the name of its director. - HELD THAT: - The Tribunal applied the principle established in Anil Pumps (P) Ltd. (affirmed by the Supreme Court) that where a director of a company had been using a brand name in relation to the company's goods and subsequently registered that name in his individual capacity, the company cannot be treated as using a brand 'belonging to another' so as to disentitle it from SSI exemption. The Tribunal noted analogous authority in CCE v. Sanjay Agarwal and held that the registration of the trade name in the director's name did not operate to deny the statutory benefit to the company which had been using the brand since inception. On this basis the impugned demand founded on the ground of use of another's brand was unsustainable.

Impugned order set aside; appellants held entitled to SSI exemption.

Demand set aside - identity of proprietor/director and company for brand use - Consequent fate of the demand framed against co-noticees where demand against the appellant company is unsustainable. - HELD THAT: - Because the primary demand against the appellant company was held unsustainable for the reasons above, the Tribunal concluded that the parallel demand on the co-noticees could not be sustained either and therefore deserved to be dropped.

Demand against the co-noticees also directed to be dropped.

Final Conclusion: Appeals allowed; impugned Order in Original set aside and appellants held entitled to SSI exemption; corresponding demands, including those on co noticees, directed to be dropped.

Failure to consider submissions - consideration of C-Forms - application under Section 84 of the TNVAT Act, 2006 - abeyance of demand

Failure to consider submissions - consideration of C-Forms - Assessing Officer's non-reference to the petitioner's replies and subsequent filing of C-Forms and whether the grievance requires fresh consideration - HELD THAT: - The petitioner contended that two replies dated 26.07.2017 and 30.08.2017 were not referred to in the assessment order and that an additional set of C-Forms filed on 20.10.2017 was likewise not considered. The High Court observed that while the assessment order did not refer to the petitioner's replies, the Assessing Officer had taken into account C-Forms filed earlier for a specified value when passing the assessment. Given the subsequent filing of further C-Forms, the Court held that these contentions are matters fit to be raised before the Assessing Officer for fresh consideration by way of a statutory application, rather than being finally adjudicated in the writ petition. [Paras 4]

Liberty granted to the petitioner to raise the grievance before the Assessing Officer by filing an application under Section 84 of the TNVAT Act, 2006, for fresh consideration.

Application under Section 84 of the TNVAT Act, 2006 - abeyance of demand - Procedure and timelines for fresh consideration and interim treatment of the impugned demand - HELD THAT: - The Court did not express any view on the merits of the petitioner's claim but directed a procedural course: the petitioner is to file the application under Section 84 within two weeks of receipt of the order along with necessary documents. On receipt, the Assessing Officer is to consider the application after giving opportunity of hearing and pass appropriate orders within four weeks. Pending such decision, the impugned demand is to be kept in abeyance. These directions are intended to ensure expeditious statutory adjudication of the petitioner's grievances. [Paras 5]

Petitioner permitted to file the Section 84 application within two weeks; Assessing Officer to decide after hearing within four weeks; impugned demand to remain in abeyance until such decision.

Final Conclusion: Writ petition disposed of by granting the petitioner liberty to file an application under Section 84 of the TNVAT Act, 2006 for fresh consideration of the material (including the C-Forms); the Assessing Officer is directed to decide the application after hearing within the prescribed timeline and the impugned demand is stayed in abeyance pending that decision.

Principles of natural justice - personal hearing - opportunity to file reply - remand for fresh assessment

Principles of natural justice - personal hearing - opportunity to file reply - remand for fresh assessment - Assessment order set aside for non-compliance with principles of natural justice and remitted for fresh adjudication on merits after giving opportunity of reply and personal hearing. - HELD THAT: - The Court found that although the notice of proposal was served at the address where the petitioner had vacated business, one of the partners had in fact received the notice; nonetheless the petitioner did not file any reply before the Assessing Officer. The assessment was passed on the basis that no reply was filed and a penalty was imposed without affording a personal hearing. In view of the absence of a personal hearing and in the interests of both parties, the Court set aside the impugned order and remitted the matter to the Assessing Officer for fresh assessment. The Court imposed procedural conditions: the petitioner must file a reply and deposit 10% of the tax liability within three weeks of receipt of the order; on receipt the Assessing Officer shall notify a date for personal hearing; and thereafter the Assessing Officer shall decide the assessment on merits within six weeks of the personal hearing. [Paras 7, 8, 9]

Impugned assessment order set aside and matter remitted to the Assessing Officer to redo the assessment after receipt of reply and deposit of 10% tax, followed by personal hearing and decision on merits within prescribed timelines.

Opportunity to file reply - merits not considered - Court declined to examine merits of the assessment since no reply had been filed before the Assessing Officer. - HELD THAT: - The petitioner resisted the assessment by raising multiple grounds on merits, but the Court refused to go into the merits because the petitioner did not file any reply before the Assessing Officer. The absence of a reply deprived the Court of a basis to adjudicate the substantive contentions at this stage, prompting remand for fresh consideration after the statutory opportunity is availed. [Paras 7]

Merits not decided; adjudication on merits to be undertaken afresh by the Assessing Officer after compliance with the ordered procedural steps.

Final Conclusion: Writ petition allowed; impugned assessment order dated 15.10.2018 set aside and matter remitted to the Assessing Officer with directions that the petitioner file a reply and pay 10% of the tax liability within three weeks, be afforded a personal hearing, and the Assessing Officer decide the assessment on merits within six weeks thereafter.

Input tax credit - disallowance of discount/incentive - credit note in Form No. 9 - prescribed form of credit note - requirement of declaration of no output tax deduction by supplier - revised return under section 42(2)

Input tax credit - disallowance of discount/incentive - Sustainability of the Appellate Tribunal's order refusing input tax credit to the extent of incentives received from the manufacturer - HELD THAT: - The Tribunal's confirmation of the Assessing Officer's disallowance was upheld. The assessee had not disclosed the incentive in returns and did not avail the opportunity to revise returns under section 42(2) after the audit revealed the incentive. The credit notes produced were not in the prescribed form and lacked necessary particulars; accordingly, the claim could not be allowed. On these facts the Tribunal's decision refusing input tax credit in respect of the incentive is sustainable. [Paras 2, 3, 8, 9]

Tribunal's order refusing input tax credit on the incentive is sustained and answered against the assessee.

Credit note in Form No. 9 - prescribed form of credit note - Whether the disallowance was correct notwithstanding production of credit notes and a declaration - HELD THAT: - The court examined Form No. 9 and held that the prescribed form for a credit note under the Act is not confined to returns of goods; the form captures particulars necessary for allowing credit claims. The credit notes relied upon by the assessee were not in Form No. 9 and did not contain the details requisite for permitting the input tax credit. Consequently, there was no basis to allow the claimed credit on the material tendered before the authorities. [Paras 7, 8]

Disallowance was correct because the credit notes produced were not in Form No. 9 and lacked required details.

Circular No. 41/2007 - requirement of declaration of no output tax deduction by supplier - Applicability of Circular No. 41/2007 and related declaration to permit input tax credit - HELD THAT: - The court observed that the question of applicability of Circular No. 41/2007 does not arise where the statutory/formal requirement of producing the prescribed credit note has not been complied with. Although Circular No. 41/2007 (and judicial interpretation extending its scope) deals with allowing credit when credit notes and a declaration of no output tax deduction are produced, the assessee failed to place the prescribed form and particulars on record; therefore the court did not apply the circular to grant credit. [Paras 6, 9]

Circular No. 41/2007 was not applied because the prescribed form and particulars were not furnished; the issue is decided against the assessee.

Revised return under section 42(2) - Whether the turnover/incentive was accounted for when amounts appeared in books and audit statement - HELD THAT: - Even though the amounts appeared in the books and the audit statement disclosed the incentive, the assessee did not seek to rectify its return by availing revision under section 42(2) after the discrepancy was noticed. The failure to revise the return and to produce credit notes in the prescribed form meant the claim could not be accepted despite disclosure in books. [Paras 2, 3, 9]

Being undisclosed in the filed returns and not corrected by revision, the turnover/incentive could not support the input tax credit claim; the finding against the assessee is affirmed.

Final Conclusion: All questions of law raised are answered against the assessee; the revision is dismissed and parties are left to bear their respective costs.