TaxTMI Updates e-Newsletter
Jan 22,2021

Composite supply of works contract - concessional rate under Entry No. 3(vi)(a) of Notification No. 11/2017-Central Tax (Rate) - predominant use for commerce, industry or any other business or profession - Explanation: 'business' shall not include activities undertaken by Central/State Government or local authority as public authorities

Composite supply of works contract - The contracts combining supply, erection, testing and commissioning qualify as composite supply of works contract. - HELD THAT: - The Authority for Advance Ruling had held, and the appellant does not dispute, that the two work orders forming the contract RGGVY/TN-13 constitute a composite supply of works contract as defined in section 2(119) of the CGST Act. The appellate authority recorded that there was no contest on this finding and proceeded to consider the rate applicability on that basis. [Paras 6]

Supplies under the two work orders are a composite supply of works contract.

Concessional rate under Entry No. 3(vi)(a) of Notification No. 11/2017-Central Tax (Rate) - predominant use for commerce, industry or any other business or profession - Explanation: 'business' shall not include activities undertaken by Central/State Government or local authority as public authorities - The composite works contract is not eligible for the concessional 12% rate under Entry No. 3(vi)(a) because the work is predominantly for use in commerce/business of AVVNL. - HELD THAT: - Entry No. 3(vi)(a) requires, inter alia, that the civil structure or original work be meant predominantly for use other than for commerce, industry or any other business or profession and, where supplied to a Government Entity, that the work be procured in relation to a work entrusted to it by government or local authority. The appellant's contract relates to rural electrification under RGGVY, but the appellate authority examined the scheme and the role of AVVNL and observed that beneficiaries receive free connections but pay for consumption. AVVNL is engaged in the purchase and sale of electricity, collects consideration from consumers, and its memorandum of association shows business objects including purchase and sale of power. The works undertaken by the appellant facilitate transmission/supply of electricity and will increase AVVNL's consumer base and revenue; accordingly the works are incidental to and predominantly for AVVNL's business. The Explanation excluding 'business' when activities are undertaken by government as public authorities was considered inapplicable. The AAAR distinguished precedents relied upon by the appellant on the basis that those works did not serve a revenue-raising commercial activity of the government entity. Applying these considerations, the concessional rate under Entry No. 3(vi)(a) does not apply. [Paras 6, 7]

Concessional rate under Entry No. 3(vi)(a) is not available; the composite supply is taxable at the standard rate applicable to works contracts.

Final Conclusion: The appeal is dismissed; the AAAR's finding that the supplies constitute a composite works contract is affirmed and the determination that the contract is not eligible for concessional taxation under Entry No. 3(vi)(a) is upheld.

Summary order. Application for exemption (CM No.1891/2021) allowed subject to just exceptions and extant rules and disposed of; petition under W.P.(C) 751/2021 seeking de-freezing of bank account listed for further consideration on 22 January 2021 with respondent granted time to take instructions until that date.

Summary order. Petition listed for hearing on 24th February, 2021; interim arrangement proposed and agreed that the small sum presently in the frozen bank account may remain frozen or be placed in a fixed deposit while the account's operation is otherwise permitted; the question whether respondents are entitled to any monies credited to the account after the date of the freezing order is left open for hearing.

Provisional attachment to protect revenue - Requirement of a written order of the Commissioner and communication of reasons for attachment - Right to file objections against provisional attachment - Refund of voluntarily deposited amount where no demand or show cause notice was pending - Retention of a portion of claimed duty while directing refund - Binding effect of a Division Bench decision of the same High Court over decisions of other High Courts

Provisional attachment to protect revenue - Requirement of a written order of the Commissioner and communication of reasons for attachment - Right to file objections against provisional attachment - Validity of provisional attachment of the petitioner's bank account under the Act in absence of a communicated written order of the Commissioner and the consequential right to file objections. - HELD THAT: - The Court examined Section 83 (provisional attachment to protect revenue) and the procedure under the Rules which permit a person whose property is provisionally attached to file objections. The order of attachment in the present case was passed by the Assistant Commissioner allegedly with the consent of the Commissioner. The Court held that if the written order of the Commissioner, containing the reasons for concluding that attachment was necessary to protect revenue, is not communicated to the affected person, that person cannot effectively exercise the statutory right to object. Accepting the respondents' contention that the Commissioner merely 'consented' would, in effect, deprive the person of the benefit of the Commissioner's reasons and of a meaningful opportunity to file objections. For these reasons the Court concluded that the attachment could not be sustained and set aside the order of attachment. [Paras 3, 4]

The provisional attachment of the petitioner's bank account was set aside for want of communication of the Commissioner's written order and reasons, thereby denying effective opportunity to file objections.

Refund of voluntarily deposited amount where no demand or show cause notice was pending - Retention of a portion of claimed duty while directing refund - Binding effect of a Division Bench decision of the same High Court over decisions of other High Courts - Entitlement to refund of amounts deposited by the petitioner prior to issuance of any demand or show cause notice, and the relief to be granted in view of binding precedent of this Court's Division Bench. - HELD THAT: - The Court noted that the petitioner had deposited certain amounts at a time when no show cause notice or demand was pending; subsequently a show cause notice was issued. A Division Bench decision of this Court in Concepts Global Impex (supra) dealing with an identical factual situation directed refund of the amount while retaining 10% of the duty demanded. Counsel for the respondents conceded applicability of that decision but relied on a contrary decision of another High Court. The Court held that the Division Bench decision of this High Court is binding on the present Bench and, accordingly, disposed of the refund prayer in the same terms as Concepts Global Impex, directing refund subject to the retention ordered therein. [Paras 5, 7, 8]

The petitioner is entitled to refund of the deposited amount in accordance with the Division Bench decision of this Court, with the limited retention of a portion of the duty as directed in that precedent.

Final Conclusion: The Court set aside the provisional attachment of the petitioner's bank account for failure to communicate the Commissioner's written order and reasons, and directed refund of the voluntarily deposited amount in terms of the Division Bench decision of this Court (retaining the portion of duty as ordered therein); miscellaneous applications stand disposed of.

Provisional attachment - attachment of bank accounts - cash credit account - power under Section 83 of the Act - quashing of provisional attachment order

Provisional attachment - cash credit account - power under Section 83 of the Act - quashing of provisional attachment order - Provisional attachment of the cash credit account maintained with Kotak Bank is not sustainable in law and the order of provisional attachment dated 23rd September 2020 is quashed and set aside. - HELD THAT: - The Assistant Commissioner passed an order in Form GST DRC-22 dated 23.09.2020 for provisional attachment of the assessee's cash credit account maintained with Kotak Bank. The writ applicant contended that the provisional attachment power under Section 83 could not be validly exercised in respect of the cash credit account and that the bank, by reason of a common PAN, froze other accounts though the order related only to the cash credit account. The Court held that the law on attachment of such an account is no longer res integra and that the provisional attachment of the cash credit account in the present case was not sustainable. Accordingly, the impugned Form GST DRC-22 dated 23.09.2020 was quashed and set aside. The other reliefs sought in the petition were not pressed and therefore were not adjudicated.

Impugned provisional attachment order dated 23.09.2020 in Form GST DRC-22 attaching the cash credit account maintained with Kotak Bank is quashed and set aside; other reliefs not pressed.

Final Conclusion: Writ petition disposed of by quashing and setting aside the provisional attachment order dated 23rd September 2020 in Form GST DRC-22 insofar as it attached the cash credit account; remaining reliefs not pressed.

Special enactment prevails over the Code of Criminal Procedure - simultaneous initiation of adjudication and prosecution - power of inspection, search and seizure under a special statute - power of arrest and procedure under the special statute - prima-facie material to prosecute for offences under section 132(1)(b) and (c) of the Act

Special enactment prevails over the Code of Criminal Procedure - simultaneous initiation of adjudication and prosecution - Whether the procedural provisions of the Code of Criminal Procedure (such as Sections 154 and 173) must be followed in full for investigation and prosecution under the Central Goods and Services Tax Act, 2017, or whether the special procedures in the Act govern. - HELD THAT: - The Court held that the scheme and specific provisions of the Act constitute a special enactment governing inspection, search, seizure, adjudication and prosecution under the Act. The Act contains separate chapters for determination of tax liabilities and for offences and penalties, and includes tailored provisions (for example, Section 67(10) altering the application of CrPC search provisions and Section 69 governing arrest and related procedure). In light of this special scheme, the Court concluded that the Act's provisions shall prevail and it is not necessary to apply all provisions of the Code of Criminal Procedure such as Sections 154 and 173 in toto before initiating prosecution under the Act. The Court limited its observations to offences under the Act and noted a different approach may follow if offences under the Indian Penal Code are involved. [Paras 16, 17, 18, 21]

The special procedures under the Act govern; it is not mandatory to apply all the CrPC provisions like Sections 154 and 173 before prosecution under the Act, and adjudication and prosecution may be initiated simultaneously.

Power of inspection, search and seizure under a special statute - power of arrest and procedure under the special statute - prima-facie material to prosecute for offences under section 132(1)(b) and (c) of the Act - Whether there is prima-facie material to make out offences under section 132(1)(b) and (c) of the Act against the petitioners based on the seized documents, statements and deposit of tax. - HELD THAT: - The Court observed that search and seizure of the company's premises and statements recorded (including under section 70 of the Act) along with seized documents pointed to alleged issuance and utilisation of fake invoices and the availing of inadmissible input tax credit. The record indicated reversal or deposit of the asserted liability by the company and statements which could be used in prosecution (Section 136). Given these materials and the presumption available under Section 135, the Court found that there was material to make out a prima-facie case of offences under Section 132(1)(b) and (c). [Paras 3, 5, 14, 18]

There is prima-facie material to institute prosecution for offences under Section 132(1)(b) and (c) of the Act.

Prematurity of criminal writ where criminal proceedings are not instituted - Whether the petitions seeking relief against proposed/ongoing departmental action were maintainable at the stage when no prosecution had been instituted. - HELD THAT: - The Court noted that no criminal proceeding had yet been instituted before a court (cognizance requires prior sanction of the Commissioner under Section 134) and observed that from that perspective the petitions were premature. The Court further observed that interlocutory orders which prevented the department from exercising statutory powers (including issuance of summons) had the practical effect of conferring relief akin to anticipatory bail, which was not ordinarily permissible in matters of this nature and would impede investigation. Having considered these aspects alongside the merits and materials, the Court concluded that dismissal was warranted and imposed costs for the conduct and forum-shopping including urgent listing before the Vacation Court. [Paras 19, 22, 23]

The petitions were dismissed as premature and inappropriate relief; costs were imposed on the petitioners.

Final Conclusion: The petitions are dismissed. The Court held that the GST Act's special provisions govern investigations and prosecutions (and may be proceeded with simultaneously with adjudication), found prima-facie material to prosecute for offences under Section 132(1)(b) and (c), treated the writs as premature in the absence of instituted criminal proceedings and imposed costs on the petitioners.

Provisional attachment under Section 83 - subjective satisfaction based on credible material - necessity to protect interest of revenue - provisional attachment as a drastic, last-resort measure - prohibition of mechanical or casual exercise of attachment powers

Provisional attachment under Section 83 - provisional attachment of bank accounts - Validity of the provisional attachment of the writ-applicant's current and savings bank accounts by order in FORM GST DRC-22. - HELD THAT: - The Court examined whether the provisional attachment of the two bank accounts ought to continue. Having regard to the statutory purpose of Section 83, the prescribed form (FORM GST DRC-22) and the factual material on record, the Court concluded that continuation of attachment served no useful purpose where the combined balance in the two accounts was negligible. The Court took a practical view that provisional attachment is intended to protect the revenue against loss of assets that would frustrate recovery after assessment; attaching accounts which held only a paltry sum would not meaningfully protect revenue but would cause undue hardship to the assessee. In that factual matrix the Court found no justification to continue the provisional attachment and, accordingly, quashed and set aside the impugned order insofar as it attached those two accounts, while preserving the Department's right to proceed with investigation and subsequent steps in accordance with law. [Paras 42, 43, 50, 51, 52]

The provisional attachment of the two bank accounts is quashed and set aside and the writ-application is allowed; the order has no bearing on further proceedings the authority may initiate in accordance with law.

Subjective satisfaction based on credible material - necessity to protect interest of revenue - provisional attachment as a drastic, last-resort measure - prohibition of mechanical or casual exercise of attachment powers - Legal standards governing exercise of power under Section 83 and the limits of judicial scrutiny over the authority's opinion. - HELD THAT: - The Court reiterated that Section 83 permits provisional attachment during the pendency of specified proceedings, but the requisite 'opinion' of the Commissioner must be founded on credible material and a bona fide satisfaction that attachment is necessary to protect revenue. Though subjective, that opinion is not immune from limited scrutiny: there must be a rational connection between the material relied upon and the satisfaction formed, and the power is to be used sparingly as a last resort. The Court emphasised that attachment cannot be a mechanical consequence of initiation of proceedings under Section 67 and condemned routine, casual or mechanical exercise of Section 83 which dilutes its efficacy. The Court relied on earlier coordinates (including Valerius Industries and other authorities) to state that absence of cogent material or use of the power for extraneous or oppressive purposes would render attachment malafide or arbitrary in law. [Paras 39, 40, 41, 44, 53]

Section 83 confers a drastic power which must be exercised only after due application of mind on credible materials; routine or mechanical attachment is impermissible and subject to judicial review for absence of relevant material or malafide exercise.

Final Conclusion: The writ succeeds: the provisional attachment of the two bank accounts is quashed and set aside as unnecessary in the facts of this case; the Court reiterated that Section 83 is a drastic power to be exercised sparingly, on credible material and not as a mechanical consequence of proceedings, without prejudice to the authority's right to continue investigation and take lawful steps thereafter.

Condition for invoking Rule 86A - restriction only where credit is fraudulently availed or ineligible - Use of electronic credit ledger - limitation to liabilities under the CGST/SGST regime - Non-applicability of director liability provision to public companies under Section 18 (Central Sales Tax Act, 1956) - Transitional recovery of pre existing dues as arrears under the CGST Act - non admissibility as input tax credit

Condition for invoking Rule 86A - restriction only where credit is fraudulently availed or ineligible - Use of electronic credit ledger - limitation to liabilities under the CGST/SGST regime - Rule 86A could not be validly invoked to block the writ applicant's input tax credit for recovering dues of Dolphin Metals (India) Ltd. - HELD THAT: - The Court held that Rule 86A empowers the Commissioner or an authorised officer to restrict debit of the electronic credit ledger only if there are recorded reasons to believe that the input tax credit has been fraudulently availed or is ineligible for the specific grounds enumerated in Rule 86A(1)(a)-(d). The power under Rule 86A is conditional and cannot be invoked as a general tool to appropriate the petitioner's input tax credit for recovery of third party liabilities unless those statutory conditions are satisfied. The Court found no basis in the materials to show that the conditions in Rule 86A were fulfilled in the present case and relied on prior decisions of this High Court to the same effect. Consequently the restriction imposed under Rule 86A could not be sustained for the purpose of recovering Dolphin Metals' dues from the petitioner's electronic credit ledger. [Paras 16, 17]

The restriction under Rule 86A as applied to block the petitioner's input tax credit for recovery of Dolphin Metals' dues is not justified and must be removed.

Non-applicability of director liability provision to public companies under Section 18 (Central Sales Tax Act, 1956) - Section 18 of the Central Sales Tax Act, 1956 (liability of directors of a private company in liquidation) does not apply to Dolphin Metals (India) Ltd., a public limited company. - HELD THAT: - The Court rejected the State's reliance on Section 18 of the Central Sales Tax Act, 1956 because that provision expressly pertains to "private company" and does not extend to public limited companies. The petition's averment that Dolphin Metals is a public limited company was not disputed, and on that basis the Court held that Section 18 could not be invoked to hold the petitioner liable or to justify appropriation of his input tax credit for recovery of Dolphin Metals' assessed dues. [Paras 16]

Section 18 of the Central Sales Tax Act, 1956 is inapplicable to Dolphin Metals (India) Ltd. and cannot justify blocking the petitioner's input tax credit.

Final Conclusion: Writ petition allowed. The respondent is directed to unblock the input tax credit in the petitioner's electronic credit ledger forthwith. The order does not preclude the department from pursuing recovery of Dolphin Metals' dues by any other mode of recovery permissible in law.

Section 50C - revision under section 264 - limitation and condonation of delay - quashing and remand

Quashing and remand - Impugned order of the Principal Commissioner dated 19.03.2018 is quashed and set aside. - HELD THAT: - The Court found that the order under challenge was liable to be quashed. Having considered the nature of the proceedings and the manner in which the Principal Commissioner dealt with the matter, the High Court set aside the impugned order and directed further action as recorded. The quashment is limited to the defects identified and is without expressing any opinion on the merits of the substantive tax questions which remain open for adjudication by the authority. [Paras 9]

Impugned order dated 19.03.2018 quashed and set aside.

Section 50C - revision under section 264 - Issue relating to applicability of Section 50C is remitted to the Principal Commissioner for fresh adjudication. - HELD THAT: - Although the Principal Commissioner recorded findings on limitation and proceeded to decide the revision application on merits, he did not record a conclusive finding on the specific contention regarding applicability of Section 50C. The High Court therefore remitted the matter to the Principal Commissioner of Income Tax-4, Ahmedabad to adjudicate the Section 50C issue afresh. The Court expressly declined to express any view on the merits, leaving the substantive determination to the authority in accordance with law. [Paras 2, 7, 8, 9]

Matter remitted to the Principal Commissioner for adjudication of the Section 50C issue; merits left open.

Limitation and condonation of delay - Limitation issue stands concluded and shall not be re-opened by the Principal Commissioner while deciding the Section 50C claim. - HELD THAT: - The High Court clarified that the question of limitation, which the Principal Commissioner had earlier recorded and used to reject the revision petition, is not to be re-opened on remand. The authority is precluded from re-adjudicating the limitation/condonation aspect and must confine its consideration to the Section 50C issue as directed by the Court. [Paras 10]

Limitation concluded; Principal Commissioner shall not re-open the limitation question on remand.

Final Conclusion: The writ petition succeeds in part: the Principal Commissioner's order dated 19.03.2018 is quashed and set aside; the matter is remitted to the Principal Commissioner of Income Tax-4, Ahmedabad for fresh adjudication solely on the applicability of Section 50C, with the limitation issue finally concluded and not to be re-opened; no opinion is expressed on the merits.

Extension of due dates - discretionary power under section 119 - judicial restraint in fixation of cut off dates - arbitrariness and reasonableness of executive action - filing discipline and revenue collection considerations

Extension of due dates - discretionary power under section 119 - arbitrariness and reasonableness of executive action - judicial restraint in fixation of cut off dates - Whether the Court should direct the CBDT to further extend the due dates for filing income tax returns and tax audit reports for A.Y. 2020 2021. - HELD THAT: - Petitioners sought a mandamus directing respondent to extend the due dates for filing tax audit reports and income tax returns for A.Y. 2020 21. The CBDT had already granted three successive extensions and, by an order under section 119, rejected representations for any further extension after considering the evolving COVID 19 situation, filing statistics, international comparisons and the impact of indefinite postponement on revenue collection and filing discipline. The High Court accepted that the power exercised by the CBDT under section 119 is discretionary and noted binding authorities emphasising judicial restraint in interfering with executive fixation of cut off dates unless the decision is blatantly arbitrary or capricious. Applying those principles, the Court found no failure to exercise discretion or arbitrariness in the CBDT order and no legal basis to direct a further extension of the due dates.

Writ petition dismissed; no direction to CBDT to further extend the due dates for A.Y. 2020 2021.

Final Conclusion: The petition challenging CBDT's refusal to grant any further extension of the statutory due dates for filing tax audit reports and income tax returns for A.Y. 2020 21 is dismissed; the CBDT's exercise of discretion under section 119 is held not to be arbitrary and there shall be no order as to costs.

Invocation of revisional power under Section 263 being permissible only where AO's order is erroneous and prejudicial to revenue - Section 263 cannot be invoked where the Assessing Officer has adopted a possible view - Entitlement to deduction under Section 80IA despite audit report (Form No.10CCB) being filed at appellate stage - Interaction between deductions under Section 80IA and Section 80HHC and the operation of Section 80IA(9)

Invocation of revisional power under Section 263 being permissible only where AO's order is erroneous and prejudicial to revenue - Section 263 cannot be invoked where the Assessing Officer has adopted a possible view - Entitlement to deduction under Section 80IA despite audit report (Form No.10CCB) being filed at appellate stage - Whether the Commissioner was justified in invoking Section 263 to withdraw the deduction under Section 80IA where Form No.10CCB was filed before the Commissioner (at appellate stage) and the Assessing Officer had taken one of the possible views. - HELD THAT: - The Court reiterated the twin conditions for exercise of revisional power under Section 263 - the assessing officer's order must be both erroneous and prejudicial to the revenue - and applied the settled proposition that Section 263 should not be invoked where the Assessing Officer has adopted a view that is one of the possible views. The record shows that the assessee had filed Form No.10CCB with written submissions before the Commissioner (and this filing was acknowledged). High Court and other High Court precedents have held that entitlement to deduction under Section 80IA may survive where the audit report is produced at the appellate stage. Given these authorities and the fact that the Commissioner's own order under Section 263 acknowledged that two views were possible, the invocation of Section 263 was not justified on the facts. The Court therefore concluded that the Assessing Officer's allowance on the question of eligibility under Section 80IA constituted a possible view and could not be upset by revision under Section 263. [Paras 7, 8, 9]

The invocation of Section 263 was unjustified; the deduction under Section 80IA could not be withdrawn by revision where the Assessing Officer had taken a possible view and the audit report had been filed at the appellate stage; the substantial questions of law are answered for the assessee.

Interaction between deductions under Section 80IA and Section 80HHC and the operation of Section 80IA(9) - Whether deduction under Section 80HHC must be computed after adjusting for deduction allowed under Section 80IA as contemplated by Section 80IA(9), and the consequent relief if Section 80IA is held allowable. - HELD THAT: - The Commissioner's order under Section 263 expressly directed that if it is subsequently held that the assessee is entitled to deduction under Section 80IA, the deduction under Section 80HHC would have to be recomputed keeping in mind Section 80IA(9). The High Court did not undertake fresh computation; rather it recorded that the Commissioner himself recognised the conditional interplay and that two views on entitlement existed. The consequence is that the question of recomputation and the correct application of Section 80IA(9) to the computation of Section 80HHC is to be left to the appropriate forum in the light of the determination on entitlement to Section 80IA. [Paras 8, 9]

Computation of deduction under Section 80HHC in the event Section 80IA is held allowable is to be revisited by the assessing/appellate authorities as indicated by the Commissioner; the Court did not uphold the revisionary withdrawal but recognised the need for recomputation if Section 80IA is finally held allowable.

Final Conclusion: The appeal is allowed; the orders dated 11.03.2008 (Commissioner under Section 263) and 23.11.2009 (Tribunal) are quashed. The Assessing Officer/Appellate Authority shall proceed in accordance with law, including recomputation of Section 80HHC if Section 80IA is ultimately held allowable.

Disallowance under Section 37 of the Income Tax Act - non-application of mind - unspeaking/cryptic order - appreciation of material on record and admission of evidence - remand for fresh consideration - restoration to Assessing Officer for independent enquiry

Disallowance under Section 37 of the Income Tax Act - unspeaking/cryptic order - non-application of mind - Validity of the tribunal's decision upholding the disallowance of commission expenses where the tribunal relied on a preceding year's order without independently appreciating the evidence placed on record for the relevant years. - HELD THAT: - The High Court found that the tribunal upheld the disallowance under Section 37 by merely following the order for a preceding year, without considering material produced by the assessee for Assessment Years 2009-10 and 2010-11. The appellate record (notably para 4.6 of the Commissioner of Income Tax (Appeals) order) manifested that the assessee had furnished agency agreements, invoices, bank remittances, payment vouchers and TDS certificates in support of the claim. The tribunal's order was held to be cryptic and to suffer from non-application of mind because it did not evaluate the evidence placed on record nor take into account the tribunal's earlier course in Assessment Year 2006-07 where the matter had been remitted to the Assessing Officer for independent enquiry and the claim subsequently allowed after appreciation of material. For these reasons the tribunal's affirmation of the addition was unsustainable.

Tribunal's upholding of the disallowance is quashed insofar as it was based on a mere reiteration of a prior year's order without appreciation of the facts and evidence.

Remand for fresh consideration - appreciation of material on record and admission of evidence - restoration to Assessing Officer for independent enquiry - Appropriate remedy and further course of action following the tribunal's failure to consider the assessee's evidence. - HELD THAT: - In view of the tribunal's cryptic order and failure to consider the material supplied by the assessee and its own earlier remand-related proceedings in Assessment Year 2006-07, the High Court remitted the matters relating to Assessment Years 2009-10 and 2010-11 to the tribunal for fresh decision. The tribunal and, if necessary, the Assessing Officer are to independently examine and appreciate the evidence already produced by the assessee and decide the claim in accordance with law, applying relevant principles to the material on record rather than mechanically following prior orders.

Matters remitted to the tribunal for fresh adjudication in accordance with law after independent appreciation of evidence.

Final Conclusion: The tribunal's order dated 30.12.2015 insofar as it pertains to Assessment Years 2009-10 and 2010-11 is quashed; the matters are remitted to the tribunal for fresh consideration and decision in accordance with law after independent appreciation of the evidence on record.

Proportionate deduction under Section 80IB(10) - project completion method of accounting - percentage completion method of accounting - applicability of Accounting Standard 7 to real estate developers - Accounting Standard 9

Proportionate deduction under Section 80IB(10) - Assessee entitled to proportionate deduction under Section 80IB(10) in respect of flats conforming to prescribed built-up area limits. - HELD THAT: - The Court held that the substantial question whether proportionate deduction under Section 80IB(10) could be allowed was no longer res integra in light of this Court's prior decisions, including CIT v. BRIGADE ENTERPRISES LTD. and CIT v. SJR BUILDERS, and therefore answered against the revenue. The Tribunal and the Commissioner (Appeals) correctly allowed deduction proportionately for those units that met the statutory built-up area condition, and the revenue's contention that the provision does not envisage proportionate deduction was rejected. [Paras 6]

First substantial question answered against the revenue and in favour of the assessee; proportionate deduction under Section 80IB(10) allowed for qualifying units.

Project completion method of accounting - percentage completion method of accounting - applicability of Accounting Standard 7 to real estate developers - Accounting Standard 9 - Project completion method is permissible for the assessee and Accounting Standard 7 does not apply to enterprises undertaking construction activities such as real estate developers. - HELD THAT: - The Tribunal's reliance on its earlier decision in PRESTIGE ESTATE PROJECTS - upheld by this Court - to the effect that Accounting Standard 7 is not applicable to real estate developers was accepted. In consequence, the percentage completion method could not be imposed on the assessee and the assessee was entitled to follow the project completion method in accordance with Accounting Standard 9. The Court also observed that the first substantial question being decided in favour of the assessee rendered the second question academic, and noted the Institute of Chartered Accountants' clarification that revised Accounting Standard 7 is not applicable to enterprises undertaking construction activities. [Paras 7]

Second substantial question answered against the revenue and in favour of the assessee; project completion method permissible and Accounting Standard 7 held not applicable.

Final Conclusion: Both substantial questions of law were answered against the revenue and in favour of the assessee; the appeal is dismissed and the assessments stand confirmed insofar as the Tribunal's grant of proportionate deduction under Section 80IB(10) and the acceptance of the project completion method are concerned.

Re-opening under Section 147 of the Income Tax Act - notice under Section 148 - escapement of income - satisfaction based on cogent or tangible material - interest on partners' capital and remuneration - failure to disclose material facts fully and truly

Re-opening under Section 147 of the Income Tax Act - notice under Section 148 - escapement of income - interest on partners' capital and remuneration - satisfaction based on cogent or tangible material - Validity of reopening the assessment for Assessment Year 2011-12 beyond four years on the basis that interest on capital and remuneration received from the partnership firm had escaped assessment. - HELD THAT: - The Court examined whether the Assessing Officer had formed a belief, based on cogent or tangible material, that income chargeable to tax had escaped assessment so as to justify reopening beyond four years. The decision to reopen was substantially premised on an allegation that the petitioner had received interest on capital and remuneration from the partnership firm which were not offered to tax. The Court reiterated the settled legal position that mere incorporation of provision for interest and remuneration in the partnership deed does not by itself demonstrate that such amounts were actually received by the partner; there must be material on record indicating receipt of such income. Applying the principle laid down by this Court in PCIT vs. Alidhara Taxspin Engineers, the Court concluded that the reasons recorded amounted to conjecture and surmise and did not constitute tangible material to satisfy the jurisdictional requirement under Section 147. Consequently, the assumption of jurisdiction to reopen the assessment for AY 2011-12 was held to be unjustified. [Paras 20, 21, 23, 24, 25]

Re-opening of the assessment for Assessment Year 2011-12 was not justified; the impugned notice is quashed and set aside and all consequential proceedings are terminated.

Final Conclusion: Writ allowed. The notice issued for re-opening the assessment for Assessment Year 2011-12 is quashed and set aside for lack of cogent or tangible material to show escapement of income; consequential proceedings pursuant to the notice stand terminated.

Deduction under Section 54F - long term capital asset - short term capital asset - settlement deed versus gift - period of holding - characterisation of property as commercial or residential

Settlement deed versus gift - deduction under Section 54F - long term capital asset - short term capital asset - period of holding - Whether the assessee was entitled to deduction under Section 54F by treating the trademark transfer as a gift (via settlement deed) and the capital gain as long term despite the assessee's short possession. - HELD THAT: - The Assessing Officer treated the trademark transfer as not being a gift and held the asset to be a short term capital asset because the assessee's period of possession was less than four months, disallowing the Section 54F deduction. The CIT(A) examined the covenants and conditions of the document dated 19.12.2010, concluded that it was a voluntary gift (no consideration and unconditional acceptance), and allowed the deduction. The Tribunal affirmed that factual conclusion after considering the deed and prior Tribunal decisions concerning the other owners. The High Court found that the dispute turned on factual findings which were thoroughly examined by the CIT(A) and the Tribunal and that no substantial question of law arises from those concurrent factual determinations. [Paras 4, 5, 6, 7, 8]

Findings that the document dated 19.12.2010 was a deed of gift and that the assessee was entitled to treat the gain as long term for purposes of Section 54F are upheld; no substantial question of law arises and the Revenue's challenge is dismissed.

Characterisation of property as commercial or residential - Whether the property held by the assessee was commercial and therefore properly characterised as such for tax purposes. - HELD THAT: - The Assessing Officer had characterised the property as residential. The CIT(A) referred to the sale deed dated 24.3.1995 and the clauses therein to conclude the property in Secunderabad (in 'Diamond Towers') was a commercial property. The Tribunal confirmed that factual conclusion. Although the Revenue did not frame this as a substantial question of law, the High Court independently examined the finding and found the CIT(A) and Tribunal were correct in their factual assessment based on the sale deed. [Paras 9, 10, 11]

The property is correctly characterised as commercial; the Revenue has no valid ground to interfere and no substantial question of law arises.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal's factual findings that the transfer was a gift permitting long term capital gain treatment for Section 54F and that the property is commercial are upheld; no substantial question of law arises.

Rectification under section 154 of the Income-tax Act - Valuation of intra-division transfer of steam - Deduction under section 80IA - Penalty for concealment under section 271(1)(c) of the Income-tax Act - Concealment versus debatable/technical claim

Rectification under section 154 of the Income-tax Act - Valuation of intra-division transfer of steam - Deduction under section 80IA - Validity of the recomputation of the cost/value of steam transferred from the power division to the sugar division made in the order under section 154 and whether the assessee was prejudiced thereby. - HELD THAT: - The Tribunal examined the assessee's application under section 154 which sought correction of the value of steam from the figure adopted in the consequential order. The Addl. CIT's recomputation under section 154 fixed the cost of steam at a figure higher than that prayed for by the assessee. The Tribunal found that the recomputed value granted in the rectification order was more beneficial to the assessee than the value earlier adopted by the AO and was therefore not prejudicial. The Tribunal also recorded that the disputed computation would not have consequential effect on subsequent assessment years. In these circumstances, interference with the rectification order was unwarranted and no prejudice to the assessee arising from the recomputation was shown. [Paras 5, 6]

Assessee's appeal against the order under section 154 dismissed; the rectification/recomputation of the steam value was upheld as not prejudicial to the assessee.

Penalty for concealment under section 271(1)(c) of the Income-tax Act - Concealment versus debatable/technical claim - Valuation of intra-division transfer of steam - Whether penalty under section 271(1)(c) could be sustained for allegedly furnishing inaccurate particulars in relation to the claimed cost of steam. - HELD THAT: - The Tribunal reviewed the penalty proceedings in the light of its findings on the technical and complicated nature of the computation of steam value carried out in consequential and rectification proceedings. It concluded that the dispute over the appropriate valuation was a debatable and technical issue, not a deliberate suppression of income or furnishing of incorrect particulars. Given that the computation involved substantial technical judgment and was reworked by the AO and in rectification, the Tribunal held that imposition of penalty for concealment was not justified. [Paras 9, 10]

Penalty under section 271(1)(c) set aside and assessee's appeal in that regard allowed.

Final Conclusion: For A.Y. 2009-10 the rectification/recomputation of the cost of steam effected under section 154 was sustained as not prejudicial to the assessee and the corresponding appeal dismissed, whereas the penalty levied under section 271(1)(c) was quashed because the valuation dispute was technical and debatable and did not amount to concealment.

Vivad Se Vishwas Scheme - withdrawal of appeal and consignment to record - reinstitution of appeal upon failure of settlement - depreciation on assets installed at third party premises - claim of depreciation despite hire/possession arrangements - application of coordinate tribunal precedents in assessee's own case

Vivad Se Vishwas Scheme - withdrawal of appeal and consignment to record - reinstitution of appeal upon failure of settlement - Withdrawal of appeals by the assessee under the Vivad Se Vishwas Scheme and treatment of those appeals as consigned to record and dismissed subject to a caveat for reinstitution. - HELD THAT: - The assessee applied to withdraw its appeals after opting for the Vivad Se Vishwas Scheme and obtaining Form No. 3 under section 5(1) of the Scheme. The Tribunal recorded the withdrawal, consigned the appeals to record and treated them as dismissed, while expressly allowing the assessee liberty to seek reinstitution if the dispute relating to tax arrears is not ultimately resolved under the Scheme. The Revenue raised no objection to this caveat. [Paras 3, 4, 5]

Appeals by the assessee consigned to record and treated as dismissed subject to liberty to apply for reinstitution if settlement under the Scheme fails.

Depreciation on assets installed at third party premises - claim of depreciation despite hire/possession arrangements - application of coordinate tribunal precedents in assessee's own case - Whether the addition of depreciation claimed on assets installed at premises of third parties (rented/hired out assets) could be sustained by the Revenue or had rightly been deleted by the CIT(A). - HELD THAT: - The AO disallowed depreciation on the ground that the assets were not used by the assessee for self use and were subject to hire arrangements with transfer of title on payment of instalments. The CIT(A) deleted the addition, following earlier Tribunal decisions in the assessee's own case where identical facts led to allowance of depreciation for assets provided to third parties for manufacture/use under contractual arrangements. The Tribunal found no distinguishing features in the present assessment year to depart from that consistent view and, in the absence of contrary persuasive distinguishing facts, upheld the CIT(A)'s deletion of the addition. The Revenue's ground alleging higher purchases or hire arrangements was not found to justify reversal. [Paras 7, 8, 10]

Ground raised by the Revenue dismissed; deletion of the addition of depreciation upheld.

Final Conclusion: Assessee's appeals withdrawn under the Vivad Se Vishwas Scheme and consigned to record as dismissed subject to reinstitution if settlement fails; revenue's appeal against deletion of depreciation for AY 2011-12 dismissed and the CIT(A)'s order upholding the claim of depreciation sustained.

Allowability of commission expenditure - proof of rendition of services - initial onus under section 68 - genuineness of loans - creditworthiness and documentary proof for loans - remand for fresh examination where identity/status disputed - allowability of interest on undisputed genuine loan

Allowability of commission expenditure - proof of rendition of services - Extent of disallowance of commission payments debited to profit and loss account. - HELD THAT: - Although payments were supported by invoices and confirmations and some similar commissions were allowed in earlier and later years, the AO was justified in requiring evidence of actual rendition of services by the payees. Mere receipt of income by payees and banking channel transactions do not, by themselves, prove rendition of services. Having considered the material and the pattern in other years, the Tribunal concluded that half of the disallowed commission should be accepted as genuine while the balance disallowance should be sustained. [Paras 9, 10]

Disallowance reduced by fifty per cent; restriction of disallowance to Rs. 9,40,000/- and deletion of the balance.

Initial onus under section 68 - genuineness of loans - creditworthiness and documentary proof for loans - remand for fresh examination where identity/status disputed - Genuineness and consequent tax treatment of unsecured loans received from three specified parties. - HELD THAT: - Sapebelle Trader Linkers Pvt Ltd: Existence of an opening credit balance, repayments during the year, subsequent full repayment, income-tax returns, statements of account and robust bank transactions established the identity and creditworthiness of the lender; the assessee discharged the initial onus under section 68 and the addition was deleted. Ishwar Das Gupta: Records before the lower authorities treated the provider as an individual, whereas the paper book indicates the lender is an HUF; because the facts were not clearly examined below, the Tribunal remanded the issue to the AO for fresh scrutiny and directed the assessee to furnish necessary evidence, with opportunity to be heard. Binod Choudhary: Only a ledger entry without confirmation or supporting evidence was produced; absence of corroboration led the Tribunal to confirm the addition. [Paras 17, 18, 19, 20]

Addition in respect of Sapebelle Trader Linkers Pvt Ltd deleted; addition in respect of Ishwar Das Gupta remanded to AO for fresh examination treating the lender as HUF (statistical allowance); addition in respect of Shri Binod Choudhary confirmed.

Allowability of interest on undisputed genuine loan - interest disallowance linked to outcome under section 68 - Allowability of interest paid on the unsecured loans considered above. - HELD THAT: - Interest attributable to the loan from Sapebelle Trader Linkers Pvt Ltd is to be allowed in view of the finding that the loan is genuine. Interest in respect of the loan from Ishwar Das Gupta is to be kept in abeyance pending the AO's fresh examination on remand regarding the lender's status and genuineness. Interest claimed in respect of Shri Binod Choudhary is to be disallowed because the underlying loan addition was confirmed for lack of corroborative evidence. [Paras 21]

Interest allowed for Sapebelle Trader Linkers Pvt Ltd; interest in respect of Ishwar Das Gupta kept in abeyance pending AO's fresh decision; interest relating to Shri Binod Choudhary disallowed.

Final Conclusion: The appeal is allowed in part: commission disallowance reduced by fifty per cent; addition relating to loan from Sapebelle Trader Linkers Pvt Ltd deleted; addition relating to Ishwar Das Gupta remanded to the Assessing Officer for fresh examination treating the lender as HUF; addition relating to Shri Binod Choudhary confirmed; interest consequences directed accordingly. Appeal disposed of in part for statistical purposes.

Assessment under section 153A after search and abatement of pending assessments - Relevance and nexus of additions to seized material in proceedings under section 153A - Levy of interest under section 234A for delay in filing return pursuant to notice under section 153A - Disallowance under section 40A(3) for cash payments - Exception under Rule 6DD(k) for payments to agents/intermediaries - Non attraction of section 40A(3) to capital expenditure - Additional depreciation on capitalised pre operative expenses forming part of block of assets - Disallowance under section 40(a)(ia) for non deduction of TDS (scope after legislative amendments) - No disallowance under section 40(a)(ia) for mere short deduction where tax was deducted/deposit dispute is one of differing opinion

Assessment under section 153A after search and abatement of pending assessments - Relevance and nexus of additions to seized material in proceedings under section 153A - Validity of assessment and additions framed under section 153A for the abated assessment year - HELD THAT: - Search under section 132 having taken place and the assessment for A.Y. 2007-08 being pending on the date of search, the assessment stood abated and the Assessing Officer was required to compute total income afresh under section 153A. The Tribunal applied the legal position laid down by the jurisdictional High Court (Kabul Chawla) that while section 153A does not expressly limit additions strictly to seized material, the assessment cannot be arbitrary and must have relevance or nexus with seized material or other material available to AO. On the facts, because the statutory abatement had occurred and the AO lawfully proceeded to recompute total income, the assessee's challenge to the vires/competence of assessment under section 153A and attendant additions was rejected; no interference with the CIT(A)'s order was warranted. [Paras 12, 13]

Assessee's grounds challenging validity of assessment under section 153A and related additions dismissed; assessment under section 153A upheld.

Deductibility of business expenses under section 37 - Allowability of alleged personal expenses amounting to Rs. 2,49,650 disallowed by AO - HELD THAT: - AO disallowed the expenses for want of substantiation and relied on the special auditor's observations. The assessee produced details and supporting documents before the AO (not controverted by Revenue) and explained that the expenses related to directors' travel incurred for business purposes. Considering the uncontroverted production of documentary evidence and the business purpose, the Tribunal found the disallowance unjustified and deleted the addition. [Paras 15, 16, 17]

Disallowance deleted; expenses held allowable.

Levy of interest under section 234A for delay in filing return pursuant to notice under section 153A - Whether interest under section 234A is leviable where return was filed after the due date specified in the notice under section 153A and assessee's request for extension was not shown to be granted - HELD THAT: - Section 234A applies where return is filed after the 'due date' specified in notice under section 142. Notice under section 153A required filing within 16 days; the assessee contended it sought extension and filed later. No material showed AO granted the extension. The Tribunal held there was delay in filing the return and interest under section 234A was correctly levied from the date following the due date; the assessee's ground was therefore rejected. [Paras 21, 22]

Interest under section 234A sustained; assessee's ground dismissed.

Disallowance under section 40A(3) for cash payments - Exception under Rule 6DD(k) for payments to agents/intermediaries - Non attraction of section 40A(3) to capital expenditure - Validity of disallowances under section 40A(3) for various cash payments (freight to transporters/truck operators, depreciation on assets purchased in cash, salary, advances, festival gifts etc.) for A.Y. 2008-09 - HELD THAT: - For freight payments to truck operators, the Tribunal noted the assessee relied on Rule 6DD(k) (payments to agent) and on decisions in its favour, but the co ordinate bench decision in the group company's case held truck drivers/operators are not agents within Rule 6DD(k) and such payments are not protected; no distinguishing facts were shown, and the CIT(A)'s partial confirmation was upheld to that extent. As to depreciation disallowed on capital assets purchased in cash, the Tribunal followed co ordinate bench precedent (Kansi Ram Madan Lal) that section 40A(3) does not apply to capital expenditure and reversed AO's disallowance. Salary paid in cash to an employee without bank account, Diwali gifts where individual payments did not exceed threshold, and advance to contractor (where payments to individuals were not in excess of threshold and genuineness was not doubted) were held to be allowable and disallowances deleted. Overall, the appeal was partly allowed. [Paras 39, 40, 41, 42, 43]

Disallowance under section 40A(3) upheld in part (freight payments as treated by CIT(A)); disallowance on depreciation reversed; certain other disallowances deleted - appeal partly allowed.

Additional depreciation on capitalised pre operative expenses forming part of block of assets - Allowability of additional depreciation on pre operative expenses capitalised as part of plant and machinery block - HELD THAT: - Pre operative expenses capitalised formed part of the block of assets; AO had allowed normal depreciation under section 32 on the capitalised cost. Revenue did not place material to show these capitalised pre operative expenses were indirect and not attributable to bringing assets to working condition. Applying accounting standards and the guidance note relied upon by assessee, and on the acceptance by AO of capitalization and depreciation, the Tribunal directed AO to allow additional depreciation on such capitalised pre operative expenses and to recompute accordingly (assessee did not press additional depreciation on old machinery). [Paras 46, 47, 49]

Additional depreciation on capitalised pre operative expenses allowed; AO directed to recompute.

Disallowance under section 40(a)(ia) for non deduction of TDS (scope after legislative amendments) - No disallowance under section 40(a)(ia) for mere short deduction where tax was deducted/deposit dispute is one of differing opinion - Validity and extent of disallowance under section 40(a)(ia) for (a) non deduction of TDS and (b) short deduction of TDS - HELD THAT: - For non deduction of TDS, the Tribunal applied the Supreme Court's decision in Shree Choudhary Transport Company and held that the amendment by Finance Act, 2014 limiting disallowance to 30% is substantive and not retrospectively applicable; accordingly the disallowance for non deduction was upheld as per law applicable to the years in question. For short deduction (i.e., deduction at a lower rate or differing view on applicability), the Tribunal followed Calcutta High Court authority (S.K. Tekriwal) and co ordinate bench precedents: where shortfall arises from difference of opinion as to taxability or nature of payment and tax has been deducted (albeit at lower rate) or not shown to be not deposited, disallowance under section 40(a)(ia) is not called for. On these bases the Tribunal partly allowed the appeal. [Paras 51, 55, 56]

Disallowance for non deduction of TDS sustained in accordance with binding Supreme Court ruling; disallowance for short deduction deleted where shortfall arose from difference of opinion - appeal partly allowed.

Final Conclusion: Both appeals are partly allowed: assessments under section 153A were upheld; the disallowance of certain personal and specified expenses was deleted; interest under section 234A was sustained; cash payment disallowances under section 40A(3) were upheld in part and deleted in part (depreciation on capital expenditure and certain payments allowed); additional depreciation on capitalised pre operative expenses was allowed and to be recomputed; disallowances under section 40(a)(ia) were sustained for non deduction of TDS in accordance with Supreme Court precedent but deleted where only short deduction arose from a difference of opinion.

Deduction under section 80IA(4)(i) - development, operation and maintenance of infrastructure facility - agreement with a statutory body - applicability of Tribunal's precedent in assessee's own case

Deduction under section 80IA(4)(i) - development, operation and maintenance of infrastructure facility - agreement with a statutory body - Entitlement of the assessee to claim deduction under section 80IA(4)(i) for profits from cargo handling services at Bengaluru International Airport Ltd. for AY 2015-16. - HELD THAT: - The Tribunal examined earlier decisions in the assessee's own case for preceding assessment years and noted that the agreement between the assessee and BIAL was held to be for development, operation and maintenance of an infrastructure facility. Although an earlier Tribunal order had found that the requirement of agreement with a Central/State government or statutory body was not satisfied, that order was recalled after the Hon'ble High Court of Karnataka held that BIAL is a statutory body. The facts and contractual arrangements for AY 2015-16 were found to be identical to those in the earlier years where the assessee's claim was allowed. In view of the prior findings-including the High Court's characterisation of BIAL as a statutory body-and the consistency of facts, the Tribunal found no reason to take a contrary view for AY 2015-16 and affirmed the allowance of deduction. [Paras 6]

The assessee is entitled to the deduction under section 80IA(4)(i) for AY 2015-16; revenue's appeal dismissed.

Applicability of Tribunal's precedent in assessee's own case - Whether the CIT(A) erred in following the predecessor's order and prior Tribunal decisions instead of adjudicating afresh for AY 2015-16. - HELD THAT: - The Tribunal applied its earlier decisions in the assessee's own case (including the recalled order and subsequent orders where both the nature of the agreement and the statutory character of BIAL were considered) to the year under appeal. Finding the facts and circumstances identical to earlier years, the Tribunal accepted reliance on precedent in the assessee's favour and saw no justification for departing from those conclusions. Accordingly, the CIT(A)'s adoption of the predecessor's view was upheld. [Paras 6]

The CIT(A)'s reliance on prior orders in the assessee's own case was appropriate; no error in following precedent and the revenue's challenge is dismissed.

Final Conclusion: The revenue's appeal is dismissed; the assessee's claim of deduction under section 80IA(4)(i) in respect of cargo handling operations at BIAL for AY 2015-16 is upheld in view of earlier tribunal findings and the High Court's declaration that BIAL is a statutory body.

Taxability of interest income - allowability of interest expenditure against interest income - capitalisation to work-in-progress - inextricable linkage - allowance of interest under Section 36(1)(iii) of the Income Tax Act, 1961

Taxability of interest income - allowability of interest expenditure against interest income - inextricable linkage - capitalisation to work-in-progress - allowance of interest under Section 36(1)(iii) of the Income Tax Act, 1961 - Whether interest earned on fixed deposits created out of a project loan is taxable in full or can be netted with interest cost and capitalised as work-in-progress where the project has commenced but operations were stalled. - HELD THAT: - The AO taxed the interest earned on fixed deposits because the assessee did not initially offer that interest for taxation. The assessee contended that the FDRs were funded from a loan taken for the Tarun Nagar project and that the interest cost on the loan exceeded the interest income; the net interest cost was capitalised to work-in-progress. The CIT(A) and this Tribunal examined whether the project had commenced and whether the interest income was inextricably linked to the capital WIP. The Tribunal accepted that the project had commenced (approvals obtained and advances received) and that the FDRs were created from the project loan; consequently the interest expenditure could be allowed under the provision permitting deduction of interest incurred for the purposes of business (i.e., Section 36(1)(iii)) and capitalised to WIP. Because the project had commenced, the interest income could not be taxed in full without permitting set-off of the corresponding interest expenditure; only the net amount is to be brought to tax in accordance with law.

Appeals partly allowed; the impugned additions are set aside to the extent that only the net interest (interest received minus allowable interest expenditure properly capitalised to WIP) shall be taxed in accordance with law.

Final Conclusion: The Tribunal set aside the addition of gross interest income and directed that, since the project had commenced and the FDRs were sourced from the project loan, the corresponding interest expenditure be recognised under the statutory allowance and only the net interest be brought to tax; the three appeals are partly allowed.

Allowability of salary to a relative where services are rendered - prohibition on Revenue re-assessing commercial reasonableness of business expenditure - disallowance under section 14A read with Rule 8D - requirement of recording satisfaction before invoking Rule 8D - no disallowance under section 14A in years with no exempt income - allowance of depreciation on assets shown in books though temporarily parked at promoters' residences - inadmissibility of adhoc disallowance without pinpointing non-business expenditure - treatment of payments to related/non-resident service providers - genuineness and DTAA/TDS considerations - treatment of seized cash which is subsequently accounted for in books

Allowability of salary to a relative where services are rendered - prohibition on Revenue re-assessing commercial reasonableness of business expenditure - Deletion of disallowance of salary paid to Ms. Sonali Nanda in all three assessment years - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the disallowance because the assessee produced appointment letters, terms of service and evidence of prior experience and services rendered by Ms. Sonali Nanda; her salary was reflected and taxed in her hands. The Assessing Officer's basis for disallowance - employment by virtue of relationship and absence of open selection - was held not to constitute a legal ground for disallowance when services and nexus to business are demonstrated. The Revenue had not shown that the expenditure was not incurred for the purpose of business; further, the Assessing Officer cannot sit in the place of management to reassess commercial reasonableness as per established precedents. On these findings the departmental grounds challenging deletion were dismissed for AYs 2011-12, 2012-13 and 2013-14. [Paras 5]

Disallowance of salary to Ms. Sonali Nanda deleted in all three years; departmental grounds dismissed.

Disallowance under section 14A read with Rule 8D - requirement of recording satisfaction before invoking Rule 8D - no disallowance under section 14A in years with no exempt income - Validity of disallowance under section 14A/read with Rule 8D for the three assessment years - HELD THAT: - For AY 2011-12 the AO computed disallowance under Rule 8D without recording any satisfaction or cogent reasons for rejecting the assessee's suo moto disallowance; following the jurisdictional principle in Maxopp Investment Ltd., the Tribunal held such computation unsustainable and confirmed that only the assessee's suo moto disallowance stands. For AYs 2012-13 and 2013-14 the assessee had earned no exempt income; applying the principle in Cheminvest Ltd. and the Tribunal's earlier orders in the assessee's own case, the Tribunal held that no disallowance under section 14A could be made in years where no exempt income was earned. Consequently the departmental grounds on section 14A were dismissed and the assessee's cross-objections on the point were allowed where applicable. [Paras 5]

Disallowance under section 14A/Rule 8D struck down for AY 2011-12 for lack of recorded satisfaction; disallowance deleted for AYs 2012-13 and 2013-14 as no exempt income was earned.

Allowance of depreciation on assets shown in books though temporarily parked at promoters' residences - inadmissibility of adhoc disallowance without pinpointing non-business expenditure - Deletion of disallowance of depreciation on cars and deletion of adhoc addition for car running/maintenance expenses - HELD THAT: - The Tribunal followed its earlier findings in the assessee's own case that cars shown as fixed assets and forming part of written down value in the books are entitled to depreciation even if, during renovation, they were temporarily parked at promoters' residences. Mere parking does not ipso facto establish non-business use. Further, the AO's adhoc disallowance of running and maintenance expenses without identifying specific non-business items was held unsustainable. The CIT(A)'s deletion (and direction as to the adhoc disallowance) was upheld for the relevant years. [Paras 5]

Depreciation on cars allowed and adhoc disallowance for car running/maintenance deleted; departmental grounds dismissed.

Allowance of depreciation on assets shown in books though personally used by director - Sustainability of disallowance of depreciation on gym equipment - HELD THAT: - Applying the Tribunal's earlier reasoning, equipment purchased and appearing in the company's fixed assets and used in the course of hotel business cannot have depreciation disallowed merely because the managing director also uses it. If exclusive personal use is established, perquisite treatment may be appropriate, but not disallowance in the hands of the company when the asset forms part of the block. Consequently the CIT(A)'s deletion of the disallowance was accepted. [Paras 5]

Disallowance of depreciation on gym equipment deleted; assessee's cross-objections allowed on this point.

Treatment of payments to related/non-resident service providers - genuineness and DTAA/TDS considerations - Deletion of disallowance of payment to M/s Apex Enterprises in AY 2012-13 - HELD THAT: - The assessee produced agreements (General Sales Agent/consultancy) found during search, correspondence and evidence of efforts by M/s Apex Enterprises; the AO did not demonstrate that no services were rendered. Further, under the DTAA with UAE, the payments were not subject to TDS. The CIT(A)'s finding that failure to procure concrete business did not render the transaction non-genuine was accepted; the Tribunal found no cogent reason to interfere and dismissed the departmental ground challenging deletion. [Paras 5]

Addition disallowing payment to M/s Apex Enterprises deleted; departmental ground dismissed.

Treatment of seized cash which is subsequently accounted for in books - Deletion of addition of unexplained cash of Rs. 5,50,000 in AY 2012-13 - HELD THAT: - Although the cash was seized during search and no specific explanation was offered at that moment, the CIT(A) found that the seized cash was subsequently reflected separately in the audited balance sheet and included in income from sale of scrap offered to tax. This factual finding that the seized cash was accounted for was not controverted as perverse; the Tribunal declined to interfere with the factual conclusion and upheld deletion of the addition. [Paras 5]

Addition in respect of seized cash deleted; departmental ground dismissed.

Final Conclusion: All three departmental appeals are dismissed and the assessee's cross objections are allowed to the extent indicated above, with the Tribunal upholding deletion of the impugned additions/disallowances on the legal and factual bases stated.

Estimation of income - comparative net profit ratio - rejection of books of account - application of reasonable criteria for best judgment assessment - no higher presumptive rate solely because books are not maintained

Estimation of income - comparative net profit ratio - rejection of books of account - no higher presumptive rate solely because books are not maintained - Whether the Assessing Officer was justified in estimating the assessee's income by applying a net profit rate of 5% instead of accepting the assessee's declared net profit rate of 2% on admitted turnover detected from bank deposits. - HELD THAT: - The assessee admitted that bank deposits represented sale proceeds and the admitted turnover for the year was the higher figure reflected in bank deposits, which were not recorded in books and not audited. Once books are rejected or absent and the Assessing Officer proceeds to estimate income, he must apply a reasonable and proper criterion such as prevailing GP/NP in the trade or the assessee's past history. Comparative net profit ratios of other concerns in the same trade are a proper guide. The authorities below declined to accept the comparatives solely because the assessee had not maintained audited books; that approach is arbitrary. There is no basis recorded for adopting a 5% net profit rate except the absence of books. Absence of books cannot, by itself, justify applying a higher arbitrary profit rate. The comparatives produced show NP rates below 2% and the assessee offered 2%, which is in line with prevailing rates in the trade. On these determinative findings the Tribunal held that the Assessing Officer's adoption of 5% was without basis and the assessee's declared NP of 2% on the admitted turnover is reasonable and must be accepted. [Paras 5, 6, 7]

The addition made by the Assessing Officer on account of applying 5% NP is deleted and the assessee's offered net profit rate of 2% on the admitted turnover is accepted.

Final Conclusion: Appeal allowed; addition confirmed by assessing authorities deleted and income estimated on net profit rate of 2% on admitted turnover for AY 2014-15.

Provisional release pending adjudication under Section 110A of the Customs Act, 1962 - detention of goods under the Customs Act - responsibility of Customs Cargo Service Provider and prohibition on charging demurrage for seized or detained goods under Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulations, 2009 - judicial direction to administrative authority to decide pending application

Provisional release pending adjudication under Section 110A of the Customs Act, 1962 - judicial direction to administrative authority to decide pending application - Application filed by the petitioner under Section 110A for provisional release of detained imported MFDs must be considered and decided by the competent authority within a specified time. - HELD THAT: - The Court confined itself to the limited question of provisional release and did not adjudicate the substantive legality of importation or the reasons for detention which are pending before the Supreme Court. The materials show an application dated 3rd October 2019 under Section 110A seeking provisional release. In view of the pending administrative decision, the Court directed respondent No.2 to examine that application and pass an appropriate order. While deciding the application, respondent No.2 is to take into account the statutory scheme for provisional release under Section 110A and relevant regulatory considerations identified by the Court. The Court fixed a short timeline for administrative decision-making to avoid undue delay in resolution of the plea for provisional release. [Paras 6, 7, 8, 11]

Respondent No.2 is directed to decide the petitioner's application dated 3rd October 2019 for provisional release under Section 110A within eight days of receipt of this order.

Detention of goods under the Customs Act - responsibility of Customs Cargo Service Provider and prohibition on charging demurrage for seized or detained goods under Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulations, 2009 - While the provisional release application is to be decided, the Court leaves open the larger question of the right to import and the correctness of detention, and requires the authority to have regard to Regulation 6(1)(l) and relevant judicial orders. - HELD THAT: - The Court expressly refrained from determining the merits of detention or the ultimate rights and liabilities of the petitioner, noting that these issues are sub judice before the Supreme Court. However, in adjudicating the provisional release application respondent No.2 must keep in mind Regulation 6(1)(l) which prohibits charging rent or demurrage on goods seized or detained by customs officers, as well as the decisions of higher courts mentioned by the Court. The larger controversy is to remain open and governed by the final outcome of the Supreme Court proceedings. [Paras 5, 12, 13, 14]

The Court left the substantive issue of legality of import and detention open for final adjudication while directing respondent No.2 to consider Regulation 6(1)(l) and relevant judicial precedents when deciding the provisional release application.

Final Conclusion: Writ petition disposed by directing respondent No.2 to decide the petitioner's Section 110A application for provisional release of the detained MFDs within eight days, having regard to Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulations, 2009 and the judicial orders referred to; the substantive dispute over import rights and detention is left open pending final adjudication by the Supreme Court.

Eligible passenger concession under Notification No. 12/2012-Cus. - confiscation under Section 111 of the Customs Act - release on payment of concessional duty - commercial quantity versus personal use - penalty under Section 112(a)(i) - penalty under Section 114AA - jurisdiction of appellate forum in baggage/gold seizures

Jurisdiction of appellate forum in baggage/gold seizures - Preliminary objection that appeal against the Commissioner (Appeals) order lies before Joint Secretary under the Baggage Rules and not before the Tribunal - HELD THAT: - The Tribunal held that pure gold does not fall under the Baggage Rules, 2016 for purposes of determining the appellate forum in this case. Because the dispute principally concerned seizure of gold, the appeal was properly entertainable before this Tribunal and the preliminary objection raised by the Revenue was rejected. [Paras 11]

Preliminary objection dismissed; appeal lies to this Tribunal.

Eligible passenger concession under Notification No. 12/2012-Cus. - confiscation under Section 111 of the Customs Act - release on payment of concessional duty - commercial quantity versus personal use - Whether the seized gold (233.00 gms in discs) was liable to absolute confiscation or was importable by the appellant as an eligible passenger on payment of concessional duty - HELD THAT: - The Tribunal found that the quantity of gold seized (20 discs totalling 233.00 grams) was a small quantity for personal use and did not amount to commercial import. The appellant met the definition of an "eligible passenger" as envisaged in condition No. 35 of Notification No. 12/2012-Cus. Consequently, there was no contravention warranting confiscation under the cited provisions of Section 111 of the Customs Act in respect of the gold. The Tribunal therefore set aside confiscation and directed release of the seized gold on payment of concessional duty under the Notification read with the Customs Tariff provisions. [Paras 12]

Confiscation of gold set aside; gold to be released on payment of concessional duty under Notification No. 12/2012-Cus.

Confiscation under Section 111 of the Customs Act - commercial quantity versus personal use - penalty under Section 112(a)(i) - penalty under Section 114AA - Whether the seized cigarettes (960 sticks) should be confiscated and whether penalties imposed should be sustained or modified - HELD THAT: - The Tribunal accepted that the cigarettes were not of commercial character but noted that the appellant was entitled to import only 100 sticks duty free. The larger quantity (960 sticks) therefore could be confiscated. In relation to penalties, the Tribunal reduced the penalty under Section 112(a)(i) from the amount imposed below to a reduced sum, finding mitigation appropriate, and set aside the penalty under Section 114AA because the statutory prerequisites for imposing that penalty were not established on the facts. [Paras 13]

Absolute confiscation of cigarettes upheld; penalty under Section 112(a)(i) reduced; penalty under Section 114AA set aside.

Final Conclusion: Appeal allowed in part: confiscation of gold set aside and gold ordered released on payment of concessional duty; confiscation of cigarettes upheld; penalty under Section 112(a)(i) reduced and penalty under Section 114AA set aside; preliminary jurisdictional objection dismissed.

Provisional assessment - penalty under the Customs (Provisional Duty Assessment) Regulations, 2011 - delay in furnishing import documents and condonation of delay - no revenue implication and bona fide lapse - enhancement of penalty without reasoned basis

Penalty under the Customs (Provisional Duty Assessment) Regulations, 2011 - delay in furnishing import documents and condonation of delay - no revenue implication and bona fide lapse - enhancement of penalty without reasoned basis - Whether the enhancement of penalty by the Commissioner (Appeals) to the maximum prescribed amount per Bill of Entry was justified in view of delays in submission of documents which were bona fide and involved no revenue implication. - HELD THAT: - The Tribunal found that the delays related to late furnishing of certain import documents and there was no established revenue loss or deliberate or mala fide conduct by the appellant. The appellant produced documents as and when they were procured and 27 out of 35 Bills of Entry were finalised even before adjudication. The original adjudicating authority imposed a nominal, lenient penalty which had been paid. The Commissioner (Appeals) enhanced the penalty to the maximum per remaining Bill of Entry without furnishing reasons to justify imposition of the maximum penalty. In these circumstances, and having regard to precedent treating bona fide delay with no revenue implication as not warranting severe penalty, the Tribunal concluded that enhancement to the maximum penalty was unjustified and that the original order of the adjudicating authority should be restored. [Paras 9, 11]

The enhancement order of the Commissioner (Appeals) is set aside and the adjudicating authority's order imposing a nominal penalty is restored.

Final Conclusion: Appeal allowed; Order-in-Appeal dated 29.03.2019 set aside and the Original Authority's order dated 01.11.2017 restoring the nominal penalty is reinstated.

Oppression and mismanagement - appointment of a Special Officer to preside over Board meetings - interim powers of the Tribunal under Section 242(4) of the Companies Act - expeditious disposal obligation under Section 422 of the Companies Act - preservation and protection of company assets pending adjudication - supervision of corporate affairs to prevent depletion of assets

Appointment of a Special Officer to preside over Board meetings - interim powers of the Tribunal under Section 242(4) of the Companies Act - supervision of corporate affairs to prevent depletion of assets - Validity of NCLT's appointment of a Special Officer to preside over board meetings and supervise the conduct of the company. - HELD THAT: - The Tribunal found that there were bona fide allegations of conflicts among management, diversion of business and the need for in depth physical verification of documents and the state of affairs. In that factual backdrop the NCLT was entitled to exercise its interim powers to make orders it considered just and equitable to regulate the conduct of the company's affairs. Appointment of a Special Officer to preside over Board meetings, ensure implementation of resolutions, maintain minutes and safeguard that resolutions are not prejudicial to the company was thus within the Tribunal's powers and directed to preserve assets and prevent further depletion pending final adjudication. The court also noted absence of any material to show maladministration in making the appointment or what steps were taken by the NCLT on the Special Officer's report. [Paras 31, 32, 34]

NCLT's appointment of the Special Officer and conferral of supervisory functions was valid and within its powers.

Expeditious disposal obligation under Section 422 of the Companies Act - preservation and protection of company assets pending adjudication - Whether appointment of the Special Officer defeated the statutory mandate for expeditious disposal under Section 422. - HELD THAT: - The Appellants contended that appointing the Special Officer would frustrate the obligation to dispose of petitions within the period envisaged by Section 422. The Tribunal held that because pleadings and multiple interlocutory applications were pending and there were concrete allegations requiring on site verification, the interim appointment was a proportionate measure to protect company assets and to enable proper adjudication. The exercise of appointing a Special Officer in the interregnum was therefore not inconsistent with the duty to decide expeditiously; it was a step taken to prevent further prejudice while the petition remained pending. [Paras 33]

Appointment of the Special Officer did not impermissibly defeat the expeditious disposal obligations; it was justified by pending pleadings and the need to protect the company.

Oppression and mismanagement - preservation and protection of company assets pending adjudication - Whether there was any merit to interfere with the impugned order in the exercise of appellate jurisdiction. - HELD THAT: - After hearing parties and considering record, including admitted disputes between management and the need for ground verification, the Appellate Tribunal found no reason to interfere with the NCLT order. There was no material placed before the Tribunal to demonstrate that the appointment was wrongful or that the Special Officer's report produced actionable prejudice. The Appellate Tribunal therefore declined to entertain the appeal and dismissed it. [Paras 30, 34, 35]

No interference; appeal dismissed.

Final Conclusion: The Appellate Tribunal upheld the NCLT's appointment of a Special Officer as a valid interim measure to investigate allegations of oppression and mismanagement and to protect the company's assets; the contention that such appointment frustrated the duty of expeditious disposal was rejected and the appeal was dismissed.

Oppression and mismanagement - limitation and laches - annulment of allotment of shares - rectification of the Register of Members - interest of the company - equitable relief of issue of further shares to restore percentage shareholding - powers of the Tribunal under Section 241/242 of the Companies Act, 2013 and Sections 397/398 of the Companies Act, 1956

Limitation and laches - oppression and mismanagement - Maintainability of the petition under the Companies Act and whether the petition was barred by delay or laches. - HELD THAT: - The Appellate Tribunal agreed with the Tribunal's finding that the alleged wrongful act - increase of authorised share capital and allotment without proper notice - had a continuing effect on the petitioners' rights and therefore could be treated as a continuing wrong. In such circumstances delay/laches did not bar relief: where the wrongful act produces continuing consequences and there is no prospect of an effective remedy otherwise, the forum may intervene. Accordingly the petition was held not to be time barred and was maintainable. [Paras 13]

The petition is not barred by limitation or laches and is maintainable.

Annulment of allotment of shares - rectification of the Register of Members - interest of the company - equitable relief of issue of further shares to restore percentage shareholding - powers of the Tribunal under Section 241/242 of the Companies Act, 2013 and Sections 397/398 of the Companies Act, 1956 - Appropriate relief for the complained conduct - whether the allotments and filings from 30.09.2011 should be set aside and paid up capital restored, or whether an alternative equitable remedy ought to be directed in the interest of the company. - HELD THAT: - While the Tribunal had annulled the AGM, the increased authorised capital and subsequent allotments and ordered rectification of the register and reversal of filings w.e.f. 30.09.2011, the Appellate Tribunal considered the wider commercial and legal consequences of such reversal on the company's borrowings, charge security and ongoing operations. Applying the object and powers of the provisions dealing with oppression and mismanagement, the Appellate Tribunal concluded that the same remedial purpose could be achieved without causing disproportionate harm to the company by directing an equitable measure: issuance of further shares to the aggrieved shareholders so as to restore their percentage shareholding to the level claimed as on 2007. The court therefore set aside the Tribunal's order of annulment and filings reversal, and instead directed the appellants to issue further shares to Respondents No.1 and No.2 at the same price at which the appellants had purchased those shares, within three months, observing that buyout arrangements on expert valuation could be privately settled and were not to be ordered by the Tribunal in these proceedings. [Paras 14, 15, 17, 18]

The Tribunal's order annulling allotments and directing reversal of filings is set aside; appellants are directed to issue further shares to restore the respondents' 2007 percentage shareholding at the same purchase price within three months, with no order as to costs.

Final Conclusion: The appeal is allowed in part: the petition challenging the 2011 increase/allotment was held maintainable, but the Tribunal's annulment and reversal order is set aside; instead the Appellate Tribunal directed issuance of further shares to restore the respondents' earlier percentage shareholding within three months, leaving private buyout/valuation matters to be settled between the parties.

Dispensation of convening meetings under Section 230(9) of the Companies Act, 2013 - consent by affidavit constituting at least ninety per cent in value - certification of shareholders and creditors by chartered accountants - principle of ease of doing business - tribunal's power to examine scheme broadly for compliance with law and protection of stakeholders

Dispensation of convening meetings under Section 230(9) of the Companies Act, 2013 - consent by affidavit constituting at least ninety per cent in value - certification of shareholders and creditors by chartered accountants - tribunal's power to examine scheme broadly for compliance with law and protection of stakeholders - Whether meetings of the shareholders and creditors of the Demerged Company and the Resulting Company could be dispensed with and the Scheme considered without convening such meetings - HELD THAT: - The Tribunal applied Section 230(9) which permits dispensing with calling of meetings of creditors or a class of creditors where creditors having at least ninety per cent in value agree and confirm the scheme by affidavit. The chartered accountants' certificates and the affidavits filed by the respective shareholders and creditors were examined and found to certify the composition of shareholders and creditors and to record requisite consents for the Scheme and for dispensation of meetings. The Tribunal noted its limited role is to examine the Scheme broadly to ensure it is prepared in accordance with law and that stakeholders' interests are addressed, and that where material information has been disclosed and requisite consents obtained there would be no purpose in convening the meetings. Relying also on the stated commercial rationale and the principle of ease of doing business, the Tribunal concluded that convening the meetings was unnecessary and dispensation was justified, subject to statutory formalities at the second stage. [Paras 5, 6, 7, 8]

Meetings of the equity shareholders, secured creditors and unsecured creditors of the Demerged Company and the equity shareholders and unsecured trade creditors of the Resulting Company are dispensed with; the companies are directed to publish notifications and permitted to file the petition for sanction of the Scheme subject to statutory requirements.

Final Conclusion: The Tribunal, having considered the chartered accountants' certifications, affidavits of consent exceeding the statutory threshold and the Scheme's disclosure, dispensed with convening the prescribed meetings under Section 230(9) and directed publication of notifications and leave to file the sanction petition, while reserving remedy to any aggrieved party to seek appropriate directions.

Market manipulation - Advancing the Bid - Prohibition of Fraudulent and Unfair Trade Practices - Unilateral price manipulation - Connection between parties not necessary to establish manipulation - Momentum trading versus manipulative trading - Proportionality of penalty and debarment

Market manipulation - Advancing the Bid - Prohibition of Fraudulent and Unfair Trade Practices - Momentum trading versus manipulative trading - Whether the trading pattern adopted by the appellants in the scrip of Blue Blends during February 2, 2016 to April 1, 2016 amounted to market manipulation violative of PFUTP Regulations. - HELD THAT: - The Tribunal examined the trading data and the pattern of repeated sell orders placed below the last traded price (LTP). It noted 166 such trades by the appellants producing a gross LTP difference and a net adverse impact on price, with 124 of those trades comprising single-digit share quantities. The court held that placing a large number of sell orders below LTP, especially in single-share or very small quantities on numerous occasions, is not conduct of a rational investor pursuing ordinary momentum trading but is manipulative. While some trades were placed at or marginally above LTP and are innocent seller behaviour, the overwhelming evidence of repeatedly placing sell orders below LTP and thereby creating downward price movement supported the finding of manipulation by the advancing-the-bid strategy. The authorities relied upon by the appellants were held distinguishable on facts where the number and nature of infractions here were substantial. [Paras 10, 11]

The appellants' trading pattern amounted to market manipulation in violation of PFUTP Regulations.

Unilateral price manipulation - Connection between parties not necessary to establish manipulation - Whether establishing connection or collusion with counterparties was necessary to sustain the finding of manipulation in the present case. - HELD THAT: - The Tribunal accepted SEBI's submission that in cases of unilateral price manipulation such as advancing the bid, proof of connection with counterparties is difficult and not indispensable because the trades themselves demonstrate manipulative conduct. The court observed that even without conclusively establishing inter-party connectivity, the appellants' trading strategy by its nature and repeated execution had the effect of influencing price and volume and thus violated PFUTP. The WTM's reliance on trading pattern and impact on LTP was therefore sufficient to uphold the finding of manipulative conduct. [Paras 11]

Finding of manipulation stands despite absence of proved connection between the appellants and counterparties.

Proportionality of penalty and debarment - Whether the debarment for four weeks and joint and several penalty imposed on the appellants were harsh or disproportionate. - HELD THAT: - The Tribunal considered mitigating aspects inherent in the sanctions and the factual matrix. Having found manipulative trading, the court held that a four-week restraint from the securities market and a joint penalty were not disproportionate in the circumstances. The Tribunal observed that the punishment also allowed an option for appellants to pay the penalty apportioned between them, indicating moderation. On this basis, there was no interference with the WTM and AO orders. [Paras 12, 13]

The debarment and monetary penalty were not harsh or disproportionate and the appeals challenging them were dismissed.

Final Conclusion: All four appeals are dismissed. The Tribunal upheld SEBI's finding that the appellants engaged in manipulative trading (advancing the bid) in breach of PFUTP Regulations, held that proof of connection with counterparties was not necessary to sustain the finding, and found the debarment and penalty imposed to be proportionate; penalty to be paid within 30 days with option to each appellant to pay a specified share.

Duty of a Registered Valuers Organisation to admit and recommend only eligible individuals - eligibility for registration as a valuer requiring prescribed qualifications, experience, completion of recognised educational course and passing of valuation examination - obligation of an RVO to verify and scrutinise experience certificates and supporting documents with due diligence - RVO liability for procedural irregularity and negligence in enrolment and recommendation - discretion to issue warning under the Authority's powers under the Companies (Registered Valuers and Valuation) Rules, 2017

Duty of a Registered Valuers Organisation to admit and recommend only eligible individuals - eligibility for registration as a valuer requiring prescribed qualifications, experience, completion of recognised educational course and passing of valuation examination - PVAI-VPO admitted and recommended for registration an individual (Mr. Nikhil Chandak) who was in employment at the time of enrolment and therefore ineligible under the Valuer Rules and IBBI circulars. - HELD THAT: - The Authority found that enrollment, provision of the 50-hour educational course and recommendation of Mr. Chandak for registration took place while he was in active employment, which he himself admitted in Part C of Form A and by affidavit. The Valuer Rules and the IBBI Circular require that RVOs admit only those who meet eligibility criteria and that individuals in employment at the relevant time are not eligible to be enrolled and recommended. Humanitarian or compassionate considerations are not a permissible basis for recommendation where statutory eligibility is not met. The submission that PVAI-VPO acted out of ignorance or on compassionate grounds was held not tenable. [Paras 5]

Finding of contravention in respect of Mr. Chandak upheld; PVAI-VPO failed to comply with eligibility requirements when enrolling and recommending him.

Obligation of an RVO to verify and scrutinise experience certificates and supporting documents with due diligence - RVO liability for procedural irregularity and negligence in enrolment and recommendation - PVAI-VPO issued a certificate of completion and enrolled Mr. Dhaval Chheda despite his lacking the requisite experience to be eligible for registration as a valuer. - HELD THAT: - The Authority accepted that Mr. Chheda completed graduation in 2018 and did not have the requisite years of experience when the certificate was issued in August 2019. PVAI-VPO admitted the certificate was issued erroneously and contended it was for imparting knowledge only. The Authority held that an RVO must admit only those eligible for registration and that issuance of the certificate to an ineligible person demonstrated a failure of institutional obligations, although the admission that this was a first-time inadvertent error merited consideration in mitigation. [Paras 5]

Finding of contravention in respect of Mr. Chheda upheld; PVAI-VPO erred in issuing certificate and enrolling an ineligible person.

Obligation of an RVO to verify and scrutinise experience certificates and supporting documents with due diligence - RVO liability for procedural irregularity and negligence in enrolment and recommendation - PVAI-VPO recommended for registration Mr. Kapadia Jai Vikram despite contradictory and unverified experience certificates, reflecting inadequate scrutiny. - HELD THAT: - The Authority found conflicting experience certificates submitted by the applicant and noted that PVAI-VPO did not adequately justify the removal of an earlier experience certificate nor resolve contradictions. The explanation that simultaneous employment was plausible was rejected as impractical. The lapses evidenced casual verification by PVAI-VPO and failure to discharge its screening responsibilities professionally. [Paras 5]

Finding of contravention in respect of Mr. Kapadia upheld; PVAI-VPO failed to properly verify experience credentials before recommending registration.

RVO liability for procedural irregularity and negligence in enrolment and recommendation - discretion to issue warning under the Authority's powers under the Companies (Registered Valuers and Valuation) Rules, 2017 - Appropriate regulatory response to the procedural irregularities committed by PVAI-VPO. - HELD THAT: - Having found that PVAI-VPO allowed enrollment and recommendation of ineligible candidates and displayed lapses in due diligence, the Authority noted corrective steps taken by the RVO in the respective cases and accepted that the irregularities arose from inadvertence, lack of experience, and initial procedural unfamiliarity. Balancing the seriousness of the obligations of RVOs as frontline regulators in the valuation ecosystem against the mitigating factors of bona fide first-time errors and corrective action, the Authority exercised its power under the Companies Act read with rule 17 to issue a warning rather than harsher sanctions, and directed the RVO to improve its processes for enrolment, education and recommendations. [Paras 5, 6]

Show Cause Notice disposed of by issuing a warning to PVAI-VPO and directing it to strengthen enrolment, educational and recommendation procedures.

Final Conclusion: The Authority found that PVAI-VPO contravened the Valuer Rules by enrolling and/or recommending ineligible individuals and failing to exercise due diligence in verifying qualifications and experience, but taking into account corrective steps and that the lapses were inadvertent first-time errors, disposed of the show cause notice by issuing a warning and directing the RVO to improve its processes.

Interpretation of board resolution authorizing bank to use subscription proceeds as security in connection with loans - prohibition of fraudulent and unfair trade practices - liability of director for fraud under the SEBI Act and PFUTP Regulations - requirement of knowledge or involvement for imposition of liability under Section 27 of the SEBI Act

Interpretation of board resolution authorizing bank to use subscription proceeds as security in connection with loans - prohibition of fraudulent and unfair trade practices - The legal import of the board resolution dated October 19, 2007 and whether that resolution, by itself, established a fraudulent scheme under the PFUTP Regulations resulting in the appellant's liability. - HELD THAT: - The Tribunal held that the resolution authorising the bank to "use the funds so deposited... as security in connection with loans if any" is susceptible of the ordinary meaning that the bank could use the deposited GDR proceeds as security for loans taken by the company itself. The Tribunal followed its earlier decision in Adi Cooper, observing that at the time the resolution was passed the third party (Clifford) was not in the picture and there was no basis to infer that the resolution was a prelude to a fraudulent arrangement to finance a third party's subscription. Absent any finding that the appellant knew of or participated in the subsequent Credit Agreement or Account Charge Agreement, the WTM's conclusion that the resolution evidences fraud under Regulations 3 and 4 of the PFUTP Regulations was held to be unsupported. The Tribunal therefore found that the charge of collusion or fraud against the appellant was not proved on the basis of the resolution alone (paras 12-13). [Paras 12, 13]

The resolution did not, by itself, establish a fraudulent scheme implicating the appellant; the finding of fraud based solely on that resolution was set aside.

Liability of director for fraud under the SEBI Act and PFUTP Regulations - requirement of knowledge or involvement for imposition of liability under Section 27 of the SEBI Act - Whether the appellant, a non executive director who asserted lack of involvement in day to day management, could be held liable under Section 27 of the SEBI Act and thereby be debarred absent findings of knowledge or participation. - HELD THAT: - The Tribunal observed there was no finding by the WTM that the appellant was involved in day to day management, aware of, or party to the Credit Agreement and Account Charge Agreement that enabled the third party financing. The respondent's attempt to rely on attendance or committee chairmanship was not supported by record material before the WTM and could not be relied upon to fasten liability. As Section 27 cannot be applied where the offence is committed without the incumbent's knowledge, the Tribunal held that applying Section 27 to the appellant was erroneous on these facts. The Tribunal distinguished the authority relied upon by the respondent and concluded that the WTM had not established the requisite knowledge or participation to impose director liability (paras 14-15). [Paras 14, 15]

The appellant could not be held liable under Section 27 in the absence of findings of knowledge or involvement; the imposition of debarment on that basis was unsustainable.

Final Conclusion: The impugned order insofar as it debarred the appellant and held him liable for fraud under the SEBI Act and PFUTP Regulations is quashed; the appeal is allowed with no order as to costs.

Condonation of delay in filing claim before liquidator - time barred claim - admission of claim by the liquidator - application under Section 42 of the Insolvency and Bankruptcy Code, 2016 - application of the Limitation Act to claims under the IBC

Condonation of delay in filing claim before liquidator - admission of claim by the liquidator - Whether the Adjudicating Authority was precluded from examining the maintainability or time barred character of the claim when asked to condone delay and admit the claim. - HELD THAT: - The Tribunal found that the application filed before the Adjudicating Authority did not seek only condonation of delay but also sought direction to the liquidator to accept and admit the claim. In that factual context the Adjudicating Authority was entitled to examine whether the claim was maintainable or tainted by delay and lack of evidence. The appellate Tribunal accepted the Adjudicating Authority's approach that condonation and admission could not be considered in isolation where the claim itself was surrounded by doubt, and there was no bar on the Adjudicating Authority looking into the merits or the time barred nature of the claim while considering condonation. [Paras 9, 11]

The Adjudicating Authority was not barred from examining the maintainability and time barred character of the claim while deciding condonation and admission; its doing so was permissible.

Time barred claim - application under Section 42 of the Insolvency and Bankruptcy Code, 2016 - application of the Limitation Act to claims under the IBC - Whether the Adjudicating Authority erred in rejecting the application because the claim was time barred and unsupported by documentary proof. - HELD THAT: - The Tribunal noted that the claim related to arrears purportedly due since 2012 and that the claimant only filed Form E with the liquidator in January 2020. The Adjudicating Authority recorded absence of contemporaneous supporting documents such as salary slips, bank statements showing salary credits, verified calculations, correspondence demanding the dues, or other proof of having pursued the claim earlier. The Tribunal also referred to the Supreme Court's exposition that the Limitation Act applies to claims under the Code and that time barred claims may not be permitted to be reopened without justification. On the record-late presentation at the liquidation stage, lack of documentary evidence and absence of any demand or prosecution of the claim since 2012-the Tribunal held there was no error in the Adjudicating Authority rejecting the application as the claim was liable to be treated as time barred and doubtful on merits. [Paras 6, 9, 11]

The Adjudicating Authority rightly rejected the application because the claim was time barred and lacked requisite documentary support; no interference was warranted.

Final Conclusion: The appeal is without merit and is rejected; the Adjudicating Authority did not err in refusing to condone delay and in declining to admit the claimed claim in liquidation.

Existence of a pre-existing dispute vis-a -vis demand notice - commencement of arbitral proceedings under Section 21 of the Arbitration and Conciliation Act, 1996 - admissibility of petition under Section 9 of the Insolvency and Bankruptcy Code having regard to pre-existing dispute - application of Mobilox principle on pre-existence of dispute

Existence of a pre-existing dispute vis-a -vis demand notice - application of Mobilox principle on pre-existence of dispute - No dispute existed prior to the first demand notice dated 2nd December, 2017; therefore there was no pre-existing dispute to defeat the Section 9 petition. - HELD THAT: - The Tribunal applied the principle in Mobilox that the existence of a dispute (or pendency of suit/arbitration) must predate receipt of the demand notice. The record shows the Corporate Debtor first responded raising disputes on 13th December, 2017, after receipt of the first demand notice of 2nd December, 2017. The subsequent legal notice (13th March, 2018) and invocation of arbitration (10th April, 2018) occurred after the first demand notice and therefore could not be treated as pre-existing. Reliance on this Tribunal's earlier decision in Dinesh Gupta was accepted for the proposition that disputes arising after the first demand notice are irrelevant to the question of pre-existence. The Adjudicating Authority therefore correctly held that there was no dispute existing prior to the first demand notice and that disputes raised later did not bar admission under Section 9. [Paras 32, 33, 34, 35, 36]

Pre-existence of dispute not established as of the first demand notice; disputes and arbitration invoked thereafter are irrelevant for the purpose of determining pre-existence.

Admissibility of petition under Section 9 of the Insolvency and Bankruptcy Code having regard to pre-existing dispute - The Adjudicating Authority rightly admitted the Section 9 petition and initiated CIRP against the Corporate Debtor. - HELD THAT: - Given the finding that no dispute pre-existed the first demand notice, the conditions in Section 9 (read with the Mobilox test) for admitting an operational creditor's petition were satisfied. The Tribunal noted documentary communications from the Operational Creditor and absence of any prior objection by the Corporate Debtor before the first demand notice; the arbitration notice and other disputes were raised subsequent to that date. On this basis the Adjudicating Authority's admission of the petition was held to be correct and did not warrant interference. [Paras 30, 36, 37]

Impugned order admitting the Section 9 petition is upheld; appeal dismissed.

Final Conclusion: Applying the Mobilox standard, the Tribunal found no dispute existed prior to the first demand notice of 2nd December, 2017, observed that arbitration and other objections were invoked only thereafter, and held that the Adjudicating Authority correctly admitted the Section 9 petition; the appeal is dismissed.

Dissolution of corporate debtor under section 54 of the Code - completion of liquidation process under Chapter III of Part II of the Code - distribution of liquidation proceeds in accordance with section 53 of the Code - deposit of undistributed liquidation proceeds into Company Liquidation Account in the Public Account of India under Regulation 46 - closure of liquidation bank account and discharge of liquidator

Dissolution of corporate debtor under section 54 of the Code - completion of liquidation process under Chapter III of Part II of the Code - distribution of liquidation proceeds in accordance with section 53 of the Code - M/s. Tirupati Ceramics Ltd. be dissolved on account of completion of the liquidation process and distribution of proceeds as per the Code - HELD THAT: - The Tribunal found that the liquidator carried out the liquidation in accordance with the Code and Liquidation Regulations: public announcement, valuation by registered valuers, collating and admitting claims, submission of preliminary and progress reports, conduct of e-auctions, filing of asset sale reports and final report, and compliance with Regulation 45 and Form H showing distributions. The realized amounts were placed and distributed to stakeholders as per Section 53 and Regulation 42, and no asset remained for realization. On these findings the liquidation process was treated as complete under Chapter III of Part II of the Code and dissolution under section 54 was held appropriate. [Paras 14, 15, 21, 22, 23]

The Corporate Debtor is dissolved with immediate effect.

Deposit of undistributed liquidation proceeds into Company Liquidation Account in the Public Account of India under Regulation 46 - closure of liquidation bank account - Undistributed liquidation proceeds to be deposited in the Company Liquidation Account in the Public Account of India and the liquidation bank account closed - HELD THAT: - The Tribunal recorded that the liquidator had deposited the undistributed amount into the IBBI Corporate Liquidation Account in compliance with earlier directions and Regulation 46, produced Form I and acknowledgements, and filed affidavits delineating remaining balances earmarked for provisional liquidation expenses. Having satisfied itself of the deposit and the small residual provisional balance, the Tribunal directed the liquidator to close the pending liquidation bank account within three weeks of receipt of the order and to finalize accounts as required. [Paras 18, 20, 21, 22, 23]

The liquidator shall close the pending liquidation bank account within three weeks and the undistributed amounts shall stand deposited in the Company Liquidation Account in the Public Account of India.

Closure of liquidation bank account and discharge of liquidator - notification to Registrar of Companies and statutory authorities - Liquidator to be discharged and registry to forward the dissolution order to Registrar of Companies and other statutory authorities - HELD THAT: - On satisfaction that liquidation has been completed and requisite deposits and filings made, the Tribunal exercised its power under section 54 to direct administrative steps consequential to dissolution: directing the Registry to forward the order to the Registrar of Companies and requiring the liquidator to forward copies to other statutory authorities. The Tribunal also discharged the liquidator, thereby relieving him of office subject to compliance with the directions to close accounts and submit final expense details. [Paras 21, 22, 23]

The liquidator is discharged; Registry to forward the order to the Registrar of Companies and the liquidator to send copies to other statutory authorities.

Final Conclusion: The Tribunal, being satisfied that the liquidation process was completed and distributions made in accordance with the Code and Regulations, dissolved M/s. Tirupati Ceramics Ltd., directed deposit and closure of liquidation accounts, ordered communication of the order to Registrar of Companies and other authorities, and discharged the liquidator.

Appointment of Special Officer - Access to Registered Office Premises - Inspection and Report by Special Officer - Use of Architect/Draughtsman for measurement and demarcation - Allocation of fees and out of pocket expenses between parties - Pleadings to be completed and further detailed hearing - Adjournment and restraint on coercive steps pending hearing

Appointment of Special Officer - Inspection and Report by Special Officer - Two Special Officers were appointed to inspect the registered office premises and to submit a report to the Adjudicating Authority. - HELD THAT: - The Tribunal appointed two Special Officers-one proposed by the Liquidator and one proposed by the respondents-to visit the disputed premises with advance intimation and, with the assistance of an architect/draughtsman of their choice, to assess the situation on the spot. The Special Officers are tasked to give their report to the Adjudicating Authority within two weeks and may take measurements and suggest whether an independent office can be carved out from the undivided office space for the use of the Liquidator and staff so that the liquidation process may proceed without interference. The appointment was made to obtain a clear factual picture before taking coercive measures and to facilitate an overall view of the dispute. [Paras 5]

Special Officers appointed with powers to inspect, take measurements with an architect/draughtsman, and to file a report within two weeks.

Use of Architect/Draughtsman for measurement and demarcation - Allocation of fees and out of pocket expenses between parties - The Special Officers may engage an architect/draughtsman and the parties shall equally share the fees and out of pocket expenses; each party will pay the fees of the Special Officer they suggested. - HELD THAT: - The Tribunal authorised the Special Officers to take the assistance of an architect/draughtsman to measure and advise on possible carving out of an independent office. The parties were directed to bear the fees of the architect and other out of pocket expenses in equal proportion. Further, each party is to pay the fees of the Special Officer they proposed. These directions allocate the cost burden between the parties to enable an informed factual report without delay. [Paras 5]

Architect/draughtsman assistance permitted; costs and fees to be borne by the parties (architectial/out of pocket equally; each party to pay its nominated Special Officer).

Access to Registered Office Premises - Adjournment and restraint on coercive steps pending hearing - Pleadings to be completed and further detailed hearing - Proceedings were adjourned for a detailed hearing, parties were directed to complete pleadings, and the Tribunal refrained from taking coercive steps until the next listed date. - HELD THAT: - After considering the material and submissions that compliance with earlier directions required on site verification, the Tribunal declined to take immediate coercive action and instead listed the matter for a detailed hearing on the specified future date. Parties were directed to exchange affidavit in reply and rejoinder by e filing within the stipulated time so that the matter can be heard on merits. The adjournment was granted to allow the Special Officers' factual report and completion of pleadings to inform the subsequent adjudication. [Paras 6]

Matter adjourned for detailed hearing; parties to complete pleadings; coercive steps deferred until the next listing.

Final Conclusion: The Tribunal appointed two Special Officers to inspect the registered office with architect assistance, allocated costs between the parties, directed submission of the report within two weeks, ordered completion of pleadings and adjourned the matter for a detailed hearing while refraining from taking coercive measures meanwhile.

Authorisation for Assignment (AFA) - Regulation 7A - requirement of AFA for assignments after 31st December, 2019 - Code of conduct under Section 208(2) of the Insolvency and Bankruptcy Code, 2016 - Obligation to comply with insolvency professional agency bye laws and the Code of Conduct - Disciplinary proceedings and disposal under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016

Regulation 7A - requirement of AFA for assignments after 31st December, 2019 - Authorisation for Assignment (AFA) - Code of conduct under Section 208(2) of the Insolvency and Bankruptcy Code, 2016 - Obligation to comply with insolvency professional agency bye laws and the Code of Conduct - Whether the insolvency professional undertook the assignment as Interim Resolution Professional after 31st December, 2019 without holding a valid Authorisation for Assignment and thereby contravened the Code and IP Regulations. - HELD THAT: - The Disciplinary Committee found that Regulation 7A plainly requires an insolvency professional to hold a valid AFA to accept or undertake any assignment after 31st December, 2019, subject only to the limited provisos. An IP who undertakes an assignment without a valid AFA is not eligible to perform the assignment. Although the respondent had given consent in Form 2 on 1 3 2019, the CIRP for Coastal Energy Private Limited commenced on 6 1 2020, which is after 31 12 2019. On that basis the Committee concluded that the respondent contravened the requirement of Regulation 7A and thereby breached the Code of Conduct obligations under Section 208(2) and the conditions of registration in regulations 7(2)(a) and 7(2)(h) of the IP Regulations. The Committee also noted that the respondent's IPA had issued a separate show cause notice and had imposed a disciplinary warning through its Disciplinary Committee. In view of the existing disciplinary action by the IPA, and exercising the power under Regulation 11, the IBBI Disciplinary Committee disposed of the IBBI show cause notice without directing further action against the respondent. [Paras 4, 5]

The Committee found a contravention of Regulation 7A and the code of conduct under Section 208(2) but, since the IPA had already taken disciplinary action (a warning), the IBBI Disciplinary Committee disposed of the show cause notice without imposing further directions.

Final Conclusion: The show cause notice issued by IBBI was disposed of: the Disciplinary Committee found non compliance with Regulation 7A and the Code of Conduct but declined to issue further directions because the insolvency professional's IPA had already taken disciplinary action; copies of the order were directed to the IPA and the NCLT Registrar.

Authorisation for assignment (AFA) requirement for assignments after 31st December, 2019 - Regulation 7A - prohibition on acceptance/commencement of assignments without valid AFA - Code of Conduct of insolvency professionals and obligations under section 208(2) - Certificate of registration subject to compliance with bye laws and Code of Conduct - Effect of disciplinary action by Insolvency Professional Agency on subsequent regulatory action - Ineligibility for AFA due to age

Authorisation for assignment (AFA) requirement for assignments after 31st December, 2019 - Regulation 7A - prohibition on acceptance/commencement of assignments without valid AFA - Code of Conduct of insolvency professionals and obligations under section 208(2) - Effect of disciplinary action by Insolvency Professional Agency on subsequent regulatory action - Ineligibility for AFA due to age - Whether disciplinary action or other direction was required against the insolvency professional for undertaking CIRP assignments which commenced after 31st December, 2019 without holding a valid AFA. - HELD THAT: - Regulation 7A requires an insolvency professional to hold a valid authorisation for assignment on the date of acceptance or commencement of any assignment after 31st December, 2019; absent such AFA, an IP is not eligible to undertake assignments after that date. The Code and the IP Regulations (including the Code of Conduct and the conditions of certificate of registration) impose an obligation on insolvency professionals to comply with bye laws and take reasonable care and diligence in performance of duties. In the present case, the IP gave consent to act (Form 2) prior to 31st December, 2019 but the CIRPs commenced after that date. The Disciplinary Committee of the IP's Insolvency Professional Agency has already passed an order and issued a warning in respect of the same issue. Further, the IP is over 70 years of age and is ineligible to apply for AFA and has stated he will not accept further assignments. Having considered the statutory requirement for AFA, the prior disciplinary action by the IPA, and the IP's ineligibility and assurances, the Disciplinary Committee of the Board exercised its discretion under Regulation 11 to dispose of the show cause notice without any further direction against the IP. [Paras 4, 5]

Show cause notice disposed of without any direction against Mr. Arun Rajabhau Joshi.

Final Conclusion: The Disciplinary Committee held that while Regulation 7A mandates a valid AFA for assignments after 31st December, 2019, in view of the IPA's disciplinary action relating to the same conduct and the IP's ineligibility to obtain AFA due to age, the SCN is disposed of without any further direction; copies of the order are to be forwarded to the IPA and to the Registrar, NCLT (Principal Bench).

Cenvat credit of service tax on deposit insurance premium - input service - negative list exclusion (accepting deposits v. extending deposits) - binding effect of Larger Bench decisions / judicial discipline - per incuriam

Cenvat credit of service tax on deposit insurance premium - input service - negative list exclusion (accepting deposits v. extending deposits) - binding effect of Larger Bench decisions / judicial discipline - Assessees are eligible to avail Cenvat credit of service tax paid on premiums paid to the Deposit Insurance Corporation for insuring public deposits. - HELD THAT: - The Tribunal applied the Larger Bench decision in M/s. South Indian Bank which held that the service provided by the Deposit Insurance Corporation to banks falls within the main part of the definition of input service because it is used by the banks in providing their output service of banking. The Larger Bench had considered and rejected the contention that accepting deposits is covered by the negative-list exclusion (distinguishing accepting deposits from extending deposits) and observed that the insurance service is not excluded from the definition of input service. Although the department urged that the Larger Bench decision was rendered per incuriam for not considering the Apex Court decision in Dilip Kumar & Co., the Tribunal held that the Dilip Kumar & Co. authority concerned interpretation of exemption notifications and is not material to the issue of Cenvat credit. Having been decided by a Larger Bench, the South Indian Bank ratio is binding on the Tribunal by judicial discipline and must be followed. Applying that ratio, the impugned order denying credit was set aside.

Credit of service tax on insurance premium paid to the Deposit Insurance Corporation is allowable; impugned denial of credit set aside.

Final Conclusion: Following the Larger Bench decision in M/s. South Indian Bank, the Tribunal allowed the appeal and held that service tax paid on deposit insurance premiums is an allowable input service for banks; the impugned order denying Cenvat credit was set aside.

Section 11A recovery of erroneously refunded duty - binding precedent and finality of orders - per incuriam and effect of subsequent re-interpretation - appeal under Section 35 as the statutory remedy - no power to revise or recall order on change of law

Section 11A recovery of erroneously refunded duty - binding precedent and finality of orders - per incuriam and effect of subsequent re-interpretation - appeal under Section 35 as the statutory remedy - no power to revise or recall order on change of law - Whether the Assistant Commissioner could issue a show-cause notice under Section 11A to recover refunds of education cess and higher education cess which were granted earlier pursuant to a then-binding decision of the Supreme Court later disapproved by a larger Bench - HELD THAT: - The Court held that Section 11A authorises recovery where duty has been erroneously refunded, but an order of refund passed by an authority applying the law declared by the Supreme Court at the time cannot be treated as "erroneous" merely because a later decision by a larger Bench departs from or disapproves the earlier precedent. The legal position prevailing when the refund order was passed governed that decision; subsequent re-interpretation or overruling by a larger Bench does not render finalised proceedings illegal or improper so as to permit reopening by the same authority under Section 11A. Where the department was aggrieved by the refund order, the statutory remedy available was to prefer an appeal under Section 35 within the prescribed period (with condonation where permissible); the impugned show-cause effectively sought to revise and recall the Assistant Commissioner's own order on the basis of a later change in law, which Section 11A does not authorize. Reliance on authorities emphasising finality of orders made in accordance with the law then prevailing and the requirement that challenges be pursued by appeal supports treating the refund as not "erroneously refunded" within the meaning of Section 11A in the circumstances of this case. The Court therefore concluded that the show-cause notice was impermissible and set it aside. [Paras 12, 13, 14, 15, 20]

Impugned show-cause notice under Section 11A issued to recover refund granted pursuant to the then-binding Supreme Court decision is set aside; recovery cannot be effected by revising the refund order on the basis of a subsequent change in law.

Final Conclusion: The petition succeeds. The show-cause notice dated 03.07.2020 issued to recover refunds of education cess and higher education cess (for the period 2005-06 to 2014-15) granted in accordance with the law then prevailing is quashed; the department's statutory remedy was appeal under Section 35, and the Assistant Commissioner cannot reopen or recall his refund order on the ground of a subsequent overruling by a larger Bench.

Violation of principles of natural justice - duty to furnish relied upon and non-relied upon seized documents - duty of adequate disclosure - remand for de novo adjudication to cure curable defects - personal hearing and opportunity to file written reply

Violation of principles of natural justice - duty to furnish relied upon and non-relied upon seized documents - duty of adequate disclosure - personal hearing and opportunity to file written reply - Whether the appellants were denied principles of natural justice by non-return of non-relied upon seized documents and by passing the order ex parte without giving adequate opportunity to file replies and attend personal hearing - HELD THAT: - The Tribunal found that substantial parts of the non-relied upon documents (Non-RUDs) seized during investigation were not returned to the appellants within a reasonable time after issuance of the show cause notice, despite repeated requests and correspondence. The adjudicating authority fixed multiple dates for personal hearing while the process of returning Non-RUDs was still ongoing and the appellants repeatedly sought time to reconcile and prepare replies after receipt of documents. The Tribunal applied the doctrine of duty of adequate disclosure and relied on precedents and CBEC instructions which require return of un-relied documents and recognition that such documents may be material for preparing a defence. The Tribunal held that the department's delay in returning documents, followed by hurried proceedings and repeated fixation of hearings without ensuring complete supply of records, amounted to non-observance of the principles of natural justice. The defect was recognised as substantial insofar as it deprived the appellants of the right to represent themselves effectively, though the Tribunal characterised the lapse as curable rather than deciding the merits on record. [Paras 8, 11, 12]

Principles of natural justice were violated by non-return of non-relied upon documents and by conducting adjudication in the circumstances described; the appellants were not afforded adequate opportunity to file replies or to be heard.

Remand for de novo adjudication to cure curable defects - remedial relief by giving opportunity to file written reply and personal hearing - Remedy to be granted upon finding violation of natural justice - whether to set aside the order and decide merits afresh or to remit to the adjudicating authority for de novo consideration - HELD THAT: - Having concluded that principles of natural justice were not followed, the Tribunal considered precedent and the nature of the lapse. Noting the gravity of the alleged evasion and absence of substantive adjudication by either party on merits before it, the Tribunal held that the defect was curable and that remand for de novo proceedings was the appropriate remedy. The Tribunal directed the adjudicating authority to supply the outstanding documents within a specified short period, allowed the appellants time to file written replies, and directed completion of adjudication within a further specified period, while admonishing both sides to cooperate and avoid seeking undue adjournments or new document requests beyond what was earlier sought. [Paras 13, 14]

The appeals are allowed by remanding the matters for de novo adjudication after providing the missing documents, permitting the appellants to file replies and attend personal hearing within the timelines specified by the Tribunal.

Final Conclusion: Appeals allowed in part; impugned orders set aside on ground of violation of principles of natural justice by non-return of non-relied upon seized documents and for rushed proceedings; matters remanded to the adjudicating authority for de novo consideration after supplying outstanding documents and after giving the appellants specified opportunity to file replies and attend personal hearing.

Time-bar - proof of service of order - date of receipt of order - obligation on Revenue to prove delivery - remand for decision on merits - dispatch register insufficient to prove service

Time-bar - proof of service of order - date of receipt of order - obligation on Revenue to prove delivery - dispatch register insufficient to prove service - Whether the appeal filed against the Order in Original dated 18/03/2019 was barred by limitation in view of the Department's assertion of dispatch but absence of proof of service. - HELD THAT: - The Tribunal found on the material that the Order in Original dated 18/03/2019 was not actually delivered to the appellant and that the appellant first became aware of the order on 12/03/2020 when the Superintendent informed them and thereafter obtained a scanned copy on 17/03/2020. The Department did not produce any evidence of actual service; mere dispatch or entries in postal/dispatch records without proof of delivery are inadequate. Consistent decisions of this Tribunal and High Courts require the Revenue to prove actual receipt when service is disputed; in the absence of such proof the date on which the assessee obtains a copy from the Department is to be treated as the date of receipt. Applying this principle to the facts, the appeal filed on 19/03/2020 was within the prescribed period counted from the date the appellant actually received the order copy, and therefore could not be dismissed as time barred. The Tribunal set aside the impugned order and remanded the matter to the Commissioner (Appeals) to decide the appeal on merits. [Paras 6, 7]

Impugned order dismissing the appeal as time barred set aside; appeal remanded to Commissioner (Appeals) for decision on merits.

Final Conclusion: The appeal is allowed by way of remand: because the Department failed to prove service of the Order in Original, the date the appellant actually obtained the copy is to be treated as the date of receipt, and the appeal - having been filed within time from that date - is to be decided on merits by the Commissioner (Appeals).

Security interest under Section 26E of the SARFAESI Act - priority of charge between SARFAESI security and State tax attachment - attachment notice under the Gujarat Value Added Tax Act, 2003 - rights of auction purchaser under SARFAESI sale - registration of sale deed and mutation consequent to SARFAESI sale

Security interest under Section 26E of the SARFAESI Act - priority of charge between SARFAESI security and State tax attachment - attachment notice under the Gujarat Value Added Tax Act, 2003 - The State cannot claim a first priority charge over property subject to a pre-existing security interest created in favour of the Bank under Section 26E of the SARFAESI Act; the attachment notice issued by the State was not maintainable insofar as it sought to override the Bank's charge. - HELD THAT: - The Court applied the principle that a security interest created in favour of a bank under Section 26E of the SARFAESI Act, 2002, which pre-dated the determination of tax dues, takes precedence over a subsequent attachment asserted under the VAT legislation. The matter was held to be covered by the Court's prior decision in Kalupur Commercial Cooperative Bank Limited v. State of Gujarat, wherein the State's claim of first priority under the VAT law was negatived. Applying that settled position, the impugned attachment notice which purported to subject the mortgaged property to the State's charge was quashed as it could not override the Bank's pre-existing charge created under SARFAESI and the Bank was entitled to put the secured asset to auction. [Paras 6, 7]

Impugned attachment notice dated 31.07.2019 quashed; State cannot claim first charge over the mortgaged property which was subject to the Bank's security interest under Section 26E of the SARFAESI Act.

Rights of auction purchaser under SARFAESI sale - registration of sale deed and mutation consequent to SARFAESI sale - The purchasers declared highest bidders in the SARFAESI auction have the right to have the SARFAESI sale confirmed, the sale deed registered and their names mutated in the record of rights as owners. - HELD THAT: - Having held that the Bank had the first charge and was entitled to auction the secured asset, the Court recognised the legal consequences of a valid SARFAESI sale in favour of the auction purchasers. The sale having been confirmed and the final sale certificate issued by the Bank, the purchasers are entitled to registration of the sale deed and subsequent mutation in the record of rights. The Sub-Registrar was directed to register the sale deed executed between the Bank and the purchasers, after which mutation proceedings may follow. The Court clarified that this determination does not impede the State from pursuing recovery of VAT dues from the borrower by other lawful means or against other assets. [Paras 8, 9]

Writ applicants, as auction purchasers, entitled to have the sale deed registered and to pursue mutation as owners; Sub-Registrar directed to register the sale deed.

Final Conclusion: Writ allowed; the attachment notice dated 31.07.2019 set aside, Bank's prior security under Section 26E of the SARFAESI Act recognised as having first charge over the property, purchasers entitled to registration and mutation; State remains free to recover dues from the borrower by other lawful means.

Pre-deposit requirement - summary dismissal for non-compliance - exercise of discretion by the Tribunal - judicial review under Article 226 - stay of recovery

Pre-deposit requirement - summary dismissal for non-compliance - exercise of discretion by the Tribunal - Validity of the Tribunal's dismissal of the second appeal for nonpayment of the 20% pre-deposit and consequent vacating of earlier interim relief. - HELD THAT: - The Tribunal had on 03.09.2019 admitted the second appeal on the condition that the appellant deposit 20% of the tax as pre-deposit and ordered stay of recovery on payment. The Tribunal later considered the appellant's application claiming inability to comply and the Government Representative's objection, examined the paper book and the reasons earlier recorded for directing pre-deposit, and found the later contention to be an afterthought. The Tribunal concluded that the appellant had failed to comply with the specific direction and accordingly dismissed the second appeal on 02.03.2020, vacating earlier relief. The High Court, exercising judicial review under Article 226, found no error of law in the Tribunal's exercise of discretion, observed that the Tribunal had recorded reasons for imposing the pre-deposit condition and that noncompliance justified summary dismissal, and further inquired whether the appellant could furnish tangible security in lieu of the deposit. The appellant declined to offer any tangible security. On these facts the Court held there was no ground to interfere with the Tribunal's order.

Tribunal's dismissal for noncompliance with the 20% pre-deposit upheld; no interference with the impugned order.

Final Conclusion: Writ petition dismissed; no error of law found in the Tribunal's order dismissing the second appeal for nonpayment of the prescribed pre-deposit and vacating earlier relief.