TaxTMI Updates e-Newsletter
Jan 25,2023

Detention of goods under the Goods and Services Tax regime - requirement of specific reasons in show-cause and demand orders - consent versus compulsion in payment for release of detained goods - setting aside appellate order for lack of reasoned adjudication - remand for fresh adjudication after affording opportunity to be heard

Requirement of specific reasons in show-cause and demand orders - consent versus compulsion in payment for release of detained goods - Whether the order dated 23.10.2020 raising demand of tax and levy of penalty is vitiated for want of specific reasons and whether the petitioner's payment amounted to a voluntary consent barring challenge. - HELD THAT: - The Court found that neither the notice dated 23.10.2020 nor the demand order of the same date specified the precise defect or discrepancy relied upon to detain the goods and impose tax and penalty; the notice merely recorded that the documents tendered were "defective" without identifying the defect. The Appellate Authority's order similarly did not disclose the specific mismatch or discrepancy forming the basis for penalisation. The Court rejected the contention that the demand order was a consent order: although the petitioner paid the demanded amount for release of the goods, the payment was made under compulsion because the goods were detained and would not have been released otherwise; therefore the payment could not be treated as voluntary acquiescence precluding challenge. On these findings the impugned demand and penalty order was held to be legally unsustainable in its present form. [Paras 20, 21]

Order dated 23.10.2020 raising demand of tax and penalty set aside as it lacked specific reasons; payment by the petitioner held not to be voluntary consent.

Setting aside appellate order for lack of reasoned adjudication - remand for fresh adjudication after affording opportunity to be heard - Whether the Appellate Authority's order dated 31.12.2021 should be interfered with and what further course should be directed. - HELD THAT: - Because the primary adjudicatory order did not state the specific defect relied upon and the payment securing release of goods was made under compulsion, the Court concluded that the appellate decision upholding that order could not stand. The matter was therefore restored to the file of the concerned GST officer for a fresh decision. The GST officer is directed to issue a fresh show-cause notice within two weeks and to pass an appropriate order after affording the petitioner a reasonable opportunity to be heard. The remand is for fresh adjudication on merits and not merely for quantification. [Paras 22, 23]

Order dated 31.12.2021 set aside; matter remanded to the concerned GST officer to issue fresh show-cause notice and decide afresh after giving the petitioner an opportunity of hearing.

Final Conclusion: Impugned demand and penalty order and the appellate order are set aside; the matter is remitted to the concerned GST officer to issue a fresh show-cause notice within two weeks and to pass a reasoned order after affording the petitioner a reasonable opportunity to be heard.

Time limit for issuance of order under Section 73(10) - time limit for issuance of show cause notice under Section 73(2) - extension of time under Section 168A - plain meaning rule - writ jurisdiction under Article 226

Time limit for issuance of order under Section 73(10) - time limit for issuance of show cause notice under Section 73(2) - extension of time under Section 168A - Whether extension of the time limit for issuance of order under Section 73(10) by a notification under Section 168A also extends the time limit for issuance of the show cause notice under Section 73(2). - HELD THAT: - Sub-section (2) of Section 73 requires that the notice under sub-section (1) be issued at least three months prior to the time limit specified in sub-section (10) for issuance of the order. Ext.P6, issued under Section 168A, extended the time limit for issuance of orders for financial year 2017-18 up to 30.09.2023. The plain wording of sub-section (2) therefore permits the show cause notice to be issued with reference to the extended date specified in sub-section (10). There is no ambiguity in the statutory language that would call for applying interpretive rules in favour of the petitioner; the plain meaning rule applies and leads to the conclusion that extension of the order date carries with it the corresponding reference date for issuance of the notice as prescribed by sub section (2). [Paras 5]

Extension of time for issuance of order under Section 73(10) by notification under Section 168A also operates to permit issuance of the show cause notice in accordance with Section 73(2) with reference to the extended date.

Writ jurisdiction under Article 226 - Whether the impugned proceedings culminating in Ext.P4 were without jurisdiction so as to render the writ petition maintainable and require interference under Article 226. - HELD THAT: - The petitioner challenged Ext.P4 as being issued without jurisdiction on the ground that the show cause notice was not issued within the original time limits. Having held that the extended date under sub section (10) validly governs the timing of the show cause notice under sub section (2), the Court found no jurisdictional infirmity in the impugned proceedings. The statutory scheme is clear and the contention that only the order date was extended while the notice date remained unextended is untenable on the language of Section 73 read with the notification. Consequently, there is no basis for exercise of extraordinary writ relief under Article 226. [Paras 6]

Writ petition dismissed as the impugned order was not shown to be issued without jurisdiction.

Extension of time under Section 168A - Whether the petitioner should be granted extension of time to file the appeal against Ext.P4 in view of having invoked the writ jurisdiction. - HELD THAT: - Although the writ petition was dismissed, the petitioner represented that the limitation for filing an appeal against Ext.P4 would expire the same day. In view of the fact that the petitioner had approached the Court by way of the writ petition, the Court found it reasonable to grant a short extension to secure the appellate remedy. The Court directed that if the appeal is filed within the extended period it shall be treated as filed in time and considered on merits by the appellate authority. [Paras 6]

Petitioner permitted two weeks from the date of the order to file the appeal; such appeal to be treated as timely and to be decided on merits if filed within that period.

Final Conclusion: Writ petition dismissed for lack of jurisdictional infirmity; the Court held that extension of the order date under Section 168A governs the timing of the show cause notice under Section 73(2), and granted the petitioner a two week extension to file the appeal against Ext.P4, to be treated as timely and decided on merits if filed within that period.

Principles of natural justice - speaking order doctrine - requirement to record reasons - cancellation of GST registration

Principles of natural justice - speaking order doctrine - requirement to record reasons - cancellation of GST registration - Impugned show cause notice and orders canceling GST registration were without adequate reasons and thereby violated principles of natural justice. - HELD THAT: - The Court applied the enunciated principle that reasons are the heart and soul of an order and that quasi judicial authorities must record cogent, clear and succinct reasons. Following the coordinate bench decision in Aggarwal Dyeing and Printing Works, the Court held that non communication of adequate reasons for cancellation amounts to denial of reasonable opportunity and miscarriage of justice. Consequently, the show cause notice dated 29.11.2021 and the impugned orders dated 25.03.2022 and 22.09.2022 were quashed and set aside. The Court granted liberty to the authority to issue a fresh notice incorporating particularised reasons, afford a reasonable opportunity of hearing and thereafter pass an appropriate speaking order on merits, to be done physically as directed in the cited decision. [Paras 9, 10]

Quash and set aside the show cause notice and the impugned cancellation orders for violation of principles of natural justice; GST registration restored forthwith; liberty to issue fresh notice with detailed reasons and to pass a speaking order after hearing.

Power to condone delay - Question regarding the appellate authority's power to condone delay beyond the statutory period was not adjudicated and remains pending. - HELD THAT: - The Court expressly noted that the issue of whether the appellate authority can condone delay beyond the statutory period under Section 107 is pending before the Court and declined to decide it in the present petition. Without expressing any view on that contention, the Court proceeded to quash the impugned orders on natural justice grounds and remitted the matter to the authority for fresh proceedings. [Paras 9]

Left undecided and to be determined in appropriate proceedings; impugned orders quashed on other grounds notwithstanding.

Final Conclusion: Petition allowed solely on the ground of breach of principles of natural justice; cancellation-related show cause notice and orders quashed, GST registration restored, and respondent granted liberty to initiate fresh proceedings with particularised reasons and reasonable opportunity of hearing; the separate question of condonation of delay remains pending and was not decided.

Risky exporter tag - timelines under Circular No. 131/1/2020-GST - opportunity of personal hearing - distinction between risk-tagging and adjudication - show-cause notice

Risky exporter tag - timelines under Circular No. 131/1/2020-GST - opportunity of personal hearing - Representation dated 10th March, 2022 to be considered by the sixth respondent and decision to be communicated within a specified time after hearing. - HELD THAT: - The Court held that affixing a risky exporter tag is administratively distinct from adjudication and cannot be perpetually maintained so as to unreasonably impede the right to carry on exports. The Central Board's Circular No.131/1/2020-GST prescribes strict timelines and an escalation mechanism which the department is bound to follow. The representation dated 10th March, 2022 by the appellant fell within those processes and, given the department's non-adherence to the prescribed timelines, the representation must be considered afresh. The sixth respondent is directed to afford an opportunity of personal hearing to the authorised representative of the appellant, decide the representation on merits and in accordance with law, and communicate the decision to the appellant within 15 days from receipt of the judgment copy. [Paras 5, 6, 7, 8]

Representation of 10th March, 2022 to be considered after personal hearing and an order communicated within 15 days.

Distinction between risk-tagging and adjudication - show-cause notice - Whether adjudication proceedings may continue notwithstanding the direction to consider the representation. - HELD THAT: - The Court clarified that tagging an exporter as risky and the process of adjudication are separate. While the risky-exporter tag requires timely administrative decision-making under the Circular, this does not preclude initiating or continuing adjudicatory proceedings. The Court therefore left it open to the first and second respondents to proceed to issue a show-cause notice and carry on with adjudication in accordance with law. [Paras 9]

First and second respondents may proceed to issue show-cause notice and continue adjudication as per law.

Final Conclusion: The intra-Court appeal is disposed of by directing the sixth respondent to decide the appellant's representation dated 10th March, 2022 after personal hearing and to communicate the decision within 15 days; adjudicatory proceedings may nevertheless be initiated or continued by the revenue. No order as to costs.

Cancellation of GST registration - principles of natural justice - non-speaking order - show cause notice containing material particulars - physical service of notice and order by RPAD pending portal rectification - restoration of GST registration - liberty to initiate de novo proceedings - costs for departmental non-compliance

Cancellation of GST registration - non-speaking order - principles of natural justice - The impugned order cancelling the petitioner's GST registration was quashed on the ground of violation of natural justice because it was non-speaking and did not disclose material particulars. - HELD THAT: - The Court found that the final order of cancellation did not articulate reasons, wrongly recorded that no reply had been submitted despite a dated response, and fixed an arbitrary effective date without any reasoning. Such non-application of mind and absence of intelligible reasons meant the dealer was deprived of a meaningful opportunity to defend himself. The approach violated the basic principles of natural justice and the directions earlier laid down in the coordinate Bench's decision (Aggarwal Dyeing (supra)) requiring show cause notices and orders to contain necessary particulars. On these determinative grounds the cancellation order was set aside. [Paras 10, 11, 13]

Impugned cancellation order quashed and set aside for being non-speaking and violative of natural justice; GST registration restored.

Show cause notice containing material particulars - physical service of notice and order by RPAD pending portal rectification - liberty to initiate de novo proceedings - The respondent is granted liberty to issue a fresh show cause notice incorporating particular reasons and particulars and to pass a speaking order after providing a reasonable opportunity, to be done physically as directed in the coordinate Bench's decision. - HELD THAT: - Relying on the earlier directions, the Court recorded that technical glitches in the GST portal do not justify issuing vague portal notices or cryptic orders. Until the portal is suitably amended, the department must issue show cause notices and final orders in physical form containing all material particulars and serve them by RPAD so that the taxpayer can effectively respond. The matter is remitted to the authority to proceed de novo, allowing issuance of a fresh notice with particulars and an opportunity of hearing, and thereafter to pass an appropriate speaking order on merits. [Paras 7, 13]

Liberty granted to respondent to initiate fresh cancellation proceedings by issuing a detailed physical show cause notice and to pass a speaking order after giving a reasonable opportunity; matter to proceed de novo.

Costs for departmental non-compliance - The department was directed to pay costs to the petitioner for the repetition of the procedural lapse. - HELD THAT: - Noting repeated failure to follow this Court's directions and the consequent consumption of judicial time, the Court exercised its discretion to quantify and impose costs against the department. Although the Court refrained from initiating contempt proceedings against the officer in the present case, it held that continued repetition would attract strict consequences. The department was ordered to bear the cost as a measure of accountability for non-compliance with judicial directions. [Paras 14, 15]

Department to pay costs to the petitioner; initiation of contempt proceedings not undertaken in the present matter.

Final Conclusion: Writ allowed on grounds of violation of natural justice; cancellation order quashed and GST registration restored. Respondent permitted to issue a fresh, detailed show cause notice and to decide the matter afresh by following physical service procedures until portal defects are remedied. Department directed to pay costs to the petitioner.

Classification under Harmonized System of Nomenclature (HSN) - definition of "goods" under the CGST Act - interpretative primacy of Customs Tariff Act, 1975 for classification - explanatory notes as a guide to tariff headings - beverages containing milk (HSN 2202 99 30) - exclusion of milk flavoured beverages from Chapter 04 - classification on the basis in which goods are bought and sold - binding nature of an Advance Ruling

Definition of "goods" under the CGST Act - Whether the product called "Jigarthanda" manufactured by the applicant is "goods" - HELD THAT: - The Authority applied the statutory definition of "goods" and found that the applicant's product - a semi solid composition prepared from pasteurised milk with added sugar, nannari syrup, badam pisin and milk cream and sold in unit containers - falls within the definition of movable property. The product satisfies the elements of "goods" as it is a tangible movable article prepared for sale. [Paras 8]

Jigarthanda is "goods".

Classification under Harmonized System of Nomenclature (HSN) - interpretative primacy of Customs Tariff Act, 1975 for classification - explanatory notes as a guide to tariff headings - exclusion of milk flavoured beverages from Chapter 04 - beverages containing milk (HSN 2202 99 30) - classification on the basis in which goods are bought and sold - Whether "Jigarthanda" is classifiable under HSN 0402 (milk and cream) or under some other heading - HELD THAT: - The Authority held that classification must follow the Customs Tariff Act, 1975 and its HSN explanatory notes. The explanatory note to Heading 0402 covers milk and cream (including concentrated or sweetened forms) but expressly excludes beverages consisting of milk flavoured with other substances. The applicant's product, though milk based, contains added flavouring/sweetening ingredients and is a ready to consume beverage. Having regard to the HSN explanatory notes and the principle that goods are classified according to the form in which they are bought and sold, Jigarthanda does not fall under Chapter 04 but falls within the tariff provision for beverages with a basis of milk under Heading 2202, specifically sub item 2202 99 30. [Paras 8]

Jigarthanda is not classifiable under HSN 0402; it is classifiable as a milk based beverage under HSN 2202 99 30.

Beverages containing milk (HSN 2202 99 30) - exemption status under Notification No.2/2017 CTR - taxability under Notification No.1/2017 CTR - Whether the product is exempt from GST or taxable - HELD THAT: - After classifying the product under Heading 2202 99 30, the Authority examined the relevant GST notifications. Jigarthanda does not fall within Schedule III non supply items nor is it exempted under Notification No.2/2017 CTR. Consequently, it is taxable under the entries for "Beverages containing milk" in the notifications cited. [Paras 9]

Jigarthanda is taxable and not exempted.

Beverages containing milk (HSN 2202 99 30) - taxability under Notification No.1/2017 CTR - The HSN code and the GST rate applicable to the product - HELD THAT: - The Authority specified that the product is classifiable under HSN 2202 99 30 (beverage containing milk). Under the GST notifications referred to, beverages containing milk listed at the relevant serial entry attract the notified central and state tax rates for intra state supplies and the integrated rate for inter state supplies. The Authority accordingly identified the applicable CGST, SGST and IGST rates as set out in the notifications. [Paras 9]

HSN 2202 99 30 applies; the product attracts the notified GST rates for "beverages containing milk".

Final Conclusion: The Advance Ruling holds that the applicant's product "Jigarthanda" is "goods", is not classifiable under HSN 0402 but is classifiable as a milk based beverage under HSN 2202 99 30, is not exempt, and attracts the GST rates prescribed for "beverages containing milk" in the cited notifications. The ruling is binding as an Advance Ruling subject to the statutory limits on binding effect and appeal.

Classification of dried coconut (copra) under HS headings 0801 vs 1203 - Exclusion of copra from heading 0801 and classification under heading 1203 - Applicability of GST rate consequent to classification - Reliance on Ministry of Finance Circular clarifying definition of Copra - Binding effect of advance ruling - Advance ruling void if obtained by fraud or suppression of facts

Classification of dried coconut (copra) under HS headings 0801 vs 1203 - Exclusion of copra from heading 0801 and classification under heading 1203 - Applicability of GST rate consequent to classification - Reliance on Ministry of Finance Circular clarifying definition of Copra - Whether the dried coconuts (copra) supplied by the applicant meant for human consumption are classifiable under Chapter Heading 0801 (nil rate) or under Heading 1203 (5% GST). - HELD THAT: - The Authority examined the manufacturing process and segregation practised by the applicant and the documentary material showing that coconuts are cut, sun-dried, deshelled and thereafter edible copra is hand picked, cleaned and finished while the remainder is sold as milling copra. Noting that the classification cannot properly depend on end use, the Authority relied on the Ministry of Finance clarification (Circular No.163/19/2021 GST) which, citing the Explanatory Notes, states that copra is the dried flesh of coconut generally used for oil extraction and is excluded from heading 0801. The Circular expressly clarifies that copra is classifiable under heading 1203 and attracts the GST rate at the entry for that heading irrespective of its use. Applying that determinative clarification, the Authority concluded that the applicant's goods constitute copra and are not covered by the exemption entry for coconuts under heading 0801; consequently they fall under heading 1203 and attract the 5% GST rate. [Paras 5]

The goods supplied by the applicant are classifiable under Heading 1203 and attract 5% GST (CGST 2.5% + SGST 2.5%).

Final Conclusion: The Authority ruled that the dried coconut product supplied by the applicant is copra within heading 1203 and not covered by the exemption for coconuts under heading 0801; accordingly the applicable GST rate is 5%.

Job work - treatment or process as supply of services - Composite Supply - Manufacturing services on physical inputs (Heading 9988) - classification and rate differentiation depending on ownership being a registered person

Job work - treatment or process as supply of services - Whether the tanning activity carried out by the applicant on hides and skins owned by another person falls within the definition of job work. - HELD THAT: - The Authority examined the contract terms, flowchart, invoices and transport documents and applied the statutory definition of job work under Section 2(68). The hides and skins received from the principal remained the property of the principal and were to be returned after processing. Although tanning chemicals were consumed in the process and supplied/decided upon by the job worker, addition of such inputs to effect the agreed finish does not alter the nature of the transaction. The activity constitutes treatment or processing of another person's goods and is therefore job work rather than a composite supply where goods transfer of ownership would be principal. [Paras 6]

The tanning activity on goods belonging to another person is a job work (treatment or processing) and falls within the purview of job work.

Manufacturing services on physical inputs (Heading 9988) - classification and rate differentiation depending on ownership being a registered person - Composite Supply - Classification of the job work service and the applicable GST rate depending on whether the goods belong to a registered person or to an unregistered person. - HELD THAT: - Having held the activity to be job work, the Authority applied Schedule II (treatment or process as supply of services) and the entries under Heading 9988 of the rate notification. Entry (i)(e) of Heading 9988 covers processing of hides, skins and leather (Chapter 41) where the inputs belong to another registered person and attracts CGST 2.5% and SGST 2.5% (total 5%). Entry (iv) of Heading 9988 covers manufacturing services on physical inputs owned by persons not registered under the CGST Act and attracts CGST 9% and SGST 9% (total 18%). The CBIC circular distinguishing item (id) and item (iv) was applied to differentiate supplies on inputs owned by registered persons from those owned by unregistered persons. [Paras 6]

If the goods processed belong to a registered person the job work service is classifiable under Heading 9988 (i)(e) and taxable at 5% (CGST 2.5% + SGST 2.5%); if the goods belong to a person not registered under the CGST Act it falls under item (iv) of Heading 9988 and is taxable at 18% (CGST 9% + SGST 9%).

Final Conclusion: The Authority ruled that the applicant's tanning activity is job work (treatment or processing of another's goods) and accordingly classified it under Heading 9988: taxable at 5% where the inputs belong to a registered person, and at 18% where the inputs belong to an unregistered person.

Treatment or process applied to another person's goods is a supply of service - job work - SAC 998881 - Motor vehicle and trailer manufacturing services - GST rate 18% (CGST 9% + SGST 9%) - advance ruling binding on applicant and jurisdictional officer unless facts/law change - advance ruling void ab initio if obtained by fraud or suppression of material facts

Treatment or process applied to another person's goods is a supply of service - job work - SAC 998881 - Motor vehicle and trailer manufacturing services - GST rate 18% (CGST 9% + SGST 9%) - Classification of bus body building on chassis supplied by customer and applicable GST rate and SAC. - HELD THAT: - The Authority found that the applicant fabricates and mounts bus bodies on chassis owned and supplied by customers, receives lump-sum charges for fabrication, and does not take ownership of the chassis (paras 6.0-6.4). Section 2(68) and Schedule II(3) of the CGST Act treat any treatment or process applied to another person's goods as a supply of services; the activity therefore qualifies as job work (para 6.1-6.2). The Authority relied on Circular No.52/26/2018 (para 12.2(b)) which distinguishes two situations and clarifies that where fabrication is performed on chassis provided by the principal the supply is a service attracting 18% GST (para 6.6-6.7). The Authority also noted a consistent earlier AAR decision on similar facts (M/s Anamallais Engineering) and found no reason to depart from that conclusion (para 6.5). Applying these legal provisions and the Ministry clarification, the bus body building on customer-supplied chassis is a service classified under SAC 998881 and taxable at 18% (CGST 9% + SGST 9%) (paras 6.7-6.9). [Paras 6, 7]

Bus body building on chassis supplied by the customer is a supply of service (job work) classified under SAC 998881 and taxable at 18% (CGST 9% + SGST 9%).

Final Conclusion: Advance Ruling: the activity of bus body building on customer supplied chassis is a service under Schedule II(3) of the CGST Act, classified as SAC 998881 and taxable at 18% (CGST 9% + SGST 9%); the ruling is binding as provided under the Act.

Sham transactions - long term capital gains exemption - invocation of deeming fiction of Section 68 - reopening of assessment under Section 148 - concurrent findings of fact - appellate interference on factual findings - stock exchange transactions, payment of STT and banking channels as indicia against bogus transactions

Sham transactions - long term capital gains exemption - stock exchange transactions, payment of STT and banking channels as indicia against bogus transactions - concurrent findings of fact - Whether the Long Term Capital Gains claimed by the assessee were bogus and liable to be treated as unaccounted income by treating the transactions as sham. - HELD THAT: - The Tribunal and the Commissioner (Appeals) found as a matter of fact that the assessee was a trader in shares who had converted part of its stock-in-trade into investment and had carried out purchases and sales through accredited brokers on the national stock exchange, paid STT and received sale proceeds through banking channels. The Assessing Officer's conclusion that the transactions were a sham rested on assumptions and conjectural links (including alleged fund flows and loans involving third parties) without material establishing rigging, collusion or manipulation implicating the assessee. Statements relied upon by the department did not demonstrate manipulation of REI's share price or direct involvement of the assessee in any accommodation scheme. In these circumstances the Tribunal's and CIT(A)'s concurrent factual findings rejecting the AO's addition were upheld and the addition was directed to be deleted. [Paras 21, 22, 23, 24, 26]

Addition treating the claimed LTCG as bogus/sham was deleted; the Tribunal's factual findings upholding the exemption were not interfered with.

Invocation of deeming fiction of Section 68 - reopening of assessment under Section 148 - appellate interference on factual findings - Whether the Assessing Officer could bifurcate transactions and invoke the deeming provision (Section 68) or otherwise sustain additions after reopening the assessment under Section 148 in the absence of material linking the assessee to any accommodation entries. - HELD THAT: - The Assessing Officer reopened the assessments under Section 148 and sought to link alleged fund flows to the assessee to invoke deeming provisions. The courts below concluded there was no material to justify such an inference: purchases were not doubted, transactions had been effected on the stock exchange at quoted prices, and receipts were through banking channels. The High Court observed that the AO's premise was based on investigation reports that only permitted speculative inferences; there was no material demonstrating the assessee's direct or indirect involvement in rigging or accommodation entries. Given concurrent factual findings by CIT(A) and the Tribunal and absence of perversity alleged by the revenue, interference was unwarranted. [Paras 12, 15, 16, 26, 27]

Invocation of Section 68/deeming fiction or sustaining additions post-reopening was not justified on the record; the findings upholding the assessee stood and were not disturbed.

Final Conclusion: The High Court dismissed the appeals and declined to interfere with the Tribunal's order; concurrent findings of fact that the claimed LTCG were not bogus were upheld and no substantial question of law arose.

Treatment of expenditure as revenue or capital - abandonment of project and prior period write off - doctrine of approbate and reprobate - remand for factual verification of nature of expenditure - allowance of depreciation on capitalised expenditure

Treatment of expenditure as revenue or capital - abandonment of project and prior period write off - doctrine of approbate and reprobate - remand for factual verification of nature of expenditure - Whether the expenditures claimed by the assessee for the year could be allowed as revenue expenditure or ought to be treated as capital in nature and disallowed, and whether the matter required remand to the Assessing Officer for verification. - HELD THAT: - The Tribunal recorded that the assessee had earlier capitalised similar expenditure as capital work in progress and subsequently written off the opening balance as prior period/abandoned project expenses. During the year under appeal the assessee sought to treat similar items as revenue expenditure, a stance inconsistent with its earlier treatment. Applying the principle that a party cannot approbate and reprobate, the Tribunal concluded that expenditures identical to those written off as part of the abandoned project cannot be allowed as revenue expenditure without further verification. Consequently the Tribunal remitted the matter to the Assessing Officer to examine the nature of the expenditures incurred during the year, to identify those identical to earlier written off items and to disallow them as revenue expenditure as appropriate, while directing that the assessee be given opportunity of hearing. The Tribunal thereby upheld the need for capitalisation/allowance of depreciation where justified and refused to permit inconsistent accounting treatment without AO's factual scrutiny. [Paras 8]

Remitted to the Assessing Officer to examine and determine which expenditures of the year are identical to earlier written off amounts from the abandoned project and to disallow such items as revenue expenditure after giving the assessee an opportunity of being heard.

Allowance of depreciation on capitalised expenditure - remand for factual verification of nature of expenditure - Disposition of the Revenue's cross appeal challenging the CIT(A)'s directions regarding capitalisation and allowance of depreciation. - HELD THAT: - Because the Tribunal remitted the core factual/legal question concerning the characterisation of the expenditures to the Assessing Officer for fresh examination, the Revenue's appeal, which sought to uphold the AO's disallowance, became academic. The Tribunal therefore found the Revenue's appeal to be rendered infructuous by the remand and did not decide the substantive contention on merits. [Paras 9, 10]

Revenue's appeal dismissed as infructuous.

Final Conclusion: Assessee's appeal is partly allowed for statistical purposes by remitting the question of characterisation of the expenditures to the Assessing Officer for verification and appropriate disallowance where items are identical to earlier written off abandoned project costs; Revenue's appeal is dismissed as infructuous.

Limitation under Section 153C - Date of receipt of seized books/documents/assets as triggering date - Pre-amended proviso to Section 153C - Jurisdiction of notice under Section 153C - Quashing of assessment for want of jurisdiction

Limitation under Section 153C - Date of receipt of seized books/documents/assets as triggering date - Jurisdiction of notice under Section 153C - Quashing of assessment for want of jurisdiction - Notices issued under Section 153C and consequential assessments for AY 2006-07 and AY 2007-08 are without jurisdiction and liable to be quashed as barred by limitation. - HELD THAT: - The Tribunal held that for a person other than the searched person the six-year look-back period under the pre-amended proviso to Section 153C commences from the date on which the books of account, documents or assets seized or requisitioned by the Assessing Officer of the searched person are received by the Assessing Officer having jurisdiction over the other person. In the present case the satisfaction note in the searched person's file was recorded on 05.03.2014 and handed over to the Assessing Officer of the assessee on 21.03.2014, when the seized books/documents were also received. Reckoning the six-year period from 21.03.2014 excludes AYs 2006-07 and 2007-08 from the ambit of Section 153C; consequently the notices issued on 22.09.2014 and the assessments framed thereunder in respect of those years lacked jurisdiction and were quashed. The Tribunal also noted that this view aligns with the decision of the Delhi High Court in Pr.CIT vs. Sarwar Agency P. Ltd. (as cited in the order). [Paras 5, 6]

Notices under Section 153C and the assessments for AY 2006-07 and AY 2007-08 are quashed as barred by limitation.

Final Conclusion: Both appeals are allowed and the assessments for Assessment Years 2006-07 and 2007-08 framed under Section 153C are set aside and quashed for want of jurisdiction as barred by the six-year limitation computed from the date of receipt of seized materials.

Indexation of cost of acquisition for inherited property - Indexation of cost of improvement by previous owner - De novo adjudication - Verification of documentary evidence - Admissibility of evidence before appellate authority - Notice under section 133(6) of the Income Tax Act, 1961

De novo adjudication - Verification of documentary evidence - Admissibility of evidence before appellate authority - Remand to the Assessing Officer for fresh adjudication and verification of the assessee's claim of cost of improvement. - HELD THAT: - The Tribunal observed that the Assessing Officer's assessment record (para 5 of the assessment order) records that the assessee was asked to produce documentary evidence in support of the cost of improvement but failed to do so. The appellate authority had obtained information from a third party under notice (including issuance under section 133(6)) and had material on file. In view of the absence of proper verification by the AO and the factual nature of the claim, the Tribunal concluded that the matter should be restored to the AO for de novo adjudication limited to verification of the evidence relating to cost of improvement. The remand directs the AO to examine documentary proof and the architect/interior designer's responses and decide the claim afresh. [Paras 5]

Grounds Nos. 1 and 2 of the Revenue's appeal restored to the file of the Assessing Officer for de novo adjudication and verification of the cost of improvement claimed by the assessee.

Indexation of cost of acquisition for inherited property - Indexation reference year as year previous owner acquired asset - Indexation of cost of improvement by previous owner - Precedential effect of earlier High Court and Tribunal decisions - Allowance of indexation for cost of acquisition and cost of improvement with reference to the year in which the previous owner acquired or incurred the expenditure. - HELD THAT: - The Tribunal agreed with the view adopted by the CIT(A) and followed earlier decisions which held that where a capital asset is acquired by the assessee by way of gift or inheritance, the indexed cost of acquisition must be computed with reference to the year in which the previous owner first held the asset and, similarly, indexation of cost of improvements by the previous owner is to be with reference to the year those improvements were made. The assessee's case facts (inheritance of property originally acquired in 1969 by the previous owner) brought it within that principle. The Tribunal expressly followed the decisions cited by the assessee - CIT Vs. Manjula J. Shah and Arun Shungloo Trust Vs. CIT - and directed the Assessing Officer to allow indexation in accordance with those principles. [Paras 8]

Assessee's ground No. 5 allowed; indexation of cost of acquisition and cost of improvement to be computed with reference to the year(s) when the previous owner acquired or effected the improvements.

Final Conclusion: The Revenue's appeal is restored to the Assessing Officer for de novo adjudication limited to verification of the cost of improvement claimed by the assessee; the assessee's appeal is partly allowed by permitting indexation of cost of acquisition and cost of improvement with reference to the year(s) in which the previous owner acquired the asset or incurred the improvements.

Disallowance under section 14A read with Rule 8D - Additional depreciation under section 32(1)(iia) - Revenue v. capital characterisation of registration/approval fees (Certificate of Suitability and Drug Master File) - Prior-period expenses and crystallisation of liability under mercantile system - Admission of fresh claims at appellate stage and deduction under section 80IA for generation of steam - Taxability of incentives under Foreign Trade Policy (FMS, FPS, SHIS) - capital receipt v. revenue receipt (purpose test) - Allowability of education cess as business expenditure after retrospective Explanation and Supreme Court decision

Disallowance under section 14A read with Rule 8D - Deletion/limitation of the disallowance under section 14A read with Rule 8D in respect of exempt income. - HELD THAT: - The Tribunal noted that the assessee had interest free funds (share capital and reserves) sufficient to cover investments yielding exempt income. Following the jurisdictional High Court decision in CIT v. Reliance Utilities & Power Ltd. and the Coordinate Bench's earlier orders in the assessee's own case, the Tribunal accepted that where own funds suffice a presumption arises that investments were funded from such funds. The Tribunal also relied on the jurisdictional High Court decision in Nirved Traders that disallowance under section 14A cannot exceed exempt income and accordingly found the CIT(A)'s deletion of the interest disallowance and limitation of other disallowance to the exempt dividend to be justified. [Paras 8]

The disallowance under section 14A r.w.r. 8D was confirmed as limited; Revenue's ground is dismissed.

Additional depreciation under section 32(1)(iia) - Permissibility of claiming the balance additional depreciation in the subsequent year where only 50% was allowable in the year of acquisition due to use for less than 180 days. - HELD THAT: - The Tribunal followed the Coordinate Bench's earlier decision in the assessee's own case and the reasoning of the relevant High Court which held that clause (iia) grants an additional deduction of 20% (wording 'shall' is significant) and that the proviso merely restricts the quantum allowable in the year where plant is used for less than 180 days; it does not bar claiming the balance in the subsequent year. Applying the principle of liberal construction of beneficial provisions and no change in facts or law being shown, the Tribunal found the CIT(A)'s allowance of the remaining 10% to be correct. [Paras 14]

The claim for the balance additional depreciation is allowable; Revenue's ground is dismissed.

Revenue v. capital characterisation of registration/approval fees (Certificate of Suitability and Drug Master File) - Whether payments for obtaining Certificate of Suitability and filing Drug Master File are capital or revenue expenditure. - HELD THAT: - The Tribunal followed the Coordinate Bench's earlier order in the assessee's own case and precedent of the Gujarat High Court to hold that such registration/approval fees are part of the ongoing business of marketing products in regulated markets and are not pre-production or capital in nature. The Tribunal observed that the payments are incurred as part of the process of sale and are incurred periodically; Revenue did not show any change in material facts or law to warrant departing from the prior view. [Paras 21]

The expenditure is revenue in nature and deductible; Revenue's grounds are dismissed.

Prior-period expenses and crystallisation of liability under mercantile system - Allowability of prior period bank charges claimed in the year under consideration where debit advices were received after finalisation of earlier year accounts. - HELD THAT: - Applying the Gujrat High Court decision in Saurashtra Cement, the Tribunal held that an expense relating to an earlier year is deductible in the current year if the liability crystallised in the current year. The assessee showed that bank advices were received only after finalisation of accounts for the earlier year and a provision had been created; Revenue produced no evidence that the liability had been crystallised in the preceding year. The Tribunal also noted consistent acceptance of similar claims in the assessee's earlier years and the absence of Revenue challenge in those years. [Paras 30]

The prior period bank charges are allowable in the year under consideration; Revenue's ground is dismissed.

Admission of fresh claims at appellate stage and deduction under section 80IA for generation of steam - Admissibility and merit of a fresh claim at appellate stage for deduction under section 80IA in respect of profits from generation of steam. - HELD THAT: - The Tribunal held that the appellate authority may entertain a fresh claim even if not made in the original return, following Supreme Court and jurisdictional High Court precedents allowing admission of additional grounds at appeal. The CIT(A) remanded the claim to the AO, who in his remand report accepted that generation of steam amounted to generation of power and raised no adverse finding on the method of computation or valuation used by the assessee; thus the claim was accepted on merits in the remand report. Having been accepted on merits by the AO in remand, the Tribunal found that Revenue could not raise further grievance. [Paras 37]

The deduction under section 80IA for generation of steam is admissible and was correctly allowed; Revenue's grounds are dismissed.

Taxability of incentives under Foreign Trade Policy (FMS, FPS, SHIS) - capital receipt v. revenue receipt (purpose test) - Whether incentives under FMS, FPS and SHIS are capital receipts not includible in total income. - HELD THAT: - The Tribunal upheld the CIT(A)'s admission of the additional ground and application of the 'purpose test'. It examined the Foreign Trade Policy objectives and relied on Ponni Sugars and allied decisions, the Coordinate Bench decisions and the Rajasthan High Court decision in Nitin Spinners (whose SLP dismissal by the Supreme Court was noted) to conclude that the schemes aim at increasing global trade share, technological upgradation and industry promotion, and therefore the receipts are of an encouragement/subsidy nature creating enduring benefits and should be treated as capital receipts. [Paras 48]

The incentives under FPS, FMS and SHIS are capital receipts and not includible in total income; Revenue's grounds are dismissed.

Allowability of education cess as business expenditure after retrospective Explanation and Supreme Court decision - Whether education cess paid by the assessee is allowable as business expenditure. - HELD THAT: - The Tribunal noted the retrospective insertion of Explanation 3 to section 40(a)(ii) by Finance Act, 2022 (with effect from 01/04/2005) treating surcharge/cess as tax, and the Supreme Court's decision in JCIT v. Chambal Fertilisers & Chemicals Ltd., which held that education cess is not allowable as expenditure under section 37 read with section 40(a)(ii). Respectfully following the Supreme Court, the Tribunal found that the CIT(A)'s allowance of education cess could not be sustained. [Paras 50]

The allowance of education cess is disallowed and Revenue's grounds on this issue are allowed.

Final Conclusion: The Revenue's appeal is partly allowed. The Tribunal upheld the CIT(A)'s orders on issues of section 14A disallowance, additional depreciation under section 32(1)(iia), revenue treatment of registration/DMF expenses, allowability of prior period bank charges, admission and allowance of deduction under section 80IA for generation of steam, and capital characterisation of FMS/FPS/SHIS incentives; however, following the Supreme Court and statutory explanation, the Tribunal allowed the Revenue on the issue of education cess and disallowed its deduction.

Revisionary jurisdiction under section 263 - Erroneous order prejudicial to the interest of the Revenue - Failure to make inquiry / lack of application of mind - Clause (f) of section 80-IB(10) - prohibition on allotment of more than one residential unit to an individual or specified relatives - Assessing Officer as investigator and adjudicator - Admissibility and timing of evidence before assessment authority

Revisionary jurisdiction under section 263 - Erroneous order prejudicial to the interest of the Revenue - Assessing Officer as investigator and adjudicator - Whether the Principal Commissioner was justified in invoking jurisdiction under section 263 and holding the assessment order erroneous and prejudicial to the interest of the Revenue. - HELD THAT: - The Tribunal examined whether the twin conditions in Malabar Industries (i.e. that the AO's order is erroneous and prejudicial to revenue) were satisfied. It applied the settled principle that an AO is both investigator and adjudicator and that failure to make necessary enquiries can render an order erroneous. The record shows that the AO had called for a list of all purchasers with PAN but did not verify bank statements, sale agreements or cheque details relating to specific allotments and merely recorded that documents were 'kept on record' without examination. The Tribunal found that the AO did not investigate or verify facts material to clause (f) of section 80-IB(10) and thereby accepted the deduction without application of mind. On these facts the Tribunal held the AO's view to be unsustainable in law and the PCIT's invocation of section 263 to be justified. [Paras 21, 22, 23]

The PCIT was justified in invoking section 263; the assessment order was erroneous and prejudicial to the interest of the Revenue.

Clause (f) of section 80-IB(10) - prohibition on allotment of more than one residential unit to an individual or specified relatives - Failure to make inquiry / lack of application of mind - Admissibility and timing of evidence before assessment authority - Whether the Assessing Officer examined and verified compliance with clause (f) of section 80-IB(10) and whether the assessee had furnished the relevant evidence during assessment proceedings. - HELD THAT: - The Tribunal reviewed the material concerning allotments where the same or related PANs/family names suggested multiple allotments to individuals or their family members. It noted that key evidence (bank statements, cheque particulars and agreements/sale deeds showing booking dates) relied upon by the assessee before the Tribunal were not placed before or examined by the AO during assessment. The Tribunal observed that certain particulars furnished before the Bench were new and not available to the AO; the AO had not sought or scrutinised bank statements or agreements and therefore failed to verify the specific condition in clause (f). Consequently the AO's acceptance of the claim without such enquiry amounted to lack of application of mind and failure to investigate a material condition for the deduction. [Paras 17, 18, 19, 21]

The AO did not verify compliance with clause (f) of section 80-IB(10) and material evidence relied upon before the Tribunal was not placed before the AO; therefore the AO failed to apply his mind.

Final Conclusion: On the facts and in law the Tribunal upheld the Principal Commissioner's order under section 263: the assessment for AY 2017-18 was held to be erroneous and prejudicial to the Revenue because the Assessing Officer failed to verify compliance with clause (f) of section 80-IB(10) and granted the deduction without application of mind; the appeal is dismissed.

Capital gain exemption under section 54B - agricultural land versus land used for agricultural purposes in the two years preceding transfer - contemporaneous revenue records and their evidentiary value - official acts regularly performed (presumption under section 114(e)) - sale to builder and stamp valuation for computing capital gains (section 50C)

Capital gain exemption under section 54B - agricultural land versus land used for agricultural purposes in the two years preceding transfer - contemporaneous revenue records and their evidentiary value - sale to builder and stamp valuation for computing capital gains (section 50C) - Whether the assessee is entitled to deduction under section 54B in respect of capital gain on sale of the subject land - HELD THAT: - The Tribunal held that the question is essentially one of fact whether the land was used for agricultural purposes in the two years immediately preceding the transfer. The contemporaneous revenue record (P-II / Khasra) and the sale deed describe the land as padti (fallow), unirrigated and not serviced, and show no crops recorded for the relevant years; the property was sold to a builder at urban stamp valuation and pursuant to an earlier agreement for real estate development. The Patwari's 2018 report and the SDM's order setting aside the Tehsildar's rejection were given little weight because the Patwari's report was based on a belated, unevidenced survey and hearsay without identification of persons or crops, and contradicted the regular entries in the revenue record which are contemporaneous and accorded statutory presumption of regularity. Applying the cumulative-facts approach in the precedent relied upon, the Tribunal concluded that the land had not been used for agricultural purposes in the relevant two-year period and therefore the assessee was not entitled to exemption under section 54B; the assessment treating the whole capital gain as chargeable was upheld. [Paras 4]

Deduction under section 54B disallowed; capital gains assessed as held by the AO and upheld.

Agricultural income assessment and appellate correction powers - official duties of appellate authorities to correct errors - Whether the assessment of the assessee's returned agricultural income was correctly dealt with by the AO and CIT(A) - HELD THAT: - The Tribunal noted that the AO treated the returned agricultural income as nil though the assessee declared agricultural income (quantum not on record) and the CIT(A) found agriculture to be the assessee's only source of income but did not disturb the AO's nil finding. Applying the principle that an appellate authority may correct errors and dispose of matters afresh where permissible, and that the Tribunal must decide questions arising from the appeal in light of evidence and justice of the case, the Tribunal found it necessary to remit the matter to the AO for fresh adjudication. The AO is to hear the assessee and issue definite findings of fact on agricultural income (in respect of other lands held by the assessee) so as to correct the anomaly of admitted income being left neither assessed nor held exempt. [Paras 4]

Assessment of the returned agricultural income restored to the file of the AO for fresh adjudication and definite findings in accordance with law.

Final Conclusion: Revenue's appeal allowed to the extent that exemption under section 54B is denied and the capital gain assessment upheld; the matter of the assessee's returned agricultural income is remitted to the AO for fresh determination after hearing the assessee.

Onus on the assessee to substantiate purchases - genuineness of entries recorded in books and inclusion in closing stock - right to cross-examination of third party witness whose statement is relied upon - evidentiary value of statement recorded under section 132(4) - reliance on third party statements without opportunity of cross examination violates principles of natural justice

Onus on the assessee to substantiate purchases - genuineness of entries recorded in books and inclusion in closing stock - evidentiary value of statement recorded under section 132(4) - right to cross-examination of third party witness whose statement is relied upon - Whether purchases of Rs. 10,14,600/- from M/s. Kriya Impex Pvt. Ltd. could be treated as bogus and subjected to addition in reassessment. - HELD THAT: - The Tribunal found that the assessee discharged the initial onus by producing the supplier's bill showing delivery at Chandigarh, bank evidence of payment through cheques, purchase and stock registers and ledger entries, and that the purchases were recorded as part of closing inventory. Although the Assessing Officer relied on the statement of Shri Rajender Jain recorded on oath u/s. 132(4) to impugn genuineness, he did not afford the assessee an opportunity to cross examine that third party despite a specific request. While a statement under section 132(4) has evidentiary value against the declarant, reliance on such a statement to adversely affect another party requires that the other party be allowed to test the statement by cross examination; absence of that opportunity infringes principles of natural justice and precedent of the Hon'ble Supreme Court in Andaman Timber. In the circumstances, and having regard to the fact that the purchases formed part of inventory with no adverse finding that values were inflated or closing stock understated, the Tribunal held the addition unsustainable and deleted it. [Paras 7, 8, 9, 10, 11]

Addition of Rs. 10,14,600/- held to be unsustainable and deleted.

Reliance on third party statements without opportunity of cross examination violates principles of natural justice - evidentiary value of statement recorded under section 132(4) - Whether the Assessing Officer's reliance on the statement of a third party without granting cross examination rendered the reassessment additions valid. - HELD THAT: - The Tribunal reiterated that statements recorded under section 132(4) carry evidentiary weight against the person who makes them, but when used to support adverse findings against another party the latter must be given an opportunity to cross examine the declarant. The Assessing Officer and the first appellate authority failed to grant or adjudicate the request for cross examination. Following the Supreme Court's ratio in Andaman Timber and the co ordinateTribunal decisions relied upon, the omission rendered the reliance on the third party statement legally infirm and vitiated the addition. [Paras 9]

Reliance on the third party statement without allowing cross examination was impermissible and contributed to the deletion of the addition.

Consistency in application of findings on identical facts - Whether an addition of Rs. 3,00,000/- (similar purchases from M/s. Avi Exports) should be sustained. - HELD THAT: - The parties agreed that the facts and contentions in the second appeal were identical except for the supplier's name and the quantum. Applying the reasoning and directions given in the lead appeal (deletion of the disputed addition where the assessee had substantiated purchases and was denied cross examination of the declarant), the Tribunal directed deletion of the addition in the second appeal as well. [Paras 14, 15]

Addition of Rs. 3,00,000/- deleted and the appeal allowed.

Academic character of procedural objections once substantive relief is granted - Merits of grounds challenging validity of reassessment proceedings (grounds 1-3) after substantive additions were deleted. - HELD THAT: - No specific arguments were advanced challenging the validity of reopening before the Tribunal, and having decided the substantive issue by deleting the additions on merits, the Tribunal held those procedural grounds to be rendered academic and dismissed them as infructuous. [Paras 12]

Grounds challenging validity of reassessment dismissed as infructuous.

Final Conclusion: The Tribunal allowed the assessee's appeals for AY 2010-11 and AY 2013-14 by deleting the additions treated as bogus purchases (Rs. 10,14,600/- and Rs. 3,00,000/- respectively), holding that the assessee had discharged the initial onus and that reliance on third party statements without permitting cross examination violated principles of natural justice.

Unexplained cash credit - burden of proof under Section 68 - retracted third-party statement - opportunity of cross-examination and principles of natural justice - genuineness, identity and creditworthiness of the creditor - assessment in the hands of the lender

Unexplained cash credit - burden of proof under Section 68 - retracted third-party statement - opportunity of cross-examination and principles of natural justice - genuineness, identity and creditworthiness of the creditor - assessment in the hands of the lender - Addition of Rs. 4,76,50,000 made under Section 68 on account of unsecured loan from M/s. Fairplan Vincom Pvt. Ltd. - HELD THAT: - The Tribunal found that the assessee had furnished documentary evidence (ITR acknowledgments, NBFC certificate, loan agreement, confirmations, audited accounts, bank statements, TDS evidence and an assessment order in the lender's case) establishing the receipt and repayment of the loan and proof of the lender's financials. The addition by the AO was founded primarily on a statement of the lender's director recorded under section 131 which was subsequently retracted by him by affidavit, in which he asserted that he had been induced to sign a pre-prepared statement and also affirmed that the loan was genuine. The Tribunal held that reliance solely on a statement recorded at the back of the assessee, subsequently retracted, without affording the assessee a proper opportunity to cross-examine the maker of that statement, is impermissible. The Tribunal further noted that the lender's assessment had been completed without any addition in respect of the loan, reinforcing the genuineness of the transaction. Applying settled principles that once the assessee furnishes details to discharge the initial burden under Section 68, the onus shifts to the AO to make further enquiry and record reasons for disbelief, the Tribunal concluded that the addition could not be sustained and directed deletion. [Paras 8, 9]

Addition under Section 68 deleted and order of Ld. CIT(A) set aside to the extent it sustained the addition.

Unexplained cash credit - interest attributable to an added cash credit - retracted third-party statement - opportunity of cross-examination and principles of natural justice - Addition of interest (Rs. 21,87,350) claimed by AO on account of interest on the above unsecured loan. - HELD THAT: - The Tribunal treated the interest disallowance/addition as consequential to the primary invocation of Section 68. Since the primary addition based on the lender's retracted statement and without permitting cross-examination was held to be unsustainable, the related addition of interest could not stand. The Tribunal also noted that the assessee had produced evidence of payment and TDS on the interest, and that no material infirmity in those supporting documents was pointed out by the revenue. [Paras 3, 8]

Addition of interest deleted as consequential to deletion of the cash-credit addition.

Final Conclusion: Appeal allowed. The Tribunal set aside the impugned addition (and consequential interest) sustained by the authorities below and directed the AO to delete the addition, holding that reliance on a retracted statement recorded at the back of the assessee without permitting cross-examination was unsustainable in view of the documentary evidence and the lender's assessment having been completed without addition.

Mistake apparent from the record - rectification under section 154 - deduction under section 80IB - principle of consistency - debatable issue not amenable to rectification

Mistake apparent from the record - rectification under section 154 - deduction under section 80IB - debatable issue not amenable to rectification - missed regular appeal deadline - Rectification application under section 154 seeking allowance of deduction under section 80IB for AY 2009-10 - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that the assessing officer's disallowance of the claim under section 80IB was supported by cogent reasons in the assessment order and rested upon a debatable question of law and fact. The plain meaning of "apparent" in the expression "mistake apparent from the record" requires an error that is ex facie and not open to argument or debate; a contested legal view taken after reference to precedents does not qualify. The AO had cited decisions (including the ITAT Ahmedabad decision in the case of Standard Oil and greases) and taken a reasoned view that scrap and discount were not part of eligible profits under section 80IB; earlier favourable appellate orders in other years were not shown to have been placed before the AO during assessment. The Tribunal accepted the Revenue's submission that where the assessee missed the period for filing a regular appeal and seeks to revive the matter by a rectification petition, rectification u/s 154 is not the appropriate remedy to re-open a debatable issue which should have been contested by regular appeal. The Tribunal found no infirmity in the CIT(A)'s confirmation of rejection of the rectification petition. [Paras 5, 10, 11]

Rectification application under section 154 to allow deduction under section 80IB is not maintainable as the matter is debatable and the AO's reasoned disallowance does not constitute a mistake apparent from the record; appeal dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2009-10, upholding the rejection of the rectification application under section 154 because the disallowance under section 80IB involved a debatable, reasoned view by the AO and therefore did not amount to a mistake apparent from the record.

TDS credit - TDS mechanism as a mode of tax recovery - estoppel under section 205 of the Income Tax Act - liability of the deductor as assessee in default - recovery of TDS only from the deductor where deducted but not remitted

TDS credit - recovery of TDS only from the deductor where deducted but not remitted - liability of the deductor as assessee in default - estoppel under section 205 of the Income Tax Act - Whether the assessee is entitled to TDS credit where tax was deducted by the employer from salary but the employer failed to remit the deducted tax to the Government and the deductor did not report the payment in Form 26Q/24Q. - HELD THAT: - The Tribunal found as an undisputed fact that tax had been deducted from the assessee's salary by the employer but Form 26AS showed no credit because the employer had not deposited the deducted tax or filed the requisite TDS return. The court explained that taxes under the Act can be discharged either directly by the assessee or indirectly by deduction at source, and where TDS has been deducted the doctrine of estoppel embodied in section 205 operates to prevent recovery from the assessee in respect of the amount deducted. Reliance was placed on earlier judicial pronouncements to the effect that where tax is deducted at source but not remitted, recovery can be directed only against the person who deducted the tax, who is the assessee in default, and the employee cannot be made to pay tax twice (reference to Yashpal Sahni vs Rekha Hajarnavis and Ashok Kumar B. Chowatia Vs JCIT (TDS) as relied on in the judgment). Applying these principles, the Tribunal held that the Revenue is restrained from recovering the amount of tax from the assessee which had been deducted by the employer but not deposited, and the proper course is to proceed against the deductor-employer. [Paras 8, 9, 10, 11]

Assessee entitled to claim TDS credit; demand set aside and appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, setting aside the orders of the lower authorities and holding that where tax has been deducted from salary by the employer but not remitted, recovery must be made from the deductor and the assessee cannot be saddled with the tax liability.

Allowability of write off of obsolete/damaged inventory as business loss - treatment of provision versus actual write off of stock - deductibility under section 43B of employer's/employee contributions to provident fund/ESI - employees' contribution held in trust and deductible only if deposited by statutory due date - precedential effect of coordinate bench and earlier orders in assessee's own case

Allowability of write off of obsolete/damaged inventory as business loss - treatment of provision versus actual write off of stock - precedential effect of coordinate bench and earlier orders in assessee's own case - Deletion of addition made by AO on account of alleged provision for loss of stock due to damage/obsolescence - HELD THAT: - AO disallowed the claim treating the amount as a mere provision for inventory and not as an ascertained write off, applying the rule that closing stock should be valued at cost or net realisable value. The CIT(A) allowed the claim following the assessee's predecessor's order under section 153C r.w.s. 153A and a coordinate Tribunal bench which had held on identical facts that the obsolete inventories were written off by reducing the carrying cost of inventory. Revenue did not point to any fallacy in those findings or any distinguishing facts for the year under consideration. In view of the consistent findings in the assessee's own earlier orders and the coordinate bench decision on identical facts, there was no reason to interfere with the deletion of the addition. [Paras 8, 9]

Deletion of the addition on account of obsolete/damaged stock upheld and Revenue's ground dismissed.

Deductibility under section 43B of employer's/employee contributions to provident fund/ESI - employees' contribution held in trust and deductible only if deposited by statutory due date - Validity of disallowance under section 43B for belated deposit of PF/ESI contributions - HELD THAT: - It was undisputed that the PF/ESI contributions were not deposited by the due dates prescribed under the respective enactments. The Tribunal applied the Apex Court's decision in Checkmate Services (P.) Ltd., which holds that employees' contributions are monies held in trust by the employer and are income of the employer unless deposited into the fund by the statutory due date; deductibility under section 43B therefore requires deposit by that date. On these facts, following the Supreme Court's ratio, the delayed payments are not allowable and the AO's disallowance is sustained. [Paras 15]

Disallowance under section 43B in respect of belated PF/ESI contributions upheld and Revenue's ground allowed.

Final Conclusion: The appeal is partly allowed: the deletion of the addition for obsolete/damaged stock is sustained, whereas the disallowance for belated PF/ESI contributions under section 43B is upheld.

Depreciation on goodwill - effect of demerger appointed date on allowance of depreciation - precedent in the assessee's own case by a coordinate bench

Depreciation on goodwill - effect of demerger appointed date on allowance of depreciation - precedent in the assessee's own case by a coordinate bench - Whether the disallowance of excess depreciation claimed on goodwill for AY 2016-17 should be sustained or deleted in view of the coordinate-bench decisions in the assessee's own cases. - HELD THAT: - The Tribunal accepted the assessee's contention that identical factual and legal questions concerning depreciation on goodwill arising from a demerger had been decided in favour of the assessee by a coordinate Bench of the ITAT (orders concerning earlier assessment years). The coordinate-bench reasoning addressed the relevance of the demerger's appointed date and concluded that depreciation as computed by the AO for an earlier year could be allowed to the assessee in the relevant year, and that the assessee could not be deprived of eligible depreciation where the AO's own reworking supported the claim. No material was placed on record to show that those coordinate-bench orders had been stayed or reversed by a higher authority. In these circumstances the Tribunal held that the principles and conclusions in the assessee's own earlier ITAT decisions were squarely applicable and that the CIT(A) was not justified in sustaining the addition. The Tribunal therefore set aside the CIT(A)'s finding and directed deletion of the addition made by the AO. [Paras 8, 9]

The disallowance of excess depreciation on goodwill is deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2016-17, setting aside the CIT(A)'s confirmation of the addition and directing deletion of the disallowance of depreciation on goodwill in accordance with the coordinate-bench decisions in the assessee's own case.

Reopening of assessment - change of opinion doctrine - notice under Section 148 of the Income tax Act - verification of stock statement during original assessment proceedings - jurisdictional invalidity of reassessment initiated on grounds already considered

Reopening of assessment - change of opinion doctrine - verification of stock statement during original assessment proceedings - notice under Section 148 of the Income tax Act - Reopening of assessment on the basis of alleged discrepancy between stock in books and stock statement furnished to bank where the same stock statement was called for and considered during original assessment proceedings. - HELD THAT: - The Tribunal found on the record that the Assessing Officer had issued a questionnaire under Section 142(1) during the original assessment and the assessee furnished the stock statement submitted to the bank. The original assessment under Section 143(3) was completed after examination of those particulars and no discrepancy was acted upon at that stage. Reopening the assessment by issuing notice under Section 148 on the same factual basis thus amounted to a mere change of opinion by the assessing officer. The Tribunal followed the binding reasoning in the decision of the Hon'ble Supreme Court (as cited in the order) that reassessment cannot be initiated where the issue relied upon in the reasons for reopening was raised, responded to and considered in the original assessment, and the subsequent notice proceeds only from a change of opinion and is therefore without jurisdiction. Applying that principle to the facts, the reassessment was held to be invalid in law. [Paras 6, 7]

The reassessment proceedings initiated by the issue of notice under Section 148 on the stock discrepancy were quashed as a change of opinion; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the Commissioner (Appeals) in quashing the reassessment initiated for AY 2009-10 on the ground that the disputed stock statement had been called for and considered during the original assessment and the reopening therefore amounted to an impermissible change of opinion.

Reopening of assessment on the basis of tangible material - reassessment under Section 147/148 of the Income Tax Act, 1961 - accrual principle versus receipt basis of taxation - onus on Revenue to establish that income pertains to the assessment year under consideration

Reopening of assessment on the basis of tangible material - accrual principle versus receipt basis of taxation - onus on Revenue to establish that income pertains to the assessment year under consideration - Whether the interest income of Rs. 3,23,800/- pertained to Assessment Year 2011-12 or to Assessment Year 2012-13 and whether the addition made in AY 2012-13 could be sustained. - HELD THAT: - The Assessing Officer initiated reassessment proceedings based on information and a loan confirmation received from ITO-34(3)(5), which showed the loan and interest were outstanding as on 31/03/2011 and that interest of Rs. 3,23,800/- related to earlier year. The proper test is whether the income pertained to the previous year relevant to AY 2012-13, not whether it had been offered earlier; the record showed the loan confirmation for AY 2011-12 had been forwarded and formed part of the assessment record. The CIT(A) and AO overlooked that material and proceeded on the basis that the assessee had not produced the confirmation or return for AY 2011-12. Once the material on record indicated the interest pertained to AY 2011-12, the onus lay on Revenue to produce material establishing that the income pertained to AY 2012-13. Revenue failed to discharge that onus. Consequently the addition in AY 2012-13 could not be sustained and was deleted. [Paras 8]

Addition of Rs. 3,23,800/- in AY 2012-13 deleted as interest pertained to AY 2011-12; appeal allowed.

Final Conclusion: The reassessment addition in respect of interest of Rs. 3,23,800/- for Assessment Year 2012-13 was deleted on the ground that the material on record established the income pertained to Assessment Year 2011-12 and Revenue failed to prove otherwise; the appeal is allowed.

Maintainability of writ jurisdiction in presence of an efficacious alternative statutory remedy - availability of statutory appeal to Commissioner (Appeals) as exclusive/adequate remedy - pre-deposit requirement under the Customs Act as a condition precedent to filing appeal - alleged violation of principles of natural justice by non-grant of cross-examination - inapplicability of Central Excise / Service Tax adjudication monetary limits to Customs adjudication

Maintainability of writ jurisdiction in presence of an efficacious alternative statutory remedy - availability of statutory appeal to Commissioner (Appeals) as exclusive/adequate remedy - Writ petition challenging the adjudication order dated 09.05.2017 was not maintainable because an efficacious statutory appeal to the Commissioner (Appeals) was available and should be availed. - HELD THAT: - The Court held that the grievance arising from the impugned adjudication order falls within the scope of the statutory appellate remedy before the Commissioner (Appeals). The Division Bench previously considered identical challenges to the same order and concluded that the relevant master circular provisions cited by petitioners relate to Central Excise and Service Tax adjudication and do not render the Additional Commissioner's order under the Customs Act without jurisdiction. Given the availability of the appeal mechanism, the High Court, exercising extraordinary writ jurisdiction under Article 226, declined to interfere with the impugned order and directed the petitioners to file the appeal before the Commissioner (Appeals). Time spent in prosecuting the writ petitions before this Court was to be excluded for limitation purposes if the appeal was filed within the prescribed period. [Paras 5, 7]

Writ petition dismissed as not maintainable; petitioner directed to file appeal before Commissioner (Appeals) with time exclusion as indicated.

Alleged violation of principles of natural justice by non-grant of cross-examination - pre-deposit requirement under the Customs Act as a condition precedent to filing appeal - The contention that denial of opportunity for cross-examination warranted writ relief was rejected; such grievance should be raised and adjudicated in the statutory appeal, subject to statutory requirements including pre-deposit. - HELD THAT: - The Court considered the petitioners' complaint that they were denied the opportunity to cross-examine witnesses whose statements were relied upon. It observed that this grievance goes to the merits of the adjudication and is an issue which the Commissioner (Appeals) is competent to consider on appeal. Accordingly, the High Court refused to entertain the writ on that ground and clarified that the Commissioner (Appeals) would examine such contentions on their merits if an appeal is filed. The Court also reminded petitioners that statutory conditions for filing the appeal, including the requirement of pre-deposit under the Customs Act, must be satisfied. [Paras 6, 7, 8]

Grievance of non-grant of cross-examination to be addressed in the statutory appeal; petitioner must comply with statutory pre-deposit and other requirements.

Final Conclusion: Writ petition disposed of as not maintainable because an efficacious statutory appeal to the Commissioner (Appeals) exists; petitioner permitted to file the appeal within the prescribed period with exclusion of time spent in the writ proceedings, subject to compliance with statutory pre-deposit and other appellate requirements.

Condition No. 104 - exemption notification dated 03.05.2007 - undertaking given at the time of import - jurisdiction of DGCA versus customs authorities - confiscation under Section 111(o) of the Customs Act, 1962 - penalty under Section 112 of the Customs Act, 1962 - public transport versus private aircraft

Condition No. 104 - exemption notification dated 03.05.2007 - undertaking given at the time of import - Compliance with Condition No. 104 and consequent liability to duty under the undertaking. - HELD THAT: - Condition No. 104 required that at import the importer hold approval from the competent authority in the Ministry of Civil Aviation and furnish an undertaking that the aircraft would be used only for the specified non-scheduled services and that duty would be paid on demand if not so used. The Tribunal examined the DGCA approvals, the pattern of use of the aircraft and the flight records and held that the question of violation of the undertaking cannot be determined solely by the customs authority. Following the Larger Bench in VRL Logistics and later precedents, the customs authority may invoke the undertaking to demand duty only when the competent authority under DGCA finds that the permit conditions have been violated. In the present case DGCA had not initiated proceedings and permits were renewed; therefore the customs demand founded on the undertaking could not be sustained. [Paras 26, 28, 35]

Demand of customs duty confirmed on the basis of the undertaking was set aside because DGCA had not found misuse and had renewed permits.

Jurisdiction of DGCA versus customs authorities - undertaking given at the time of import - Whether customs can independently adjudicate violation of the DGCA permit and enforce the undertaking without DGCA proceedings. - HELD THAT: - The Tribunal accepted the Larger Bench's ratio that the exemption was granted in reliance on representations and conditions linked to Civil Aviation regulation; therefore monitoring and determination of compliance fall within jurisdiction of DGCA (the authority empowered under rule 133A). The customs authorities are not precluded from action generally, but may invoke the importer's undertaking to recover duty only after the DGCA (or competent civil aviation authority) finds that the permit conditions have been violated. Absent such a finding and with DGCA having renewed permits, customs could not demand duty under the undertaking in this case. [Paras 23, 26, 35]

Customs cannot demand duty under the undertaking in absence of DGCA having found violation of permit; therefore the demand was invalid.

Public transport versus private aircraft - Condition No. 104 - Whether non revenue flights by the Chairman and employees converted the aircraft into a private aircraft thereby violating the exemption condition. - HELD THAT: - The Tribunal applied the Larger Bench's interpretation of the Aircraft Rules definitions and held that carriage effected by an air transport undertaking remains public transport even if some flights are without remuneration. Personnel of group companies are members of the public for these purposes and use by the Chairman/MD for non revenue trips does not automatically convert the aircraft into a private aircraft. Moreover, the flight record showed predominant revenue use. Consequently, such use did not establish non compliance with Condition No. 104 where DGCA had not taken adverse action. [Paras 29, 30, 31]

Use of the aircraft for certain non revenue flights by Chairman/ employees did not, of itself, make the aircraft a private aircraft or establish breach of Condition No. 104.

Penalty under Section 112 of the Customs Act, 1962 - confiscation under Section 111(o) of the Customs Act, 1962 - Sustainability of confiscation and penalties imposed on the company and its officers. - HELD THAT: - Because the foundational demand for duty under the undertaking could not be sustained in the absence of any adverse finding by DGCA, the ancillary enforcement consequences flowing from an asserted breach - namely confiscation under Section 111(o) and penalties under Section 112 against the company and its officers - could not be upheld. The Tribunal therefore set aside the impugned order including the confirmed duty, confiscation and penalties. [Paras 36, 37, 38]

Confiscation and penalties set aside as they were predicated on a demand that could not be sustained.

Final Conclusion: Impugned order dated 20.11.2009 confirming duty, directing confiscation and imposing penalties is set aside: customs could not invoke the importer's undertaking to demand duty in absence of a finding by the competent DGCA authority that the permit conditions under Condition No. 104 were violated; consequential confiscation and penalties were therefore unsustainable and appeals are allowed.

Confiscation under Section 111(d) of the Customs Act - tallying of seized goods with Bills of Entry - burden of proof to establish smuggling where import documentation produced - scope of appellate interference on findings of fact - perversity test - loss of commercial value due to prolonged storage

Tallying of seized goods with Bills of Entry - burden of proof to establish smuggling where import documentation produced - scope of appellate interference on findings of fact - perversity test - Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the seized fabrics were not smuggled and in setting aside the confiscation imposed by the Commissioner after comparing the panchanama with the Bills of Entry. - HELD THAT: - The Court recognised that whether seized goods were validly imported is a question of fact and that appellate interference with the Tribunal's factual finding is permissible only if the finding is demonstrably perverse or impossible on the record. The Commissioner had carried out a tally between the panchanama and the Bills of Entry and concluded there was a mismatch except for six common entries, leading to confiscation. The Tribunal reviewed the same material, noted that the panchanama recorded countries of origin consistent with the Bills of Entry and observed that once the Bills of Entry were produced the burden lay on the department to show otherwise. The Tribunal's conclusion that the department failed to demonstrate smuggling represented a possible view reasonably open on the evidence. As the Tribunal's view was not shown to be perverse, the Court held there was no question of law warranting interference and that the Appellant's attempt to re-appreciate the factual material could not succeed. [Paras 9, 10]

Tribunal's factual finding that the goods were not proved to be smuggled is a possible view on the evidence and not perverse; appellate interference is not warranted, therefore confiscation cannot be sustained on the record before the Court.

Loss of commercial value due to prolonged storage - scope of appellate interference on findings of fact - perversity test - Whether the Tribunal's finding that synthetic polyester fabrics had lost value and importance due to storage for more than four years was justifiable. - HELD THAT: - The Court observed the scope of its review is confined to perverse findings of fact. The Tribunal entertained the contention regarding deterioration or loss of commercial value from prolonged storage but, on the material before it, reached a view acceptable as a possible inference. The Court refused to re-appraise the evidence merely because the Appellant preferred a different factual conclusion. Absent demonstration that the Tribunal's finding was perverse or impossible on the record, the Court would not disturb it. [Paras 9, 10]

Tribunal's conclusion regarding loss of value from prolonged storage was a possible factual finding on the record and not amenable to appellate interference.

Final Conclusion: Appeal dismissed. The Tribunal's factual conclusions - that the department failed to prove smuggling despite production of Bills of Entry and that loss of value due to prolonged storage justified the view taken - were possible on the evidence and not demonstrably perverse, and therefore the Court declined to disturb the Tribunal's order setting aside confiscation.

Exclusion of time for obtaining previous consent or sanction under Section 470(3) of the Cr.P.C. - commencement of limitation - knowledge of offence under Section 469 of the Cr.P.C. - power of Central Government to prosecute and discretion under Section 242 of the Companies Act - complaint to be filed only by Registrar, shareholder or a person authorised by Central Government under Section 621 of the Companies Act - role and capacity of SFIO as an authorised person to file complaint - entertainment of petitions under Section 482 Cr.P.C. notwithstanding bar under Section 397(3) Cr.P.C.

Entertainment of petitions under Section 482 Cr.P.C. notwithstanding bar under Section 397(3) Cr.P.C. - second revision and limit on revisional jurisdiction - Maintainability of petition under Section 482 Cr.P.C. despite earlier revisional order under Section 397(3) Cr.P.C. - HELD THAT: - The High Court held that Section 397(3) Cr.P.C. is intended to prevent frivolous second revisions but does not amount to an absolute bar on the High Court's power under Section 482 Cr.P.C. In special cases the bar can be lifted and the inherent jurisdiction of the High Court may be invoked even against orders passed by a Sessions Judge in revision; decisions relied upon for the proposition of an absolute bar do not preclude exercise of Section 482 in appropriate cases. The court therefore found the present petition maintainable. [Paras 8, 9]

Petition under Section 482 Cr.P.C. is maintainable notwithstanding the bar in Section 397(3) Cr.P.C.

Commencement of limitation - knowledge of offence under Section 469 of the Cr.P.C. - exclusion of time for obtaining previous consent or sanction under Section 470(3) of the Cr.P.C. - Whether the period 26.11.2007 to 03.06.2008 is to be excluded in computing limitation for filing the complaint. - HELD THAT: - The court identified 26.11.2007 (date of SFIO report to the Central Government) as the date on which the offence came to the knowledge of the Central Government and hence the commencement point for limitation under Section 469. It held that exclusion under Section 470(3) applies only where previous consent or sanction of some authority is statutorily required for institution of prosecution. As neither Section 242 nor Section 621 of the Companies Act speak of a requirement of 'previous consent' or 'sanction' in the statutory sense contemplated by Section 470(3) Cr.P.C., the period between 26.11.2007 and 03.06.2008 (the time the Government took to authorize prosecution) could not be excluded. To allow such exclusion would effectively import words into the statute and convert administrative authorisation into statutory 'sanction' for the purpose of Section 470(3), which the court declined to do. [Paras 12, 13, 26]

The period 26.11.2007 to 03.06.2008 is not excluded from computation of limitation under Section 468-470 Cr.P.C.

Power of Central Government to prosecute and discretion under Section 242 of the Companies Act - complaint to be filed only by Registrar, shareholder or a person authorised by Central Government under Section 621 of the Companies Act - distinction between administrative authorisation and statutory 'consent'/'sanction' - Whether Sections 242 and 621 of the Companies Act require prior statutory 'consent' or 'sanction' so as to attract exclusion under Section 470(3) Cr.P.C. - HELD THAT: - The court examined Sections 242 and 621 and observed that Section 242 confers discretion on the Central Government to prosecute after considering the SFIO report and taking legal advice; Section 621 prescribes who may file a complaint (Registrar, shareholder or person authorised by Central Government). Neither provision statutorily mandates a previous 'consent' or 'sanction' in the sense required by Section 470(3) Cr.P.C. Administrative steps taken by the Government (such as authorising an officer) do not equate to the statutory prior sanction/consent contemplated by Section 470(3). Consequently, the existence of administrative authorisation or delay in taking such administrative decision does not provide ground for exclusion of time under Section 470(3). [Paras 15, 17, 19]

Sections 242 and 621 do not create a statutory requirement of prior 'consent' or 'sanction' for prosecution that would attract exclusion under Section 470(3) Cr.P.C.

Role and capacity of SFIO as an authorised person to file complaint - effect of existing Gazette notification authorising SFIO officers - Whether SFIO (or its officers) could claim exclusion of limitation on the ground that it lacked authority to file the complaint until the Central Government's administrative decision of 03.06.2008. - HELD THAT: - The court noted that SFIO as such has no independent prosecutorial role under Sections 242 and 621 unless specific authorisation by the Central Government exists. However, the record showed a Gazette Notification dated 06.05.2005 authorising certain SFIO officers (including the officer who filed the present complaint) to file and conduct prosecutions. Because an authorised officer already existed, there was no statutory impediment requiring the period between 26.11.2007 and 03.06.2008 to be excluded. The court further observed that even where administrative authorisation is required, any delay by the Central Government in taking the administrative decision cannot be treated as benefitting the Government for limitation purposes, unless properly explained and shown to attract Section 470(3) or grounds for exercise of Section 473 Cr.P.C. [Paras 21, 22, 23, 27]

SFIO cannot claim exclusion of limitation for the period 26.11.2007-03.06.2008; an authorised officer already existed by Gazette notification and administrative delay cannot be invoked to exclude limitation absent statutory sanction.

Final Conclusion: The High Court dismissed the petitions, holding that the period 26.11.2007 to 03.06.2008 is not excludable for computation of limitation, that Sections 242 and 621 of the Companies Act do not require a previous statutory 'consent' or 'sanction' for prosecution within the meaning of Section 470(3) Cr.P.C., that SFIO could not claim exclusion on the ground of lacking authority (a Gazette notification already authorised officers), and that the petition under Section 482 Cr.P.C. was maintainable but fails on merits.

Moratorium under section 14(1)(d) of the Insolvency and Bankruptcy Code - Prohibition on recovery of property occupied by the corporate debtor - Supply of services during moratorium under section 14(2-A) - Residuary jurisdiction of NCLT/NCLAT - nexus with insolvency - Excess of jurisdiction in adjudicating contractual rent disputes

Moratorium under section 14(1)(d) of the Insolvency and Bankruptcy Code - Prohibition on recovery of property occupied by the corporate debtor - Whether the 'said premises' were in possession of the corporate debtor prior to initiation of CIRP and thus covered by the moratorium prohibiting recovery by the owner/lessor. - HELD THAT: - The Tribunal found on the basis of the undated but undisputed no-objection letter, the Form INC-22 filing and the board resolution shifting the registered office w.e.f. 14.2.2018, together with complaints lodged by the RP, that the corporate debtor was in actual possession of the said premises at least from 14.2.2018 and therefore on the insolvency commencement date (25.7.2018) the premises were occupied by the corporate debtor. Consequently the recovery of the premises by the owner/lessor was prohibited under section 14(1)(d) of the IBC for the subsistence of the moratorium. [Paras 15, 16]

The said premises were in possession of the corporate debtor prior to CIRP and thus recovery by the owner was prohibited by the moratorium.

Moratorium under section 14(1)(d) of the Insolvency and Bankruptcy Code - Supply of services during moratorium under section 14(2-A) - Whether the insertion of padlocks by the owner during the moratorium was permissible and whether section 14(2-A) warranted continuation of rental services. - HELD THAT: - The Tribunal held that insertion of padlocks on 28.7.2020 was an act of recovery occurring after the insolvency commencement date and therefore infringed section 14(1)(d). It further held that section 14(2-A) applies only where the (I)RP has considered the supply critical to preserve value and has recorded or requested continuation of such supply; no such consideration or request was made by the IRP/RP here. Hence section 14(2-A) did not save the owner's conduct and the premises should have remained in the lawful possession of the RP/corporate debtor during CIRP. [Paras 17, 18, 19]

Insertion of padlocks by the owner during moratorium was prohibited; section 14(2-A) is not attracted as the RP did not consider or request continuation of rental services.

Excess of jurisdiction in adjudicating contractual rent disputes - Residuary jurisdiction of NCLT/NCLAT - nexus with insolvency - Whether any monthly rent had been agreed and was payable by the corporate debtor to the owner either before or during the moratorium, and whether the Adjudicating Authority could direct assessment/payment of rent. - HELD THAT: - On examination of the NOC, the e-mail of 28.8.2018 and follow-up reminders, and the doubtful undated NOC allegedly from the corporate debtor, the Tribunal concluded there was no agreement or prior payment of rent commencing from 14.2.2018. The e-mails showed JOML sought to create a rent claim after CIRP commenced. Further, following Supreme Court authorities, the Tribunal held that NCLT's residuary jurisdiction under section 60(5) is circumscribed by the requirement of a nexus with insolvency; contractual disputes unrelated to insolvency fall outside that jurisdiction. Applying those principles, the Adjudicating Authority exceeded its jurisdiction in directing assessment of rental value and payment during moratorium. [Paras 23, 24, 25, 26, 30]

No rent was agreed or payable from 14.2.2018; the Adjudicating Authority exceeded its jurisdiction in ordering assessment/payment of rent during the moratorium.

Excess of jurisdiction in adjudicating contractual rent disputes - Effect of subsequent liquidation on interlocutory reliefs - Whether the Adjudicating Authority erred in disposing of IA No.199/2020 without adjudicating the RP's prayer for restoration of possession, and whether further orders are required given liquidation has been ordered. - HELD THAT: - The Tribunal observed that the Adjudicating Authority did not adequately adjudicate the RP's IA No.199/2020 seeking restoration of possession after the lockout. However, since a liquidation order has since been passed in respect of the corporate debtor, the Tribunal found that no further orders in the present appeals were necessary in relation to IA No.199/2020. [Paras 32, 33]

Adjudicating Authority failed to decide IA No.199/2020, but no further orders are necessary now because liquidation has been ordered.

Final Conclusion: The Impugned Order dated 6.8.2021 is set aside: the Tribunal held the premises were in possession of the corporate debtor prior to CIRP and protected by the moratorium, the owner's forcible recovery during moratorium was prohibited, no rent was shown to have been agreed or payable from the relevant date and the Adjudicating Authority exceeded its jurisdiction in directing assessment/payment of rent; IA No.199/2020 was not adjudicated below but, in view of subsequent liquidation, no further orders are required. No order as to costs.

Eligibility of a resolution applicant under Section 29 A of the IBC - disqualification on account of connected person and related party relationships - effect of invocation of corporate guarantee on eligibility under Section 29 A(h) - participation of operational creditors and appointment of their representative under Section 24(3)(c)-(4) - sanction of resolution plan under Section 30 and Section 31 of the IBC - validity of constitution and decisions of the Committee of Creditors - scope for initiating proceedings under Section 70(2) against the resolution professional

Eligibility of a resolution applicant under Section 29 A of the IBC - disqualification on account of connected person and related party relationships - effect of invocation of corporate guarantee on eligibility under Section 29 A(h) - Whether Passavant Energy & Environment GmbH (SRA) was ineligible to submit a resolution plan under Section 29 A (including clauses (c), (h), (i) and (j)) by virtue of its connection with Drake & Scull group or invocation/insolvency of connected persons. - HELD THAT: - The Tribunal examined the materials relied upon to show a connected party relationship and whether any disqualifying event preceded the commencement of the CIRP. The press note relied upon by the Appellant showed that the holding company's financial reorganisation was accepted only in May 2020, whereas CIRP in the corporate debtor commenced on 30.10.2018 and the SRA's plan was submitted in July 2019. Consequently the condition in Section 29 A(c) (NPA/insolvency antecedent before commencement of CIRP) is not attracted. As to Section 29 A(h)/(i), the Tribunal observed that no clear material was placed to show invocation of a corporate guarantee by a creditor prior to or in a manner that would disqualify the SRA; the precedents cited do not permit inferring disqualification in the absence of specific particulars of invocation and its timing. The RP obtained legal opinions and the CoC considered the matter; the CoC members present did not treat the SRA as disqualified and voted to approve the plan. On the record and timing of events, no disqualification under Section 29 A attached to the SRA. [Paras 26, 29, 30, 31, 33]

No ineligibility under Section 29 A was found to attach to the SRA and the SRA was eligible to submit the resolution plan.

Participation of operational creditors and appointment of their representative under Section 24(3)(c)-(4) - validity of constitution and decisions of the Committee of Creditors - Whether failure to include an authorised representative of operational creditors in the CoC meetings rendered the constitution of the CoC or the approval of the resolution plan defective. - HELD THAT: - The Tribunal noted the statutory scheme under Section 24(3)(c)-(4): operational creditors whose aggregate dues are at least 10% may appoint a representative who may attend but has no voting right. The RP had repeatedly invited operational creditors to appoint a consensus representative; no consensus name was placed on record. An earlier order of the Adjudicating Authority in CA No. 314/2019 had held that participation of such representative does not confer voting rights and that the CoC comprises financial creditors only; that order was not appealed and is final. Given the RP's communications and the absence of any consensus appointment, and the non voting status of the representative, the Tribunal found no material irregularity in not including a representative which could invalidate the CoC's proceedings or affect approval of the plan. [Paras 17, 19, 20, 21, 22]

Non inclusion of an operational creditor representative did not vitiate the constitution of the CoC or its approval of the resolution plan.

Sanction of resolution plan under Section 30 and Section 31 of the IBC - validity of constitution and decisions of the Committee of Creditors - Whether the resolution plan sanctioned by the Adjudicating Authority (order dated 03.12.2020) could be set aside for material irregularity in conduct of CIRP or CoC voting, and whether the RP's conduct warranted penal action under Section 70(2) or disciplinary reference to IBBI. - HELD THAT: - The Tribunal reviewed the CIRP steps: appointment of RP, public announcements, valuation, information memorandum, issuance of Form G, evaluation of RAs, process advisor's and external legal opinions, and CoC meetings where Axis Bank and RBL (financial creditors) participated and approved the plan with 100% voting of those present. The Tribunal found that the RP sought and obtained legal opinions on eligibility, that the CoC deliberated and resolved to approve the SRA's plan, and that the Adjudicating Authority considered the plan and granted sanction subject to specified observations. There was no evidence of bias or prejudice on the part of CoC members who voted; the Appellant's contentions of material irregularity were unsupported. Consequently, the Tribunal saw no ground to direct initiation of proceedings under Section 70(2) against the RP or to refer the RP to IBBI. [Paras 32, 34, 35, 36, 37]

The sanction of the resolution plan is valid and no penal or disciplinary proceedings against the RP were warranted on the record.

Final Conclusion: The appeal is dismissed. The Tribunal finds no merit in challenges to the SRA's eligibility, to the RP's conduct, or to the constitution/decision of the CoC; the resolution plan sanctioned by the Adjudicating Authority stands and no penal or disciplinary action against the RP is justified.

Filing of Form FC-4 - designated FCRA Account requirement under Section 17(1) of the FCRA - retrospective application of FCRA (Amendment) Act, 2020 - permissibility of belatedly opened FCRA account for prior annual returns - extension of time for filing annual returns - imposition of penalty and coercive steps for non-compliance

Filing of Form FC-4 - designated FCRA Account requirement under Section 17(1) of the FCRA - retrospective application of FCRA (Amendment) Act, 2020 - permissibility of belatedly opened FCRA account for prior annual returns - Whether the petitioner could file Form FC-4 for FY 2019-2020 and FY 2020-21 by furnishing details of an FCRA account opened in August 2021 despite the Form requiring the FCRA account 'as on 31st March' and the FCRA amendment becoming effective on 29th September, 2020. - HELD THAT: - The Court noted that the amended Section 17 and consequent rules and Form FC-4 were notified after 29th September, 2020 and that the Form requires details of the designated SBI, Sansad Marg FCRA account 'as on 31st March of the year ending'. Given that the petitioner opened the FCRA account in August 2021 and that the amendments could not reasonably be given retrospective effect to require an account as on 31st March preceding the amendment, the Court found merit in the petitioners' contention. Balancing the narrow nature of the dispute and the practical difficulty posed by the online portal which disallowed submission without the SBI account details, the Court permitted the petitioner to fill in and submit serial no.7 of Form FC-4 with the details of the FCRA account opened in August 2021 for the relevant years. [Paras 11, 12]

Petitioner permitted to fill in and submit serial no.7 of Form FC-4 for FY 2019-2020 and FY 2020-21 with details of the FCRA account opened in August 2021.

Extension of time for filing annual returns - imposition of penalty and coercive steps for non-compliance - Whether coercive action or penalty should be imposed on the petitioners for belated opening of the FCRA account and delayed filing of annual returns for FY 2019-2020 and FY 2020-21. - HELD THAT: - The Court observed that the petitioner states no foreign contribution was received in the disputed years and that the account was opened belatedly due to the changed regulatory requirement and portal constraints. In view of these facts and the narrow scope of the grievance, the Court directed that no coercive steps be taken for having opened the account belatedly. Further, the Court ruled that no penalty shall be imposed provided the returns for FY 2019-2020 and FY 2020-21 are filed within one month from the order. [Paras 13, 14]

No coercive steps to be taken; no penalty shall be imposed if the returns for the two years are filed within one month.

Final Conclusion: The petition is disposed of: the petitioner may submit Form FC-4 for FY 2019-20 and FY 2020-21 by providing the SBI, Sansad Marg FCRA account details opened in August 2021; no coercive action will be taken and no penalty shall be imposed if the returns are filed within one month.

Adjudication and imposition of penalty for contravention of FERA - continuance of offences under the repealed Act and application of corresponding provisions of FEMA - jurisdiction and power of the Special Director of Enforcement to adjudicate under FERA - availability and efficacy of statutory appellate remedy under FEMA - maintainability of writ petition in presence of efficacious alternative remedy - compliance with principles of natural justice - credit of time under the Limitation Act for filing statutory appeal

Continuance of offences under the repealed Act and application of corresponding provisions of FEMA - availability and efficacy of statutory appellate remedy under FEMA - Whether the adjudication proceedings initiated under FERA in 1993 and the order dated 25.02.2010 are to be treated as proceedings under FEMA with the appellate remedies under FEMA becoming available. - HELD THAT: - The Court held that proceedings initiated when FERA was in force continue to be governed by the repealed Act by virtue of the transition provisions, and actions taken under the repealed Act insofar as not inconsistent with FEMA are to be treated as having been done under corresponding provisions of FEMA. Consequently, the order dated 25.02.2010 must be treated as an order under FEMA and the appellate remedy provided under FEMA (appeal to the Appellate Tribunal and subsequent appeal to the High Court) applies. The petitioners were accordingly informed in the adjudication order about the availability of appeal in line with the transition provision. [Paras 7]

Proceedings and the order dated 25.02.2010 are to be treated as under FEMA and the statutory appellate remedy under FEMA is available.

Jurisdiction and power of the Special Director of Enforcement to adjudicate - adjudication and imposition of penalty for contravention of FERA - Whether the Special Director of Enforcement had power and jurisdiction to adjudicate the alleged contravention and impose penalty. - HELD THAT: - The Court found that the adjudication in the present matter was carried out by the Special Director of Enforcement himself and therefore there was no requirement for a separate empowerment by the Central Government; the Special Director possessed the statutory power and jurisdiction to adjudicate contraventions under FERA and to impose penalty. The Court therefore rejected the contention that the adjudicating authority lacked jurisdiction. [Paras 8]

The Special Director of Enforcement had power and jurisdiction to adjudicate and impose penalty under FERA.

Compliance with principles of natural justice - Whether the impugned order suffered from breach of principles of natural justice. - HELD THAT: - The Court noted that the adjudicating authority passed the order after giving sufficient opportunity to the parties and held that the impugned order does not suffer from any violation of the principles of natural justice. [Paras 9]

No breach of principles of natural justice was found in the impugned adjudication.

Maintainability of writ petition in presence of efficacious alternative remedy - availability and efficacy of statutory appellate remedy under FEMA - Whether the High Court should entertain the writ petition despite existence of an efficacious and specific statutory appellate remedy and whether disputed questions of fact required determination by the Appellate Tribunal. - HELD THAT: - Having regard to the nature of the dispute, which required consideration of documents and resolution of disputed questions of fact, and in view of the availability of specific appellate remedies under FEMA (appeal before the Appellate Tribunal and further appeal to the High Court), the Court held that the alternative remedy was efficacious and ought not to be bypassed. The Court observed that although High Courts may sometimes exercise jurisdiction under Article 226 despite alternative remedies, no special circumstances were shown here to warrant such exercise. The cause of action and the adjudication were centered in Mumbai, further weighing against entertaining the writ petition in Madras. Accordingly, the petitioners were relegated to the statutory appellate forum. [Paras 11, 12, 13, 14]

The writ petition is not maintainable on merits in view of the efficacious statutory appeal; petitioners are directed to file appeal before the Appellate Tribunal.

Credit of time under the Limitation Act - Whether time spent in prosecuting the writ petition would be excluded for purposes of limitation in filing the statutory appeal. - HELD THAT: - The Court directed that the period spent during the pendency of the writ petition shall be taken into account and given credit under Section 14 of the Limitation Act so that if the statutory appeal is filed within the time specified by the Court, the appeal shall be entertained and decided on merits by the Appellate Tribunal. [Paras 15]

Time spent in the writ petition shall be credited under the Limitation Act and the Appellate Tribunal shall entertain the appeal if filed within the period specified.

Final Conclusion: The High Court declined to adjudicate the merits, holding that the adjudication under FERA continues under FEMA and that the Special Director had jurisdiction and complied with natural justice; the petitioners were directed to seek remedy by filing an appeal before the Appellate Tribunal (time to file limited to 45 days from receipt of this order), interim protection extended until the appeal is filed, and time spent in the writ petition is to be credited for limitation purposes.

Summary order. Delay condoned; notice issued returnable in four weeks; matter listed after four weeks (to be taken up along with Civil Appeal No. 5464 of 2010).

Non-speaking order - territorial jurisdiction - exemption under Mega Exemption Notification No.25/2012 Clause-14(a) - opportunity of personal hearing - quash and set aside - prohibition on adverse action pending reconsideration

Non-speaking order - territorial jurisdiction - quash and set aside - Validity of the orders dated 25.03.2022 and 16.11.2022 demanding service tax and related reliefs - HELD THAT: - The Court found that the demand-making orders were passed without adequate reasoning and, in respect of the order dated 16.11.2022, by an authority which lacked territorial competence because the contractual works were executed under the N.F. Railways within the State of Assam and fell within the jurisdiction of the Principal Commissioner, Guwahati. The impugned orders did not deal with the exemption claimed under the Mega Exemption Notification and were non-speaking. In view of these defects the Court set aside the impugned demand and related orders, restraining adverse action pending re-adjudication. [Paras 12, 14, 15, 16]

The impugned orders are set aside and the demand is quashed; no adverse action shall be taken pending reconsideration.

Exemption under Mega Exemption Notification No.25/2012 Clause-14(a) - opportunity of personal hearing - prohibition on adverse action pending reconsideration - Requirement for fresh, speaking adjudication applying the exemption notification and granting opportunity of personal hearing - HELD THAT: - The Court directed the respondents to consider the petitioner's explanations afresh in the light of the Mega Exemption Notification No.25/2012, Clause-14(a), and to pass a speaking order after affording the petitioner an opportunity of personal hearing. The Court noted the Circular requirement that at least three opportunities for personal hearing be given and observed that only two had been provided; accordingly the matter was remitted for reconsideration with specific directions to apply the exemption and to comply with hearing requirements. Until such reconsideration is complete, adverse action is barred. [Paras 13, 16, 17]

Matter remanded for fresh consideration and a speaking order after giving the petitioner personal hearing; no adverse action in the interim.

Final Conclusion: The Court set aside the impugned demand orders as non-speaking and territorially irregular, remitted the matter for fresh adjudication applying Clause-14(a) of the Mega Exemption Notification No.25/2012 with an opportunity of personal hearing (observing circular guidance), and stayed any adverse action until decision on reconsideration.

Condonation of delay in filing appeal - reasonable explanation for delay - balancing of equities by imposing conditions for condonation - service tax on sale of space or time for advertisement

Condonation of delay in filing appeal - reasonable explanation for delay - Whether the Tribunal erred in rejecting the petitioner's application for condonation of delay of four years, nine months and twenty days in filing the appeal. - HELD THAT: - The Court examined the reasons advanced by the petitioner, namely that legislative amendment and communications from the Railway Board led the Railways reasonably to believe that the service tax liability for the relevant period stood extinguished, and that the department did not actively pursue the demand in the interim. The Tribunal's order simply referred to the Supreme Court's ratio in Collector, Land Acquisition, Anantnag v. Katiji without considering the peculiar factual matrix of the petitioner or explaining why the petitioner's explanation was unacceptable. The High Court found the explanation to be a reasonable one and concluded that some indulgence was warranted. The Court further held that the Tribunal had other discretionary options besides outright rejection and should have considered balancing equities by imposing suitable conditions. [Paras 7, 8, 9]

The Tribunal's refusal to condone the delay was set aside and condonation was granted subject to conditions.

Balancing of equities by imposing conditions for condonation - What relief, if any, should be granted in exercise of discretion after allowing condonation of delay. - HELD THAT: - The Court exercised its equitable discretion to balance competing equities by directing that condonation be allowed on the condition that the petitioner deposit 25% of the principal amount of the demand in the Tribunal within six weeks from the date the order is uploaded. The Court noted that such conditional acceptance was an appropriate alternative to the binary options of unconditional allowance or outright rejection which the Tribunal failed to consider. [Paras 9, 10, 11]

Condonation granted on condition that the petitioner deposits 25% of the principal amount within six weeks.

Final Conclusion: Writ petition allowed: the Tribunal's order refusing condonation of delay is set aside and condonation is granted on the condition that the petitioner deposits 25% of the principal amount in the Tribunal within six weeks from the date the order is uploaded.

Sabka Vishwas (Legacy Dispute Resolution) Scheme - Discharge Certificate - time for payment under Rule 7 of the Sabka Vishwas Rules - payment effected when debited from taxpayer's bank account - technical/system error on electronic payment portal - beneficial/benign construction of amnesty schemes - proviso to section 126(1) regarding voluntary disclosure - extension of payment period on account of COVID-19 emergency

Time for payment under Rule 7 of the Sabka Vishwas Rules - payment effected when debited from taxpayer's bank account - technical/system error on electronic payment portal - beneficial/benign construction of amnesty schemes - Whether the Designated Committee was justified in treating the petitioners' declaration as lapsed and refusing to issue the Discharge Certificate where the declared amount was debited from the petitioners' bank account on 30.06.2020 but credited to the Government account on 01.07.2020. - HELD THAT: - The Court found as an established fact on the record that the petitioners' bank account was debited on 30.06.2020 and that the payment was received in the Government account on 01.07.2020. The determinative question was whether non-credit of funds into the Government account on the same calendar date precluded the petitioners from claiming the benefit of SVLDRS under Rule 7. The Court held that, for the purposes of Rule 7, once the taxpayer's bank account is debited and the bank's upload/processing shows the transaction on the last date, the taxpayer has effectuated payment. That time lag between debit and ultimate credit, caused by electronic/processing constraints (including admitted RTGS timing limitations), did not mean that the petitioners failed to make payment within time, particularly where the delay in credit was not attributable to the taxpayer and where there was evidence of attempted payment and debiting on the last permissible date. The Court further observed that SVLDRS is a benevolent scheme meant to conclude legacy disputes and must be construed to give effect to its object; mechanical denial of benefits where payment was in fact made (debited) would defeat the legislative purpose. Consequently, the Designated Committee's refusal to issue the Discharge Certificate on the ground that the Government account received the funds on 01.07.2020 was not tenable. The Court noted ancillary contentions (including references to the automated portal, FAQs, and the proviso to section 126(1)) but concluded that they did not justify denying relief where payment was shown to have been effected from the petitioners' account on the last date. [Paras 9, 11, 12, 13, 16]

Declaration not to be treated as lapsed; payment made on 30.06.2020 (debited from petitioners' bank) to be treated as valid payment within time under Rule 7 and Designated Committee directed to issue Discharge Certificate.

Final Conclusion: Writ petition allowed; impugned decision treating the declaration as lapsed is quashed and set aside and Designated Committee directed to issue the Discharge Certificate in favour of the petitioners treating the payment debited on 30.06.2020 as timely, the exercise to be completed within four weeks.

Business Support Service - employer-employee relationship - brand promotion service - classification beyond show cause notice

Business Support Service - brand promotion service - classification beyond show cause notice - Whether the fees paid to the appellants for playing in IPL and related activities are taxable as Business Support Service (or alternatively as Brand Promotion Service) under the Finance Act. - HELD THAT: - The Tribunal examined the definition of Business Support Service and found that no specific entry in that definition was shown to cover the activities performed by the players. The wearing of team clothing bearing sponsors' marks and the limited promotional obligations under the playing contract did not amount to independent business-support or marketing services of the franchisee or sponsors. The contractual terms (including clauses identified in the agreement) recognise the assessee first as a professional player engaged by the franchisee, and the Tribunal accepted that the contract creates an employer-employee relationship, with playing cricket as the primary obligation and promotional/ancillary activities incidental to that employment. The Tribunal also noted the settled position in the cited precedents that services rendered by an employee under the control of the employer are not separately taxable as services provided by the employee. Further, reliance on a different taxable head at the appellate stage (brand promotion) when the show cause notice and adjudication proceeded on Business Support Service was impermissible; the classification cannot be altered to fit a different taxable head beyond the case made in the show cause notice. Applying these principles to the contractual provisions and the record, the Tribunal concluded that the activities and fees in dispute are not taxable as Business Support Service (nor could they be reclassified as Brand Promotion Service at the appellate stage when proceedings were initiated under BSS). [Paras 5, 6]

Demands of service tax under Business Support Service (and consequentially under Brand Promotion Service as pleaded later) are not sustainable; the confirmed demands are set aside.

Final Conclusion: The appeals are allowed; the service-tax demands confirmed by the authorities are set aside and the appellants are not liable to service tax on the fees received under the playing contracts, with consequential relief as per law.

Leviability of service tax on advances/consideration - security deposit versus advance - admissibility of CENVAT credit on goods used in providing taxable output service - definition of capital goods under the CENVAT Credit Rules - entitlement of provider of output service to CENVAT credit under Rule 3 of the Cenvat Credit Rules - invocation of extended period of limitation for suppression/mens rea

Leviability of service tax on advances/consideration - security deposit versus advance - Explanation 3 to Section 67 - Whether the amounts received from the service recipient were advances liable to service tax or security deposits not exigible to service tax - HELD THAT: - The Tribunal examined the contract clause (para 6.7) which expressly described the sums as 'advance', quantified them as equivalent to two months' estimated fee and specified adjustment against the last two months' fees. The contractual language and the nature of adjustment established that the amounts were consideration for services to be provided and not refundable security deposits. The Tribunal applied the principle that any amount received before, during or after provision of service forms part of the gross amount charged for the taxable service (as reflected in Explanation 3 to Section 67 of the Finance Act) and upheld the Commissioner's finding that the impugned receipts were advances liable to service tax. The Tribunal found no merit in the appellant's contention that long non-adjustment transforms the advance into a security deposit. [Paras 18, 19, 20]

The impugned amount received from Indus Towers Ltd. was an advance towards taxable service and is leviable to service tax; the Commissioner's demand on this score is maintained.

Admissibility of CENVAT credit on goods used in providing taxable output service - definition of capital goods under the CENVAT Credit Rules - entitlement of provider of output service to CENVAT credit under Rule 3 of the Cenvat Credit Rules - Whether CENVAT credit on items such as MS angles, GI sheets, bolts, shelter cabins and fabricated/galvanized structures was admissible as capital goods/inputs used for rendering the output service - HELD THAT: - The Tribunal held that the impugned items were procured and used in the fabrication/installation of solar systems through which the appellant rendered the taxable output service. Relying on the Tribunal's earlier decision in AST Telecom Solar, the Tribunal applied the principle that a provider of output service is entitled under Rule 3 to take CENVAT credit on inputs or capital goods used in rendering taxable output services. The Tribunal concluded that the disputed goods were integrally used in providing the Hybrid Power Solutions and thus the appellant was rightly in position to avail CENVAT credit; the Commissioner's disallowance of such credit was therefore unjustified and set aside. [Paras 21, 22, 23]

Denial of CENVAT credit in respect of the specified goods is set aside; the appellant was entitled to the CENVAT credit.

Invocation of extended period of limitation for suppression/mens rea - Whether the extended period of limitation could be invoked in view of alleged suppression with intent to evade tax - HELD THAT: - The show cause notice averred that the appellant had deliberately mischaracterised the transactions and omitted to disclose material facts, and that agreements were not furnished to conceal the nature of receipts. The Commissioner found that the appellant itself termed the receipts as advances in agreements but attempted to treat them as security deposits, indicating suppression and mens rea to evade tax. The Tribunal found no error in this finding and upheld the invocation of the extended period of limitation on the basis of deliberate suppression and wrongful availment/utilisation of inadmissible credit revealed during audit. [Paras 24, 25, 26]

Invocation of the extended period of limitation was justified on the finding of suppression with intent to evade tax; the extended-period demand is maintainable.

Final Conclusion: The appeal is allowed in part: the Tribunal sets aside the Commissioner's denial of CENVAT credit on the specified goods and upholds the appellant's entitlement to that credit; otherwise the Commissioner's order is sustained - the demand of service tax on the advances is maintained and the invocation of the extended period of limitation is upheld.

Extended period of limitation under Section 73 of the Finance Act, 1994 - suppression as positive act for invocation of extended limitation - business auxiliary service - trade versus service characterisation of sale/purchase of SIM cards and recharge coupons

Extended period of limitation under Section 73 of the Finance Act, 1994 - suppression as positive act for invocation of extended limitation - Validity of invoking extended period of limitation for the demand when an earlier show cause notice on the same issue was issued to the appellant - HELD THAT: - The Tribunal held that invocation of the extended period under the statutory provision requires proof of fraud, collusion, willful mis-statement, suppression of facts or violation of law with intent to evade tax. Suppression is a positive act and does not include mere omission. The Department was aware of the appellant's activities and had earlier issued a show cause notice dated 26.04.2011. In those circumstances the Department could not legitimately contend that the appellant had suppressed information so as to justify issuance of a later notice invoking extended limitation. The decision in Nizam Sugar Factory was applied and the later show cause notice issued beyond the normal period was set aside on limitation grounds. [Paras 7]

Extended period of limitation was wrongly invoked; the show cause notice is barred by limitation and must be set aside.

Business auxiliary service - trade versus service characterisation of sale/purchase of SIM cards and recharge coupons - Whether the appellant's buying and selling of SIM cards and recharge coupons amounted to providing a taxable business auxiliary service to the telecom principal - HELD THAT: - On the merits the Tribunal observed that the appellant was engaged in buying and selling SIM cards and recharge coupons and that this arrangement, as practiced by telecom operators, is trading activity. The Tribunal relied upon consistent precedents of the Tribunal and relevant High Court decisions which have held that persons dealing in or selling SIM cards and recharge coupons do not render a separate business auxiliary service liable to service tax, particularly where the telecom operator has already discharged tax linked to SIM/recharge value. Having considered authorities including Tribunal and High Court decisions, the Tribunal found that the sale/purchase activity did not constitute a business auxiliary service exigible to service tax and thus the impugned demand could not be sustained on merits. [Paras 6, 8, 9]

Buying and selling of SIM cards and recharge coupons by the appellant does not amount to providing taxable business auxiliary service to the principal; the demand is unsustainable on merits.

Final Conclusion: The impugned order confirming service tax demand and imposing penalties was set aside: the extended period of limitation could not be invoked and, on merits, the appellant's activities in buying and selling SIM cards and recharge coupons did not constitute a taxable business auxiliary service; appeal allowed with consequential relief.

Extended period of limitation - Change of opinion - Cenvat credit-input services and invoices not in assessee's name - Abatement under Notification No.26/2012 ST - Place of Provision of Services-services hosted on server located outside India - Revenue neutrality - Penalties on directors under Section 78 and 78A - Penalty under Section 77(2)

Extended period of limitation - Change of opinion - Show cause notice-time barred - Whether demand could be confirmed by invoking extended period of limitation - HELD THAT: - The Tribunal found that the appellant maintained proper books and records and had earlier been audited in Feb.-March, 2016 without any Audit Report being issued for the earlier audit period. The show cause notice issued later was held to be based on a change of opinion by Revenue rather than on facts indicating suppression or non-maintenance of records. On that basis the Tribunal held extended period of limitation was not invokable for demands up to the normal period and specifically held demand upto October, 2015 (and effectively upto the period March, 2016 for earlier audit) to be time barred. [Paras 26]

Demand up to October, 2015 is time barred; extended period of limitation not available to Revenue.

Cenvat credit-input services and invoices not in assessee's name - Business exigency and back office arrangements - Whether cenvat credit of the disputed balance was admissible where invoices were in the name of director or addressed to a back office - HELD THAT: - The Tribunal accepted the appellant's evidence that services were received by the company, payments were effectively borne by the company (including reimbursements to the director), and that the Bangalore back office was only a support location. The Tribunal found the services constituted input services and that the questioned invoices legitimately resulted in credit entitlement. On that basis the Tribunal allowed the balance cenvat credit of Rs.3,01,045, concluding there was no material defect to deny credit. [Paras 14]

Cenvat credit of Rs.3,01,045 allowed.

Abatement under Notification No.26/2012 ST - Verification and re quantification on remand - Validity and quantification of demand alleged for short payment due to non allowance of abatement and recognition of manually filed ST 3 return - HELD THAT: - The Commissioner (Appeals) accepted that the appellant contended a manually filed ST 3 return for April-September 2015 (with supporting challans) had not been recognised by adjudicating authority and that abatement under Notification No.26/2012 ST had not been allowed. The Tribunal agreed with the Commissioner (Appeals) that these aspects required verification and directed remand to the Adjudicating Authority to re quantify the demand after allowing the abatement and verifying tax payments, clarifying that the appellant is entitled to adjustment both in cenvat credit and cash subject to verification of invoices/payments. [Paras 15, 18]

Demand of Rs.28,49,800 remanded to Adjudicating Authority for verification and re quantification after allowing abatement and verifying payments; appellant entitled to cenvat credit and cash adjustments upon verification.

Place of Provision of Services-services hosted on server located outside India - Revenue neutrality - Whether amounts paid for package software, image rights and server hosting are taxable as import of services under Service Tax - HELD THAT: - The Tribunal examined invoices for pre packaged software, rights to use photographs and purchases of server storage/hosting. It held the pre packaged software was a good and not taxable as service, and services in relation to storage/hosting by Cloudinary and Amazon Web Services were not taxable in India because the physical servers were located outside India (place of provision principles). The Tribunal therefore set aside the demand relating to those items and further held that remaining claimed demand was revenue neutral since the appellant had books and was entitled to cenvat credit and had discharged service tax on its taxable outward supplies. [Paras 25]

Demand of Rs.4,85,258 (software/storage/hosting items) set aside as not taxable; remaining part of the demand set aside on ground of revenue neutrality.

Penalties on directors under Section 78 and 78A - Penalty under Section 77(2) - Whether penalties under Sections 78/78A (on directors) and other penal provisions could be sustained - HELD THAT: - The Tribunal found the show cause notice arose from a change of interpretation/opinion by Revenue and that the assessee had a long history of availing similar credits without earlier objection. In that factual matrix the Tribunal concluded benefit of extended limitation was not available and penalties premised on extended period/change of opinion could not be sustained. Consequently penalties under Sections 78 and 78A (on directors) and certain Section 77 penalties and Rule 15(3) CCR were set aside; penalty under Section 77(2) for late filing was reduced to Rs.5,000. [Paras 27]

Penalties under Sections 78, 78A and several other penalties set aside; penalty under Section 77(2) reduced to Rs.5,000.

Final Conclusion: The appeal is allowed: multiple demands and penalties were set aside or reduced-cenvat credit of Rs.3,01,045 allowed; demands relating to imported software/hosting set aside; extended limitation rejected for periods up to October, 2015; demand of Rs.28,49,800 remanded for re quantification after allowance of abatement and verification of payments; penalties largely set aside, Section 77(2) penalty reduced to Rs.5,000.

Declared service under section 66E(e) - consideration for agreeing to refrain from an act or to tolerate an act - liquidated damages, penalty and forfeiture of earnest money as consideration - requirement of express or implied agreement for toleration to attract tax - distinction between contractual penal clauses and consideration for a service

Declared service under section 66E(e) - consideration for agreeing to refrain from an act or to tolerate an act - liquidated damages, penalty and forfeiture of earnest money as consideration - distinction between conditions to a contract and consideration for a contract - Whether amounts recovered by the appellant as penalty, liquidated damages and forfeiture of earnest money constitute a declared service under section 66E(e) and are taxable as consideration for agreeing to refrain from or tolerate an act. - HELD THAT: - The Tribunal held that a declared service under section 66E(e) requires an agreement (express or implied) where one party, for consideration, agrees to refrain from an act, to tolerate an act or situation, or to do an act. There must be a flow of consideration specifically for that obligation. Penal clauses in contracts that impose liquidated damages, forfeiture or penalties are safeguards to ensure performance and deter breach; they are not consideration paid for tolerating or agreeing to an obligation to refrain from an act. The Tribunal followed the reasoning in South Eastern Coalfields Ltd. that the agreements in question contemplate supply of coal or services and the consideration in those agreements is for such supply; recovery under penal clauses arises only upon breach and is not the consideration for an independent toleration service. The Departmental Circular of 03.08.2022, emphasising that an agreement to tolerate an act should not be presumed merely because money changes hands, reinforces this position. Applying these principles, the amounts recovered by the appellant do not constitute a declared service under section 66E(e) and are not taxable as service. [Paras 16, 17, 18, 19, 20]

The amounts recovered as penalty, liquidated damages and forfeiture of earnest money do not constitute a declared service under section 66E(e) and are not taxable as consideration for agreeing to refrain from or to tolerate an act.

Recovery of service tax with interest and penalty - sustainability of adjudication where taxability is negatived - Whether the impugned order dated 27.04.2018 directing recovery of service tax with interest and penalty can be sustained. - HELD THAT: - Since the Tribunal concluded that the amounts in question are not taxable as declared services under section 66E(e), the demand framed by the Commissioner treating those recoveries as taxable consideration cannot be sustained. The impugned adjudication which quantified liability and directed recovery (including interest and penalty) was founded on the incorrect view that the recoveries were consideration for tolerating or refraining from an act. Having negated taxability, the Tribunal set aside the entire order. [Paras 19, 21]

The impugned order confirming recovery of service tax with interest and penalty is not sustainable and is set aside.

Final Conclusion: Appeal allowed; the order dated 27.04.2018 confirming service tax demand (with interest and penalty) on amounts recovered as liquidated damages, penalty and forfeiture of earnest money is set aside as such recoveries do not constitute a declared service under section 66E(e).

Cenvat credit - input service - deposit insurance service - output service - acceptance of deposits not a taxable service

Cenvat credit - deposit insurance service - input service - output service - Whether banks can avail Cenvat credit of service tax paid for the deposit insurance service provided by the Deposit Insurance Corporation of India (DICGC). - HELD THAT: - The Principal Commissioner had held that the deposit insurance service related only to the activity of acceptance of deposits, which is not a "service" and therefore could not qualify as an "output service" or an "input service" for CENVAT credit. The Tribunal, however, applied the binding decision of the Larger Bench in South Indian Bank v. Commissioner, which held that the insurance service provided by the Deposit Insurance Corporation to banks is an "input service" and that Cenvat credit of service tax paid for that service can be availed by banks for rendering output services. Subsequent Division Bench decisions of the Tribunal and the Bombay High Court (which remitted for conformity with the Larger Bench) have followed that ratio. In view of the Larger Bench decision and the subsequent consistent Tribunal precedents, the impugned order confirming denial of credit was set aside and the appeal allowed, holding that credit is eligible. [Paras 4, 6, 7, 8]

The deposit insurance service is an input service and banks are entitled to avail Cenvat credit of the service tax paid thereon; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the service provided by the Deposit Insurance Corporation to banks is an input service and that banks are entitled to Cenvat credit of the service tax paid on deposit insurance.

Extended period of limitation under the proviso to Section 73(1) - requirement to establish fraud, collusion, wilful mis-statement, suppression of facts or intent to evade - detection during audit not by itself constituting suppression or ground for extended limitation - self-assessment and returns obligation under Section 70 and supervisory role under Section 72 (best judgment assessment)

Extended period of limitation under the proviso to Section 73(1) - requirement to establish fraud, collusion, wilful mis-statement, suppression of facts or intent to evade - detection during audit not by itself constituting suppression or ground for extended limitation - self-assessment and returns obligation under Section 70 and supervisory role under Section 72 (best judgment assessment) - Whether the demand raised for the period 2006-2007 to 2008-2009 was time-barred and whether the proviso to Section 73(1) (extended period) was rightly invoked. - HELD THAT: - The Tribunal examined the proviso to Section 73(1) and observed that invocation of the extended five-year period requires a positive finding of one or more of the specified causes: fraud, collusion, wilful mis-statement, suppression of facts, or contravention of the Chapter or rules with intent to evade tax. The show cause notice, the order-in-original and the order-in-appeal relied solely on the fact that the tax shortfall came to light during audit and stated that "had the audit not been conducted" the escapement would not have been detected. The Tribunal held that mere detection during audit does not, without more, establish any of the statutory ingredients necessary to invoke the extended period. It further noted that the assessee had obtained registration and filed returns (self-assessment) and that the statutory scheme provides a check by the jurisdictional officer under Section 72 to call for accounts and make a best judgment assessment. Consequently, the detection by audit in the factual matrix could as readily indicate a failure on the part of the assessing officer to exercise Section 72 powers as any deliberate suppression by the assessee. In absence of any specific findings or material establishing fraud, collusion, wilful mis-statement, suppression of facts or intent to evade, the extended period could not be invoked and the demand was barred by the one-year limitation. [Paras 13, 14, 15, 16]

The demand for the period 2006-2007 to 2008-2009 is time-barred; invocation of the proviso to Section 73(1) was not justified and the impugned order is set aside.

Final Conclusion: Appeal allowed; the extended period under the proviso to Section 73(1) was not attracted on the material before the authorities, the demand was time-barred and the impugned order is set aside with consequential benefits to the appellant.

CENVAT credit - denial for procedural lapses - Proof of receipt and duty-paid character as determinative for credit - Limitation - show cause notice barred by limitation - Board Circular No.441/7/99-CX - procedural lapses should not defeat substantive benefit

CENVAT credit - denial for procedural lapses - Proof of receipt and duty-paid character as determinative for credit - Board Circular No.441/7/99-CX - procedural lapses should not defeat substantive benefit - Denial of CENVAT credit on account of alleged procedural defects in supplier invoices was not sustainable where goods were duty-paid, received in the factory and used in manufacture. - HELD THAT: - The Tribunal found that it was undisputed that the goods covered by the invoices were duty-paid, were received at the appellant's factory and were utilized in manufacture of final products. Relying on the Board's guidance in Circular No.441/7/99-CX that show cause notices should not be issued for mere procedural lapses and that substantive benefits ought not be denied on such grounds, the Tribunal held that technical defects in the invoices (such as non-mention of vehicle number or registration particulars) could not justify denial of CENVAT credit where receipt and duty-paid character stood established. Consequently the order denying credit on those invoices was set aside. [Paras 5]

Impugned denial of CENVAT credit on procedural grounds set aside and credit allowed.

Limitation - show cause notice barred by limitation - Show Cause Notice issued on 01.08.2013 was held to be barred by limitation in respect of the periods under dispute. - HELD THAT: - The Tribunal noted the appellant's contention that the normal limitation period had expired for the periods 2007-08 and 2008-09 and that the department's Show Cause Notice was issued following an audit of records maintained by the appellant. Given that returns had been regularly filed and there was no adequate contemporaneous action by the Department to issue timely proceedings, the Tribunal concluded that the appellants had a strong case on limitation and the Show Cause Notice was time-barred. [Paras 5]

Show Cause Notice held to be barred by limitation; consequential relief granted to the appellant.

Final Conclusion: The impugned orders denying CENVAT credit and imposing consequences were set aside; the appeal is allowed with consequential relief, the credit being permitted and the Show Cause Notice held time-barred.

Assessing Officer's jurisdiction to reopen assessment under Rule 10 of the CST (O) Rules - order passed under Sub-Section (2) of Section 6A of the Central Sales Tax Act cannot be reopened except where obtained by fraud, collusion, misrepresentation or suppression of material facts - power of reassessment by amendment inserting Sub Section (3) to Section 6A (with effect from 8 May 2010)

Assessing Officer's jurisdiction to reopen assessment under Rule 10 of the CST (O) Rules - order passed under Sub-Section (2) of Section 6A of the Central Sales Tax Act cannot be reopened except where obtained by fraud, collusion, misrepresentation or suppression of material facts - Assessing Officer could not reopen the assessments for the years 1986-87 and 1987-88 under Rule 10 of the CST (O) Rules. - HELD THAT: - The Court held that at the relevant time there was no statutory power enabling the Assessing Officer to reassess orders passed under Sub-Section (2) of Section 6A of the CST Act. The Supreme Court's decision in Ashok Leyland Limited v. State of Tamil Nadu established that an order under Section 6A(2) could not be reopened under the State Act except where the order was vitiated by fraud, collusion, misrepresentation or suppression of material facts. The subsequent insertion of Sub-Section (3) to Section 6A with effect from 8 May 2010 confers reassessment power only prospectively and is not applicable to the assessment years in question. Applying these principles, the reassessment orders impugned in these petitions were beyond the AO's jurisdiction and therefore set aside; the original assessment orders, in which the Assessing Officer had accepted that the inter branch transfers were not inter State sales, were restored. [Paras 4, 5, 6, 7, 8]

Reopening of the assessments for AY 1986-87 and AY 1987-88 by the AO under Rule 10 was without jurisdiction; the reassessment orders are set aside and the original assessment orders are restored.

Final Conclusion: Both revision petitions are allowed; the reassessment orders for AY 1986-87 and AY 1987-88 are set aside for lack of jurisdiction and the original assessment orders, which accepted that the inter branch transfers were not inter State sales, are restored.

Dismissal for non-appearance - non-prosecution - discretionary relief by restoration of appeal - personal hearing and speaking order - refusal of adjournment

Dismissal for non-appearance - non-prosecution - Whether the writ court should interfere with the revisional and appellate orders which dismissed proceedings for non-appearance in view of the appellant's conduct. - HELD THAT: - The Court agreed with the learned Single Bench that the appellant had not diligently prosecuted the matter before the appellate and revisional authorities and that the orders recorded non-appearance on several dates. Nevertheless, the Court considered the peculiarity of the assessment record - namely that the substantial part of the tax had already been paid leaving a small balance - and concluded that, despite the appellant's conduct, exercise of equitable discretion was justified to afford a final opportunity to litigate the appeal. The Court therefore set aside the revisional and appellate orders and restored the appeal for fresh hearing, subject to conditions. [Paras 3, 4]

Orders of the revisional authority and the appellate authority set aside; appeal restored and one final opportunity granted despite appellant's earlier non-prosecution.

Discretionary relief by restoration of appeal - personal hearing and speaking order - refusal of adjournment - The manner in which the restored appeal is to be proceeded with by the appellate authority. - HELD THAT: - The appellate authority was directed to issue notice to the appellant, fix a date for personal hearing, and proceed to hear the appellant on that date; if the appellant fails to appear the appeal may be dismissed for non-prosecution. The appellate authority was required to pass a speaking order on merits and in accordance with law after hearing. No adjournment was to be granted and the appellate authority was directed to endeavour to dispose of the appeal within three weeks from the date of the personal hearing. [Paras 4, 5]

Appellate authority to grant personal hearing, pass a speaking order on merits without adjournment, and endeavour to dispose within three weeks.

Final Conclusion: The intra-court appeal is allowed: the writ court order is set aside, the appellate and revisional orders that dismissed proceedings for non-appearance are set aside, the appeal is restored for final hearing with directions for personal hearing, no adjournment, and disposal by the appellate authority within three weeks; no order as to costs.

Presumption under Section 139 of the Negotiable Instruments Act - onus of rebuttal on the drawer - service of demand notice by registered post and deemed service - material alteration and validity of negotiable instruments - presentation period and limitation under Section 138 of the Negotiable Instruments Act - post-dated cheque and penal liability - effect of Section 269-SS of the Income Tax Act on enforceability of loan transactions - appellate reappreciation of evidence in appeals against acquittal

Presumption under Section 139 of the Negotiable Instruments Act - onus of rebuttal on the drawer - Complainant discharged initial burden that the cheque was issued for lawful discharge of debt and the onus shifted to the accused to rebut the presumption. - HELD THAT: - The Court found that the cheque (Ex.P1) bearing the accused's signature was produced, and its dishonour for insufficiency of funds was established by bank memos and the demand notice sequence (paras 9, 11, 12). Relying on the settled position that proof of issuance and dishonour discharges the initial statutory burden, the Court held that the trial court's narrower reading of the earlier decision cited by it was inconsistent with later authoritative pronouncement; accordingly the initial presumption under Section 139 stood established and the burden shifted to the accused to rebut it (paras 9, 11, 12). [Paras 9, 11, 12]

Initial presumption under Section 139 established; burden shifted to accused to rebut.

Service of demand notice by registered post and deemed service - Demand notice (Ex.P5) was duly served by posting to the accused's correct address and receipt by a family member amounted to deemed service. - HELD THAT: - The Court noted that Ex.P5 was posted to the accused's ordinary residence and was received by a family member (Ex.P6). Although the accused's own signature did not appear on the acknowledgement, there was no dispute that the recipient was his wife and that the address was his residence. Applying the principle of Section 27 of the General Clauses Act regarding service by post, and in the absence of contrary evidence, the Court held that service was effected (para 13). [Paras 13]

Demand notice held to be duly served (deemed service).

Material alteration and validity of negotiable instruments - The alleged overwriting in the year on the cheque did not amount to a material alteration rendering the cheque invalid. - HELD THAT: - The trial court's finding of material alteration was examined. The appellate Court observed that the bank did not refuse payment on account of any alteration; dishonour was for insufficiency of funds. The overwriting of a digit in the year was not shown to be a material alteration affecting enforceability, particularly when the cheque was otherwise presented and dishonoured on substantive grounds (para 14). [Paras 14]

Alleged alteration not material; cheque not void on that ground.

Presentation period and limitation under Section 138 of the Negotiable Instruments Act - post-dated cheque and penal liability - Presentation of the post dated cheque was within the applicable statutory period and the claim was not time barred. - HELD THAT: - The accused had delivered a post dated cheque dated 07.12.2010. The cheque was presented within the six month period applicable prior to the RBI change, and thus presentation complied with Section 138(a)'s prescription as applicable to the date in question. Reliance on authority holding that issuing a post dated cheque does not absolve the drawer of penal consequences supported the conclusion that the trial court's finding of time bar was unsustainable (para 16). [Paras 16]

Cheque presentation timely; debt not barred by limitation.

Effect of Section 269-SS of the Income Tax Act on enforceability of loan transactions - Contravention of Section 269-SS does not render the loan transaction ipso facto illegal or the debt unenforceable for purposes of Section 138 of the N.I. Act. - HELD THAT: - The appellate Court reviewed the object and scope of Section 269 SS and related authorities, concluding that the provision prescribes mode of acceptance and was introduced to curb unaccounted money but does not declare cash loans beyond the threshold to be illegal or unenforceable. The trial court's reliance on Section 269 SS to hold the cheque issued for an unenforceable debt and thereby to treat the presumption as rebutted was held to be legally unsustainable (paras 17-19). [Paras 17, 18, 19]

Section 269 SS contravention does not automatically render the debt unenforceable for Section 138 proceedings.

Onus of rebuttal on the drawer - appellate reappreciation of evidence in appeals against acquittal - Accused failed to satisfactorily rebut the statutory presumption by proving the cheque was only security for an earlier loan and that repayment had been made; trial court's acceptance of that defence was erroneous and acquittal was set aside. - HELD THAT: - Although the accused asserted that the cheque was given as security for an earlier alleged loan of Rs.50,000 and that repayment (with very large claimed interest) had been made by DD (Ex.D1), the Court found that the accused did not establish necessary particulars (timing, agreed rate of interest, credible explanation for the claimed quantum of repayment). The appellate Court re appreciated the evidence, applying the principle that while caution is warranted in appeals against acquittal, the appellate Court may reverse where the accused's rebuttal fails to probabilize the defence. The accused's evidence and documents were held insufficient to discharge the onus of rebuttal (paras 20-24). [Paras 20, 21, 22, 23, 24]

Accused failed to rebut the presumption; acquittal set aside and accused convicted under Section 138.

Final Conclusion: The appeal is allowed. The judgment of acquittal is set aside; the accused is convicted under Section 138 of the Negotiable Instruments Act and sentenced by the High Court to pay the fine imposed by the Court, failure of which attracts the specified period of imprisonment; trial court records to be returned to the trial court for compliance.