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The primary issue considered by the Court was whether the appellate authority, the Senior Joint Commissioner of Revenue, Bally Circle, was justified in dismissing the appellants' appeal and confirming the penalty imposed under Section 129(1) of the GST Act, 2017. The core question revolved around whether there was an intention to evade tax, justifying the invocation of Section 129.
ISSUE-WISE DETAILED ANALYSIS
Relevant Legal Framework and Precedents:
The legal framework centers on Section 129 of the GST Act, 2017, which deals with the detention, seizure, and release of goods and conveyances in transit. This provision is typically invoked when there is a suspicion of tax evasion. The Court examined whether the facts of the case justified the application of this section.
Court's Interpretation and Reasoning:
The Court scrutinized the rationale behind the penalty imposition, focusing on the e-way bill generated by the appellants. The adjudicating and appellate authorities had penalized the appellants for not fully disclosing the details of the supplier in the e-way bill. However, the Court noted that the appellants had provided the place of dispatch as required, and this information was accepted by the system, leading to the generation of the e-way bill.
Key Evidence and Findings:
The key evidence considered was the e-way bill generated on July 8, 2023, and the tax invoice dated July 6, 2023. Both documents indicated that the goods were transported in the same vehicle, and the place of dispatch was correctly mentioned as West Bengal, 713212. The appellants explained that it is a trade practice to mention only the place of dispatch to avoid revealing supplier details to the customer.
Application of Law to Facts:
The Court applied Section 129(1) of the GST Act to the facts, assessing whether there was a genuine intention to evade tax. Given that the e-way bill was generated with the accepted details and there was no evidence of tax evasion intent, the Court found that the invocation of Section 129 was unjustified.
Treatment of Competing Arguments:
The authorities argued that the lack of full supplier details indicated a possible intention to evade tax. However, the Court found this reasoning insufficient, given the appellants' explanation and the accepted trade practice of not disclosing full supplier details in such transactions. The Court emphasized that the mere omission of supplier details, without more, does not constitute tax evasion.
Conclusions:
The Court concluded that the penalty imposed under Section 129(1) was unwarranted given the lack of evidence indicating tax evasion. The decision to penalize the appellants was based on a misinterpretation of the requirements for generating an e-way bill and the information provided therein.
SIGNIFICANT HOLDINGS
The Court held that the power under Section 129(1)(a) of the GST Act could not be invoked in this case due to the absence of tax evasion intent. The Court set aside the orders of both the appellate and original authorities, allowing the appellants to apply for a refund of the penalty paid.
Preserve Verbatim Quotes of Crucial Legal Reasoning:
"...merely because the appellants did not disclose the name of the company and the full particulars of his supplier, cannot be stated to be a ground that the appellants had intention to evade the payment of tax."
Core Principles Established:
The judgment underscores that the mere omission of supplier details in an e-way bill, when the place of dispatch is correctly mentioned and accepted, does not automatically imply an intention to evade tax. The application of Section 129 requires a clear demonstration of such intent.
Final Determinations on Each Issue:
The Court determined that the penalty imposed was not justified and directed that the appellants are entitled to a refund of the penalty amount, subject to legal formalities. The decision reinforces the principle that penalties under tax law must be supported by clear evidence of wrongdoing.
Power under Section 129(1)(a) of the GST Act, 2017 - intention to evade payment of tax - e-way bill disclosure obligations - acceptance of e-way bill on portal - refund of penal amount remitted
Power under Section 129(1)(a) of the GST Act, 2017 - intention to evade payment of tax - e-way bill disclosure obligations - Whether the appellate authority was justified in confirming the penalty imposed under Section 129(1) of the GST Act, 2017. - HELD THAT: - The Court found that the facts did not indicate any intention to evade payment of tax. The e-way bill generated by the appellants specified the place of despatch (West Bengal, 713212) in Part-A, and the portal accepted that data and generated the e-way bill. The appellants explained that, as a trade practice in direct dispatches, only the place of despatch is sometimes shown to avoid revealing supplier details to the consignee; the pin code in the e-way bill matched the supplier's location and the goods moved in the same vehicle consistent with the tax invoice. In these peculiar facts, mere non-disclosure of the supplier's full particulars in the e-way bill did not disclose an intention to evade tax. Consequently, the exercise of power under Section 129(1)(a) could not be sustained and the penalty confirmed by the appellate authority was set aside. [Paras 3, 4, 5, 6, 7]
The appellate order confirming the penalty under Section 129(1) was set aside; the appellants may apply for refund of the penalty remitted and such application shall be dealt with in accordance with law.
Final Conclusion: Appeal allowed; orders of the original and appellate authorities confirming penalty under Section 129(1) are set aside and the appellants are entitled to apply for refund of the penal amount remitted, to be dealt with according to law.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Maintainability of the Writ Petition
Issue 2: Consideration of the Appellants' Reply
Issue 3: Procedural Compliance in Issuing the Show-Cause Notice
3. SIGNIFICANT HOLDINGS
Show-cause notice - intimation under Section 74(5) - duty to consider replies before issuing show-cause notice - judicial interference with show-cause notice - remand for fresh consideration
Show-cause notice - duty to consider replies before issuing show-cause notice - judicial interference with show-cause notice - Validity of the show-cause notice dated 8th August, 2024 in view of the authority's failure to deal with the appellants' reply to the prior intimation. - HELD THAT: - The Court found that the impugned show-cause notice was largely a replica of the earlier intimation under Section 74(5) dated 10th July, 2024 and did not address the detailed explanation and documents furnished by the appellants in response to that intimation dated 18th July, 2024. When an authority exercises powers under Section 74(5) it is obliged to consider the reply before deciding to issue a show-cause notice under Section 74(1). The assessing officer's brief statement that the reply was 'not satisfactory' without confronting or answering the contentions rendered the show-cause notice procedurally infirm. For that reason the Court held interference with the show-cause notice to be justified and set it aside. [Paras 3, 4, 6, 7, 8]
The show-cause notice dated 8th August, 2024 was set aside for failure to consider the appellants' reply; interference was warranted.
Remand for fresh consideration - intimation under Section 74(5) - Procedure to be followed on remand and scope of further action by the assessing authority. - HELD THAT: - The matter was remanded to the assessing authority with a direction to consider the reply dated 18th July, 2024 and deal with the issues raised therein. If, after proper consideration, the authority still finds the reply unsatisfactory, it remains open to initiate proceedings in accordance with law, including issuance of a fresh show-cause notice. Observations by the Single Bench on the merits were vacated in light of the remand. [Paras 7, 8, 9]
Remand to the assessing authority to consider the reply dated 18th July, 2024; authority may proceed thereafter in accordance with law.
Final Conclusion: The intra-Court appeal is allowed: the show-cause notice dated 8th August, 2024 is set aside and the matter is remanded to the assessing authority to consider the appellants' reply to the prior intimation; if found unsatisfactory after proper consideration, the authority may proceed in accordance with law.
Issues: Whether, pending consideration of the writ petition, the hearing on the show cause notice should be stayed and whether any adjudication order could be passed in the meantime.
Analysis: The writ petition concerns the manner in which a show cause notice was issued after a pre-consultation notice under Rule 142(1A) of the Central Goods and Services Tax Rules, 2017. On the limited interim request, the Court declined to stay the scheduled hearings on the show cause notice, but protected the petitioner by directing that no adjudication order be passed on the notice until further orders.
Conclusion: The request to stay the hearings was rejected, but the respondents were restrained from passing any adjudication order until further orders.
Pre-consultation process under Rule 142(1A) of the Central Goods and Services Rules, 2017 - show cause notice and duty to consider reply to pre-consultation notice - interim protection against adjudication pending judicial review - procedural fairness in pre-adjudication consultation
Show cause notice and duty to consider reply to pre-consultation notice - procedural fairness in pre-adjudication consultation - Whether the adjudicating authority could proceed to issue an adjudication order without taking into account the petitioner's reply to the pre-consultation notice - HELD THAT: - The Court did not adjudicate the merits of whether the reply should have been considered before issuance of the show cause notice. The petition records that the petitioner sought and purportedly availed time to reply to the pre-consultation notice and that the reply was in the possession of the authorities before the show cause notice was forwarded. Having heard limited submissions, the Court declined to stay the hearings fixed on the show cause notice but expressly restrained the concerned Authority from passing any adjudication order on the show cause notice until further orders of this Court. By this order the Court preserved the petitioner's claim for substantive consideration without finally deciding the legal question whether the reply vitiated issuance of the show cause notice. [Paras 2, 6]
The question of whether the reply to the pre-consultation notice had to be considered before any adjudication is not finally decided; the Authority is restrained from passing any adjudication order until further orders.
Interim protection against adjudication pending judicial review - pre-consultation process under Rule 142(1A) of the Central Goods and Services Rules, 2017 - Interim directions concerning the conduct of hearings and filing of the respondent's affidavit-in-reply - HELD THAT: - On the limited interlocutory application, the Court directed that the respondent may file an affidavit in reply by the date specified and that the matter be placed for admission on the listed date. The Court refused to grant a stay of the hearings already listed on the show cause notice, but ordered that notwithstanding the continuance of hearings the Authority shall not pass any adjudication order on the show cause notice until further orders of this Court. These directions preserve the interim position of the parties while permitting procedural hearing activity to continue. [Paras 3, 4, 6]
Respondents to file an affidavit in reply by the stated date; matter listed for admission on the stated date; hearings may proceed but no adjudication order shall be passed until further orders.
Final Conclusion: The Court declined to stay hearings listed on the show cause notice but granted interim protection by prohibiting the Authority from passing any adjudication order until further orders; the substantive question whether the reply to the pre consultation notice had to be considered before adjudication remains undetermined and is preserved for further adjudication.
Issues: Whether the impugned GST adjudication order was liable to be quashed and the matter remanded for fresh consideration on the ground that the petitioner's reply to the show cause notice was not considered and the order incorrectly recorded that no reply had been filed.
Analysis: The petitioner had filed a reply to the show cause notice, yet the impugned order proceeded on the incorrect premise that no submissions had been made. The challenge raised on the nature of the underlying transaction under the GST scheme was also not dealt with in the order. In these circumstances, and without entering into the merits of the taxability issue, the appropriate course was to set aside the order and direct a fresh adjudication after permitting further reply and affording personal hearing.
Conclusion: The impugned order was quashed and set aside and the matter was remanded to the adjudicating authority for fresh decision after considering the petitioner's reply and granting hearing.
Quashing and remand for fresh adjudication - Failure to consider reply to show cause notice - Right to personal hearing - Duty to consider relevant judicial precedent in fresh adjudication - Taxability of transfer by a lessee - Schedule III versus Schedule II of the CGST Act
Failure to consider reply to show cause notice - Quashing and remand for fresh adjudication - Impugned order was quashed and matter remitted because the authority recorded that no submissions were made despite receipt of the petitioner's reply. - HELD THAT: - The Court found that the impugned order incorrectly stated that no submissions were made in response to the show cause notice, whereas a reply dated 22nd July 2024 had been filed and received by the Assistant Commissioner of State Tax on the same day. In view of this factual error and without adjudicating the merits, the Court set aside the impugned order and remanded the matter for fresh adjudication. The remand requires the authority to re-adjudicate the show cause notice after allowing the petitioner to file a detailed reply and after hearing them personally. The Court expressly refrained from examining the substantive question of taxability on the merits. [Paras 3, 4]
Impugned order quashed; matter remanded for fresh adjudication with liberty to file a detailed reply within two weeks and direction to afford personal hearing before passing any order.
Duty to consider relevant judicial precedent in fresh adjudication - Taxability of transfer by a lessee - Schedule III versus Schedule II of the CGST Act - Right to personal hearing - On remand, the authority must consider the petitioner's contention that the transaction falls under Item 5 of Schedule III (and not Item 2 of Schedule II) and must take into account the decision of the Gujarat High Court cited by the parties. - HELD THAT: - Although the Court did not decide the substantive legal question whether the Deed of Assignment is taxable under GST, it directed that on re-adjudication the authority shall consider the contention advanced by the petitioner regarding classification under Schedule III vis-a -vis Schedule II. The authority is further directed to take into consideration and deal with the Gujarat High Court decision referred to by the parties while rendering its findings. The Court mandated that this consideration occur after the petitioner's detailed reply is filed and a personal hearing is granted. [Paras 2, 4, 5]
On remand, the authority must address the petitioner's Schedule III v. Schedule II contention and the Gujarat High Court decision, after receiving the petitioner's detailed reply and granting a personal hearing.
Final Conclusion: The writ petition is disposed by quashing the impugned order and remanding the show cause notice for fresh adjudication; the petitioner may file a detailed reply within two weeks, the authority must afford a personal hearing and, in its fresh order, deal with the petitioner's Schedule III v. Schedule II contention and the cited Gujarat High Court decision; no order as to costs.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of the Show-Cause Notice
Issue 2: Exemption of Commission Income
3. SIGNIFICANT HOLDINGS
The judgment concludes with the disposal of WPA 28834 of 2024, affirming the procedural correctness of the show-cause notice and the need for further adjudication on the exemption claim, with no order as to costs. All parties are instructed to act on the server copy of the order downloaded from the court's official website.
Show-cause notice - lawful issuance of notice as preliminary step in tax adjudication - natural justice - short payment of tax - adjudication on applicability of exemption for intermediary services under Notification No. 9/2017-IGST (R) entry 12AA
Show-cause notice - lawful issuance of notice as preliminary step in tax adjudication - short payment of tax - Validity of the show-cause notice issued on 19th November, 2024 in relation to alleged short payment of tax on commission income - HELD THAT: - The Court examined the show-cause notice and the materials placed before it, and concluded that issuance of the notice was lawful. The Court treated the show-cause notice as a preliminary step in the statutory adjudication process which permits the assessee to make further submissions and produce evidence prior to final adjudication. While the petitioners had contended that the notice did not reflect independent consideration of their earlier replies, the Court found that the authority had considered the relevant answers and recorded the alleged discrepancy as a basis for contesting the exemption claim and the short payment. In view of these features, the notice cannot be set aside at the interlocutory stage. [Paras 6, 7]
The show-cause notice dated 19th November, 2024 was held to be lawfully issued and is not liable to be quashed.
Natural justice - adjudication on applicability of exemption for intermediary services under Notification No. 9/2017-IGST (R) entry 12AA - Requirement for adjudicating authority to consider the petitioners' submissions on applicability of the claimed exemption before passing final order - HELD THAT: - Although the Court upheld the validity of the show-cause notice, it emphasised that the notice is a preliminary step and that the petitioner must be afforded an opportunity to present further submissions and evidence. The Court directed the petitioner to appear before the adjudicating authority and stated that the adjudicating authority shall consider all submissions of the petitioner, including contentions and documents relied upon to claim exemption under the relevant notification, before passing the adjudicating order. The matter of whether the exemption applies thus remains for adjudication and has not been decided on merits by this Court. [Paras 6, 7]
The issue of applicability of the claimed exemption is left open for determination by the adjudicating authority after considering the petitioners' submissions in accordance with principles of natural justice.
Final Conclusion: Writ petition dismissed; the show-cause notice dated 19th November, 2024 is sustained as lawfully issued, and the petitioners are directed to appear before the adjudicating authority which shall consider their submissions on the claimed exemption and decide the matter on merits; no order as to costs.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Jurisdictional Fact for Invoking Section 122(1A) of the CGST Act
Issue 2: Maintainability of the Writ Petition Challenging the Show Cause Notice
Issue 3: Validity of Issuing a Show Cause Notice Without Prior Summon or Statement
3. SIGNIFICANT HOLDINGS
Maintainability of writ against show-cause notice in taxation - Jurisdictional fact for invoking penalty under Section 122(1A) CGST Act - Penalty under Section 122(1A) of the CGST Act - Requirement of obtaining statement/summons before issuing show-cause notice - Exercise of writ jurisdiction under Article 226 in taxation matters
Maintainability of writ against show-cause notice in taxation - Exercise of writ jurisdiction under Article 226 in taxation matters - Writ petition challenging the show-cause notice at the stage of issuance is not maintainable except in exceptional circumstances; the Court declined to examine merits at this stage. - HELD THAT: - Having regard to settled precedent, the High Court held that it is ordinarily inappropriate to exercise writ jurisdiction under Article 226 to quash or pre-emptively interfere with a show-cause notice in taxation proceedings. The Court declined to enter upon merits of the allegations contained in the impugned notice and observed that challenges to a show-cause notice should generally be raised before the issuing authority by way of reply and, if aggrieved by the authority's decision, pursued via the statutory remedies. The Court therefore refused to adjudicate the factual or merit-based contentions raised by the petitioner at the notice stage and directed the parties to proceed with the statutory adjudicatory process. [Paras 5, 6, 9, 10]
Writ petition not entertained at the stage of show-cause notice; petitioner directed to file objections/reply and statutory process to be followed; Court refrained from expressing any view on merits.
Jurisdictional fact for invoking penalty under Section 122(1A) CGST Act - Penalty under Section 122(1A) of the CGST Act - Requirement of obtaining statement/summons before issuing show-cause notice - No requirement that a statement or summons must be obtained as a condition precedent to issuing a show-cause notice; absence of specific provision mandating prior statement was noted. - HELD THAT: - The petitioner contended that the show-cause notice was invalid for want of a prior statement/summons and for lack of a recorded finding that the petitioner had retained benefit under transactions covered by Section 122(1A). The Court observed that counsel could not point to any statutory provision making the obtaining of a statement a condition precedent to issuance of a show-cause notice. The Court therefore did not hold the notice to be non est on that ground and left the factual questions, including any finding as to retention of benefit or instance of transactions under Section 122(1A), to be considered in the adjudicatory proceedings after the petitioner files its objections/reply. [Paras 3, 7, 8, 9]
No mandatory requirement to obtain a statement/summons before issuing the show-cause notice; factual and jurisdictional contentions to be addressed in the statutory adjudication on receipt of petitioner's reply.
Final Conclusion: Writ petition dismissed at the notice stage; petitioner permitted to file objections/reply within four weeks, respondents to consider the same and proceed with adjudication in accordance with law; Court expressed no view on merits.
Outcome: The writ petition was dismissed on the ground that the impugned adjudication order was amenable to an appeal under the statutory appellate remedy, and the challenge to Rule 36(4) was held not to have direct bearing on the issues arising from the adjudication.
Principle of natural justice - outreach of showcause notice - appeal under Section 107 of the GST Act - vires of Rule 36(4) of the CGST Rules, 2017 - maintainability of writ petition where statutory appeal is available
Principle of natural justice - outreach of showcause notice - maintainability of writ petition where statutory appeal is available - Validity of challenge to the adjudication order dated 28th August, 2024 on grounds of breach of natural justice and adjudication exceeding the scope of the showcause notice, by way of writ petition. - HELD THAT: - The Court held that the alleged breach of the principle of natural justice and the contention that the adjudication had outreached the showcause notice did not justify exercise of writ jurisdiction in the face of an available statutory remedy. The adjudication dated 28th August, 2024 concerns factual and adjudicatory questions which can be agitated and reviewed in an appeal under the statutory appellate mechanism; therefore the writ petition is not the appropriate forum for raising those contentions.
Writ petition challenging the adjudication on grounds of breach of natural justice and outreach of the showcause notice dismissed for want of alternative remedy.
Vires of Rule 36(4) of the CGST Rules, 2017 - appeal under Section 107 of the GST Act - Maintainability of a constitutional challenge to Rule 36(4) of the CGST Rules, 2017 insofar as it was raised in the present writ petition. - HELD THAT: - The Court observed that the challenge to the vires of Rule 36(4) of the CGST Rules, 2017 did not have a direct bearing on the specific factual controversies before it (short payment of RCM, excess ITC availed, ITC found reversible). Given that the adjudication order is amenable to an appeal under Section 107 of the GST Act, the petitioner's attempt to obtain relief by way of the writ petition was not entertained and the constitutional challenge was not permitted to be pressed in this proceeding.
Challenge to Rule 36(4) in this petition declined as not directly relevant to the adjudicated issues and because the statutory appeal remedy is available.
Final Conclusion: The writ petition (WPA 28649 of 2024 and CAN 1 of 2024) is dismissed; the proper remedy for the grievances against the adjudication order is to be pursued by appeal under Section 107 of the GST Act. No order as to costs.
Issues: Whether the cancellation of the petitioner's GST registration for non-filing of returns was liable to be set aside and the registration restored subject to payment of dues.
Analysis: The writ petition challenged the cancellation of registration on the ground of non-filing of return. The Court accepted the petitioner's willingness to pay the revenue dues, including penalty, and granted relief by directing restoration of registration and reopening of the portal for a limited period to facilitate payment. The authorities were also permitted to indicate the amount payable within the stipulated time, with liberty to block the portal again and cancel the registration if payment was not made.
Conclusion: The cancellation orders were set aside and the petitioner was granted restoration of registration subject to payment of the dues within the time allowed.
Cancellation of registration for nonfiling of returns - restoration of registration upon payment of due taxes and penalties - direction to reopen electronic portal for compliance - authority to determine and indicate dues within prescribed time - power to recancel registration upon nonpayment
Cancellation of registration for nonfiling of returns - restoration of registration upon payment of due taxes and penalties - direction to reopen electronic portal for compliance - authority to determine and indicate dues within prescribed time - power to recancel registration upon nonpayment - Impugned orders cancelling the petitioner's registration for nonfiling of returns were set aside and the petitioner's registration was directed to be restored subject to compliance with payment of dues as indicated by the GST authority. - HELD THAT: - The Court permitted restoration of the petitioner's registration notwithstanding earlier cancellation for nonfiling of returns, on the condition that the petitioner shall be allowed to pay any revenue and other dues required for restoration. The respondent GST authority was directed to reopen its electronic portal for a limited period of 45 days from the date the authority's counsel communicates the order, and to indicate the amount of revenue and other dues including penalty within 15 working days of such communication. The order explicitly preserves the authority's power to block the portal and to cancel the registration again if the petitioner fails to make the payment after the dues are indicated. The Court declined to impose costs and required parties to act on the copy of the order downloaded from the Court's official website.
Impugned cancellation orders set aside; registration restored subject to payment of indicated dues within the specified timelines; authority may reblock or cancel on nonpayment.
Final Conclusion: Writ petition disposed of by setting aside the orders of cancellation and directing restoration of registration conditional upon payment of dues as indicated by the GST authority within the procedural timeline prescribed by the Court; no order as to costs.
Outcome: The writ petition was disposed of with liberty to the petitioner to respond to the impugned notice, seek copies of relied upon materials, and raise all available contentions before the authority, which was directed to proceed in accordance with law after affording a reasonable opportunity of hearing.
Issuance of statutory notice before expiry of response period - right to file reply to Form DRC-01A and opportunity to be heard - production of documents/materials relied upon by revenue - consideration of replies and requests in accordance with law
Issuance of statutory notice before expiry of response period - right to file reply to Form DRC-01A and opportunity to be heard - Petition challenging issuance of Form DRC-01 (DRC-01) issued before expiry of time to respond to Form DRC-01A was disposed of by directing an opportunity to reply and further action in accordance with law. - HELD THAT: - The Court noted that Form DRC-01A was issued on 23.08.2023 and the petitioner had time to respond up to 07.09.2023, whereas Form DRC-01 was issued on 29.08.2023. Rather than quashing the impugned notice outright, the Court directed that the petitioner may respond to DRC-01A within one week from receipt of a copy of the order and that the respondents would thereafter proceed in accordance with law. The Court emphasised that the respondent authorities must consider any reply and afford the petitioner a reasonable opportunity of hearing before passing orders. [Paras 4, 6, 7]
Petition disposed with direction that the petitioner be permitted to file reply within one week and that respondents consider such reply and proceed in accordance with law after affording a reasonable opportunity of hearing.
Production of documents/materials relied upon by revenue - consideration of replies and requests in accordance with law - Request for supply of copies of materials relied upon by the authority (such as audit slips) was recognised and left to be considered in accordance with law. - HELD THAT: - The Court observed that the petitioner sought copies of documents on which the authority relied following issuance of DRC-01A. It held that it is open to the petitioner to request such materials and that any request will be considered by the respondents in accordance with law. The Court further recorded that the respondents must consider any such request or reply and pass orders after affording the petitioner a reasonable opportunity of hearing. [Paras 5, 6]
Petitioner may request copies of materials relied upon; respondents to consider such request in accordance with law and thereafter proceed after affording reasonable opportunity of hearing.
Final Conclusion: Writ petition disposed by directions permitting the petitioner to file its reply to Form DRC-01A within one week of receipt of the order and by directing the respondent authorities to consider any request for documents and any reply in accordance with law, affording the petitioner a reasonable opportunity of hearing; no costs.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Violation of Principles of Natural Justice
Issue 2: Opportunity to Explain Discrepancies
3. SIGNIFICANT HOLDINGS
The court's decision reflects a balanced approach, ensuring compliance with tax laws while upholding the principles of natural justice by allowing the petitioner a fair opportunity to address the noted discrepancies. The judgment also emphasizes the importance of partial payment as a condition for remanding cases, aligning with precedents that promote fairness and accountability in tax adjudication processes.
Violation of principles of natural justice - setting aside of assessment order and remand for fresh consideration - predeposit / deposit of a percentage of disputed tax as condition for interim relief - treating assessment order as show cause notice and affording opportunity of hearing - restoration of order on noncompliance - lifting of attachment/garnishee on compliance
Violation of principles of natural justice - setting aside of assessment order and remand for fresh consideration - predeposit / deposit of a percentage of disputed tax as condition for interim relief - treating assessment order as show cause notice and affording opportunity of hearing - restoration of order on noncompliance - lifting of attachment/garnishee on compliance - Impugned assessment order dated 19.07.2024 set aside and matter remitted for fresh consideration subject to conditions including deposit of 10% of disputed taxes and providing opportunity to file objections and be heard. - HELD THAT: - The writ petition challenged the assessment order on the ground that it was passed in breach of principles of natural justice as the petitioner had filed a reply and sought to produce documents but the order proceeded on an alleged nonproduction of documents. By consent, the High Court set aside the impugned order and directed an interim regime: the petitioner to deposit 10% of the disputed tax within specified timelines (with prior payments to be adjusted), the assessing authority to verify payments and intimate any balance, and the entire verification and adjustment exercise to be completed within fixed periods. On compliance, the impugned order is to be treated as a show cause notice; the petitioner shall file objections with supporting material and the authority shall consider them and pass orders after affording a reasonable opportunity of hearing. The court further directed that any existing recovery measures (including bank attachments or garnishee proceedings) shall be withdrawn on compliance, and that failure to comply with the payment or filing conditions will result in restoration of the impugned assessment order. [Paras 6]
Impugned order set aside; matter remitted for fresh consideration on petitioner depositing 10% of disputed taxes and on condition that objections filed will be considered after affording hearing; failure to comply will restore the impugned order; attachments to be lifted on compliance.
Final Conclusion: Writ petition disposed of by setting aside the assessment order and remitting the matter to the assessing authority for fresh adjudication on the petitioner making the directed deposit of 10% of the disputed taxes, filing objections and being afforded a hearing; noncompliance will lead to restoration of the impugned order and compliance will entail lifting of recovery measures.
Issues: Whether the impugned notice in Form GST ASMT-10 should be set aside and the matter remitted for reconsideration after hearing the petitioner in light of the Supreme Court's ruling on the functionality test under Section 17(5)(c) and 17(5)(d) of the GST enactments.
Analysis: The controversy was treated as covered by the Supreme Court's conclusions on the vires of clauses (c) and (d) of Section 17(5) and on application of the functionality test to determine whether a building can qualify as a plant. Instead of deciding the matter finally at this stage, the Court found it appropriate to direct a fresh examination by the respondents and require a speaking order after granting the petitioner an opportunity of hearing.
Conclusion: The impugned notice was set aside and the matter was remanded to the respondents for reconsideration and passing of a speaking order after hearing the petitioner.
Vires of Section 17(5)(c) and 17(5)(d) of the Central GST Act/Punjab GST Act, 2017 - HELD THAT:- The issue raised by the petitioner in the present petition assailing the vires of Section 17(5)(c) and 17(5)(d) of the Central GST Act/Punjab GST Act, 2017, is no more res integra in view of the judgment passed by the Supreme Court in Chief Commissioner of Central Goods and Service Tax vs. Safari Retreats (P.) Ltd., [2024 (10) TMI 286 - SUPREME COURT], wherein the Supreme Court has concluded 'The challenge to the constitutional validity of clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act is not established.'
While the Apex Court has directed all the petitions to be heard by the concerned High Court and examine the functionality test, it is found that in the present case, the matter can be remanded back to the respondents to re-examine the aspect and pass a speaking order, after giving an opportunity of hearing to the petitioner.
The writ petition is accordingly partly allowed by way of remand.
Outcome: The earlier order reserving the matter for judgment was recalled in view of subsequent developments, and the matter was directed to be re-notified for further consideration.
Taking subsequent legislative instruments on record - recall of reserved order - re-notification for fresh consideration
Taking subsequent legislative instruments on record - Minutes of the GST Council and Notification No.20/2024-Central Tax dated 08th October, 2024 were taken on record of the pending Special Civil Application. - HELD THAT: - The Court, on being informed of the GST Council's recommendation and subsequent Notification omitting certain rules prospectively, permitted those documents to be placed on the file of Special Civil Application No.22519 of 2019. The Court accepted the applicants' submission regarding the post-reservation developments and ordered that both the Minutes of the GST Council and the Central Tax Notification be incorporated into the record to inform further adjudication. [Paras 2, 3]
Minutes of the GST Council and Notification No.20/2024-Central Tax dated 08th October, 2024 were ordered to be taken on record.
Recall of reserved order - re-notification for fresh consideration - The earlier order dated 19th September, 2024 reserving judgment was recalled and the matter was re-notified for further consideration before the regular Bench. - HELD THAT: - In view of the subsequent legislative development occurring after the Court had reserved judgment, the Court exercised its power to recall the earlier order reserving the matter and directed that the case be re-notified for hearing and consideration afresh. The re-notification was fixed for 19th December, 2024 before the regular Bench to enable adjudication in light of the newly recorded Minutes and Notification. [Paras 3]
Order dated 19th September, 2024 recalled and the matter re-notified for further consideration on 19th December, 2024.
Final Conclusion: Application disposed of; Minutes and Notification taken on record, the reserved order of 19th September, 2024 recalled and the matter re-notified for further consideration on 19th December, 2024.
Issues: Whether the assessment order could be set aside for want of effective opportunity and whether the matter should be restored for fresh consideration on compliance with the stipulated deposit condition.
Analysis: The impugned assessment was challenged on the ground that the notices and order were uploaded only under the additional notices and orders tab on the GST portal, resulting in lack of awareness and absence of participation in the adjudication. The petitioner sought one final opportunity to place objections, and the respondents did not seriously oppose that course. The Court accepted this submission and coupled the relief with a condition to deposit 25% of the disputed tax, after which the assessment order would be treated as a show cause notice and the objections would be considered afresh after hearing.
Conclusion: The impugned order was set aside and the petitioner was granted an opportunity to contest the proposal subject to deposit of 25% of the disputed tax within the stipulated time, failing which the assessment order would stand restored.
Adequacy of service of notice via electronic GST portal - opportunity of hearing / audi alteram partem - setting aside assessment order and remand for fresh adjudication - deposit as condition for grant of interim relief - assessment under GST
Adequacy of service of notice via electronic GST portal - opportunity of hearing / audi alteram partem - assessment under GST - Impugned assessment order set aside for want of effective participation by the petitioner and remitted for fresh consideration after affording opportunity to file objections and for personal hearing. - HELD THAT: - The Court found that the notices and orders were uploaded under the "view additional notices and orders" tab on the GST Portal, which resulted in the petitioner being unaware of the initiated proceedings and thus unable to participate in the adjudication. Reliance was placed on this Court's recent decision in M/s. K. Balakrishnan, Balu Cables as supporting the proposition that where the assessee was prevented from participating in the proceedings owing to inadequate notice, the assessment cannot be allowed to stand without affording an opportunity to be heard. In consequence, the impugned order was set aside and the assessment was remitted to the respondents to treat the impugned order as a show cause notice, invite objections and consider them after affording a reasonable opportunity of hearing to the petitioner. [Paras 3, 5]
Order set aside and matter remitted for fresh adjudication after giving the petitioner an opportunity to file objections and to be heard.
Deposit as condition for grant of interim relief - Grant of interim relief made conditional upon the petitioner depositing 25% of the disputed tax within the stipulated period. - HELD THAT: - The Court directed that as a condition for ordering remand and fresh consideration, the petitioner must deposit 25% of the disputed tax within four weeks from receipt of the order. On compliance, the respondents are to treat the impugned assessment as a show cause notice and proceed as directed. The Court further specified that if the deposit is not made or objections are not filed within the respective four week periods, the impugned order shall stand restored. [Paras 5]
Petitioner to deposit 25% of the disputed tax within four weeks as condition for remand; failure to comply will result in restoration of the impugned order.
Final Conclusion: Writ petition allowed to the extent that the impugned assessment order for assessment year 2018-19 is set aside and remitted for fresh adjudication after the petitioner deposits 25% of the disputed tax within four weeks and files objections within four weeks; failure to comply will restore the impugned order. No order as to costs.
Issues: Whether the denial of input tax credit under section 16(4) of the CGST/SGST Acts could be sustained in view of section 16(5) of the CGST/SGST Acts, and whether the matter required fresh consideration by the competent authority.
Analysis: The petitioner's claim to input tax credit for the financial year 2018-19 had been rejected by the impugned order on the footing of section 16(4) of the CGST/SGST Acts. The Court took note of the contention that, after notification of section 16(5), the petitioner would be entitled to the benefit of input tax credit. In that backdrop, the impugned rejection could not be retained without reconsideration of the effect of section 16(5), and the competent authority was required to re-examine the claim after hearing the petitioner.
Conclusion: The denial of input tax credit under section 16(4) was set aside to that extent, and the matter was directed to be decided afresh after considering section 16(5) and after affording an opportunity of hearing.
Denial of benefit of input tax credit on account of the provisions contained in sub-section (4) of Section 16 of the CGST/SGST Acts - HELD THAT:- Having regard to the assertion of the learned counsel appearing for the petitioner that on account of notification of sub-section (5) of Section 16 of the CGST/SGST Acts, the petitioner will be entitled to input tax credit, which has been denied to the petitioner by Ext.P3 order, the writ petition will stand disposed of, setting aside Ext.P3 to the extent that it denied input tax credit to the petitioner on account of the provisions of sub-section (4) of Section 16 of the CGST/SGST Acts and directing the competent authority to pass fresh orders, after taking note of the provisions contained in Section 16(5) of the CGST/SGST Acts and after affording an opportunity of hearing to the petitioner, within a period of three months from the date of receipt of a certified copy of this judgment.
Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Retrospective vs. Prospective Application of Notification No. 54/2018
Issue 2: Validity of Summons and Recovery Proceedings
3. SIGNIFICANT HOLDINGS
The judgment emphasizes the importance of clarity in legislative amendments and the protection of constitutional rights against arbitrary retrospective applications. It underscores the necessity for tax authorities to adhere to the correct interpretation of notifications and amendments to avoid unjust consequences for taxpayers.
Applicability of Rule 96(10) of the CGST Rules, as amended by Notification No. 54/2018-Central Tax dated 9.10.2018 - retrospective or prospective effect - validity of summons and recovery proceedings based on the retrospective application of Notification No. 54/2018 - HELD THAT:- This Court in case of Cosmo Films Limited [2024 (10) TMI 275 - GUJARAT HIGH COURT] has held that 'On perusal of above notification, it is clear that same has come into effect from 9th October, 2018 and as such there is a mistake apparent on record in CAV judgment dated 20th October, 2020 wherein it is incorrectly stated that said notification has come into effect from 23rd October, 2017.'
This Court while considering the mistakes pointed out in Misc. Civil Application No.1 of 2020 in Special Civil Application No. 15833 of 2018 has passed the rectification order holding that Notification No.54 of 2018 shall apply prospectively with effect from 9th October, 2018 only.
The summons, issued, notices as well as recovery proceedings on the basis of retrospective operation of Notification No.54 of 2018 dated 09.10.2018 is held to be without jurisdiction. The summons issued, notices as well as recovery proceedings are quashed and set aside as Notification No.54/2018 would be applicable prospectively with effect from 09.10.2018 and therefore, the amount quantified for the period prior to 09.10.2018 towards alleged erroneous refund would not survive.
Petition disposed off.
Issues: Whether the order refusing condonation of delay in filing a revised return was liable to be set aside for being signed by a subordinate officer with only stated approval of the competent Member and for want of a personal hearing and reasoned decision.
Analysis: The power to condone delay under section 119(2)(b) of the Income-tax Act, 1961 is vested in the CBDT and its assigned Member. The impugned order was signed by an Additional Commissioner and only recorded approval of the Member, without showing that the Member himself decided the application. In similar matters, such an order has been quashed where the record did not show actual decision-making by the competent authority. The refusal to condone delay carried serious civil consequences and, in the absence of any exclusionary provision, principles of natural justice required an opportunity of personal hearing and a speaking order.
Conclusion: The impugned order was set aside and the matter was remanded to the CBDT for fresh consideration after granting a personal hearing and passing a reasoned order.
Ratio Decidendi: Where an application under section 119(2)(b) of the Income-tax Act, 1961 is decided by a subordinate signatory with only recorded approval of the competent Member, and the decision entails serious civil consequences, the order is vulnerable unless it reflects actual consideration by the competent authority and compliance with natural justice, including a hearing and a reasoned decision.
Condonation of delay in filing revised return - Power under Section 119(2)(b) to condone delay to avoid genuine hardship - validity of orders approved by a Member of the Central Board of Direct Taxes and signature by subordinate officer - principles of natural justice and right to personal hearing - requirement of a reasoned order and remand for fresh consideration
Condonation of delay in filing revised return - validity of orders approved by a Member of the Central Board of Direct Taxes and signature by subordinate officer - requirement of a reasoned order and remand for fresh consideration - Impugned order refusing condonation of delay, which was signed by an Additional CIT with stated approval of Member (IT), CBDT, was quashed and the matter remanded to the CBDT for fresh decision after affording a hearing and passing a reasoned order. - HELD THAT: - The court examined the impugned order and the affidavit filed on behalf of the CBDT and found that the order was signed by the Additional CIT (ITA Cell) while paragraph 10 of the order recorded that it was issued "with the approval of Member (IT), CBDT". The affidavit explained the Board's processing practice but did not show that the Member himself made the order; it only stated that the Member approved the order and that such orders are thereafter issued in the Member's office with the signature of an officer. Relying on earlier coordinate-bench decisions where similar orders were quashed for want of material showing that the Member had in fact passed the order, the court held that the present impugned order could not be sustained on that basis alone. Without deciding the merits of the cause shown for condonation, the court set aside the order and remanded the application to the CBDT for fresh consideration. The court directed that the CBDT or the Member to whom this function is assigned must grant the petitioner or its representative a personal hearing and pass a reasoned order. The court further clarified that although Section 119(2) does not expressly provide for a show-cause notice or hearing, principles of natural justice should be read into the statute in the absence of any provision to the contrary, particularly because the refusal to condone delay entails serious civil consequences. The CBDT was ordered to complete the exercise within three months of uploading of the order. [Paras 14, 18, 19, 20, 21]
Impugned order set aside; matter remanded to CBDT for fresh consideration of the condonation application after granting a personal hearing and passing a reasoned order within three months.
Final Conclusion: Writ petition allowed; impugned order refusing condonation of delay quashed and matter remitted to the CBDT for fresh adjudication in accordance with law after affording a personal hearing and issuing a reasoned order within three months.
1. ISSUES PRESENTED and CONSIDERED
The core legal question presented in this judgment is whether the 15-day delay in filing Form-10B under the Income Tax Act, 1961, for the Assessment Year 2022-23, should be condoned based on the reasons provided by the Petitioner.
2. ISSUE-WISE DETAILED ANALYSIS
Relevant Legal Framework and Precedents
The legal framework revolves around the provisions of the Income Tax Act, 1961, particularly concerning the filing of Form-10B, which is mandatory for certain trusts to claim tax exemptions. The case also references the principle that every day's delay must be explained, as highlighted in the cited precedent of Ranka & others Vs. Rewa Coalfields Ltd.
Court's Interpretation and Reasoning
The court interpreted the requirement for condoning delay by considering whether the reasons provided by the Petitioner constituted a "sufficient cause." The court acknowledged the ongoing reconstruction and redevelopment of the trust premises since 2018 and the disruptions caused by the Covid pandemic as legitimate reasons for the delay.
Key Evidence and Findings
The court found that the Petitioner provided sufficient evidence, including necessary approvals and commencement certificates, to substantiate the claim of ongoing construction activities. This evidence supported the Petitioner's argument that the delay was not due to negligence or an attempt to gain undue advantage.
Application of Law to Facts
The court applied the legal principle that, while every day's delay needs to be explained, a liberal approach can be adopted when the delay is marginal and the cause shown is not mala fide. The court concluded that the 15-day delay was justified given the circumstances presented by the Petitioner.
Treatment of Competing Arguments
The Respondents argued that the trust, being an established entity, should have been aware of the filing timelines and that the reasons provided did not constitute sufficient cause. The court, however, found this argument unpersuasive, noting that the ongoing construction and pandemic-related disruptions were valid reasons for the delay.
Conclusions
The court concluded that the reasons provided by the Petitioner constituted a sufficient cause for the delay and that the impugned order refusing to condone the delay was improper. The delay was therefore condoned.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning
"In most matters involving condonation of delay, some lapse on the part of the party seeking indulgence is quite normal. However, that by itself, cannot be a ground for refusing to exercise discretion."
Core Principles Established
The judgment establishes that a liberal approach can be adopted in condoning delays when the delay is marginal, the cause shown is not mala fide, and no undue advantage has been gained.
Final Determinations on Each Issue
The court set aside the impugned order and condoned the 15-day delay in filing Form-10B, allowing the Petitioner to proceed with the necessary steps regarding the impugned intimation.
The rule was made absolute, and no costs were awarded.
Refusal to condone a 15-day delay in filing Form-10B on the ground that no sufficient cause was shown - HELD THAT:- There is no serious denying that the reconstruction and redevelopment of the trust premises have been going on since 2018. Necessary approvals are on record. There is a reference to the intervening Covid pandemic. If, for all these reasons, there was some disruption in the normal functioning of the trust office, entailing a marginal delay of 15 days in filing Form-10B, a case of sufficient cause was made out.
The reason is neither frivolous nor can it be said to be some excuse to derive some undue benefits. Even assuming that each day’s delay must be explained, considering the delay is only 15 days and the cause shown is eminently acceptable, the impugned order warrants interference.
Thus, condone the delay of 15 days in filing Form-10B of the IT Act.
1. ISSUES PRESENTED and CONSIDERED
A. Whether the ITAT erred in law and on facts in deleting the adjustment proposed by the Transfer Pricing Officer (TPO) on account of Arm's Length Price (ALP) adjustment of specified domestic transactions from Associated Enterprises for the Assessment Year (AY) 2014-15Rs.
B. Whether the ITAT was correct in deleting adjustments made on account of the transfer of power as per the provisions of Section 92F read with Section 80IA of the Income Tax Act, 1961, without appreciating that there was a suitable selling Comparable Uncontrolled Price (CUP) rate from the central agency in the field of power tradingRs.
2. ISSUE-WISE DETAILED ANALYSIS
Issue A: ALP Adjustment of Specified Domestic Transactions
Relevant Legal Framework and Precedents:
Section 80IA of the Income Tax Act provides deductions for profits and gains from industrial undertakings or enterprises engaged in infrastructure development. Sub-section (8) of Section 80IA mandates that if the transfer of goods or services between eligible and non-eligible businesses does not reflect market value, profits must be computed as if the transfer was made at market value. The market value is defined under Section 92F(ii) as the ALP.
Court's Interpretation and Reasoning:
The court focused on whether the ITAT correctly applied the CUP method to determine the ALP for electricity transferred between the Assessee's eligible and non-eligible units. The ITAT's decision was based on the premise that the IEX rates could not serve as a valid external CUP due to significant differences in transaction characteristics.
Key Evidence and Findings:
The court noted that the Assessee had historically used rates from State Electricity Boards (SEBs) as internal CUPs. The TPO had used IEX rates to propose adjustments, but the ITAT found these rates unsuitable due to differences in transaction nature and reliability.
Application of Law to Facts:
The court applied the legal framework of Section 80IA and the definition of ALP under Section 92F(ii), emphasizing the need for comparable transactions to determine market value. The court agreed with the ITAT that IEX rates were not comparable due to their volatile and short-term nature.
Treatment of Competing Arguments:
The Revenue argued that IEX rates were appropriate for benchmarking. However, the court sided with the Assessee, finding that the nature of IEX transactions (short-term, bid-based) differed materially from the continuous supply agreements with SEBs.
Conclusions:
The court concluded that the ITAT was correct in deleting the adjustment proposed by the TPO, as the IEX rates were not a suitable benchmark for determining the ALP of the electricity transferred.
Issue B: Transfer of Power and Section 80IA
Relevant Legal Framework and Precedents:
Section 80IA(8) requires that the transfer of goods or services between eligible and non-eligible units be at market value, defined as the ALP. The ALP must be determined using the most appropriate method under Section 92C.
Court's Interpretation and Reasoning:
The court examined whether the ITAT correctly rejected the use of IEX rates as an external CUP. The court acknowledged the differences in transaction characteristics between IEX trades and SEB agreements, supporting the ITAT's decision.
Key Evidence and Findings:
The court highlighted the Assessee's use of SEB rates as internal CUPs and noted the ITAT's agreement that these rates were more appropriate than IEX rates due to the latter's volatility and short-term nature.
Application of Law to Facts:
The court applied the legal principles under Section 80IA and Section 92F(ii) to determine that the ITAT correctly identified the SEB rates as a better reflection of market value than IEX rates.
Treatment of Competing Arguments:
The Revenue's argument that IEX rates should be used was countered by the Assessee's evidence of significant differences in transaction characteristics, which the court found persuasive.
Conclusions:
The court concluded that the ITAT was correct in its decision to delete the adjustments based on IEX rates, as these rates did not adequately represent the market value for the Assessee's transactions.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning:
"The CUP method cannot be applied where there is significant dissimilarity between the comparable transactions and it is not feasible to determine an adjustment to eliminate the impact of the said differences on the prices of comparable transactions."
Core Principles Established:
The court reaffirmed the necessity of using comparable transactions to determine ALP under the CUP method. It emphasized that transactions must be materially similar to serve as valid benchmarks.
Final Determinations on Each Issue:
For Issue A, the court upheld the ITAT's decision to delete the proposed ALP adjustment, finding that IEX rates were not suitable comparables. For Issue B, the court agreed with the ITAT that SEB rates were more appropriate than IEX rates for determining market value under Section 80IA.
In conclusion, the court dismissed the Revenue's appeal, affirming the ITAT's decision in favor of the Assessee. The court's analysis focused on the appropriateness of using IEX rates as a benchmark for ALP, ultimately determining that SEB rates provided a more accurate reflection of market value for the Assessee's transactions.
Quantum of deduction available u/s 80IA - determining the ALP and the market value for the purposes of Section 80IA - ALP adjustment of specified domestic transactions from Associated Enterprises - electric power transferred by the Assessee from its eligible unit to its non-eligible unit - adjustments made on account of transfer of power as per the provision of section 92F r.w.s 80IA
HELD THAT:- In the present case, the Assessee had computed the ALP by adopting the CUP method as provided in Rule 10B (1) (a) of the Rules. TPO had also accepted it as the most appropriate method in the facts of the present case. Thus, there is no dispute that CUP method is required to be used for determining the ALP and the market value for the purposes of Section 80IA of the Act.
As is apparent from Sub-clause (i) of Clause (a) of Rule 10B (1) of the Rules, it is necessary to determine the price charged or paid for the property or goods transferred or services provided in a comparable uncontrolled transaction.
In the present case, the transaction relates to the sale of electricity by the Assessee’s eligible unit to a non-eligible unit. Thus, a comparable uncontrolled transaction would necessarily involve determining a transaction of sale of power in a similar uncontrolled transaction.
CUP method would be an appropriate method only if the transactions are identical inasmuch as there are no differences that would materially affect the price in an open market. And, if there is any difference which affects the price, the same can be reasonably ascertained and its effect can be eliminated by an appropriate adjustment.
Determine the market value or the ALP of power supplied by power plants established by the Assessee to its other units - The market for supply of electricity is regulated. Thus, to apply the CUP method, it would be necessary to ascertain the comparable transactions that are similar in material aspects and there is no difference between the transactions which has a bearing on the price of the power supplied.
Whether power traded on IEX cannot be compared with the power supplied by a SEB ? - In the present case, the Assessee had supplied excess power to UPPCL in UP region at the rate of Rs. 4.39 per kWh. Thus, the said transaction was accepted by the learned DRP as well as the learned ITAT as an internal uncontrolled transaction. The rate at which such electricity was supplied by the Assessee being Rs. 4.39 per kWh, was rightly accepted as an ALP.
Supreme Court in Jindal Steel and Power Limited [2023 (12) TMI 417 - SUPREME COURT] had accepted the rates at which electricity was supplied by the SEBs to industrial consumers as being the market value of the said supplies for the purposes of Sub-section (8) of Section 80IA of the Act. Decided in favour of the Assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Ultra Vires Nature of the Impugned Notification
Issue 2: Claim for Deductions under Section 80IB(10)
3. SIGNIFICANT HOLDINGS
Deduction u/s 80IB (10) - only requirement was that the construction of the housing project must be completed on or before 31 March 2008 - CBDT, by the impugned notification, dated 5 January 2011, which is a purported “corrigendum” to the notification dated 3 August 2010, restricted the benefit of the proviso to Section 80IB (10) only to projects approved on or after 1 April 2004 and before 31 March 2008.
Whether the impugned notification dated 5 January 2011, styled as a corrigendum to the notification dated 3 August 2010, is ultra vires Section 80IB(10)? - HELD THAT:- As on a comparison of the present and the earlier provisions in Section 80IB(10), it is apparent that there was no special benefit to housing projects carried out in accordance with the scheme framed by the Central or State Governments for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force where such schemes were to be notified by the CBDT in this behalf. The benefit to such notified schemes for reconstruction or redevelopment of existing buildings in areas declared to be slum areas was introduced only with effect from 1 April 2005 and not earlier.
The proviso to clauses (a) and (b) of sub-section (10) of Section 80IB of the IT Act entered force on 1 April 2005. The principal notification, however, had notified the scheme with which the Petitioners are concerned only with effect from 3 August 2010. Therefore, to align the principal notification with the date of coming into force of the proviso, the impugned corrigendum dated 5 January 2011 came to be issued.
The effect of the principal notification dated 3 August 2010, as corrected by the impugned notification dated 5 January 2011, is only to align the CBDT’s notification with the proviso to Section 80IB (10), which was brought into force by legislature prospectively, i.e. with effect from 1 April 2005. The provisions of 80IB (10), as they obtained before 1 April 2005, had made no special provisions regarding any slum redevelopment schemes. There is nothing in the Finance Act, 2004 or the provisions introduced by the said act to suggest or imply legislative intention to grant any retrospective effect. Therefore, the argument that the impugned notification is ultra vires cannot be sustained.
In this case, the legislature has expressly stated that the substituted Section 80-IB (10) would come into force from 01 April 2005.
Because some of the clauses encompass or refer to past events, that is not sufficient to hold that the amendment is retrospective. Mere reference to projects approved before 1 March 2004 in sub-clause (a) of Section 80 IB (10) cannot lead to the inference that the amendment is retrospective. We are satisfied that no case is made to declare the impugned notification ultra-vires or strike it down.
As impugned notification was valid and that the petitioner was not entitled to the claimed deductions u/s 80IB(10) due to non-compliance with the notification's conditions.
1. ISSUES PRESENTED and CONSIDERED
The judgment addresses several core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Impermissible Judicial Override
Issue 2: Consistency with Section 17(2)(ii)
Issue 3: Retrospective Application
Issue 4: Violation of Article 14
Issue 5: Interference with Staff Regulations
Issue 6: Double Taxation
3. SIGNIFICANT HOLDINGS
Scope of amendments and the Explanations in Section 17 (2) (ii) of the IT Act - whether retrospective application of the amendments is permissible and constitutional? - definition of “perquisite” contained in Section 17 (2) of the IT Act - HELD THAT:- By introducing the impugned amendments, the legislature, apart from addressing the lacuna and shortcomings pointed out in the Court decisions, has provided consistency, clarity and uncertainty. These factors promote good tax governance. In fiscal matters or tax measure laws, it is well settled that the legislature enjoys far greater latitude than what may be permitted in non-fiscal legislation.
For all the above reasons, we see no force in the contention that the impugned amendments constitute an instance of impermissible judicial override or that the legislature has overruled the judicial precedents in Arun Kumar [2006 (9) TMI 115 - SUPREME COURT] or Officers’ Association, Bhilai Steel Plant [1980 (10) TMI 6 - MADHYA PRADESH HIGH COURT]
From 1 April 2006, the impugned amendment provides that a concession in the matter of rent shall be deemed provided at the specified rate by an employer to his employee by providing unfurnished employer-owned accommodation. The value of such concession in terms of Explanation 4 would be 15% of the salary in cities having a population exceeding twenty-five lakhs as per 2001 census; 10% of salary in cities having a population exceeding ten lakhs but not exceeding twenty-five lakhs as per 2001 census; and 7.5% of salary in any other place less the rent recoverable from or payable by the employee.
Thus, if for the period between 2002 to 2006, an employer were to have provided to his employee unfurnished employer-owned accommodation in a city having a population exceeding four lakhs as per the 1991 census and such employee had a monthly salary of Rs.1 lakh and was paying a monthly rent of Rs. 5,000/- towards such accommodation, then, the value of the concession for the purposes of Section 17 (2) (ii) had to be determined as the difference between 10% of such employee’s salary i.e. Rs. 10,000/- and the rental of Rs. 5,000/- which such employee was payable to the employer. This means that the value of the concession would be computed at Rs.5,000/-, the amount on which such an employee would be liable to pay tax.
Arguments about the scope of explanations and legal fiction -The arguments about the impugned amendments being inconsistent, repugnant and destructive of the main body of Section 17 (2) (ii) of the IT Act carry no force and cannot be accepted, as discussed earlier, the legislature creating legal fiction is a permissible legislative exercise. If such exercise is shown not to offend any constitutional provisions, there is no scope to interfere with such an exercise.
The following argument about the necessity of introducing an explanation without demonstrating that there was any ambiguity in Section 17 (2) (ii) of the IT Act also cannot be accepted. The purposes of introducing or adding an explanation to a Section can be manifold. The legislature has broad discretion in such matters.
The impugned amendments and the explanations introduced thereby cannot be struck down either because the legislature was incompetent to create a legal fiction, because such an explanation was unnecessary, because it destroyed the principal section, or because they were otherwise unconstitutional, ultra-vires, or null and void.
Retrospectivity of the impugned amendments - In the present case, however, we need not explore whether the Explanations inserted by the impugned amendments are clarificatory. This is because the issue of construction and determining retrospectivity arises when a legislature is either silent or ambiguous. Here, the legislature, has expressly provided a limited retrospective operation. There is nothing inherently wrong in providing for such a retrospective operation. Therefore, merely because a limited retrospectivity is granted to the impugned amendments, we cannot hold that the impugned amendments violate Article 14 of the Constitution or otherwise ultra-vires the constitutional provisions.
For all the above reasons, we find no force in the challenge based on the retrospectivity of the impugned amendments.
Amendments violating Article 14 of the Constitution of India - We see not much force in the challenges to the impugned amendments on the grounds of any breach of Article 14 of the Constitution or any other constitutional provisions.
Bank Submission - As it is too premature to decide whether the banks could be held to be “assesses in default” or made liable to pay any taxes on behalf of the employees. Therefore, we do not wish to make any observations on this issue. However, we clarify that if and when such issues arise, all parties' contentions regarding this issue are kept open. Such issues should be dealt with in accordance with law by all concerned.
Revenue authorities must consider that this Court had interdicted tax deductions at source through interim orders that operated during the pendency of some of these Petitions. The tax authorities must also consider the plight of the banks vis-a-vis its employees, most of whom must have retired by now. In any event, for the present, since such issues are yet to arise, we make no further observations on such matters, leaving all contentions of parties open.
1. ISSUES PRESENTED and CONSIDERED
The judgment addresses the following core legal questions:
i) Whether the ITAT erred in law by not appreciating that the Long Term Capital Gain claimed as exempt under Section 10(38) of the Income Tax Act, 1961, from the sale of shares of Wagend Infra Venture Pvt. Limited, was correctly disallowed and added under Section 68 by the Assessing Officer due to the shares being characterized as penny stocks used for generating bogus gainsRs.
ii) Whether the ITAT erred in failing to give credence to the investigations by the Assessing Officer and the Investigation Wing regarding the astronomical rise in the price of shares of Wagend Infra Venture Pvt. Limited, which had no net worth, and overlooked the possibility of the transactions being stage-managed to facilitate bogus Long Term Capital GainsRs.
iii) Whether the ITAT erred in deleting the addition made by the Assessing Officer under Section 68, despite the issue being covered by the jurisdictional High Court's decision in the case of Pr. CIT vs. Smt. Swati Bajaj, and exceptions in CBDT's Circular No. 5 of 2024Rs.
2. ISSUE-WISE DETAILED ANALYSIS
Issue i:
Relevant Legal Framework and Precedents: The case revolves around the interpretation of Sections 10(38) and 68 of the Income Tax Act, 1961. Section 10(38) provides exemption for Long Term Capital Gains from the sale of equity shares, while Section 68 deals with unexplained cash credits.
Court's Interpretation and Reasoning: The court examined whether the ITAT correctly appreciated the facts and evidence provided by the assessee regarding the legitimacy of the capital gains claimed.
Key Evidence and Findings: The Tribunal found that the assessee provided substantial documentation, including share application forms, bank statements, demat statements, and broker ledger accounts, to substantiate the claim of genuine transactions.
Application of Law to Facts: The Tribunal determined that the Assessing Officer's addition was based on presumptions without concrete evidence of the shares being penny stocks.
Treatment of Competing Arguments: The Tribunal considered the revenue's argument about the shares being penny stocks but found no supporting evidence from SEBI or the Bombay Stock Exchange.
Conclusions: The Tribunal concluded that the assessee had discharged the onus of proving the genuineness of the transactions, and the addition under Section 68 was unwarranted.
Issue ii:
Relevant Legal Framework and Precedents: The issue involves the assessment of transactions under the lens of human probability and the credibility of investigations conducted by the Income Tax Department.
Court's Interpretation and Reasoning: The court evaluated whether the ITAT failed to consider the investigative findings regarding the price rise of the shares and the potential for stage-managed transactions.
Key Evidence and Findings: The Tribunal noted that the shares were not listed in the AIR report as penny stocks, and no adverse inference was drawn by SEBI.
Application of Law to Facts: The Tribunal found that the transactions were not speculative and were supported by adequate documentation.
Treatment of Competing Arguments: The Tribunal rejected the revenue's argument about stage-managed transactions due to lack of evidence.
Conclusions: The Tribunal upheld the genuineness of the transactions, dismissing the revenue's claims of manipulation.
Issue iii:
Relevant Legal Framework and Precedents: The issue involves the applicability of judicial precedents and CBDT circulars on the treatment of capital gains from penny stocks.
Court's Interpretation and Reasoning: The court assessed whether the ITAT's decision was contrary to existing legal precedents and circulars.
Key Evidence and Findings: The Tribunal found that the CIT(A) had thoroughly examined the evidence and upheld the genuineness of the transactions.
Application of Law to Facts: The Tribunal applied the principles from relevant case law and circulars to the facts, finding no basis for the additions made by the Assessing Officer.
Treatment of Competing Arguments: The Tribunal addressed the revenue's reliance on the case of Pr. CIT vs. Smt. Swati Bajaj and found it inapplicable to the present facts.
Conclusions: The Tribunal concluded that the additions were not justified and upheld the CIT(A)'s decision.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning: The court noted, "The Tribunal found that the assessing officer committed a mistake which is apparent on the face of the assessment order."
Core Principles Established: The judgment reinforces the principle that substantial evidence must support additions under Section 68, and mere presumptions are insufficient.
Final Determinations on Each Issue: The court concluded that no substantial question of law arose for consideration, and the appeal was dismissed.
Addition under section 68 as unexplained share capital - onus on assessee to prove genuineness of share allotment - application of human probability test to suspect penny stock transactions - appellate scrutiny of factual findings by Tribunal and CIT(A) - substantial question of law under Section 260A
Appellate scrutiny of factual findings by Tribunal and CIT(A) - onus on assessee to prove genuineness of share allotment - procedural compliance and sufficiency of opportunity to the assessee before making addition - HELD THAT: - The CIT(A) found that the assessee was given adequate opportunity to make submissions and that the assessment was completed after considering those submissions. The Tribunal and the High Court noted that the assessing officer completed the assessment without being entitled to draw adverse inference for lack of opportunity where the assessee had placed detailed documents - share application forms, bank statements, demat statements and broker ledgers - and these were considered by the CIT(A) and Tribunal. On this basis the Courts held that there was no violation of procedural law in completing the assessment. [Paras 6, 7]
Procedural objection rejected; adequate opportunity found and procedural irregularity not established
Addition under section 68 as unexplained share capital - application of human probability test to suspect penny stock transactions - appellate scrutiny of factual findings by Tribunal and CIT(A) - whether the addition under section 68 by treating long term capital gain as bogus on account of alleged pennystock manipulation was sustainable - HELD THAT: - The Tribunal and CIT(A) reexamined the voluminous material placed by the assessee and concluded that the assessee discharged the onus to prove the genuineness of the share allotment and holding. The assessing officer's addition rested on the stock being a penny scrip and on departmental investigations of price rise, but the assessee demonstrated absence of the scrip from the department's AIR list, the company was not included among suspended companies, SEBI drew no adverse inference, and a Bombay Stock Exchange notice showed resumption of trading; these factual findings were accepted by the Tribunal. The High Court held that no substantial question of law arose because the appellate authorities had reappreciated evidence and concluded that the transactions were in the nature of longterm investment rather than staged bogus dealings. [Paras 8, 9, 10, 11]
Addition under section 68 deleted on appreciation of evidence; no perversity or legal error warranting interference
Final Conclusion: The appeal under Section 260A is dismissed; no substantial question of law arises as the Tribunal and CIT(A) have, on reappreciation of evidence, upheld the assessee's case and deleted the addition.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Jurisdiction under Section 263 of the Income Tax Act
Issue 2: Allowability of ESOP Expenses
3. SIGNIFICANT HOLDINGS
Revision u/s 263 - Employees Stock Option Plan (‘ESOP’) expenses claimed by assessee - as per CIT(A) AO failed to conduct adequate inquiry and verification before allowing the ESOP expenses as a deduction.
Whether the deduction claimed by the assessee for the Employee Stock Option Plan (ESOP) expenses paid to its parent company, MakeMyTrip, Mauritius, was allowable under the Income Tax Act?
HELD THAT:- We noted that the assessee has filed information in regard to ESOP charges claimed as deduction while furnishing information before TPO i.e., copy of information and documents maintained in TP report u/s 92D(1) including Executive Summary of ESOP cross charges. The assessee in its TP report has disclosed the ESOP cross charges which is part of assessment record and TP report.
The assessee has filed entire details and AO has carried out enquiry into the details and after verifying the details he has allowed the claim of the assessee, and hence, it is not a case that the AO has not carried out verification or has not made in enquires in regard to this claim.
We noted that the shares of MakeMy Trip, Mauritius got listed on NASDAQ Stock Exchange w.e.f., 17/08/2010 and since that date the market price of MakeMy Trip, Mauritius are readily available on the stock exchange. We noted that that the assessee has accounted for all the entries related to ESOP in term of guidelines note provided by ICAI on accounting of employees shares based payments and assessee has carried out the accounting treatment skill in compliance with the same.
Assessee has undertaken ESOP costs as part of the salary and compensation under personnel expenses in the profit and loss account. Assessee has provided complete list of employees, as subscribed to these shares and their current employment status and benefit provided to them and consequent benefit to the assessee company.
Assessee also explained before the AO and now before us that the earning under ESOP accrues to eligible employees by virtue of their employment with the assessee company. The company benefits from the services of an enthused and motivated work force, who remain committed and loyal to the company in anticipation of potential benefits under ESOP.
Assessee has also provided valuation report for issuing such ESOP scheme and as per schedule reflected in Annexure-5 of the scheme the grant price of ESOPs during the year sum up to US$ 5,27,28 as per graded vesting schedule and corresponding amount of Rs. 2,41,51,868 has been booked in the audited financial statements and duly reflected in F. No.3CBE of assessee company for the Financial Year 2010-11 relevant to AY 2011-12.
The complete benefit, if any, share shall be derived by employee and consequent benefit to the company is described is entity. Hence, on merits also the PCIT could not find fault with the scheme. He has simply directed revision on the assessment order that no verification or enquiry was carried out by the AO.
Thus the revision order quashed and allowed the appeal of the assessee.
Issues: Whether reassessment proceedings under sections 147 and 148 of the Income-tax Act, 1961 could be initiated while rectification proceedings under section 154 of the Income-tax Act, 1961 were still pending on the same grounds.
Analysis: The reasons recorded for the rectification notice and for reopening were found to be identical. Reliance was placed on the principle that, in the absence of any order showing withdrawal or disposal of the section 154 proceedings, those proceedings must be treated as pending. During the pendency of such proceedings, initiation of reassessment on the same basis was held to be impermissible.
Conclusion: Reopening under sections 147 and 148 during the subsistence of pending section 154 proceedings was held to be without jurisdiction and bad in law, and the reassessment proceedings were quashed.
Reopening of assessment u/s 147 when proceedings u/s 154 were pending - As per the reasons recorded in the approval form, the reasons recorded therein are exactly similar to the reasons recorded in the notice issued u/s 154 proceedings - HELD THAT:- We are of the view that in the proceedings initiated u/s 154, the AO has not acted upon pending proceedings u/s 154, AO cannot initiate the proceedings u/s 148 which is beyond his jurisdiction. Two simultaneous proceedings cannot be initiated.
Respectfully following the decision of S.M. Overseas Pvt. Ltd. [2022 (12) TMI 702 - SC ORDER] we are inclined to quash 148 proceedings as bad in law. Accordingly, ground is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Disallowance under Section 69C
Issue 2: Non-Filing of Tax Returns by Payees
Issue 3: Principles of Natural Justice
3. SIGNIFICANT HOLDINGS
Unexplained expenditure u/s 69C - bogus expenditure as no supporting bills for such payments made u/s 194C to non-filers were furnished before the AO - HELD THAT:- As on the basis of data available on the Departmental portal, list of non-filers was found to whom payment had been made but who had not filed their income tax returns.
Assessee was given the list of those non-filers, and the onus to prove the genuineness of transactions with them vide notice issued u/s 142(1) of the Act, but no reply was filed by the to the notice issued. Thus, it is not correct to state that the Ld. AO never asked for such details.
A perusal of the details of non-filers shows that heavy payments were made to one individual Shri Phulchand Sharma at Rs. 1,47,60,000/- and while the Ld. AO had invoked section 69C of the Act to make the addition, however, this was a case of the expenses not being verified and, therefore, the expenses claimed u/s 37(1) of the Act were liable to be disallowed as it could not be established in the absence of the vouchers that the expenditure was incurred for business purposes.
It has been held in the case of P.K. Palanisamy Vs. N Arumugham and another [2009 (7) TMI 1311 - SUPREME COURT] that it is a well settled principle of law that mentioning of wrong provision or non-mentioning of provision does not invalidate an order if the court and/or statutory authority had the requisite jurisdiction therefore.
Even though the provisions of section 69C of the Act were not applicable, however since the primary evidence for the expenditure claimed was not produced before the Ld. AO, nor the same could be produced before the Bench, therefore, some disallowance was called for on account of expenditure not being supported by vouchers.
Hence, it is considered appropriate to sustain the addition to the extent of 10% of the expenses disallowed by the Ld. AO for non-maintenance of the vouchers which was conveyed to the Ld. AR.
Thus, addition being 10% of the disallowed amount is hereby sustained and the rest of the addition is directed to be deleted. Hence, Ground Nos. 1 and 2 of the appeal are partly allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions addressed in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Late Filing of Form 10B and Exemption under Section 11
Issue 2: Denial of Application of Funds
Issue 3: Denial of Accumulation of Funds
3. SIGNIFICANT HOLDINGS
Denial of exemption u/s 11 - non-filing of Form 10B along with return of income - directory v/s mandatory provision - HELD THAT:- Filing of Form 10B is directory to facilitate the assessment and not mandatory. The assessee is running charitable trust and carried on charitable activities over the years, mere non-filing of Form 10B which is directory in nature cannot be the reason to deny the benefit extended by the statute, therefore, we are inclined to allow the claim of the assessee by relying on the findings in Green Dot Health Foods Pvt. Ltd. [2023 (2) TMI 516 - ITAT DELHI] - Decided in favor of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Reopening of Assessment under Section 147
Issue 2: Addition under Section 68 for Unexplained Credits
3. SIGNIFICANT HOLDINGS
Reopening of assessment u/s 147 - Addition u/s 68 - unexplained credits regarding share application money - HELD THAT:- AO observed that based on the information from Central Circle with regard to obtaining accommodation entries from MARRASS Industries Ltd. reasons recorded for reopening of the assessment and, it shows that he reopened the assessment after lapse of four years.
On careful consideration of the reasons recorded for reopening the assessment, the AO has not discussed or hinted on the aspect for failure on the part of the assessee particularly when provisions of section 147 (1) was attracted in this case.
Since original assessment order was already passed u/s 143(3) of the Act and after due verification of the transaction, AO allowed the same by accepting the same after verification of various documents submitted before him.
CIT (A) sought for the assessment records in order to verify the above submissions of the assessee, however no records were traceable at that point of time.
Since the assessee has submitted relevant information with regard to submission of various informations relating to receipt of share application money.
Since the issue involved is application of provisions to section 147(1) of the Act, non-recording of failure on the part of the assessee in the reasons recorded shows that the reopening of assessment is only change of opinion and also beyond jurisdiction and at this juncture, we do not see any reason to disturb the findings of the CIT (A). Appeal filed by the Revenue is dismissed.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment revolves around the following core issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of Assessment Order
Issue 2: Disallowance under Section 40(a)(ia)
Issue 3: Estimation of Income
Issue 4: Unexplained Cash Credits
Issue 5: Penalty under Section 271(1)(c)
3. SIGNIFICANT HOLDINGS
This judgment underscores the importance of maintaining proper records and compliance with tax provisions to avoid adverse findings and penalties. The court's decision reflects a strict adherence to statutory requirements and the consequences of non-compliance.
Penalty imposed u/s. 271(1)(c) - Scrutiny assessment - Addition towards unexplained cash credits in the capital accounts of the partners - HELD THAT:- For Unexplained cash credit in the partners’ capital account as the assessee firm as per the mandate of “Explanation-1” of Section 271(1)(c) had failed to come forth with any explanation as regards the aforesaid credits in its books of accounts, therefore, it was liable to be saddled with penalty under the aforesaid statutory provision. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(A) who had rightly saddled the assessee firm with penalty on the aforesaid addition made u/s. 68 of the Act, uphold the same.
Addition to the business income - Although the assessee firm on being confronted with the aforesaid fact in the course of the quantum appeal before the CIT(A), had stated that the said infirmity was on account of an inadvertent omission, but we are unable to persuade ourselves to concur with the same.
As the assessee firm had failed to come forth with any plausible explanation for having suppressed/understated the “net profit” in its return of income, therefore, as observed by the CIT(Appeals) and, rightly so, it was liable to be saddled with penalty u/s. 271(1)(c) of the Act. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(Appeals) who had rightly saddled the assessee firm with penalty u/s. 271(1)(c) of the Act on the aforementioned amount of understated/suppressed “net profit " uphold the same.
Deduction of expenses of FBT, donation and prior period expenses - There is nothing available on record which would substantiate the genuineness of the aforesaid expenses, which the assessee had admitted before the CIT(Appeals) as inadmissible, therefore, the same is nothing short of raising of a false/wrong claim of deduction. We, thus, in terms of our aforesaid observations, find no infirmity in the view taken by the CIT(Appeals) who had rightly imposed penalty u/s. 271(1)(c) on the assessee firm for raising a wrong claim of deduction of expenses.
Decided against assessee.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment revolves around the following core legal questions:
1. Whether the Commissioner of Income-Tax (Appeals) was correct in upholding the order of the Assessing Officer (A.O) without considering the material submitted by the assessee during the assessment proceedings.
2. Whether the assessment order passed by the Income Tax Officer (ITO)-4(1), Raipur, was illegal due to the lack of jurisdiction and absence of an order under Section 127 for the transfer of the case from ITO-3(1), Raipur.
3. Whether the cash deposits of Rs. 11,00,000/- made by the assessee during the demonetization period were satisfactorily explained, or if they should be treated as unexplained money under Section 69A of the Income-tax Act, 1961.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of the CIT(A)'s Decision
- Relevant Legal Framework and Precedents: The assessment and appellate proceedings are governed by the Income-tax Act, 1961, which mandates that the CIT(A) must consider all relevant materials and submissions made by the assessee.
- Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not adequately consider the material on record, as the assessee had provided explanations for the cash deposits, which were not duly addressed.
- Key Evidence and Findings: The CIT(A) relied heavily on the A.O's findings without independently verifying the explanations and evidence provided by the assessee.
- Application of Law to Facts: The Tribunal emphasized the need for the CIT(A) to independently assess the evidence and explanations provided by the assessee, rather than solely relying on the A.O's conclusions.
- Treatment of Competing Arguments: The Tribunal considered the assessee's argument that the CIT(A) failed to consider the evidence and found merit in this contention.
- Conclusions: The Tribunal concluded that the CIT(A) erred in not independently evaluating the evidence and explanations provided by the assessee.
Issue 2: Jurisdiction of the A.O
- Relevant Legal Framework and Precedents: Section 127 of the Income-tax Act, 1961, requires an order for the transfer of jurisdiction between assessing officers.
- Court's Interpretation and Reasoning: The Tribunal found that an order under Section 127(2) was indeed passed, transferring the case from ITO-3(1), Raipur to ITO-4(1), Raipur.
- Key Evidence and Findings: The A.O provided a copy of the transfer order, which was verified by the Tribunal.
- Application of Law to Facts: The Tribunal determined that the jurisdiction was properly transferred, and the assessment order was validly passed by ITO-4(1), Raipur.
- Treatment of Competing Arguments: The assessee's argument regarding jurisdiction was dismissed based on the evidence of the transfer order.
- Conclusions: The Tribunal upheld the jurisdiction of the A.O and dismissed the additional grounds of appeal raised by the assessee.
Issue 3: Explanation of Cash Deposits
- Relevant Legal Framework and Precedents: Section 69A of the Income-tax Act, 1961, deals with unexplained money, requiring the assessee to satisfactorily explain the nature and source of any money found in their possession.
- Court's Interpretation and Reasoning: The Tribunal partially accepted the assessee's explanation based on CBDT Instruction No. 3/2017, which provides guidelines for estimating cash in hand during demonetization.
- Key Evidence and Findings: The assessee claimed the cash deposits were sourced from accumulated savings, income from hobby classes, and bank withdrawals. However, the Tribunal found the explanation insufficient for the entire amount.
- Application of Law to Facts: The Tribunal applied the CBDT Instruction to estimate that Rs. 3.50 lakh could be considered as explained, while the remaining Rs. 7.50 lakh was treated as unexplained.
- Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the explanation was not credible and partially agreed, leading to a partial allowance of the assessee's appeal.
- Conclusions: The Tribunal sustained the addition of Rs. 7,50,000/- as unexplained money under Section 69A, while allowing the explanation for Rs. 3,50,000/-.
3. SIGNIFICANT HOLDINGS
- Preserve verbatim quotes of crucial legal reasoning: "The assessee had failed to come forth with an irrefutable explanation as regards the source of the cash deposits of Rs. 11 lacs (supra) made in her bank account during the year under consideration."
- Core Principles Established: The Tribunal emphasized the necessity of providing a satisfactory explanation for cash deposits during demonetization and the applicability of CBDT guidelines for estimating cash in hand.
- Final Determinations on Each Issue:
1. The CIT(A) erred in not independently evaluating the evidence; however, the jurisdiction of the A.O was validly established through a proper transfer order.
2. The assessee's explanation for the cash deposits was partially accepted, with Rs. 3,50,000/- considered explained and Rs. 7,50,000/- treated as unexplained income under Section 69A.
3. The appeal was partly allowed, with the Tribunal sustaining the addition of Rs. 7,50,000/- as unexplained money.
Order pronounced in open court on 21st day of January, 2025.
Validity of Assessment order passed by the ITO-4(1), Raipur as non-jurisdictional A.O - no order u/s.127 was passed for transfer of case from ITO-3(1), Raipur to ITO-4(1), Raipur - HELD THAT:- As on a perusal of the aforesaid order of transfer u/s. 127 of the Act that it is stated at Sr. No.20 that the case of the present assessee had been transferred from ITO-3(1), Raipur to ITO-4(1), Raipur. Additional grounds of appeal raised by the assessee are dismissed.
Addition u/s 68 - unexplained "source" of the cash deposit made in her bank account during the demonetization period - The assessee had failed to come forth with an irrefutable explanation as regards the source of the cash deposits of Rs. 11 lacs (supra) made in her bank account during the year under consideration. Left with no other alternative but to draw support from the CBDT Instruction No.3/2017, dated 21.02.2017 for estimating the amount of cash in hand that would have been available with her to source the subject cash deposits in her bank account.
As availability of cash with the assessee as on the date of cash deposits which would have sourced the cash deposits of Rs. 11 lacs (supra) in her bank account with Allahabad Bank, Raipur is restricted to the extent of Rs. 3,50,000/-. Hence, sustain the addition partly.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment addressed the following core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Additions in Absence of Incriminating Material
Issue 2: Refusal to Admit Additional Evidence
Issue 3: Opportunity to Comply with Reasons for Additions
3. SIGNIFICANT HOLDINGS
The judgment demonstrates the importance of adhering to established legal principles and the necessity of incriminating material in making additions under search assessments.
Assessment u/s 153A - Addition of unexplained cash credit u/s 68 - HELD THAT:- In the case of Smt. Shashi Agarwal [2024 (10) TMI 533 - ITAT LUCKNOW] coordinate bench of ITAT Lucknow has decided the matter in favour of the assessee, relying on Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] on the issue whether additions can be made in a search assessment in the absence of any incriminating material found during search. Thus addition cannot be made in a search assessment in the absence of any incriminating material - Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Addition under Section 69 of the Act
Issue 2: Imposition of Special Tax Rate under Section 115BBE
Issue 3: Adequate Opportunity to Present the Case
3. SIGNIFICANT HOLDINGS
In conclusion, the Tribunal's judgment focused on ensuring that the assessment was based on a comprehensive evaluation of all relevant evidence, leading to a significant reduction in the addition initially made by the AO. The decision underscores the necessity of adhering to principles of natural justice and considering all pertinent financial documentation in tax assessments.
Addition u/s 69/69A - treating all the credit found in bank as unexplained money - AO charging special tax rate 60 percent u/s 11BBE - HELD THAT:- Out of a credit amount Rs. 44,01,180/- is on account of a home loan, copy of home loan disbursal is placed on record, otherwise it is evident from the credit entry, if such amount is reduced from whole of the addition, the addition will reduce to Rs. 28,80,494/-.
Further, if the assessee is allowed deduction under section 80TTA of Rs. 2,042/-, the addition will reduce to Rs. 28,78,452/-. Further, there is mistake on figure of Rs. 19,870/- by considering as correct amount will reduce to Rs. 28,58,582/-.
From the copy of ITR for AY 2016-17, we find that the assessee was having cash-in-hand of Rs. 9,92,080/- the return of income for AY 2016-17 filed on 14.09.2016, copy of which placed on record pages 39 to 41 of the paper book.
Thus, if such credit is allowed, the additions is left only to Rs. 18,66,502/-. We find that the assessee was engaged in business income is estimated @ 10% the taxable income would be Rs. 1,86,650/-, which we rounded off to Rs. 2.00 lakhs. Thus, the additions made by AO is restricted to Rs. 2.00 lakhs. In the result, the grounds of appeal raised by the assessee are partly allowed.
Valuation of imported goods - allegation of Fabricated invoices/ original invoices - transaction value of the imported goods - Jurisdiction Of Ld. Adjudicating Authority to appreciate the evidences on record in sustaining the allegations/ the issues raised in the SCN - it was held be CESTAT that 'The transaction values of other importers could not be considered for re-determination of the subject goods' value under Rule 5 of the Customs Valuation Rules, 2007.'
HELD THAT:- It is not required to issue notice in the present appeal; hence, the same is dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Delay in Finalization of Provisional Assessment and Release of Bank Guarantee
Issue 2: Validity of Final Assessment Order
Issue 3: Entitlement to Interest on Bank Guarantee
3. SIGNIFICANT HOLDINGS
Challenge to assessment order - seeking release of the bank guarantee - import of consignment of gold jewellery from Indonesia - benefit of exemption N/N. 46/2011-CU dated 01st June, 2011 and N/N. 12/2012-CE dated 7th March, 2012 - HELD THAT:- There can be no doubt about two facts, firstly that the Division Bench judgment [2023 (12) TMI 697 - DELHI HIGH COURT] had to be complied with and the Customs Department could not hold back compliance thereof by directing adjustment in the final order. Such a course of action would not be permissible. Secondly, insofar as the impugned order is concerned, the same is an appealable order. Delay in passing the impugned assessment order is a ground on which the Petitioner seeks to challenge the same. The ground of delay can also be raised in the appeal. The appellate forum would then consider the reliefs sought in the first writ petition also while deciding whether there was delay.
This Court is also not to go into computation in terms of the impugned order. That would be a factual determination. Since the impugned order is appealable, this Court does not wish to go into merits of the order or the aspect of delay.
The Petitioner is permitted to file an appeal challenging the impugned order dated 23rd February, 2024 within a period of 30 days from today along with requisite pre-deposit in terms of the Act - Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Limitation under Section 28(9) of the Customs Act, 1962
Issue 2: Justification of Delay due to Call Book Placement
3. SIGNIFICANT HOLDINGS
Challenge to SCN - time limitation - seeking declaration that proceedings initiated under the SCN by Respondent No. 2 Principal Commissioner of Customs, ICD Tughlakabad, New Delhi, to be barred by limitation under Section 28 (9) of the Customs Act, 1962 - HELD THAT:- The issue raised in the petition is no longer res-integra. Section 28 (9) of the Act, unamended and amended, have been considered in detail by the Coordinate Benches of this Court in Swatch Group India Pvt. Ltd. [2023 (8) TMI 864 - DELHI HIGH COURT] as also M/s Vos Technologies India Pvt. Ltd. v. The Principle Additional Director General & Anr. [2024 (12) TMI 624 - DELHI HIGH COURT]. All the issues which have been raised by the Respondents now stand adjudicated.
It was held in Swatch Group India Pvt. Ltd. that 'In the absence of any ground that it was not possible for the officer to determine the amount of duty within the prescribed period, the impugned SCN has lapsed and cannot be adjudicated.'
The impugned SCN, which was issued way back in 2008, due to repeated placing in the call book has not been adjudicated for so long. Repeated placing and removing from the call book is not a valid justification for non-adjudication of the impugned SCN for about 15 years. Moreover, the gaps between the said periods is also inexplicable. Hearing notices have been given to the Petitioners but there is no reason for non-adjudication of the impugned SCN for long period.
Conclusion - The SCN was quashed due to being barred by limitation, and the justification of delay due to call book placement was rejected.
Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are as follows:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of Penalty under Section 112(a) and 112(b)
Issue 2: Reliance on Statements without Cross-Examination
Issue 3: Sufficiency of Corroborative Evidence
3. SIGNIFICANT HOLDINGS
Levy of penalty u/s 112(a) and 112(b) of the Customs Act, 1962 - abetting the smuggling of gold and his indulgence in dealing with smuggled gold - HELD THAT:- From the findings of the ld. adjudicating authority, it is observed that except the statements of Shri Pawan Prasad and Smt. Monika Yadav, there is no other corroborative evidence to establish the role of the Appellant in the alleged offence.
From the Section 112 of the Customs Act, 1962, it is observed that penalty can be imposed under this section only when a person commits an act which renders the goods liable for confiscation. In the present case, it is observed that the gold recovered from Shri Pawan Prasad and Smt. Monika Yadav has been ordered to be confiscated under Section 111 of the Customs Act vide the impugned order dated 31.03.2017 and penalty has been imposed on them for the role played by them in the offence. There is no other evidence available on record to implicate the appellant in the alleged offence.
The penalty imposed on the Appellant by invoking the provisions of Section 112(a) and (b) of the Act is not sustainable - Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Jurisdiction of Hyderabad Customs Authorities:
Confiscation under Sections 111(d), 111(i), and 111(j):
Liability for Penalty under Section 112(b):
Failure to Issue SCN to Original Importer:
3. SIGNIFICANT HOLDINGS
Smuggling of bike - Jurisdiction of DRI officers to issue SCN in view of the amendments made by the Finance Act, 2022 - power of customs authorities at Hyderabad to adjudicate the case when the bike was said to have been smuggled through Kolkata port and got registered with RTA, Raigad - challenge to SCN on the ground that Shri Sunil Lawrence has not been made a noticee at all - confiscation - redemption fine - penalty.
Jurisidiction of Customs authorities in Hyderabad - HELD THAT:- The appellant had produced a copy of Bill of Entry purported to have been filed in Kolkata Air Cargo complex, which was found to be fake. There are no other legal documents to show how the bike was imported into India. Therefore, it is inconceivable that Kolkata Customs will have any jurisdiction over this case. In fact, in this case, there is no proposal for assessment or demand of duty. The question of jurisdiction of the port will arise when goods are imported through a port and the duty has been assessed and the duty so assessed has to be modified.
The property was registered in the name of the appellant by RTA, Hyderabad. Therefore, there are no reason to hold that any officer other than the officers of Hyderabad Customs will have any jurisdiction over to decide the matter. The only question is whether the bike was liable to be confiscated and whether the appellant was liable to pay penalty under section 112(b) or not. Here it is found in favour of the Revenue and against the appellant on the question of jurisdiction.
Challenge to SCN on the ground that Shri Sunil Lawrence has not been made a noticee at all - HELD THAT:- The identity of Shri Sunil Lawrence was also not known to the appellant and the person through whom the bike was purchased from Shri Sunil Lawrence is no more. So, there was no way to find who Shri Sunil Lawrence was and where he lived and if he had smuggled the bike into India - the proposal is only to deprive the appellant of his property and therefore, SCN was issued. The proposal was also issued to impose penalty on the appellant. The mere fact that some action has not been taken against any other person, such as Shri Sunil Lawrence, does not negate the validity of this SCN or the consequential orders.
Confiscation - HELD THAT:- It is clear from section 2(33) that prohibited goods under the Customs Act are only such goods whose import or export is prohibited and not those goods where the appropriate procedures have not been followed. The SCN refers to section 46 and 47 of the Customs Act. Section 46 requires the importer of any goods to file a bill of entry and section 47 provides for proper officer to issue “out of charge” on the bill of entry. Neither of these provisions deals with any prohibitions.
While it is irregular and contrary to law to import goods, i.e., bring goods into India from a place outside India without following the due processes, such violations would not make the goods “prohibited goods” under the Customs Act. In fact, if any goods are imported or attempted to be imported other than through the customs ports or airports or land customs station, such goods will be liable for confiscation under section 111(b) of the Customs Act. Therefore, in this case, confiscation under section 111(d) cannot be sustained - Section 111(i) deals with goods which are found concealed in any package either before or after unloading thereof. There is no allegation that the bike in dispute was concealed in any manner, let alone, any evidence to this effect. In fact, it was registered with the RTA, Hyderabad in the name of the appellant. Therefore, confiscation under Section 111(i) cannot be sustained - Section 111(j) deals with the goods, which are removed or attempted to be removed, from customs area or warehouse without permission of proper officer or contrary to the terms of such permission. In this case, there is no evidence or allegation that the bike was removed from customs area without any permission. Therefore, confiscation under Section 111(j) also cannot be sustained.
None of the three clauses of section 111 under which the bike was confiscated apply. For this reason alone, the confiscation of the bike needs to be set aside.
Penalty - HELD THAT:- Penalty under Section 112(b) which is dependent on goods being liable to confiscation under Section 111 also cannot be sustained - section 112(b) provides for penalty for knowingly carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing any goods. There is nothing in this case to show or establish that the appellant had any knowledge that the bike was liable for confiscation. At any rate, once the confiscation under section 111 is set aside, the penalty under section 112 also needs to be set aside.
Conclusion - i) The property was seized from the possession of the appellant in Hyderabad. Therefore, there are no reason to hold that any officer other than the officers of Hyderabad Customs will have any jurisdiction over to decide the matter. ii) None of the three clauses of section 111 under which the bike was confiscated apply. For this reason alone, the confiscation of the bike needs to be set aside. iii) Once the confiscation under section 111 is set aside, the penalty under section 112 also needs to be set aside.
The impugned order set aside - appeal allowed.
Issues: Whether interference was warranted with the impugned order in view of the findings recorded therein and the grievance that certain submissions were not considered.
Analysis: The Court noted that paragraph Nos. 6 and 7 of the impugned order contained findings adverse to the appellant. It also recorded that the earlier submission regarding non-consideration of contentions did not persuade the Court to take a different view, particularly when the grievance was that the written submissions were never actually argued and the relevant material was not properly placed before the appellate forum.
Conclusion: No case for interference was made out, and the appeal was dismissed.
Approval of Resolution Plan - Applicant submits that RP has not issued clarification with regard to certain commercial spaces in the Corporate Debtor’s asset - It is submitted that the Applicant/ Appellant was not informed about the 4th to 9th floor also belong to the Corporate Debtor - it was held by NCLAT that 'There is no substance in the submission advanced by the Applicant in the present Application praying for setting aside the order of the Adjudicating Authority and to remand the Plan back to the CoC for fresh consideration.'
HELD THAT:- No case is made out for interference - Appeal dismissed.
Issues: Whether the remand order required modification so as to permit the respondent to produce the letter dated 25 October 2019 before the adjudicating authority.
Analysis: The appeal arose from an order of remand made after the appellate tribunal had relied upon a letter produced for the first time in appeal to hold that the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation. As the letter had not been produced before the adjudicating authority, the opposite party had no to deal with it at the initial stage. The remand direction therefore required clarification to preserve fairness and to enable consideration of that material by the adjudicating authority in accordance with law.
Conclusion: The remand order was modified to permit production of the letter before the adjudicating authority, and the appeal was partly allowed.
Dismissal of application filed by the respondent-Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 on the ground of bar of limitation - HELD THAT:- It is found that the NCLAT has relied upon a letter dated 25th October, 2019 for coming to the conclusion that Section 25(3) of the Indian Contract Act, 1872 will apply and in view of the promise contained in the same letter, the petition under Section 7 of the IB Code was within the limitation - However, the admitted position is that the letter dated 25th October, 2019 was not produced by the respondent before the NCLT and it was produced for the first time in the appeal preferred by the respondent before the NCLAT.
The finding on the issue of bar of limitation has been upset by the NCLAT mainly relying upon the letter dated 25th October, 2019.
The appeal is partly allowed by leaving open all questions for consideration of the NCLT.
Issues: Whether the validity of the MSME registration certificate could be examined in an appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016, and whether the appellant should be permitted to pursue a writ petition before the jurisdictional High Court challenging the certificate, with consequential stay of the insolvency proceedings.
Analysis: The appeal lay within the limited confines of Section 62 of the Insolvency and Bankruptcy Code, 2016, and the validity of the MSME registration certificate could not be finally adjudicated in that forum. Since the certificate had been placed on record and its consequences could affect the secured creditors, the appellant was allowed to approach the jurisdictional High Court by way of writ petition. The Court also directed expeditious consideration of such writ petition and ordered that the proceedings before the adjudicating authority and the corporate insolvency resolution process remain stayed meanwhile.
Outcome: The appellant was permitted to file a writ petition challenging the MSME registration certificate, the related insolvency proceedings were stayed, and the validity of the certificate was left open for consideration by the High Court.
Admissbility of petition u/s 9 of the IBC against the Corporate Debtor - asset value of the Corporate Debtor, M/s. Etco Denim Private Limited, was more than the norms prescribed for it to qualify as an MSME - HELD THAT:- An appeal is heard in terms of Section 62 of the IBC and within its limited confines, the question of the validity of the registration certificate dated 23.10.2020 not gone into. At the same time, the certificate having been placed on record, Section 29A read with Section 240A of the IBC would come into play and would affect the interests of the secured creditors, including the appellant, Central Bank of India. Keeping in view the peculiar facts of the present case, the appellant, Central Bank of India, is permitted to file a writ petition before the jurisdictional High Court challenging the issuance of the MSME Registration Certificate dated 23.10.2020. If any such writ petition is filed, the High Court is requested to take up the same for hearing expeditiously and preferably decide the same within a period of six months from the date of its filing. The parties and the authorities who have issued the said certificate shall also cooperate.
Re-list in the week commencing 18.08.2025.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Nature of the Moratorium Period under Section 101 of IBC
Issue 2: Alleged Error by the Adjudicating Authority
3. SIGNIFICANT HOLDINGS
Statutory interpretation of the provision of Section 101(1) of IBC - moratorium period prescribed under Section 101 of the Insolvency and Bankruptcy Code (IBC) is mandatory or directory - the period can be extended by the Adjudicating Authority or the Appellate Tribunal or not - error in not extending the moratorium period beyond 180 days during the Personal Insolvency Resolution Process (PIRP).
HELD THAT:- The principles for interpretation of statute are well settled. Reference made to the Constitution Bench Judgment of the Hon’ble Supreme Court in the matter of State of UP & Ors. Vs. Babu Ram Upadhyay [1960 (11) TMI 116 - SUPREME COURT] Constitution Bench held that for determining as to whether statute is mandatory or directory, the Court has to ascertain the real intention of the nature and the consequences which would follow from construing it from one way or other.
Another Judgment of the Hon’ble Supreme Court in the matter of Rajsekhar Gogoi Vs. State of Assam & Ors. [2001 (5) TMI 979 - SUPREME COURT], where Hon’ble Supreme Court had occasion to consider Rule 206 of Assam Excise Rules 1945, which provided that tender must be in such form and contained such particulars as may be prescribed by the State Government and tenders not containing all the particulars shall be liable to be rejected. Arguments was raised before the Hon’ble Supreme Court that the said provision is not mandatory, which argument was rejected.
Hon’ble Supreme Court in the matter of Newtech Promoters & Developers Private Limited Vs. State of Uttar Pradesh & Ors. [2021 (12) TMI 892 - SUPREME COURT] laid down that it is always advisable to interpret the legislative wisdom in the literary sense as being intended by the legislature and the Courts are not supposed to embark upon enquiry and find out the solution in substituting the legislative wisdom.
The language of Section 101(1) is plain and clear, outer limit of Moratorium is prescribed by providing that 180 days from date of commencement of admission of the Application or an Order is passed by the Adjudicating Authority on the Repayment Plan under Section 114 whichever is earlier thus on happening of the eventuality as prescribed as Section 101(1) Moratorium comes to an end. Conceding any power to the Adjudicating Authority or this Tribunal to extend the said period shall be plainly against the statutory scheme of Section 101(1). When the statutory scheme is clear and unambiguous, there is no role of any interpretive process to find out the jurisdiction of NCLT to extend the period of Moratorium when statute provides a date for cessation of the Moratorium it cannot be extended by the Adjudicating Authority or by this Tribunal against the statutory intendment under Section 101(1).
This Tribunal after noticing the provisions of Section 54D, Section 54N relying on the Judgment of the Hon’ble Supreme Court in Surendra Trading Company Vs. Jugilal Kamlapat Jute Mills Company Ltd. & Ors. [2017 (9) TMI 1566 - SUPREME COURT] and Judgment of the Hon’ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. [2019 (11) TMI 731 - SUPREME COURT] came to the conclusion that the provisions of Section 54D does not contemplate any automatic termination of the PPIRP, hence the Court had discretion to extend the time in an appropriate case.
Conclusion - In view of the expressed provisions of Section 101(1) limiting the Moratorium period to 180 days on the date when the Order is passed by the Adjudicating Authority for Repayment Plan, whichever is earlier. 180 days from commencement of the Moratorium has come to an end on 28.10.2024. The Moratorium has statutorily come to an end and could not be extended.
Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The judgment revolves around the following core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Pre-existing Dispute
Issue 2: Running Account and Limitation
Issue 3: Limitation
3. SIGNIFICANT HOLDINGS
Order: The appeal was allowed, and the Section 9 proceedings against the corporate debtor were set aside, with no orders as to costs.
Admission of the Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC) - pre-existing dispute between the parties or not - transactions under running account - demand is barred by Limitation Act, 1963.
Pre-existing dispute between the parties - HELD THAT:- Any dispute between the Promoters / Directors / Shareholders of the Respondent No.1 or Corporate Debtor is outside the scope of Section 9 of the IBC as both Respondent No.1 and Corporate Debtor are separate corporate legal entities different from their Promoters / Directors / Shareholders. Furthermore, the pre-existing dispute has to relate to the debt which is the subject matter of the application. The purported dispute does not relate to the subject matter of the present proceeding.
In the conspectus of the case, issue of the pre-existing dispute cannot be put to a strait jacket as there is a complex nature of transactions when the Demand Notice was issued. It is found that there is a pre-existing dispute between the Promoters inter-mingled with the two legal entities and is not a patently feeble argument or an assertion of fact unsupported by evidence, rather it is an actual dispute requiring adjudication.
The Hon’ble Supreme Court in the matter of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited [2017 (9) TMI 1270 - SUPREME COURT] has mandated that such an application needs to be dismissed under Section 9(5)(ii)(d).
There is a pre-existing dispute between the parties and Section 9 petition is not maintainable. There is sufficient material on record to suggest that there is a pre-existing dispute and Section 9 petition is not maintainable, even then the other additional grounds raised by the Appellant - with respect to limitation and the account being running account or not, are being delved in subsequent paragraphs to unearth the real nature of transactions between the two parties.
Time limitation - HELD THAT:- Even the Adjudicating Authority has concluded that “The latest part-payment being made on 02.03.2022 extended the limitation for further 3 years, hence, the claim of the Operational Creditor in respect of the invoices raised, is not time-barred.” This conclusion of Adjudicating Authority doesn’t provide any benefit to the Appellant and the maintainability of the petition cannot be questioned on the grounds of limitation.
Conclusion - There are multiple transactions which were happening in the purported running account - some of which relate to the supply of goods and their payment from two legal corporate entities, but others not directly related to the supply of goods and services. The dispute is apparent from the material on record with respect to the arrangement for use of the premises on rent. There are disputes, which are between the Operational Creditor and its Promoters and Corporate Debtor and its Promoters. The transactions between the Corporate Debtor and the Operational Creditor cannot be seen in isolation and it is required to go beyond the corporate veil. The disputes between all of them cannot be brushed aside. Therefore, it is concluded that there is a pre-existing dispute between the Corporate Debtor and the Operational Creditor.
The Section 9 proceedings against the Corporate Debtor are set aside - Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in the judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Procedure Followed by the ED
Issue 2: Legality of Freezing Bank Accounts
Issue 3: Quashing of ECIR and Search and Seizure Operations
Issue 4: Interpretation of Statutory Provisions
3. SIGNIFICANT HOLDINGS
Seeking direction to the Enforcement Department (ED) to produce all the records as regards purported inquiry being conducted under the Foreign Exchange Management Act, 1999 - challenge to search and seizure proceedings - quashing of the illegal act of freezing of the bank account of the petitioner company - reasons to believe - HELD THAT:- Though the jurisdiction under Article 226 of the Constitution of India is plenary, however, there are self imposed limitations which are required to be followed before exercising the power of judicial review. Ordinarily, interference at the stage of investigation carried out by the law enforcement agencies is not advisable because the law enforcement investigation techniques include coercive as well as covert techniques.
The method of search and seizure is coercive as it is used to carry out the investigation/inquiry into the affairs if violation of a statutory provision is suspected. The search and seizure is a well known tool in the investigation which enables the law enforcement agencies to come to a conclusion. Though the Constitutional Courts are the sentinels of justice, however, this power is required to be exercised with due care and caution and interference at the stage of investigation is made in rare and exceptional cases.
It is evident that while carrying out search, proper information was supplied to the petitioner. Moreover, the petitioner has not attached the ECIR. The petitioner has attached the search and seizure memos and freezing orders sent by the ED to the various banks. In the freezing orders, it has been stated that the Assistant Director, Unit-III (2) ED has reasons to believe from the documents in his possession that the proceeds of crime might have been diverted to the above said bank account maintained with that particular bank. Moreover, as already noticed, these orders were passed on 26.11.2024, whereas on the date when the arguments are heard, 30 days are yet to be completed.
Section 5 (5) of the 2002 Act mandates the ED to file a complaint stating the facts of such attachment before the Adjudicating Authority within a period of 30 days. The Adjudicating Authority is entitled to adjudicate the matter on receipt of a complaint. Before the Adjudicating Authority all the stakeholders are entitled to participate and explain their position. The Adjudicating Authority is required to decide the matter in a time bound manner. Against the final order of confirmation of attachment, the appeal is maintainable before the Appellate Tribunal. Once the 2002 Act itself provides for sufficient safeguards, it is not found appropriate for this Court to interfere at this stage.
Conclusion - The legal authority of the ED to conduct search and seizure operations and freeze bank accounts without prior notice affirmed. The petitioners are provided with the opportunity to present their case before the Adjudicating Authority under the 1999 Act and the 2002 Act.
Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Definition and Scope of "Proceeds of Crime"
Issue 2: Validity of Provisional Attachment Order
Issue 3: Attachment of Equivalent Value Properties
Issue 4: Bona Fide Purchasers and Unrelated Parties
3. SIGNIFICANT HOLDINGS
In conclusion, the judgment reaffirms the broad scope of the PMLA in addressing money laundering, emphasizing the importance of attaching properties equivalent in value to the proceeds of crime to thwart attempts at concealing illicit gains. The appeals were dismissed, with the court directing that bona fide claims be adjudicated by the trial court under the relevant provisions of the PMLA.
Money laundering - proceeds of crime - provisional attachment of properties - applicability of Section 5 (1) of the PMLA - issuance of SCN without application of mind - HELD THAT:- As there is nothing on record that appellants are in possession of any proceeds of crime. Moreover, there is nothing on record that such proceeds of crime are likely to be conceive, transfer or dealt with in any manner by the appellants. Appellant M/s Emaar Hills Township Pvt. Ltd. took the specific plea that even prior to the passing of PAO, the appellant was unable to transfer or deal with the properties in terms of the order dated 21.12.2010 passed by Hon'ble Company Law Board Chennai Bench in CP No.608/2010 without the consent of the Conciliation Board.
A perusal of this definition would show that the “proceeds of crime” includes the property derived or obtained directly or indirectly out of criminal activity, but that is not end of the definition of Proceeds of Crime. It can be for “value of any such property’’. The aforesaid words used in the definition of “Proceeds of Crime” is to cover those properties which are not derived or obtained directly or indirectly out of the criminal activity, but attached for value equivalent to the Proceeds of Crime, if money acquired has been vanished. The Act of 2002 was enacted pursuant to the International Convention to address the offence of money laundering. If the definition of “Proceeds of Crime” is given restricted meaning to hold that it shall include only the properties obtained or derived directly or indirectly from the criminal activity then it would nullify the very objects of the enactment and the consequence of it would be serious. It would result to a situation where the accused would immediately try to vanish or siphon off the proceeds, so that the properties may not be attached.
Any property of equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanished or siphoned off. Here, the significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to “the value of any such property” would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derived out of the criminal activity is not available.
Conclusion - The definition of 'proceeds of crime' is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property.
Appeal dismissed.
Order of CESTAT upheld - appeal dismissed - delay condoned - question of law reserved
Order of CESTAT upheld - appeal dismissed - delay condoned - Impugned order dated 30.11.2023 of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi was not interfered with and the appeals were dismissed. - HELD THAT: - The Supreme Court recorded condonation of delay and, on consideration of the matter, found no reason to interfere with the impugned CESTAT order dated 30.11.2023. Consequently the appellate proceedings before this Court were brought to an end by dismissal of the appeals, the court giving no further relief to the appellant and declining to disturb the tribunal's decision.
Appeals dismissed and the impugned order of the CESTAT upheld; delay condoned.
Question of law reserved - Any question of law arising from the matter was left open for determination at a later stage. - HELD THAT: - While disposing of the appeals by upholding the impugned order, the Court expressly refrained from deciding any question of law that may arise, leaving such legal questions open for future consideration. No substantive adjudication on those questions was undertaken in this order.
Question of law, if any, kept open for future determination.
Final Conclusion: The Supreme Court condoned the delay, declined to interfere with the CESTAT order dated 30.11.2023 and dismissed the appeals; any question of law arising from the matter has been left open for future consideration.
Issues: Whether CENVAT credit is admissible on service tax paid on the premium mandatorily paid to the Deposit Insurance and Credit Guarantee Corporation for deposit insurance cover required for carrying on banking business.
Analysis: The premium was paid under a mandatory regulatory framework for enabling banks to render banking and other financial services. The activity was held to have a direct and integral nexus with the output service, and the service received from the Deposit Insurance and Credit Guarantee Corporation was treated as an input service. The decision followed the settled position affirmed by the Larger Bench and by subsequent High Court decisions approving that view, and the credit mechanism was recognised as preventing double taxation in such a case.
Conclusion: CENVAT credit on the tax paid on the DICGC premium is admissible, and the denial of credit was unsustainable.
Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.
Ratio Decidendi: A service that is mandatorily required for carrying on the taxable output activity and is integrally connected to that activity constitutes an input service for CENVAT credit purposes.
Eligibility for availment of CENVAT credit of tax paid on premium mandatorily required for functioning as banks under the supervision of Reserve Bank of India - HELD THAT:- The decision of the Larger Bench of the Tribunal in M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX-CALICUT [2020 (6) TMI 278 - CESTAT BANGALORE - LB] had settled the issue of eligibility by holding that 'The insurance service provided by the Deposit Insurance Corporation to the banks is an “input service” and Cenvat credit of service tax paid for this service received by the banks from the Deposit Insurance Corporation can be availed by the banks for rendering ‘output services’.'
Conclusion - The eligibility for CENVAT credit of tax paid on such premium is beyond any controversy.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Imposition of Interest under Section 75
Issue 2: Imposition of Penalty under Section 78
Issue 3: Time-Bar on Demand for Interest and Penalty
3. SIGNIFICANT HOLDINGS
Levy of interest and penalty - short payment of service tax - time limitation - suppression of facts.
Levy of penalty u/s 78 of Finance Act, 1994 - HELD THAT:- From the record of the appeal that audit party pointed out short payment of service tax only on the basis of contracts entered with M/s. Gujarat Alkalies and Chemicals Limited and all the contracts/ work orders were available with them. The classification of the service in this case is also a subject matter of dispute, however, since the appellant has already deposited the payment of service tax, there are no reason to go into this issue. It is found that element which need to be present for invoking provisions of Section 78 are not present in this particular case and therefore, the impugned order-in-appeal as well as order-in-original are legally not sustainable in so far as invoking of Section 78 of the Finance Act, 1994 is concerned.
Demand of interest under Section 75 of FA - HELD THAT:- The demand of interest under Section 75 vide show cause notice dated 07.08.2014 on the payment made in 2011 and for the demand which pertains to 2005-06 to 2007-08 is much beyond the normal period of limitation and extended time proviso - Hon'ble Gujarat High Court decision in the case of GUJARAT NARMADA FERTILIZERS CO. LTD. VERSUS COMMR. OF C. EX., VADODARA [2010 (7) TMI 857 - CESTAT AHMEDABAD] has held that 'It is settled law that mis-declaration means not declaring something or making an incorrect declaration about something, which he is required to declare under the law and not declaring something which is not required to be declared under the law does not constitute mis-declaration.'
The impugned order-in-appeal is legally not sustainable - appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Inclusion of Exported Goods in Credit Reversal Calculation
Issue 2: Entitlement to CENVAT Credit on Exported Goods
Issue 3: Imposition of Interest and Penalties
3. SIGNIFICANT HOLDINGS
Failure to pay/reverse the amount of credit availed on input services used in the manufacture of exempted goods - HELD THAT:- This Tribunal finds that a division bench of this Tribunal, in the case of SIVARAJ SPINNING MILLS PVT. LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, MADURAI [2024 (8) TMI 990 - CESTAT CHENNAI], in a similar fact situation of the appellant therein clearing cotton yarn on payment of duty under Notification No. 29/2004-CE dated 09.07.2004 and clearing cotton yarn at nil rate as per Notification No. 30/2004 – CE dated 09.07.2004, simultaneously, after discussions, has rendered the decision in favour of the appellant therein holding 'the credit availed on input services is eligible and the contention of the Department that the credit has to be reversed is against the provisions of law.'
Conclusion - The goods exported under bond are exempt from the reversal of CENVAT credit and that CENVAT credit can be availed on input services used in the manufacture of such goods.
The impugned order in appeal is hence set aside. The appeal is allowed.
Issues: Whether the delay of 179 days in filing the appeal was liable to be condoned under Section 5 of the Limitation Act.
Analysis: The affidavit did not explain the long gap between the date of the order and the first attempt to seek legal opinion, nor did it satisfactorily account for the further delay after the opinion was received and permissions were obtained. The chronology showed prolonged inaction and unexplained intervals, and the reasons offered were not treated as sufficient cause for condonation.
Conclusion: The application for condonation of delay was rejected. Consequently, the appeal was dismissed.
Seeking condonation of delay of 179 days in filing the appeal - sufficient cause for delay or not - HELD THAT:- A perusal of the affidavit would indicate that the appellants, after passage of over four months, whereas in the order dated 22.5.2024 three months time was granted for complying with the direction, for the first time found it appropriate to seek opinion of the Chief Standing Counsel regarding filing of the appeal. As to what transpired after passing of the order dated 22.5.2024 till 11.9.2024, when the opinion was sought, no indication, whatsoever, has been made. The opinion was immediately tendered on 14.9.2024 by the office of the Chief Standing Counsel whereafter also the appeal has been filed on 13.12.2024, i.e., after three months from the date the opinion was tendered. The said period apparently has been consumed in seeking opinion first by the Secretary from the Special Secretary, Secondary Education and again by the Upper Secretary from the Special Secretary Secondary Education and once the permission was granted on 20.11.2024 also, about 25 days have been taken in filing the appeal.
The affidavit, which has been filed, does not give sufficient cause for the delay of 179 days in filing the appeal inasmuch as there are large gaps in affidavit wherein the period spent between 22.5.2024 till 13.9.2024 has nowhere been explained/adverted to despite, as noticed hereinbefore, the fact that the Court had granted only three months for the compliance. The manner in which the direction including time line, as indicated by the Court, has been taken and thereafter also the proceedings of the matter at snail pace cannot be countenanced in a case, wherein the direction by the Court only pertains to reconsideration of the matter by the appellants.
Conclusion - The appellants failed to demonstrate "sufficient cause" for the delay, noting the slow pace of proceedings and lack of adherence to the court's timeline.
Thus, no case for condoning the delay in filing the appeal is made out. The application seeking condonation of delay is dismissed.
Issues: (i) Whether a writ petition under Article 226 of the Constitution is absolutely barred against an order passed by the Micro and Small Enterprises Facilitation Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006; (ii) if not, in what circumstances the rule of alternative remedy would not apply; and (iii) whether members of the Council who conduct conciliation may thereafter act as arbitrators under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 read with Section 80 of the Arbitration and Conciliation Act, 1996.
Issue (i): Whether a writ petition under Article 226 of the Constitution is absolutely barred against an order passed by the Micro and Small Enterprises Facilitation Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006.
Analysis: The Court noted conflicting views between earlier decisions on the scope of writ jurisdiction against orders of the Council. It reaffirmed that the power under Article 226 is plenary and cannot be taken away by statute, while the existence of an alternate statutory remedy is ordinarily a rule of discretion and self-restraint, not an absolute bar. The Court also noted that statutory pre-deposit conditions and the nature of the remedy under the Act raised important questions requiring reconsideration.
Conclusion: The question was not finally answered and was referred to a larger Bench.
Issue (ii): If not, in what circumstances the rule of alternative remedy would not apply.
Analysis: The Court referred to the settled exceptions to the alternative-remedy rule, including violation of natural justice, lack of jurisdiction, and challenge to vires, and observed that hardship created by onerous statutory conditions may also be relevant. It considered that these principles needed authoritative reconsideration in the context of the statutory scheme governing Council proceedings and challenges to its orders.
Conclusion: The question was not finally answered and was referred to a larger Bench.
Issue (iii): Whether members of the Council who conduct conciliation may thereafter act as arbitrators under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 read with Section 80 of the Arbitration and Conciliation Act, 1996.
Analysis: The Court noticed the divergence between decisions on whether the same authority may move from conciliation to arbitration despite the general prohibition in Section 80 of the Arbitration and Conciliation Act, 1996. It found that the interaction between the special statutory scheme and the conciliation-arbitration sequence under the Act required examination by a larger Bench.
Conclusion: The question was not finally answered and was referred to a larger Bench.
Final Conclusion: The appeal did not result in a final merits determination of the statutory questions and the controversy was placed before a larger Bench for authoritative resolution.
Ratio Decidendi: The constitutional writ jurisdiction under Article 226 is not ousted by the mere existence of a statutory remedy, and the effect of an alternate remedy depends on the nature of the statutory scheme and the recognized exceptions to judicial self-restraint.
Maintainability of petition - whether a writ petition under Article 226 of the Constitution would be maintainable against an order passed by the Micro and Small Enterprises Facilitation Council (MSEFC) in exercise of power under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006? - interplay between the MSMED Act and the Arbitration and Conciliation Act, 1996 (A&C Act), especially regarding the roles of conciliation and arbitration.
HELD THAT:- This is a case of statutory arbitration that is mandatory. It is possible to argue that it bars a party from moving the court of law under Section 9 of the Code of Civil Procedure, 1908. Section 18 also overrides the principle of party autonomy when they enter into an arbitration agreement which prescribes the procedure for the appointment of an arbitrator and conduct of arbitral proceedings. The statute further prescribes an undoubtedly high rate of interest – three times the Reserve Bank rate of interest – presently 6.5 per cent i.e. 19.5 per cent. The interest is compounded with monthly rests - Pre-deposit is a condition for hearing a decision on the objections to the award. The issue therefore which arises and needs consideration is whether there would be an absolute and complete bar to invoke writ jurisdiction under Article 226 of the Constitution even in exceptional and rare cases where fairness, equity and justice may warrant the exercise of writ jurisdiction.
The access to High Courts by way of a writ petition under Article 226 of the Constitution of India, is not just a constitutional right but also a part of the basic structure. It is available to every citizen whenever there is a violation of their constitutional rights or even statutory rights. This is an inalienable right and the rule of availability of alternative remedy is not an omnibus rule of exclusion of the writ jurisdiction, but a principle applied by the High Courts as a form of judicial restraint and refrain in exercising the jurisdiction. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and the same is not limited by any provision of the Constitution and cannot be restricted or circumscribed by a statute.
It is deemed appropriate to refer the following questions raised in the present appeal to a larger Bench of five Judges, namely:
(i) Whether the ratio in M/s India Glycols Limited (supra) that a writ petition could never be entertained against any order/award of the MSEFC, completely bars or prohibits maintainability of the writ petition before the High Court?
(ii) If the bar/prohibition is not absolute, when and under what circumstances will the principle/restriction of adequate alternative remedy not apply?
(iii) Whether the members of MSEFC who undertake conciliation proceedings, upon failure, can themselves act as arbitrators of the arbitral tribunal in terms of Section 18 of the MSMED Act read with Section 80 of the A&C Act?
The first and second question will subsume the question of when and in what situation a writ petition can be entertained against an order/award passed by MSEFC acting as an arbitral tribunal or conciliator - The Registry is directed to place the papers before the Chief Justice so that an appropriate decision can be taken on the administrative side for the constitution of a larger Bench in the present case.
Conclusion - The writ jurisdiction is discretionary and not barred by the existence of alternative statutory remedies. A final determination is not provided but instead the significant questions are raised to a larger bench for comprehensive resolution.
Issues: (i) Whether in a prosecution under Section 138 of the Negotiable Instruments Act, the trial court can proceed with the evidence and continue the trial when the accused and counsel remain absent. (ii) Whether the trial court can dispense with the examination of the accused under Section 313 of the Criminal Procedure Code in such circumstances.
Issue (i): Whether in a prosecution under Section 138 of the Negotiable Instruments Act, the trial court can proceed with the evidence and continue the trial when the accused and counsel remain absent.
Analysis: The statutory scheme of Chapter XVII of the Negotiable Instruments Act is distinct from the ordinary criminal trial model. While Section 273 of the Criminal Procedure Code generally requires evidence to be taken in the presence of the accused or his pleader, the Court held that this protection cannot be read in isolation where the accused, after entering appearance, repeatedly absents himself, does not seek dispensation of personal attendance, and is not represented through counsel. The nature of a cheque dishonour case was treated as quasi-criminal and summary in character, and the Court considered the repeated absence of the accused, the lack of cross-examination, and the inability to secure attendance despite permissible steps.
Conclusion: The trial court was justified in proceeding further in the absence of the accused.
Issue (ii): Whether the trial court can dispense with the examination of the accused under Section 313 of the Criminal Procedure Code in such circumstances.
Analysis: Section 313 serves the purpose of enabling the accused to explain the incriminating circumstances, but the Court held that the provision is not to be applied mechanically in every cheque dishonour prosecution where the accused deliberately avoids the proceedings. Reading Section 313 alongside the special procedure under the Negotiable Instruments Act, and drawing support from the quasi-criminal nature of Section 138 proceedings, the Court concluded that insistence on a mandatory personal examination in every such case would defeat the legislative object of expeditious disposal. The Court therefore held that where the accused remains absent without justification and the court has considered the relevant factors, the statement under Section 313 may be dispensed with.
Conclusion: The trial court could dispense with the Section 313 examination in the facts of the case.
Final Conclusion: The convictions and sentences were upheld, and the revisions were rejected because no illegality was found in the conduct of the trial or in the appellate affirmation.
Ratio Decidendi: In a Section 138 prosecution, persistent and unjustified absence of the accused may justify continuation of the trial and dispensation of the Section 313 examination, having regard to the special statutory scheme and the quasi-criminal character of the proceeding.
Dishonour of Cheque - power of the trial Court to proceed with the trial for an offence punishable under Section 138 of the Negotiable Instruments Act in absence of the accused - when neither accused nor his advocate appeared during evidence recording stage, whether trial Court can a) proceed further, b) dispense statement under section 313 of the Criminal Procedure Code and c) convict the accused?
HELD THAT:- It is very well true that this view does not fit into the traditional view of ‘mandatory recording of the statement and even giving the benefit to the accused about certain lacunaes in recording Section 313 statement’.
Recently, the Hon’ble Supreme Court in case of P. MOHANRAJ & ORS. VERSUS M/S. SHAH BROTHERS ISPAT PVT. LTD. [2021 (3) TMI 94 - SUPREME COURT] has dealt with nature of cases under Section 138 being quasi-criminal. The Hon’ble Supreme Court observed “Section 138 proceeding can be said to be a “civil sheep” in a ‘criminal wolf’s’ clothing” - The issue involved in that case was whether the proceeding under Section 138 read with Section 141 of the Negotiable Instruments Act are covered by the moratorium provisions under Sections 14 of the Insolvency and Bankruptcy Code. That is why there was an occasion for the Hon’ble Supreme Court to consider the nature of proceeding under Chapter XVII of the Negotiable Instruments Act. The ingredients of Section 138, 141, 142, 143-A, 148 were considered.
If the proceeding under Section 138 of the Negotiable Instruments Act are quasi-criminal in nature, there is reason to believe that one of attribute of criminal trial about mandatory recording of statement under Section 313 of the Criminal Procedure Code is not applicable. So in given set of facts narrated hereinabove, the accused cannot make complaint about causing prejudice if evidence is adduced in his absence and he cannot make complaint of non recording of the statement under Section 313 of the Criminal Procedure Code if they have remained absent without justification. In a given case and after ascertaining certain factors, the Magistrate is justified in proceeding further in absence of accused and even dispense his statement.
It cannot be said that there is illegality in the findings recorded by the trial magistrate and confirmed by the Court of the Additional Sessions Judge. There is no merit in both these revisions applications.
The order of conviction and the sentence passed by the Court of Metropolitan Magistrate for the offence punishable under Section 138 of the Negotiable Instruments Act is confirmed - Both the revision applications are dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Discriminatory Rent Enhancement
Issue 2: Nature of Vending Activity
Issue 3: Arbitrary Determination of Rent
3. SIGNIFICANT HOLDINGS
The court disposed of the writ petition, allowing the petitioner to challenge the Chairman's decision if unsatisfied. The petitioner was not required to pay further rent until a decision was made, considering the Rs. 1.00 lakh already deposited.
Discriminatory levy - arbitrariness in fixation of licence fee - need for parity in municipal licence charges - judicial review of administrative pricing - interim deposit as evidence of bona fides
Discriminatory levy - arbitrariness in fixation of licence fee - judicial review of administrative pricing - The levy of Rs.50 per day as licence fee for the petitioner is discriminatory, shockingly disproportionate and unsustainable. - HELD THAT: - The Court found that the petitioner, who was permitted to vend fruits on a one square metre space, was initially charged Rs.20 per day and within a year the charge was enhanced to Rs.50 per day. Having regard to the public notice showing lower charges for other vendors in the same locality carrying out similar activities, the Court held that the petitioner could not be singled out for higher levy merely because he is a fruit vendor. The disparity with charges levied on other vendors (noted as lower monthly equivalents) renders the impugned demand arbitrary and unsupportable. The Court also observed that determination of licence fee must be governed by relevant parameters including prevailing rent in the locality for similar spaces, and that the earlier interim deposit by the petitioner of Rs.1.00 lakh demonstrates his bona fides. [Paras 7, 8, 9, 10, 11]
The Court held the levy of Rs.50 per day to be unsustainable and discriminatory.
Need for parity in municipal licence charges - judicial review of administrative pricing - interim deposit as evidence of bona fides - The matter of fixation of rent/licence fee for the petitioner is remanded to the municipal authority for fresh final decision, with direction that no further rent be demanded until such decision. - HELD THAT: - Noting the observed disparity and the necessity of applying appropriate parameters (including parity with other vendors and prevailing local rents), the Court directed respondent no.2 (the authority) and the Chairman to consider the petitioner's claim as set out in annexure P-7 and to take a final decision. The authority is required to keep in mind that the petitioner is a fruit vendor relying on the permission to vend on the specified space. The Court further recorded that the petitioner has deposited Rs.1.00 lakh and therefore ordered that no further rent be insisted upon until the Chairman passes the final order. The authority was given a time frame to decide the matter. [Paras 11, 12, 13, 15]
The Court remanded the fixation of rent to the Chairman for final decision within four weeks and stayed any further demand for rent pending that decision, noting the deposit already made by the petitioner.
Final Conclusion: Writ petition disposed: the Court found the enhanced levy of Rs.50 per day to be discriminatory and unsustainable, remanded the determination of appropriate rent/licence fee to the municipal Chairman for final decision within four weeks, and directed that no further rent be demanded from the petitioner pending that decision (the petitioner's earlier deposit to remain with the authorities).
TaxTMI 