TaxTMI Updates e-Newsletter
Jan 30,2021

Summary order. Ad-interim relief granted; notice issued to the respondents returnable on 2nd March 2021; respondents directed to be served by e-mail.

Disallowance under Section 14A read with Rule 8D(2)(ii) - adjustment to book profit qua disallowance under Section 14A - classification of income from transactions in shares and securities as capital gains vis-a -vis business income - disallowance under Section 40(a)(ia) for failure to deduct TDS on rent-like payments (obligation under section 194I) - disallowance under Section 40(a)(ia) for failure to deduct TDS on commission/sub-brokerage (obligation under section 194H)

Disallowance under Section 14A read with Rule 8D(2)(ii) - adjustment to book profit qua disallowance under Section 14A - Validity of deletion of disallowance of interest expense computed under Rule 8D(2)(ii) and consequential adjustment to book profit - HELD THAT: - The Tribunal and CIT(A) found that the assessee's interest income during the relevant year exceeded its interest expense and that interest free funds (share capital and reserves) substantially exceeded the alleged investments. Applying those factual conclusions and following the coordinate Bench decisions relied upon, the Tribunal deleted the disallowance computed under Rule 8D(2)(ii). The High Court examined the Tribunal's reasoning and concurred with the conclusion, holding that on the recorded facts the disallowance under Rule 8D(2)(ii) was not sustainable and accordingly the Revenue's challenge to that deletion fails. The Court therefore dismissed the appeal insofar as this question is concerned. [Paras 3, 5]

Tribunal's deletion of the interest disallowance under Rule 8D(2)(ii) is upheld and the Revenue's appeal on this point is dismissed.

Classification of income from transactions in shares and securities as capital gains vis-a -vis business income - Characterisation of income arising from transactions in shares and securities as capital gains or business income - HELD THAT: - This question was admitted for consideration by the High Court but no adjudication on the merits is recorded in the order. The appeal was not decided on this point and the Court issued notice to the respondents for further proceedings. Accordingly, the substantive controversy regarding classification remains pending and requires fresh consideration.

Admitted for consideration; not decided by this order and left for further proceedings (notice issued).

Disallowance under Section 40(a)(ia) for failure to deduct TDS on rent-like payments (obligation under section 194I) - Sustainability of disallowance under Section 40(a)(ia) for alleged failure to deduct TDS on V-Sat/lease line charges characterised as rent - HELD THAT: - The Revenue's substantial question on this point was admitted by the High Court but the order contains no decision on the merits. The Court has not resolved whether the payments were in the nature of rent attracting TDS under the mentioned provision; the matter stands admitted and notice has been issued for adjudication in due course.

Admitted for consideration; not decided by this order and left for further proceedings (notice issued).

Disallowance under Section 40(a)(ia) for failure to deduct TDS on commission/sub-brokerage (obligation under section 194H) - Validity of deletion of disallowance under Section 40(a)(ia) for failure to deduct TDS on payments characterised as commission/sub brokerage - HELD THAT: - The question was placed before the High Court but the order does not adjudicate the merits. No findings are recorded on whether the payments attract TDS under the commission provision or whether the disallowance was correctly deleted; the Court has admitted the question and issued notice to the respondent for further determination.

Admitted for consideration; not decided by this order and left for further proceedings (notice issued).

Adjustment to book profit qua disallowance under Section 14A - Whether the Tribunal was justified in deleting the adjustment to book profit made consequent to the disallowance under Section 14A - HELD THAT: - The Tribunal deleted the adjustment to book profit made by the Assessing Officer in consequence of the disallowance under Section 14A, a conclusion which the High Court examined in the course of upholding the deletion of the interest disallowance under Rule 8D(2)(ii). Given the Court's concurrence with the Tribunal's factual and legal reasoning on the interest disallowance, the consequential deletion of the book profit adjustment stands sustained as part of that decision. [Paras 3, 5]

Deletion of the book profit adjustment consequent to the disallowance under Section 14A is upheld along with the deletion of the interest disallowance.

Final Conclusion: The High Court upheld the Tribunal's deletion of the interest disallowance computed under Rule 8D(2)(ii) (and the consequential book profit adjustment) and dismissed the Revenue's challenge on that point; the remaining substantial questions concerning classification of securities income and disallowances under Section 40(a)(ia) for alleged TDS defaults were admitted but not decided, and notice was issued to the respondents for further consideration.

Proportionate deduction under Section 80IB(10) - project/percentage completion method of accounting - condition of built up area not exceeding 1500 Sq. Ft. - application of coordinate bench precedent

Proportionate deduction under Section 80IB(10) - condition of built up area not exceeding 1500 Sq. Ft. - Whether the assessee is entitled to claim proportionate deduction under Section 80IB(10) in respect of profits attributable to units with built up area below 1500 Sq. Ft. - HELD THAT: - The Court accepted the reasoning recorded in the earlier decision of a co ordinate bench in ITA No.393/2014 dated 07.01.2021 relating to the same assessee and held that the same principle applies to Assessment Year 2013 14. Having considered the orders of the Commissioner (Appeals) and the Tribunal, and for the reasons recorded in the said coordinate bench judgment, the Court concluded that the assessee is entitled to the proportionate deduction under Section 80IB(10) insofar as profits relate to units conforming to the prescribed built up area limits.

Assessee entitled to proportionate deduction under Section 80IB(10) for units meeting the built up area condition; the Revenue's challenge is rejected.

Project/percentage completion method of accounting - Whether the percentage completion (project completion) method of accounting adopted by the assessee is acceptable for the purpose of claiming deduction under Section 80IB(10). - HELD THAT: - The Tribunal and the Commissioner (Appeals) had accepted the percentage completion method, and this Court, applying the reasoning of the co ordinate bench judgment in ITA No.393/2014, held that the percentage completion method is applicable to the assessee for the relevant assessment year. The Court noted that the matter was squarely covered by the earlier decision and accordingly upheld the acceptance of the percentage completion method for computing profits eligible for deduction.

Percentage completion method is applicable and acceptable for determining profits eligible for deduction under Section 80IB(10) for the assessment year in question.

Final Conclusion: The appeal filed by the Revenue is dismissed; the Tribunal's order confirming the Commissioner (Appeals) allowing proportionate deduction under Section 80IB(10) and accepting the percentage completion method is upheld in view of the co ordinate bench precedent applied to Assessment Year 2013 14.

Disallowance under Section 14A - Rule 8D - Determination of expenditure in relation to exempt income - Assessing Officer's satisfaction requirement under Section 14A - Requirement to record reasons for rejecting assessee's claim

Disallowance under Section 14A - Rule 8D - Determination of expenditure in relation to exempt income - The disallowance of Rs. 24,95,846/- under Section 14A read with Rule 8D sustained by the Tribunal was not justified. - HELD THAT: - The Assessing Officer applied the formula under Rule 8D to compute a disallowance but did not first record any finding rejecting the assessee's claim regarding expenditure in respect of exempt income. Section 14A and Rule 8D permit determination of expenditure where the Assessing Officer is not satisfied with the correctness of the assessee's claim; however, in the present case the order shows no reasoning or satisfaction recorded to justify disallowance. The Tribunal and the CIT(A) affirmed the disallowance despite the absence of the mandatory antecedent satisfaction or reasons in the AO's order. In the absence of the required finding and recorded reasons, the mechanical application of Rule 8D cannot sustain the addition. [Paras 5, 6]

The disallowance under Section 14A read with Rule 8D is quashed.

Assessing Officer's satisfaction requirement under Section 14A - Requirement to record reasons for rejecting assessee's claim - The Assessing Officer failed to fulfil the statutory requirement of recording satisfaction and cogent reasons before determining and disallowing expenditure under Section 14A. - HELD THAT: - Section 14A contemplates that the Assessing Officer, having regard to the assessee's accounts, must be 'not satisfied' with the correctness of the claim before determining the amount of expenditure attributable to exempt income. The AO's order in paragraph 5 merely computes the disallowance by applying Rule 8D without stating any satisfaction or assigning cogent reasons for rejecting the assessee's claim (including the contention that no expenditure was incurred). The High Court held that this mandatory precondition was not complied with and therefore the disallowance could not be sustained. [Paras 5, 6]

Since the AO did not record the requisite satisfaction or reasons, the disallowance under Section 14A cannot stand and is quashed.

Final Conclusion: The substantial questions of law are answered in favour of the assessee. The orders of the Assessing Officer (30.12.2011), the Commissioner of Income Tax (Appeals) (27.02.2013) and the Tribunal (30.12.2015) insofar as they pertain to disallowance under Section 14A are quashed and the appeal is allowed.

Definition of 'transfer' under Section 2(47) - extinguishment of rights as transfer - part performance/possession under Section 53A of the Transfer of Property Act - permissive possession versus transfer - construction and effect of irrevocable General Power of Attorney

Definition of 'transfer' under Section 2(47) - extinguishment of rights as transfer - part performance/possession under Section 53A of the Transfer of Property Act - construction and effect of irrevocable General Power of Attorney - Whether the transaction between the assessee and M/s. Trishul Developers amounted to a 'transfer' of the immovable property within the meaning of Section 2(47) of the Income Tax Act, 1961. - HELD THAT: - The Court examined the statutory scope of 'transfer' which expressly includes extinguishment of rights and transactions involving allowing possession in part performance of contracts of the nature referred to in Section 53A. The assessee had executed an agreement for sale and, on the same date, an irrevocable General Power of Attorney containing wide powers including authority to enter into and register agreements for sale, to transfer and convey by way of sale, to receive consideration and part/payments, to execute release or transfer deeds, and to apply for and obtain registration/transfer of records. Those clauses collectively demonstrate that the assessee had constructively handed over all rights in the property, including possession, and had empowered the attorney to receive sale consideration and complete formalities of transfer. The Assessing Officer and the CIT(A) had found that the conditions for transfer were satisfied. The Tribunal, however, rested its conclusion on the asserted absence of physical delivery of possession and failed to consider the incriminating material and the effect of the irrevocable Power of Attorney. Having regard to the wide statutory definition and the specific terms of the Power of Attorney (which conferred the right to transfer and to receive consideration), the Court held that the transaction falls within the meaning of 'transfer' under Section 2(47) and was correctly treated as a sale by the Assessing Officer and CIT(A). The Tribunal's contrary finding was therefore set aside. [Paras 6, 7, 8, 9]

The transaction is a 'transfer' within the meaning of Section 2(47) and the Tribunal's order holding otherwise is quashed.

Final Conclusion: The appeal is allowed; the Tribunal's order dated 19.12.2014 is quashed and the transaction is held to be a transfer under Section 2(47), with the consequence that the assessment treating it as a sale stands affirmed.

Interpretation of the proviso to section 2(15) affecting charitable status - application of binding High Court precedent - appeal dismissed as covered by earlier decision

Interpretation of the proviso to section 2(15) affecting charitable status - application of binding High Court precedent - appeal dismissed as covered by earlier decision - Whether the questions of law raised by the Revenue were open for fresh consideration or were conclusively covered by this Court's earlier decision in Ahmedabad Urban Development Authority v. ACIT (396 ITR 323 (Guj.)). - HELD THAT: - The Court held that the legal questions advanced by the Revenue were no longer res integra because they are squarely covered by the earlier decision of this Court in AUDA v. ACIT (396 ITR 323 (Guj.)). Having found that the same points of law raised in the present appeal were decided by that precedent, the Court did not re-adjudicate the substantive merits of the contentions presented by the Revenue and applied the binding effect of the earlier High Court ruling to the present appeal.

The questions of law raised by the Revenue are covered by the earlier decision in AUDA v. ACIT and accordingly the appeal is dismissed.

Final Conclusion: The Tax Appeal by the Revenue is dismissed as the points raised are already covered by this Court's decision in AUDA v. ACIT (396 ITR 323 (Guj.)), and no fresh adjudication on the merits was undertaken.

Revisionary jurisdiction under section 263 - Erroneous and prejudicial to revenue - Consecutive years commencement rule for tax holiday - Interpretation of tax holiday period under section 10A - Eligibility of staffing income for deduction under section 10A - Assessing Officer's application of mind and inquiry

Revisionary jurisdiction under section 263 - Erroneous and prejudicial to revenue - Consecutive years commencement rule for tax holiday - Interpretation of tax holiday period under section 10A - Whether the Commissioner was justified in invoking revisional jurisdiction under Section 263 on the ground that the Assessing Officer erroneously allowed deduction under Section 10A for Assessment Year 2008-09 beyond the permissible tax-holiday period. - HELD THAT: - The Court reiterated the twin conditions for exercise of Section 263: the assessment order must be erroneous and such error must be prejudicial to the revenue. Applying the statutory language of Section 10A (as amended), the Court held that the tax-holiday period of ten consecutive assessment years commences with the Assessment Year relevant to the previous year in which the undertaking begins production. On the facts the ten-year period commenced in Assessment Year 1995-96 and therefore ran up to and inclusive of Assessment Year 2008-09; the Assessing Officer granted the deduction without examining this aspect and recorded no reasons. The Court concluded that the view taken by the Assessing Officer could not be treated as a plausible view and amounted to an erroneous order prejudicial to the revenue, thereby justifying exercise of revisional powers under Section 263. [Paras 11, 12, 13]

Invocation of Section 263 was valid because the Assessing Officer erroneously allowed Section 10A benefit without proper application of mind; the order was prejudicial to revenue.

Eligibility of staffing income for deduction under section 10A - Assessing Officer's application of mind and inquiry - Erroneous and prejudicial to revenue - Whether income from staffing (human resource services) was rightly allowed as eligible for deduction under Section 10A by the Assessing Officer, or whether lack of enquiry rendered the assessment erroneous. - HELD THAT: - The Court found that the Assessing Officer allowed income from staffing as eligible for Section 10A benefit without making requisite enquiries or recording findings that the activities constituted export of computer software or fell within the notified services. In the absence of any examination or reasons, the allowance could not be treated as a sustainable or plausible view. Consequently the failure to inquire or apply mind rendered the assessment order erroneous and prejudicial to the revenue, warranting revisional action under Section 263. [Paras 13]

The Assessing Officer's allowance of staffing income under Section 10A was erroneous for lack of enquiry and application of mind; revisional action under Section 263 was justified.

Final Conclusion: All substantial questions of law were answered against the assessee; the revisional jurisdiction under Section 263 was rightly invoked because the Assessing Officer erred in allowing Section 10A benefit for AY 2008-09 without application of mind (including on the tax-holiday period and on income from staffing), and the appeal is dismissed.

Disallowance under section 14A read with Rule 8D limited to exempt income - Judicial precedent restricting section 14A disallowance to amount of exempt income - Effect of administrative circular on statutory disallowance where exempt income is present or absent

Disallowance under section 14A read with Rule 8D limited to exempt income - Judicial precedent restricting section 14A disallowance to amount of exempt income - Extent of disallowance under section 14A read with Rule 8D in presence of exempt dividend income - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee had earned exempt dividend income of Rs. 4,30,621 and, applying the coordinate-bench decision in the assessee's own earlier case and the dicta of the Delhi High Court in Cheminvest Ltd. and Holcim India P. Ltd., held that the disallowance under section 14A read with Rule 8D is to be limited to the amount of exempt income. The Tribunal accepted that these precedents establish that where exempt income exists, the disallowance cannot exceed that exempt income, and on that basis curtailed the assessing officer's disallowance to Rs. 4,30,621. The Tribunal therefore dismissed the Revenue's challenge to the quantification of the disallowance. [Paras 4, 5, 6]

Disallowance under section 14A read with Rule 8D restricted to the exempt dividend income of Rs. 4,30,621; Revenue's appeal dismissed on this point.

Effect of administrative circular on statutory disallowance where exempt income is present or absent - Whether CBDT Circular No. 5 of 2014 requires disallowance under Rule 8D even where taxpayer has not earned exempt income - HELD THAT: - The Revenue urged that CBDT Circular No. 5 of 2014 mandates disallowance under Rule 8D even in the absence of exempt income. The Tribunal, however, treated this contention in light of binding judicial decisions and the coordinate-bench order which limit the disallowance to the amount of exempt income and observed that the High Court had not admitted the Revenue's appeal in a related case. Having regard to those judicial precedents, the Tribunal did not give effect to the Revenue's submission based on the Circular and declined to expand the disallowance beyond the exempt income actually earned. [Paras 4]

Revenue's reliance on CBDT Circular No. 5 of 2014 did not warrant disallowance beyond the exempt income; the ground was not accepted.

Final Conclusion: The Revenue's appeal is dismissed; the disallowance under section 14A read with Rule 8D is limited to the exempt dividend income of Rs. 4,30,621 for AY 2013-14.

Adventure in the nature of trade - Capital gains vs business income - Intention at time of purchase - Conversion of land into plots and subsequent sales - Exemption under section 54/54F

Adventure in the nature of trade - Capital gains vs business income - Intention at time of purchase - Conversion of land into plots and subsequent sales - Exemption under section 54/54F - Whether sums declared as long-term capital gains (with exemption claimed under section 54/54F) arising from sale of plots carved out of a larger landholding should be taxed as business income as an "adventure in the nature of trade" or treated as capital gains. - HELD THAT: - The Tribunal examined the facts that the assessee purchased 32 guntas of land for self occupation, treated the land as a capital asset in accounts, applied for conversion/approval and, due to financial constraints and inability to construct or sell the whole extent, divided and sold plots over a number of years. The AO's characterisation of the activity as an "adventure in the nature of trade" was tested against established principles laid down by the Supreme Court which require a broad, fact sensitive inquiry into initial intention, nature and quantity of the commodity, acts after purchase (such as development), incidents associated with the transaction and repetition. The Tribunal noted that initial intention to build a self occupied house was abandoned because the land lay outside the city and because of financial difficulty; that there was no material on record to disbelieve the assessee's declared intention; and that the factual matrix (dates of acquisition, conversion approval and staggered sales) supported the conclusion that the transactions were realisations of an investment and not a trading adventure. Reliance placed in argument on decisions of higher courts (including G.Venkataswamy Naidu , Raja J.Rameshwar Rao , Janki Ram Bahadur Ram , P.M. Mohammed Meerakhan , B. Narasimha Reddy and Kasturi Estates ) was considered; applying the tests from those authorities the Tribunal held that the character of the sales was capital in nature. Consequently, the assessee was entitled to deductions permissible while computing income under the head "Capital Gain" and to claim the exemption under section 54/54F to the extent allowable. [Paras 9, 10, 11, 12, 13]

The gains from sale of the plots are to be treated as long term capital gains (not business income), and the assessee is entitled to deductions/reliefs available under the head "Capital Gain", including exemption under section 54/54F as applicable.

Final Conclusion: The Tribunal allowed the appeal, holding that the sale of plots carved out of the assessee's larger landholding was capital in nature and not an adventure in the nature of trade; the assessee is entitled to compute the receipts as capital gains and claim the deductions/exemption permissible under section 54/54F.

Disallowance under section 14A read with Rule 8D - calculation of disallowance in respect of exempt income - capital receipt versus revenue receipt - treatment of state industrial subsidies - allowability of education cess as expenditure - remand for fresh examination by Assessing Officer

Disallowance under section 14A read with Rule 8D - calculation of disallowance in respect of exempt income - Extent of disallowance under section 14A read with Rule 8D in respect of exempt dividend and exempt share of profit - HELD THAT: - The Tribunal examined documentary evidence showing that investments were made from the assessee's own funds (Foreign Inward Remittance and bank statements) and no borrowed funds were used. Nevertheless, the Tribunal held that some expenditure attributable to earning exempt income must be disallowed. Applying the facts and in the interest of justice, the Tribunal reduced the disallowance computed by the lower authorities and directed the Assessing Officer to restore the disallowance to a nominal sum of Rs. 2 lakhs. [Paras 12, 13]

Disallowance under section 14A read with Rule 8D reduced and fixed at Rs. 2 lakhs; appeal on this ground partly allowed.

Capital receipt versus revenue receipt - treatment of state industrial subsidies - remand for fresh examination by Assessing Officer - Nature and tax treatment of interest and excise duty subsidies claimed as capital receipts - HELD THAT: - The assessee sought declaration of interest subsidy and excise duty subsidy as capital receipts relying on precedents. The Tribunal noted that although a coordinate bench had decided a similar issue in favour of the assessee, the present claim required examination of documents and factual material. In the interests of justice and fair play the Tribunal did not decide the issue on the papers but directed fresh consideration by the Assessing Officer in light of the earlier Tribunal order. [Paras 16]

Issue remanded to the Assessing Officer for fresh examination and decision, taking into account the Tribunal's earlier decision in ITA No. 1539/DEL/2016.

Allowability of education cess as expenditure - remand for fresh examination by Assessing Officer - Claim for deduction of education cess in computation of total income - HELD THAT: - The assessee claimed that education cess is an allowable business expenditure and relied on a CBDT circular and a recent High Court decision. The Tribunal did not rule finally on the claim but directed the Assessing Officer to consider the claim afresh in light of the cited High Court decision. [Paras 17, 18]

Claim left open; Assessing Officer directed to consider the allowability of education cess in computing taxable income in light of the referenced High Court decision.

Final Conclusion: Appeal partly allowed: disallowance under section 14A/Rule 8D reduced to Rs. 2 lakhs; claims regarding capital character of subsidies and allowability of education cess remanded to the Assessing Officer for fresh consideration in light of the Tribunal and High Court decisions.

Disallowance of interest as unexplained diversion of interest-bearing funds - reasonableness of director's remuneration and applicability of Section 40A(2) - allowability of rent for residential accommodation of whole-time director and apportionment under Section 38 of the Income-tax Act - perquisite treatment of rent-free accommodation and TDS obligation under Section 17(2) read with Section 192 of the Income-tax Act

Disallowance of interest as unexplained diversion of interest-bearing funds - Deletion of addition of interest of Rs. 1,00,66,740 which was disallowed by AO and sustained by CIT(A). - HELD THAT: - The Tribunal found on the record (and not disputed by Revenue before the Tribunal) that the amount disallowed by the AO had not even been claimed as an expenditure by the assessee in its return and computation; the assessee had in fact suo-moto disallowed a related interest amount in its computation. In the absence of any dispute on this factual position and since the disallowed sum was not claimed by the assessee, the Tribunal held there was no basis for the AO's disallowance and directed deletion of the addition.

Addition of Rs. 1,00,66,740 on account of interest is deleted and first ground of appeal is allowed.

Allowability of rent for residential accommodation of whole-time director and apportionment under Section 38 of the Income-tax Act - perquisite treatment of rent-free accommodation and TDS obligation under Section 17(2) read with Section 192 of the Income-tax Act - Remand for fresh adjudication of disallowance of rent of Rs. 54,00,000 paid for premises used partially as residence of the director. - HELD THAT: - The Tribunal noted that neither the AO nor the CIT(A) examined whether the rent constituted a perquisite attracting tax under Section 17(2) and whether tax was deductible at source under Section 192. Further, the authorities did not consider or make any apportionment under Section 38 although that provision governs allowability where premises are partly used for business. Relevant facts and documents necessary to determine (a) TDS/perquisite implications and (b) fair apportionment between business and personal use were not on record. In view of absence of these factual and legal determinations, the Tribunal set aside the issue to the AO for fresh decision after affording the assessee an opportunity and taking necessary factual material on record.

Issue remanded to the file of the AO for fresh adjudication on allowability/apportionment of rent; ground 3 partly allowed.

Reasonableness of director's remuneration and applicability of Section 40A(2) - perquisite treatment of rent-free accommodation and TDS obligation under Section 17(2) read with Section 192 of the Income-tax Act - Remand for fresh adjudication of disallowance of enhanced remuneration of Rs. 6,00,000 charged by the AO and sustained by CIT(A). - HELD THAT: - The Tribunal recorded that the AO and CIT(A) did not examine key facts relevant to Section 40A(2) - including market comparables/free market value, the benefits or legitimate needs of the business, whether tax was deducted at source under Section 192 in respect of the remuneration, and the actual tax position of the payee director. The assessee relied on prior administrative guidance and decisions but the necessary documentary evidence to establish the director's tax position and the existence or absence of excessive/unreasonable payments was not on record. Given these lacunae, the Tribunal concluded that relevant facts required for a fair determination under Section 40A(2) were missing and therefore remitted the matter to the AO to decide afresh after bringing the relevant material on record and giving the assessee opportunity.

Issue remanded to the AO for fresh consideration on merits regarding the enhanced director's remuneration; for statistical purposes the second ground is partly allowed.

Final Conclusion: Appeal is partly allowed: the addition of interest is deleted; the disputes concerning rent and enhanced director's remuneration are set aside to the Assessing Officer for fresh decision after obtaining and considering relevant factual materials (including TDS/perquisite issues and apportionment/market value considerations) and after affording the assessee a reasonable opportunity.

Penalty under section 271(1)(c) - bogus purchases - addition under section 69C - absence of proof of physical delivery - penalty requires finding of concealment or furnishing of inaccurate particulars - effect of undisputed sales on presumed bogus purchases

Penalty under section 271(1)(c) - bogus purchases - addition under section 69C - penalty requires finding of concealment or furnishing of inaccurate particulars - effect of undisputed sales on presumed bogus purchases - Whether the penalty imposed on the assessee for alleged bogus purchases could be sustained where sales were not doubted and additions were made on account of alleged lack of physical delivery. - HELD THAT: - The Tribunal examined the Assessing Officer's disallowance of purchases and the consequential levy of penalty. The Assessing Officer had treated purchases as bogus and made additions under the relevant provision, principally because the assessee did not produce evidence of physical delivery. However, the Assessing Officer did not dispute the sales recorded by the assessee and payments were evidenced by account-payee cheques. The Tribunal held that where sales are not doubted, it is not permissible to treat the entire purchases as automatically bogus; such a presumption cannot by itself support a penalty. Penalty under section 271(1)(c) requires a finding of concealment of income or furnishing of inaccurate particulars, not merely an addition by disallowance. On these facts, the Tribunal agreed with the CIT(A)'s conclusion deleting the penalty and found no sustainable basis to levy penalty merely on the presumption of non-delivery.

Penalty levied under section 271(1)(c) deleted; revenue appeal dismissed for AY 2011-12.

Final Conclusion: The Tribunal confirmed the CIT(A)'s order deleting the penalty imposed for alleged bogus purchases, holding that mere disallowance of purchases on the basis of absence of physical delivery, without doubt as to sales or a specific finding of concealment or inaccurate particulars, does not warrant levy of penalty; revenue's appeal for AY 2011-12 is dismissed.

Penalty under section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Initiation of penalty on alternative charges - Requirement of specifying charge in penalty notice - Burden of proof for levy of penalty - Accommodation bills / bogus purchases - Set aside for verification of bogus purchases - Re-initiation of penalty proceedings on remand

Penalty under section 271(1)(c) - Accommodation bills / bogus purchases - Set aside for verification of bogus purchases - Re-initiation of penalty proceedings on remand - Deletion of penalty order for A.Y. 2009-10 and restoration of assessment for limited verification with liberty to reinitiate penalty if warranted - HELD THAT: - The Tribunal noted that in the companion quantum order the matter concerning alleged bogus purchases was restored to the file of the Assessing Officer for limited verification whether the purchased materials were actually consumed in the assessee's manufacturing process (para 3). Having regard to that set aside for further enquiry, the Tribunal held that the penalty proceedings as adjudicated below cannot be sustained at this stage and accordingly set aside the orders of the lower authorities and deleted the present penalty (para 6). The Tribunal expressly recorded that if, during the set aside assessment proceedings, the Assessing Officer reaches the view that penalty under section 271(1)(c) is justified, he remains at liberty to reinitiate penalty proceedings (para 6). [Paras 3, 6, 7]

Penalty deleted for A.Y. 2009-10; assessment restored for limited verification and Assessing Officer may reinitiate penalty during set aside proceedings if satisfied.

Penalty under section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Initiation of penalty on alternative charges - Requirement of specifying charge in penalty notice - Burden of proof for levy of penalty - Deletion of penalty order for A.Y. 2010-11 on the grounds that penalty proceedings were initiated on alternative charges and the Assessing Officer failed to establish concealment - HELD THAT: - The Tribunal observed that the Assessing Officer had initiated penalty proceedings under section 271(1)(c) on both limbs - concealment of income and furnishing inaccurate particulars - thereby not specifying the exact charge (para 10). Relying on the principle in CIT v. Samson Perinchery, the Tribunal held that initiation on alternative charges rendered the penalty unsustainable and deleted the penalty on that ground (para 11). On the merits, the Tribunal recorded that the assessee produced ledger accounts, purchase bills, delivery challans and bank payments in respect of purchases, but only failed to produce the supplier for examination; the Assessing Officer did not otherwise establish concealment of income, and mere non production of the supplier was insufficient to sustain penalty under section 271(1)(c) (para 12). [Paras 10, 11, 12]

Penalty deleted for A.Y. 2010-11.

Final Conclusion: Both appeals are allowed and the penalties under section 271(1)(c) imposed for A.Y. 2009-10 and A.Y. 2010-11 are deleted; for A.Y. 2009-10 the assessment is restored for limited verification and the Assessing Officer may, if convinced after that process, reinitiate penalty proceedings.

Allowability of licence fee as revenue expenditure under section 37 - alienability and separability of goodwill of a profession - application of Devi Das Vithaldas ratio on licence versus sale of goodwill - inadmissibility of ad hoc disallowance based on surmise of personal element in travelling and entertainment expenses - precedential effect of earlier-year coordinate Bench order

Allowability of licence fee as revenue expenditure under section 37 - alienability and separability of goodwill of a profession - application of Devi Das Vithaldas ratio on licence versus sale of goodwill - precedential effect of earlier-year coordinate Bench order - Deductibility of licence fee paid to RSCPL for use of the 'Remfry & Sagar' goodwill and name. - HELD THAT: - Following and applying the coordinate-bench finding in the assessee's earlier-year decision, the Tribunal held that the licence arrangement dated 5.6.2001, by which RSCPL (owner of the goodwill gifted by Dr. V. Sagar) permitted the partnership to use the name and goodwill, constitutes a licence enabling the assessee to carry on its profession. The Tribunal applied the principles in the Supreme Court's decision in Devidas Vithaldas to treat such payments as payments for a licence (revenue in nature) rather than a disallowable transfer; the Assessing Officer's contentions of diversion of profits, absence of activity by RSCPL to enhance goodwill, or that the arrangement offended the Advocates Act/Bar Council rules were rejected as either unsupported by law or beyond the Tribunal's power to adjudicate. The licence fee was therefore held to satisfy the purpose test and to be wholly and exclusively laid out for the purpose of the profession and allowable under section 37. [Paras 7, 8, 9]

Deduction of licence fee paid to RSCPL is allowable as revenue expenditure under section 37; Revenue's grounds 1 and 2 dismissed in respect of this issue.

Inadmissibility of ad hoc disallowance based on surmise of personal element in travelling and entertainment expenses - Sustainability of the Assessing Officer's ad hoc 5% disallowance from travelling and entertainment expenses. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s deletion of the ad hoc 5% disallowance. The Assessing Officer made the reduction on assumptions and surmises of personal element without any material questioning of the books of account or specific evidence. Where entries in the books were undisputed and not impeached, an ad hoc disallowance on mere conjecture was held unsustainable in law and therefore liable to be deleted. [Paras 10, 11]

Ad hoc 5% disallowance of travelling and entertainment expenses is not sustainable and is deleted; Revenue's ground in this respect dismissed.

Final Conclusion: Following the earlier-year coordinate-bench precedent and applying the Devidas Vithaldas principles, the Tribunal upheld the deletion of the additions: the licence fee paid to RSCPL is allowable under section 37 as revenue expenditure and the ad hoc 5% disallowance from travelling and entertainment expenses is unsustainable; Revenue's appeal is dismissed.

Revenue expenditure vs capital expenditure - Treatment in books not determinative of tax nature - Pre-operative/deferred revenue expenditure - Deduction under section 37(1) - Precedential application of CIT v. Denso India Ltd.

Revenue expenditure vs capital expenditure - Treatment in books not determinative of tax nature - Pre-operative/deferred revenue expenditure - Deduction under section 37(1) - Allowability as revenue expenditure of amounts treated as deferred/pre-operative expenditure but claimed in full in the return for AY 2013-14. - HELD THAT: - The Tribunal examined whether amounts described as technical consultancy charges, purchase of raw materials, advertisement and electricity charges - though treated in the books as deferred revenue/pre-operative expenditure - were capital in nature because they related to development of LED drives and solar lights. Applying the principle that the true nature of the expenditure, not the accounting treatment, governs tax deductibility, the Tribunal found that no capital asset was brought into existence nor did the expenditure confer an enduring capital benefit. The Assessing Officer and CIT(A) erred in disallowing the deduction solely on account of book treatment. The Tribunal followed the reasoning and parameters laid down by the Hon'ble Delhi High Court in CIT v. Denso India Ltd., emphasising that heavy or early-incurred revenue expenditure does not automatically become capital expenditure and that expenditure incurred for making the business run efficiently is revenue in nature. Having regard to the facts and the authorities, the Tribunal concluded that the impugned amounts are revenue expenditure allowable under the Act and therefore must be allowed as claimed in the statement of total income. [Paras 8, 9, 10]

Deduction allowed; Assessing Officer directed to permit the expenditure as revenue expenditure for AY 2013-14.

Revenue expenditure vs capital expenditure - Treatment in books not determinative of tax nature - Pre-operative/deferred revenue expenditure - Deduction under section 37(1) - Allowability as revenue expenditure of the same amounts for AY 2014-15 (identical facts and issues). - HELD THAT: - The Tribunal applied the reasoning and conclusion reached in relation to AY 2013-14 mutatis mutandis to AY 2014-15, observing that the facts and issues are identical and that the tests established by precedent (notably CIT v. Denso India Ltd.) support treating the impugned expenditures as revenue in nature despite their having been shown as deferred/pre-operative in the books. [Paras 11, 12]

Deduction allowed; Assessing Officer directed to permit the expenditure as revenue expenditure for AY 2014-15.

Final Conclusion: Both appeals are allowed: the Tribunal held that the expenses treated as deferred/pre-operative in the books are revenue expenditure for the assessment years 2013-14 and 2014-15, and directed the Assessing Officer to allow the deductions claimed in the statement of total income, following the precedent in CIT v. Denso India Ltd.

Accumulation of income under section 11(2) - Filing of Form No.10 and specification of purpose - Exemption under section 11 for charitable trusts - Objects of the trust as determinative of permissible accumulation - Vagueness of purpose and its effect on accumulation - Proof of utilisation of accumulated funds

Accumulation of income under section 11(2) - Filing of Form No.10 and specification of purpose - Objects of the trust as determinative of permissible accumulation - Vagueness of purpose and its effect on accumulation - Proof of utilisation of accumulated funds - Whether accumulation of income claimed by the trust for poor children education fund and medical aid fund can be denied on the ground that the purpose specified in Form No.10 is vague and general. - HELD THAT: - The Tribunal found that the assessee filed Form No.10 specifying amounts and purposes and that the purposes for which funds were accumulated-education support and medical aid-fall within the main objects of the trust as set out in the trust deed. The record showed that the trust regularly earmarked and thereafter spent the accumulated funds for those purposes and produced ledger accounts, bills and documents evidencing utilisation. The Tribunal held that where the purpose for accumulation is within the trust's objects, the Assessing Officer cannot deny accumulation merely because the description in Form No.10 is general or framed in non technical terms. The view was reinforced by the decision referred to in the record that lack of a narrowly drafted declaration in Form No.10 is not fatal to exemption under section 11(2), a finding which the Supreme Court did not disturb in the cited proceedings. Applying these principles to the facts, the Tribunal concluded that the denial of accumulation for the two funds was not justified. [Paras 7, 8, 9]

Additions rejecting accumulation of income for the poor children education fund and medical aid fund are deleted and the benefit of accumulation under section 11(2) is allowed.

Final Conclusion: The appeal is allowed: the Tribunal set aside the denial of accumulation under section 11(2) for the specified charitable purposes and directed the Assessing Officer to delete the additions and allow the claimed accumulation.

Admissibility of a retracted confessional statement - requirement of corroboration for reliance on retracted confession - burden of proof to prove coercion or inducement in recorded statements - independence of adjudicatory proceedings from concurrent criminal proceedings - assessment of penalty under the Customs Act based on search and seizure evidence

Admissibility of a retracted confessional statement - burden of proof to prove coercion or inducement in recorded statements - requirement of corroboration for reliance on retracted confession - The Adjudicating Authority was justified in treating the statement recorded on 11.03.1998 as admissible and in rejecting the belated retraction letters dated 01.06.1998 and 01.07.1998. - HELD THAT: - The Court applied the principles in K.T.M.S.Mohd. and K.I.Pavunny to hold that voluntariness is a precondition for acting on an inculpatory statement and that the maker bears the onus of proving threat, inducement or coercion. The Adjudicating Authority examined the original statement, the subsequent retractions and the other evidence collected during search and seizure, and recorded reasons for rejecting the retraction as belated. The Authority found no proof that the statement was obtained by improper means and, after examining corroborative material (presence of the appellant at the godown, statements of other persons employed to pack the goods, and evidence that the appellant knew sandalwood was a prohibited export), concluded the confessional portions were true. The Tribunal re-appreciated the facts and concurred that the retraction was properly rejected and that reliance on the earlier statement was permissible where it is voluntary and supported by other evidence to assure its truthfulness. [Paras 22, 23]

Retraction rightly rejected; statement of 11.03.1998 admissible and could be relied upon after scrutiny and corroboration.

Independence of adjudicatory proceedings from concurrent criminal proceedings - assessment of penalty under the Customs Act based on search and seizure evidence - The appellant could not successfully challenge the Tribunal's reliance on the adjudicatory record by pointing to the Tribunal order in Janar's case or the initial criminal acquittal. - HELD THAT: - The Court noted that the Tribunal's favorable order in Janar's case was subsequently set aside by the Division Bench and that the Criminal Court's acquittal was reversed on appeal. More fundamentally, the Court reiterated that the Adjudicating Authority is empowered to proceed independently of criminal proceedings and need not await their outcome. Given the reversal of the decisions relied upon by the appellant and the Tribunal's own re-appreciation of the search, seizure and statement evidence, reliance on the adjudicatory record to impose penalty was held permissible. [Paras 24, 25]

Appellant's reliance on Janar's Tribunal order and earlier criminal acquittal was misplaced; adjudicatory proceedings could proceed independently and were properly upheld.

Assessment of penalty under the Customs Act based on search and seizure evidence - requirement of corroboration for reliance on retracted confession - The Tribunal was right to confirm liability for contravention of the Act but exercise its discretion to reduce the quantum of penalty. - HELD THAT: - On re-appraisal of facts, the Tribunal found the appellant present during the search where sandalwood was concealed in cartons and accepted the adjudicating finding that the appellant materially participated in the attempt to export prohibited goods. While the Tribunal sustained the finding of contravention, it adjusted the penalty downward having regard to the totality of facts. The High Court found no perversity or illegality in that factual conclusion or in the Tribunal's discretionary reduction of penalty, and consequently held there was no substantial question of law warranting interference. [Paras 11, 12, 26]

Liability for contravention confirmed; Tribunal's reduction of penalty upheld and no substantial question of law made out.

Final Conclusion: The High Court dismissed the appeal, holding that the retracted statement was properly considered admissible after scrutiny and corroboration, the adjudicatory proceedings were rightly conducted independently of the criminal proceedings, the Tribunal correctly confirmed liability while reducing the penalty, and no substantial question of law arises.

Claim for refund under Section 27 of the Customs Act - order of assessment - reassessment/amendment of assessment - scope of refund proceedings - entitlement to refund contingent on challenging assessment - Notification No.10/2006 - exemption notification

Claim for refund under Section 27 of the Customs Act - order of assessment - scope of refund proceedings - entitlement to refund contingent on challenging assessment - Whether refund of customs duty can be granted without challenging or obtaining amendment of the original order of assessment which has attained finality - HELD THAT: - The Court applied the settled principle in Priya Blue Industries Ltd. and the subsequent exposition in ITC Limited that proceedings under Section 27 are confined to execution for refund and do not permit reassessment or review of an order of assessment. The order of self-assessment must be followed unless it has been amended or modified under the Act; a refund authority is not empowered to adjudicate conditions of exemption or revisit the assessment. Consequently, where there is no material to show that the assessment order was challenged, amended or modified, a claim for refund cannot be entertained. The Tribunal's allowance of the refund, without any challenge to or modification of the assessment order, is contrary to this principle. The Court further observed that reliance on an exemption notification (Notification No.10/2006) does not entitle the respondent to refund unless the assessment order has been set aside or amended, because the assessed duty stands until appropriately altered. [Paras 4, 5, 6, 7]

Refund cannot be granted in the absence of challenge to or amendment of the order of assessment; the Tribunal's order allowing refund is unsustainable.

Final Conclusion: The substantial question is answered in favour of the revenue; the Tribunal's order dated 06.09.2017 is quashed and the appeal is allowed.

Self-assessment under the Customs Act - re-assessment under section 17(4) of the Customs Act - amendment of a Bill of Entry under section 149 of the Customs Act - correction of clerical or arithmetical mistakes under section 154 of the Customs Act - appeal under section 128 of the Customs Act

Self-assessment under the Customs Act - amendment of a Bill of Entry under section 149 of the Customs Act - correction of clerical or arithmetical mistakes under section 154 of the Customs Act - re-assessment under section 17(4) of the Customs Act - appeal under section 128 of the Customs Act - Validity of petitioner's request to amend self-assessed Bills of Entry post clearance by correcting an inadvertent tariff classification and for consequential reassessment, and whether petitioner must first prefer an appeal - HELD THAT: - The court examined the statutory scheme: importers self-assess duties (section 17(1)); the proper officer may verify and, if self-assessment is incorrect, re-assess (section 17(4)); discretion to amend documents after presentation is vested in the proper officer subject to the proviso requiring documentary evidence existing at time of clearance (section 149); and clerical or arithmetical mistakes or errors from accidental slips or omissions may be corrected at any time (section 154). While the Supreme Court has held that self-assessment is an appealable order and that refunds require modification of the assessment order by appropriate proceedings, that decision did not confine modification to appeals alone. The power to modify an assessment may be exercised under other statutory provisions including sections 149 and 154 where the defect is an inadvertent error apparent on the record. Where the grievance is not a challenge to the legal validity of the assessment but a factual inadvertent misclassification capable of being rectified by amendment or correction on the basis of documents existing at the time of clearance, the appropriate remedy is amendment/correction and consequential reassessment under section 17(4), not necessarily an appeal under section 128. Applying these principles, the petitioner's plea for correction of the CTH from 85176990 to 85176930 and consequential reassessment falls within the domain of section 149 read with section 154 and permits the proper officer to amend the Bills of Entry and pass a reassessment order after affording opportunity of hearing. [Paras 21, 22, 25, 28, 29]

Petitioner is entitled to have the Bills of Entry amended by respondent No.2 under section 149 read with section 154 and to consequential reassessment under section 17(4); respondent No.2 is directed to consider and act upon the petitioner's request after hearing.

Final Conclusion: Writ petition allowed. Respondent No.2 directed to consider and, if appropriate, amend Bills of Entry Nos. 2434172, 2436049, 2522910, 2805152 and 2968920 under section 149 read with section 154 of the Customs Act and thereafter pass an order under section 17(4) after giving the petitioner an opportunity of hearing; exercise to be completed within six weeks. No order as to costs.

Maintainability of appeal against provisional assessment - provisional assessment - classification of imported goods - remand for finalisation of assessment

Maintainability of appeal against provisional assessment - provisional assessment - Rejection of the appeal by Commissioner (Appeals) on the ground that the order challenged was a provisional assessment was incorrect and the appeal was maintainable. - HELD THAT: - The Tribunal found that dismissal of the appeal solely because the impugned order was a provisional assessment ran counter to settled law. The appellant had protested the provisional assessment and paid duty, and relied on earlier decisions endorsing maintainability of appeals against provisional assessments. The Revenue conceded that an appeal is maintainable against a provisional assessment. In view of the precedent and the concession, the Commissioner (Appeals)'s conclusion that the appeal was premature was unsustainable and required setting aside.

Impugned order dismissing the appeal as premature was set aside and the appeal was held to be maintainable.

Remand for finalisation of assessment - classification of imported goods - Whether the matter should be remanded to the adjudicating authority for finalisation of assessment including classification of the imported goods. - HELD THAT: - Both parties addressed classification of imported goods and the admissibility of appeal; the Revenue conceded to remand for finalisation. Having set aside the Commissioner (Appeals) order, the Tribunal directed that the matter be returned to the original adjudicating authority to finalise the assessment. The remand is for determination of the classification and completion of final assessment proceedings, to be conducted expeditiously.

Matter remanded to the adjudicating authority for finalising the assessment expeditiously.

Final Conclusion: The impugned order of the Commissioner (Appeals) is set aside; the appeal is allowed and the matter is remitted to the adjudicating authority for finalisation of the assessment without delay.

Dispensation of statutory meetings - Consent affidavits as substitute for convening meetings - Absence of secured creditors - Unsecured creditors' unanimous consent - Scheme of Amalgamation under Sections 230 & 232 of the Companies Act, 2013 - Service of notice to statutory authorities under Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

Dispensation of statutory meetings - Consent affidavits as substitute for convening meetings - Requirement of convening meetings of the Shareholders of Transferor Companies No. 1 & 2 and the Transferee Company is dispensed with. - HELD THAT: - The Tribunal found that all the shareholders of the Transferor Companies No. 1 & 2 and of the Transferee Company have given their written consents by way of individual affidavits and the Boards of the respective companies had approved the proposed Scheme of Amalgamation. In view of the unanimous shareholder affidavits filed in the record and the corporate approvals already obtained, the statutory requirement to convene meetings of the shareholders for considering and, if thought fit, approving the Scheme was dispensed with. [Paras 14]

Meetings of the shareholders of Transferor Companies No.1 & 2 and the Transferee Company are dispensed with.

Absence of secured creditors - Dispensation of statutory meetings - Requirement of convening meetings of the Secured Creditors of Transferor Companies No. 1 & 2 and the Transferee Company is dispensed with. - HELD THAT: - The Applicants produced certified lists, duly certified by Chartered Accountants, showing that there are no secured creditors in the Transferor Companies No.1 & 2 and the Transferee Company. Given the non-existence of secured creditors, the necessity to convene meetings of secured creditors for considering the Scheme does not arise and the Tribunal accordingly dispensed with such meetings. [Paras 15]

Meetings of the secured creditors of the Transferor Companies and the Transferee Company are dispensed with.

Unsecured creditors' unanimous consent - Dispensation of statutory meetings - Requirement of convening meetings of the Unsecured Creditors of Transferor Companies No. 1 & 2 and the Transferee Company is dispensed with. - HELD THAT: - The record demonstrates that all unsecured creditors of the Transferor Companies No.1 & 2 and of the Transferee Company have filed their written consents/NOCs by affidavit in favour of the proposed Scheme of Amalgamation. On that basis the Tribunal held that convening meetings of unsecured creditors for consideration of the Scheme could be dispensed with. [Paras 16]

Meetings of the unsecured creditors of Transferor Companies No.1 & 2 and the Transferee Company are dispensed with.

Service of notice to statutory authorities - Rule 8 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Applicants directed to serve notice of the Scheme upon specified statutory authorities and to allow them 30 days to make representations. - HELD THAT: - The Tribunal ordered that the Applicants must serve the notice and a copy of the Scheme on (a) the Central Government through the Regional Director, Northern Region, Ministry of Corporate Affairs, (b) the Registrar of Companies, Uttar Pradesh, Kanpur, (c) the Official Liquidator, Uttar Pradesh, Allahabad and (d) the Income Tax Department, and that these authorities may submit any representations within 30 days of receipt. This direction implements the requirement under Rule 8 for inviting representations from the specified authorities before further orders are made. [Paras 17]

Notice of the Scheme to be served on the listed statutory authorities with a 30 day period for representations.

Final Conclusion: The Tribunal dispensed with convening meetings of shareholders and creditors as noted above, directed service of notice of the Scheme on the specified authorities for representations within 30 days, and disposed of CA(CAA) No.02/ALD of 2021 accordingly.

Sanction of scheme of merger under Sections 230-232 of the Companies Act, 2013 - Scheme of Merger by Absorption - Vesting of assets, rights, liabilities and proceedings on merger - Employee continuity on amalgamation - Compliance with statutory formalities before Registrar of Companies and stamp authorities - Obligation to comply with FEMA and Reserve Bank of India guidelines - Registration as a Core Investment Company under Section 45-IA of the Reserve Bank of India Act, 1934 - Payment of additional fees consequent to increase in authorised share capital (single window clearance principle)

Sanction of scheme of merger under Sections 230-232 of the Companies Act, 2013 - Scheme of Merger by Absorption - Sanction of the Scheme of Merger by Absorption of the transferor companies into the transferee company. - HELD THAT: - The Tribunal considered the petition under Sections 230-232, the scheme placed at Annexure E, approvals of the boards of the three petitioner companies, auditor certificates as to accounting treatment, the Regional Director's report and the petitioners' rejoinders. No objector contested the scheme. The Tribunal found the scheme to be fair and reasonable, not in contravention of law or public policy and, having regard to approvals by members and creditors and compliance assurances, concluded there was no impediment to sanctioning the scheme. The sanction was granted while expressly preserving the right of competent authorities to take action in case of statutory non-compliance.

Scheme sanctioned; CP No. 158/CTB/2019 disposed of.

Vesting of assets, rights, liabilities and proceedings on merger - Employee continuity on amalgamation - Consequences of sanction: transfer and vesting of properties, rights, liabilities and continuation of proceedings; status of employees post-merger. - HELD THAT: - On sanction, the Tribunal ordered that all properties, rights and powers of the transferor companies be transferred and vested in the transferee company and that all liabilities and duties of the transferors stand transferred to the transferee. Pending suits, proceedings and appeals by or against the transferors were directed to continue by or against the transferee. Employees in service immediately preceding the effective date were declared to become employees of the transferee on terms not less favourable than those existing, without break in service. These operative directions give effect to the merger under Section 232 and embody the transfer and continuity consequences.

Assets, rights, liabilities and proceedings vested in transferee; employees continued on existing terms.

Payment of additional fees consequent to increase in authorised share capital (single window clearance principle) - Compliance with statutory formalities before Registrar of Companies and stamp authorities - Obligations to comply with fee payment on enhanced authorised capital and post-sanction filing requirements with Registrar and stamp authorities. - HELD THAT: - The Regional Director observed that the authorised capital of the transferee company would be enhanced under the scheme and that difference of fees on the enhanced authorised capital ought to be paid. The petitioners undertook to comply with Section 232(3)(i) regarding payment of fees. The Tribunal directed the petitioners to cause a certified copy of the order to be delivered to the Registrar of Companies within thirty days for registration and consolidation of files, and directed lodging a copy with the Superintendent of Stamps within 60 days for adjudication of stamp duty. The sanction was therefore made subject to these statutory formalities and payment obligations.

Petitioners to pay additional fees on enhanced authorised capital, file certified order with RoC and lodge order for stamp adjudication.

Obligation to comply with FEMA and Reserve Bank of India guidelines - Registration as a Core Investment Company under Section 45-IA of the Reserve Bank of India Act, 1934 - Requirement to ensure compliance with FEMA/RBI rules for foreign/NRI/foreign body corporate shareholders and to apply for registration as a Core Investment Company post-merger. - HELD THAT: - The Regional Director recorded potential foreign shareholding and auditors' emphasis regarding registration as a Core Investment Company under Section 45-IA. The petitioners furnished undertakings: that share allotment to NRIs would be under the automatic route (non-repatriation), that they would comply with FEMA and RBI guidelines to the extent applicable, and that the transferee would apply for RBI registration as a Core Investment Company on giving effect to the scheme. The Tribunal incorporated these assurances in the order and directed compliance with FEMA/RBI guidelines and application for registration as CIC upon effectuation of the scheme.

Transferee to comply with FEMA/RBI guidelines as applicable and to apply for Core Investment Company registration with RBI on giving effect to the scheme.

Preservation of enforcement rights despite sanction - Whether sanction bars subsequent action for statutory non-compliance. - HELD THAT: - The Tribunal clarified that sanction of the scheme does not constitute exemption from payment of any stamp duty, taxes or other charges nor does it preclude action being taken in accordance with law if any deficiency or violation of enactments, rules or regulations is subsequently found. The order therefore preserves the power of appropriate authorities to initiate proceedings for non-compliance despite the sanction.

Sanction does not bar lawful action for statutory violations; no exemption from taxes, duties or other compliances conferred.

Final Conclusion: The Tribunal sanctioned the Scheme of Merger by Absorption under Sections 230-232 of the Companies Act, 2013 and directed operative steps to give effect to the merger (vesting of assets, liabilities and continuation of proceedings; employees to continue on existing terms), while imposing compliance obligations - payment of additional fees on enhanced authorised capital, filing with the Registrar of Companies, lodging for stamp adjudication, adherence to FEMA/RBI requirements and application for Core Investment Company registration - and reserving the right of authorities to take action for any statutory non-compliance.

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - transfer of assets and liabilities - continuation of pending proceedings - change of company name - dissolution without winding up - compliance with statutory requirements including fees, stamp duty and filings - no exemption from payment of stamp duty or taxes - costs and payment to Regional Director

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - compliance with statutory requirements including fees - Sanction of the proposed Scheme of Amalgamation of the two Transferor Companies with the Transferee Company. - HELD THAT: - The Tribunal considered the petition, the approvals obtained from members and creditors, the affidavit of service to statutory authorities, the Chartered Accountant's certificate on accounting standard compliance, and the report and observations of the Regional Director along with the petitioners' supplementary affidavits and undertakings. Having found no impediment on the basis of those materials and the assurances given (including payment of any additional fees on enhanced authorised capital and compliance with Form/fee requirements), the Tribunal concluded that the Scheme could be sanctioned. The sanction is granted subject to the petitioners' continuing obligation to comply with all statutory requirements in law. [Paras 16, 20]

Scheme sanctioned under Sections 230-232 of the Companies Act, 2013; sanction subject to statutory compliances.

Transfer of assets and liabilities - continuation of pending proceedings - Effect of the sanction on transfer of assets, properties, rights and liabilities, and on pending proceedings. - HELD THAT: - Pursuant to the sanctioned Scheme, all assets, properties, rights, powers, titles and interests of the Transferor Companies are to be transferred to and vested in the Transferee Company without further act or deed, subject to existing charges. All liabilities and duties of the Transferor Companies stand transferred to and become liabilities and duties of the Transferee Company. Further, all proceedings, suits and appeals pending by or against the Transferor Companies shall be continued by or against the Transferee Company as per the terms of the Scheme.

Assets, rights, liabilities and pending proceedings of the Transferor Companies stand transferred to and vested in the Transferee Company.

Change of company name - compliance with statutory requirements including fees, stamp duty and filings - Change of name of the Transferee Company to that of Transferor Company No. 2 and attendant compliance obligations. - HELD THAT: - The sanctioned Scheme provides for the Transferee Company to assume the name of Transferor Company No. 2 on the Scheme becoming effective. The petitioners have undertaken to file requisite forms with the Registrar of Companies and to pay applicable fees and stamp duty in compliance with the Companies Act, 2013. The Tribunal approved the change of name as part of the sanction while emphasising that statutory filings and payments must be made in accordance with law.

Transferee Company to change its name to that of Transferor Company No. 2; statutory filings and payments to be complied with.

Dissolution without winding up - registration with Registrar of Companies - Consequences for the Transferor Companies on filing of the certified copy of the Tribunal's order with the Registrar of Companies. - HELD THAT: - The Tribunal ordered that upon filing the certified copy of this Order with the Registrar of Companies, Chhattisgarh, the Transferor Companies shall be dissolved without winding up. The Registrar is directed to consolidate the records of the Transferor Companies with those of the Transferee Company on its files. The Tribunal also directed delivery of certified copy of the Order to the Registrar within 30 days of receipt.

On filing certified copy of this Order with ROC, Transferor Companies to be dissolved without winding up and records consolidated.

No exemption from payment of stamp duty or taxes - compliance with statutory requirements including fees - Whether the sanction operates as exemption from payment of stamp duty, taxes or other statutory charges or bars action for statutory violations. - HELD THAT: - The Tribunal expressly clarified that the sanction of the Scheme is not to be construed as an exemption from payment of stamp duty, taxes including income tax, GST or any other charges, nor as dispensing with any permissions or compliances required under law. The Tribunal further clarified that if any deficiency or violation of any enactment, rule or regulation is found, the sanction will not preclude action being taken against concerned persons or officials in accordance with law. [Paras 18, 19]

Sanction does not exempt payment of stamp duty/taxes or bar legal action for statutory breaches; statutory compliances remain obligatory.

Directions and procedural compliance - schedule of assets - costs and payment to Regional Director - Ancillary directions including filing of schedule of assets, acceptance of computerized printouts by departments, and payment of costs. - HELD THAT: - The Tribunal directed that the schedule of assets in respect of the Transferor Companies be filed in the Tribunal within 60 days from the date of the Order. It permitted the department to append legible computerized printouts of the scheme and schedule of assets to the certified copy of the Order upon verification in lieu of hand written copies. The Transferee Company was directed to pay a cost of Rs. 50,000 to the Regional Director towards legal fees/expenses via the MCA online portal. Liberty to apply for further directions was also reserved to interested persons.

Petitioners to file schedule of assets within 60 days; departments may append verified computerized printouts; Transferee to pay specified costs to Regional Director.

Final Conclusion: The National Company Law Tribunal, Cuttack Bench, having found no impediment on the material before it and subject to statutory compliances and payment of stipulated costs, sanctioned the Scheme of Amalgamation transferring the assets, liabilities and pending proceedings of the Transferor Companies to the Transferee Company, provided for change of name, dissolution of the Transferor Companies on filing with the ROC, and clarified that the sanction does not exempt payment of stamp duty, taxes or other statutory compliances.

Restoration of company name under Section 252(3) of the Companies Act, 2013 - Striking off under Section 248(1)(c) and the Companies (Removal of names of Companies from the Register) Rules, 2016 - Requirement that the company was carrying on business or in operation at the time of striking off - Burden of proof on applicant to establish company was in operation during the default period

Restoration of company name under Section 252(3) of the Companies Act, 2013 - Requirement that the company was carrying on business or in operation at the time of striking off - Burden of proof on applicant to establish company was in operation during the default period - Application under Section 252(3) for restoration of the company's name to the Register was to be considered on the materials produced and whether the company was carrying on business at the time its name was struck off. - HELD THAT: - The Tribunal noted the statutory power under Section 252(3) is exercisable where it is shown that at the time of striking off the company was carrying on business or in operation. The petitioner placed on record incorporation documents and audited accounts for the years ended March 31, 2015 to March 31, 2018, together with certain agreements. Prima facie scrutiny of the records indicated absence of business activity during the relevant period: no revenue generated since the financial year ended March 31, 2014, absence of employment, no PAN/GST details or filed income-tax returns, no bank account details, and annual accounts not reflecting business transactions. The additional agreements produced were not dated within the default period and did not substantiate the contention that the company was operational when its name was struck off. The Registrar had issued the statutory show-cause notice and specifically recorded that the petitioner must put the contention to strict proof; the petitioner failed to comply with the Tribunal's earlier direction to furnish supporting proof of operation during the default period. On these findings the Tribunal held that the petitioner did not discharge the onus of showing that the company was carrying on business at the time of striking off and that the restoration under Section 252(3) was not warranted. [Paras 8, 9, 10, 11, 12]

Application for restoration dismissed as the petitioner failed to prove that the company was carrying on business or in operation at the time of striking off.

Final Conclusion: The petition under Section 252(3) for revocation of the Registrar's order striking off the company's name is dismissed for failure to establish that the company was carrying on business at the relevant time; copy of the order to be sent to the ROC and free copy furnished to the applicant.

Right to participate in Committee of Creditors meetings - composition and attendance rights of Committee of Creditors under Section 21 and Section 24 - conduct of meetings governed by Regulation 24 - powers and duties of the Resolution Professional including control over information and access to documents - no voting right for directors/partners/operational creditors attending CoC meetings

Right to participate in Committee of Creditors meetings - composition and attendance rights of Committee of Creditors under Section 21 and Section 24 - no voting right for directors/partners/operational creditors attending CoC meetings - Whether the Advocate, Chartered Accountant and Company Secretary of the Corporate Debtor can be permitted to attend meetings of the Committee of Creditors. - HELD THAT: - The Tribunal examined the statutory scheme under Section 21 (constitution and composition of the Committee of Creditors) and Section 24 (meeting of Committee of Creditors), together with Regulation 24 (conduct of meeting). The Code contemplates that the Committee comprises financial creditors and prescribes who may attend meetings; directors, partners and a representative of operational creditors may attend but have no voting rights and their absence does not invalidate proceedings. Regulation 24(5) empowers the Resolution Professional to permit only participants and any other person whose presence is required by the RP. Having regard to these provisions and the purpose of the RP to manage the CIRP and limit information asymmetry, the Tribunal held that permitting the Advocate/CA/Company Secretary of the Corporate Debtor to attend CoC meetings would not serve any meaningful purpose, as attendance confers no voting rights and the Corporate Debtor can provide documents to the RP as required. [Paras 8, 15, 16]

Permission for the Advocate, Chartered Accountant and Company Secretary of the Corporate Debtor to attend Committee of Creditors meetings is refused.

Powers and duties of the Resolution Professional including control over information and access to documents - conduct of meetings governed by Regulation 24 - Whether the Resolution Professional is required to provide copies of all documents in connection with the CIRP to the Corporate Debtor's Advocate/CA/Company Secretary. - HELD THAT: - The Tribunal noted that under the Code and the IBBI regulations the Resolution Professional has discretion and responsibility to appoint professionals and to manage access to information during CIRP. Section 25(2)(d) permits the RP to appoint accountants, legal and other professionals in accordance with IBBI processes, and Regulation 24 restricts access to meetings to participants or persons permitted by the RP. The RP is not obliged to disclose CIRP information to third parties, and any assistance from promoters or advisers can be sought by the RP as needed. Therefore the prayer seeking blanket provision of copies of all CIRP-related documents to the Corporate Debtor's professionals cannot be granted. [Paras 16]

The request to direct the Resolution Professional to provide copies of all documents in connection with the CIRP to the Corporate Debtor's Advocate/CA/Company Secretary is rejected.

Final Conclusion: MA/162/KOB/2020 is devoid of merit and is dismissed; the Tribunal declines to permit the Corporate Debtor's Advocate/CA/Company Secretary to attend CoC meetings and refuses the blanket disclosure of CIRP documents to them.

Delay in pronouncement of adjudicatory order - prejudice from undue delay - right to be heard / opportunity of personal hearing - setting aside and remand for fresh adjudication - expeditious disposal of adjudicatory proceedings

Delay in pronouncement of adjudicatory order - prejudice from undue delay - right to be heard / opportunity of personal hearing - Whether the undue delay in delivering the adjudication order prejudiced the appellant and warranted setting aside the order. - HELD THAT: - The Tribunal found that the Adjudicating Authority delivered the impugned order after a substantial and unexplained delay following conclusion of hearing, and that the delay had resulted in material irregularity causing prejudice to the appellant. The Tribunal examined authorities relied on by both parties, distinguished the respondent's reliance on Telestar where delay was not urged earlier, and accepted that precedents such as Bhagwandas Fatechand Daswani, Kanahaiyalal and the Bombay High Court decision in EMCO support setting aside an order where delay has caused prejudice or where the adjudicating authority has failed to explain the delay and may not have addressed the parties' submissions. On this short question of delay, and without expressing any view on the merits, the Tribunal allowed the appeal insofar as it related to the appellant and set aside the impugned adjudication order dated 09.03.2009 for the appellant. [Paras 16, 18, 19, 20]

Appeal allowed limited to delay ground; impugned order dated 09.03.2009 set aside insofar as it relates to the appellant.

Setting aside and remand for fresh adjudication - expeditious disposal of adjudicatory proceedings - opportunity to be heard - What remedial direction should follow after setting aside the adjudication order on account of delay. - HELD THAT: - Having set aside the impugned order on the limited ground of undue delay and prejudice, the Tribunal remanded the matter to the Adjudicating Authority for fresh decision on all legal and factual issues concerning the appellant. The Tribunal directed that the Adjudicating Authority decide the case afresh in accordance with law after affording opportunities to both parties, and recommended expeditious disposal preferably within six months from the date of appearance. Specific administrative directions were given as to the parties' appearance before the Adjudicating Authority by a stipulated date and that a copy of the Tribunal order be sent to the Special Director, Directorate of Enforcement, Mumbai. [Paras 20, 21]

Matter remanded to the Adjudicating Authority for fresh adjudication on all legal and factual issues relating to the appellant, to be decided expeditiously (preferably within six months) after affording opportunities to both parties; parties to appear by the date directed.

Final Conclusion: The appeal by M/s. South Indian Bank Ltd. is allowed on the limited ground of undue delay in pronouncement of the adjudication order; the impugned order dated 09.03.2009 is set aside insofar as it relates to the appellant and the matter is remanded to the Adjudicating Authority for fresh adjudication of all legal and factual issues after affording opportunity to both parties, to be decided expeditiously.

CENVAT credit - Input service - Reinsurance services - Exclusion clause in definition of input service relating to motor vehicles - Insurance Pool / pooling mechanism - Reverse charge mechanism

Reinsurance services - Input service - CENVAT credit for reinsurance services availed prior to 01.04.2011 - HELD THAT: - The Tribunal upheld the Commissioner's finding that reinsurance services obtained by the insurer for the purpose of providing general insurance services fall within the definition of "input service" as it stood prior to 01.04.2011. The adjudicating authority's reasoning, endorsed by the Tribunal, proceeded from the character of reinsurance as insurance of the insurer's assumed risks and the statutory and normative framework which treats reinsurance as within the scope of general insurance services chargeable to service tax; consequently such services are used in providing the insurer's output service and qualify for CENVAT credit. The Commissioner's conclusion that the claimed credits for the years 2008-09 to 2010-11 were correctly availed was therefore sustained. [Paras 12, 14]

CENVAT credit availed on reinsurance services for 2008-09, 2009-10 and 2010-11 upheld.

Exclusion clause in definition of input service relating to motor vehicles - Reinsurance services - Applicability of the post-01.04.2011 exclusion (relating to general insurance services in respect of motor vehicles) to reinsurance services - HELD THAT: - The Tribunal examined the exclusion introduced in rule 2(l) of the CENVAT Credit Rules w.e.f. 01.04.2011 which excluded general insurance services relating to a motor vehicle from the definition of "input service." The Tribunal held that the exclusion is limited to insurance services in respect of a particular motor vehicle and does not extend to reinsurance services which insure the assumed risks of an insurer as a business matter and are not in respect of any specific motor vehicle. On that basis, the Tribunal concluded that the exclusion clause is not applicable to the reinsurance services availed by the appellant and, accordingly, the denial of CENVAT credit for the period 2011-12 on the ground of that exclusion could not be sustained. [Paras 21, 22]

Exclusion clause introduced w.e.f. 01.04.2011 does not disentitle the appellant to CENVAT credit on reinsurance services; the denial for 2011-12 set aside.

Insurance Pool / pooling mechanism - CENVAT credit - Entitlement to CENVAT credit in respect of reinsurance services provided under the Indian Motor Third Party Insurance Pool - HELD THAT: - The Tribunal accepted the analysis in Shriram General Insurance that reinsurance services rendered by pool member companies are genuine services rendered pursuant to the IRDA directions and pooling mechanism, with the premium allocation mechanism effectively resulting in payment and discharge of service tax liability. The Tribunal held that pool-provided reinsurance services are not excluded by the amendment to the definition of input service and that credit of service tax charged by pool members can be availed by the appellant. [Paras 20, 21]

CENVAT credit on reinsurance services under the Insurance Pool is allowable; the impugned denial cannot be sustained.

Final Conclusion: The Tribunal set aside the portion of the Commissioner's order confirming recovery of CENVAT credit of Rs. 196,46,97,360/- (with interest and penalty) for the period 2011-12, upheld the appellant's entitlement to CENVAT credit on reinsurance services for the years 2008-09 to 2010-11, and held that the post-01.04.2011 exclusion for motor-vehicle-related insurance services does not apply to the appellant's reinsurance services, allowing the appeal.

Cenvat credit - input service - deposit insurance by DICGC - distinction between accepting and extending deposits - negative list of services - per incuriam - judicial discipline

Cenvat credit - input service - deposit insurance by DICGC - negative list of services - distinction between accepting and extending deposits - judicial discipline - Eligibility of Cenvat credit for service tax paid on premiums to the Deposit Insurance and Credit Guarantee Corporation (DICGC) for insuring public deposits held by banks. - HELD THAT: - The Tribunal followed the Larger Bench decision in M/s. South Indian Bank which held that the service rendered by DICGC to banks for insuring deposits falls within the main part of the definition of "input service" and is not excluded; consequently the service tax paid on such premiums is eligible for Cenvat credit. The Larger Bench reasoned that deposit insurance is a service used by banks in providing their output service of "banking and other financial services," and that without such insurance banks could be unable to carry on their deposit-accepting functions. The Tribunal rejected the department's reliance on the negative list provision relating to "extending deposits, loans or advances" by distinguishing the expression "accepting deposits" from "extending deposits" (inter-bank deposits where consideration is interest) and holding that the negative-list entry does not cover the activity of accepting deposits for customers. Although a subsequent Division Bench questioned the Larger Bench as being per incuriam for not considering the Supreme Court decision in Dilip Kumar & Co., the Tribunal applied the rule of judicial discipline and declined to depart from the Larger Bench, noting that Dilip Kumar & Co. concerned interpretation of exemption notifications and was not directly apposite to the Cenvat credit issue under consideration. [Paras 6]

Credit of service tax paid on premiums to DICGC for insuring public deposits is admissible as Cenvat credit; the impugned order denying such credit is set aside and the appeals are allowed.

Final Conclusion: The Tribunal, following the Larger Bench in M/s. South Indian Bank, held that service tax on premiums paid to DICGC for deposit insurance is an input service eligible for Cenvat credit; the impugned denial of credit is set aside and the appeals are allowed.

Ineligible modvat credit - show cause notice requirement for recovery and interest - Rule 57I of the Central Excise Rules, 1944 - commencement of interest liability after three months from receipt of demand notice - appropriation of credit at the time of refund order - interest on delayed refund under Section 11BB of the Central Excise Act, 1944 - date of filing of refund claim as trigger for interest

Ineligible modvat credit - show cause notice requirement for recovery and interest - Rule 57I of the Central Excise Rules, 1944 - commencement of interest liability after three months from receipt of demand notice - appropriation of credit at the time of refund order - Whether interest was payable by the respondent on the amount appropriated as ineligible modvat credit. - HELD THAT: - Both parties agreed that no show cause notice proposing disallowance or recovery of the credit was issued to the respondent. The Tribunal noted that, for interest to become payable under the regime applicable to the period in question, a demand process is a precondition: Rule 57I provides that liability to pay interest commences only after expiry of three months from the date of receipt of a demand notice. Here the original authority appropriated the allegedly ineligible credit in the refund Order-in-Original itself; no separate demand or SCN had been issued. In these circumstances the Commissioner (Appeals) correctly held that interest could not be sustained. The department cannot, in the refund litigation initiated by the assessee, claim interest where the procedural prerequisites for interest (a demand/SCN and the lapse of the statutory period) were not met, and appropriation in the refund order itself does not trigger interest under the applicable rule.

Demand of interest on the appropriated ineligible modvat credit is not sustainable and was rightly set aside.

Interest on delayed refund under Section 11BB of the Central Excise Act, 1944 - date of filing of refund claim as trigger for interest - Whether the respondent was entitled to interest on the sanctioned refund amount from three months after filing the refund claim under Section 11BB. - HELD THAT: - The respondent filed the refund claim on 05.11.2007. The department contended there was delay attributable to the respondent in furnishing details, and thus it should not be liable to pay interest. The Tribunal observed that if the department considered the delay in furnishing information sufficient to refuse interest or to reject the claim, it could have done so; in the absence of rejection or other action denying entitlement, Section 11BB entitles the claimant to interest from three months after the date of filing the refund claim until payment. The Commissioner (Appeals) therefore correctly awarded interest under Section 11BB, and the Tribunal found no error in that conclusion.

Respondent is entitled to interest on the sanctioned refund under Section 11BB from three months after the refund claim date; the Commissioner (Appeals) correctly granted such interest.

Final Conclusion: The departmental appeal is without merit and is dismissed: the demand of interest on the appropriated ineligible modvat credit was correctly set aside for lack of requisite demand/SCN and failure to satisfy Rule 57I conditions, and the respondent was correctly held entitled to interest on the sanctioned refund under Section 11BB from three months after the claim date.

Service of assessment order and pre-assessment notice - principles of natural justice - maintainability of writ petition in view of unexplained delay - inspection evidence to determine factual veracity - liability of person carrying on business / joint and several liability

Service of assessment order and pre-assessment notice - principles of natural justice - inspection evidence to determine factual veracity - Validity of the assessment order dated 10.09.2015 in respect of Assessment year 2014-15, including whether the appellant was duly served and whether principles of natural justice were violated. - HELD THAT: - The High Court found on the material placed before the Writ Court - including the statement recorded at the time of inspection showing the presence of both the appellant and his father in the premises (compilation) and the acknowledgement of receipt of the pre-assessment notice - that the pre-assessment notice had been received by the dealer. The impugned assessment order was sent to two addresses and postal endorsements showed refusal/return at those addresses; the Writ Court treated this as completing service. The Writ Court further directed an inspection to verify the appellant's contention that business had ceased; the Assessing Officer's report with photographs established that the entity was functioning at the stated premises, thereby negativing the appellant's claim that he had no connection with the business. On these findings the Court held that there was no breach of natural justice or defect in service that would invalidate the assessment, and the appellant's factual assertions were found to be false. [Paras 11, 12, 13, 15, 17]

The assessment order for Assessment year 2014-15 was validly served and passed; no violation of principles of natural justice was made out and the factual defence that the appellant was not carrying on the business was rejected.

Maintainability of writ petition in view of unexplained delay - inspection evidence to determine factual veracity - Whether the writ petition was maintainable despite delay between 2015 and filing in 2020. - HELD THAT: - The Writ Court recorded that the delay in approaching the Court was unexplained and that the explanation given by the appellant was factually incorrect. Having directed and received an inspection report that showed the business was functioning, the Writ Court concluded there was no jurisdiction to entertain the belated writ petition. The High Court, upon review of the same material, agreed that the delay remained unexplained and that the appellant had not established any justifiable ground to interfere with the dismissal of the writ petition. [Paras 13, 14, 17]

The writ petition was not maintainable because the delay in seeking relief was unexplained and the appellant failed to establish merit to justify condonation; dismissal was upheld.

Liability of person carrying on business / joint and several liability - Whether the appellant could escape liability by asserting that his father alone was running the business and that he was not the proprietor. - HELD THAT: - The Department's case, supported by inspection statements and the dealer's acknowledgement, was that the appellant was involved in the business and present at the time of inspection. The Writ Court found the appellant's contention that the business had been closed to be factually incorrect. On that basis the Court concluded that the appellant, being involved in carrying on the business, could not escape liability and was liable to clear the tax arrears and penalties; the assessment's computation and credits were noted by the Court. [Paras 8, 11, 15]

The appellant, found to be carrying on the business, is liable for the tax and penalties; he cannot avoid liability by alleging non-involvement.

Final Conclusion: The High Court dismissed the writ appeal, upholding the Writ Court's finding that the assessment for Assessment year 2014-15 was validly served and that the appellant's factual defence and delay were unsustainable; no interference was warranted with the dismissal of the writ petition.