TaxTMI Updates e-Newsletter
Feb 05,2024

Penalty under CGST/IGST for movement without valid E-way bill - E-way bill validity and obligation to generate fresh E-way bill - inter-unit transfer of capital goods - detention and levy under Section 129 - exercise of powers under Article 142 of the Constitution

Detention and levy under Section 129 - penalty under CGST/IGST for movement without valid E-way bill - Validity of the tax demand and penalty imposed for movement of consignment without a live/valid E-way bill - HELD THAT: - The Court accepted that on the date the consignment was intercepted there was no live/valid E-way bill and that, strictly speaking, the appellant was obliged to generate a fresh E-way bill if transportation had not occurred within the original validity period. However, having noted that the appellant was the owner of the capital goods, that the movement was for use in its own contracts (an inter unit transfer) and there was an earlier E way bill generated, the Court exercised discretion to interfere only with the quantum of penalty. The tax component imposed was held to be justified and therefore upheld, while the penalty was considered excessive in the facts of the case and reduced. The Court cautioned the appellant to be vigilant in future dealings. [Paras 17, 18, 19]

The tax demand is upheld; the penalty is reduced to 50% of the penalty imposed by the authority.

E-way bill validity and obligation to generate fresh E-way bill - inter-unit transfer of capital goods - exercise of powers under Article 142 of the Constitution - Relief and directions as to payment, release of goods, and use of Article 142 to mould relief - HELD THAT: - Applying equitable discretion in view of the factual matrix - ownership of the consignment by the appellant, its use as capital goods for contractual obligations, and existence of an earlier E way bill that had expired - the Court directed a compromise of relief by reducing the penalty and fixing a timeline for deposit of the adjusted amounts. The Court invoked Article 142 to pass a final order which, while not to be treated as precedent, directed deposit of the tax and the reduced penalty by a specified date and ordered release of the vehicle and consignment upon compliance. [Paras 19]

Deposit the upheld tax and reduced penalty by the specified date; upon compliance, the vehicle and consignment shall be released; order passed under Article 142 and shall not be treated as precedent.

Final Conclusion: The appeal is allowed in part: the tax demand is upheld, the penalty is reduced to 50% of the amount imposed, the combined adjusted amount is directed to be deposited by the appellant by the date specified in the order, and upon such deposit the vehicle and consignment shall be released; the order is passed under Article 142 and is not to be treated as a precedent.

Opportunity of personal hearing as a mandatory requirement - disjunctive interpretation of 'or' in statutory mandates - principles of natural justice in quasi judicial/administrative tax proceedings - quashing of orders for violation of audi alteram partem

Opportunity of personal hearing as a mandatory requirement - disjunctive interpretation of 'or' in statutory mandates - principles of natural justice in quasi judicial/administrative tax proceedings - Whether the authorities erred in passing adverse orders without affording the petitioner a personal hearing as mandated by Section 75(4) of the UPGST Act, 2017. - HELD THAT: - The Court held that Section 75(4) mandates that an opportunity of personal hearing must be granted either upon a written request by the person chargeable or whenever an adverse decision is contemplated; the use of the word 'or' is disjunctive and cannot be read as 'and'. Relying on the plain meaning principle and authorities cited by the Court, the obligation to afford a personal hearing is an aspect of procedural fairness and natural justice applicable to tax proceedings where adverse civil consequences are contemplated. The impugned administrative order dated August 10, 2021 was held to have been passed in patent breach of this statutory and constitutional requirement because no personal hearing was afforded; the appellate authority likewise failed to remedy this defect. [Paras 4, 14]

Findings and orders set aside insofar as they were passed without affording the petitioner the mandatory opportunity of personal hearing; the omission offended principles of natural justice and Section 75(4).

Quashing of orders for violation of audi alteram partem - remand for fresh consideration after affording personal hearing - What consequential relief should follow where an order imposing tax and penalty is passed without affording the mandated personal hearing. - HELD THAT: - The Court exercised supervisory jurisdiction to quash the impugned order of the assessing authority and the appellate order which upheld it, on the sole ground of failure to afford the personal hearing mandated by Section 75(4). Rather than adjudicating the merits, the matter was remitted for fresh consideration: the appellate authority is directed to grant a personal hearing to the petitioner and thereafter pass a reasoned order in accordance with law within two months. The remand preserves the parties' right to be heard and leaves merits to be decided afresh after compliance with the statutory requirement. [Paras 15]

Impugned orders quashed; matter remitted for fresh consideration after affording personal hearing and for passing a reasoned order within two months.

Final Conclusion: Writ petition allowed: orders dated August 10, 2021 and September 26, 2022 quashed for failure to afford the mandatory personal hearing under Section 75(4) of the UPGST Act, 2017; matter remitted for fresh adjudication after hearing, to be completed within two months.

Detention of goods on ground of undervaluation - Penalty for transit detention

Detention of goods on ground of undervaluation - Penalty for transit detention - Statutory procedure for undervaluation - Detention of goods and imposition of penalty could not be sustained where the sole basis was alleged undervaluation, despite the goods being accompanied by invoice, e-way bill and other relevant documents and there being no mismatch in description. - HELD THAT: - The Court held that undervaluation by itself is not a valid ground for detaining goods in transit when the accompanying documents are in order and the description of goods matches the documents. Relying on the Commissioner's circular, the Court found that in such a situation the detaining officer is not competent to resort to detention and penalty proceedings. The proper course in a case of alleged undervaluation is to initiate proceedings in accordance with Sections 73 or 74 of the Act. Since the statute provides a specific mechanism for dealing with undervaluation, penalty under Section 129 could not be imposed merely on speculation that the goods were undervalued. [Paras 6, 7, 8]

The penalty order and the appellate order were quashed, with consequential relief including refund of any amount deposited.

Final Conclusion: The writ petition was allowed. The Court held that alleged undervaluation, by itself, did not authorise detention of goods in transit or penalty proceedings under Section 129 when the accompanying documents were otherwise in order, and the authorities were required to proceed, if at all, under the statutory mechanism for undervaluation.

Special procedure for filing appeals under Notification No.53/2023 Central Tax - admission of delayed appeals covered by a statutory notification - condition of payment as prerequisite for filing appeal under the notification - cut off date for applicability of a declaratory notification

Special procedure for filing appeals under Notification No.53/2023 Central Tax - cut off date for applicability of a declaratory notification - admission of delayed appeals - Whether the appeal filed on 26.01.2024 should be admitted under Notification No.53/2023 Central Tax despite the assessing officer's order being passed after 31.03.2023. - HELD THAT: - The High Court accepted the reasoning in the decision of the Patna High Court which construed Notification No.53/2023 Central Tax as enabling a special procedure for filing certain delayed appeals. Although the notification on its face refers to orders passed on or before 31.03.2023, the Court found no compelling rationale to confine the benefit strictly to that cut off when the notification itself was issued on 02.11.2023. Applying that approach, and noting that the petitioner's appeal was filed before 31.01.2024 as required by the notification, the Court directed that the appeal admitted under the terms of Notification No.53/2023 Central Tax ought to be entertained rather than rejected for non admission on the ground of the earlier cut off date.

The appeal filed on 26.01.2024 is to be admitted in terms of Notification No.53/2023 Central Tax and not rejected merely on the ground that the order of the proper officer was passed after 31.03.2023.

Condition of payment as prerequisite for filing appeal under the notification - admission and fresh consideration by first Appellate Authority - Whether the matter should be remitted to the First Appellate Authority for consideration in accordance with law after admitting the appeal under the notification. - HELD THAT: - Having directed admission under the notification, the Court did not decide merits of the appeal but required the First Appellate Authority to consider the appeal in accordance with law and the conditions laid down in the notification (including the payment requirements) insofar as they are applicable. The High Court aligned with the Patna Division Bench's view that once admitted under the notification, the appeal must be placed for fresh consideration by the statutory appellate forum rather than being finally disposed of by the writ court.

The matter is remitted to the First Appellate Authority to consider the admitted appeal in accordance with law and the conditions of Notification No.53/2023 Central Tax.

Final Conclusion: Writ petition allowed to the extent that the appeal filed on 26.01.2024 shall be admitted in terms of Notification No.53/2023 Central Tax (02.11.2023) and the matter is directed to be considered afresh by the First Appellate Authority in accordance with law; petition disposed of accordingly.

E-way bill requirement unenforceable - seizure of goods for transport without e-way bill - penalty under U.P. GST Act for absence of e-way bill - refund of amounts deposited pursuant to quashed order

E-way bill requirement unenforceable - seizure of goods for transport without e-way bill - penalty under U.P. GST Act for absence of e-way bill - Validity of seizure and penalty imposed for transportation of goods without e-way bill during 01.02.2018 to 31.03.2018 - HELD THAT: - The Court accepted the petitioner's reliance on the Division Bench decision in M/s Godrej and Boyce Manufacturing Co. Ltd and held that, for the period 01.02.2018 to 31.03.2018, the statutory requirement of an e-way bill under the U.P. GST Act and the Rules framed thereunder was unenforceable. Consequent to that conclusion, the seizure of goods and the penalty imposed by the authorities for transportation without an e-way bill could not be sustained. The impugned orders of the Assistant Commissioner (Mobile Squad Unit-II) dated March 20, 2018 and the Additional Commissioner (Appeal) dated April 26, 2019 were quashed on that ground. [Paras 5, 6]

Seizure and penalty set aside and impugned orders quashed; deposit to be refunded in accordance with law.

Final Conclusion: Writ petition allowed; impugned orders dated March 20, 2018 and April 26, 2019 quashed as the e-way bill requirement was unenforceable for 01.02.2018 to 31.03.2018; any amount deposited to be refunded in accordance with law within one month.

GST registration threshold - validity of tender disqualification for non-submission of GST certificate - construction of tender condition "if necessary" for annexure of documents - remedy of setting aside selection and directing fresh consideration

GST registration threshold - validity of tender disqualification for non-submission of GST certificate - construction of tender condition "if necessary" for annexure of documents - Petitioner's disqualification from the tender on the ground of non-submission of GST clearance certificate was unsustainable. - HELD THAT: - The notice inviting tender provided at Clause 6(IX) that a GST clearance certificate was to be annexed to the bid documents "if necessary". Section 22(1) of the Central Goods and Services Tax Act, 2017 makes registration obligatory only where a supplier's aggregate turnover in a financial year exceeds twenty lakh rupees. There is no material before the Court showing that the petitioner's annual aggregate turnover exceeds that threshold; the petitioner's bid amount was Rs. 1,01,000/-, indicating that GST registration was not mandatorily required. In those circumstances the respondent authority's reliance on non-submission of a GST clearance certificate to disqualify the petitioner was not justified. [Paras 5, 6, 7]

Petitioner's disqualification for non-submission of GST clearance certificate is not sustainable and his bid ought to be considered with other eligible candidates.

Remedy of setting aside selection and directing fresh consideration - Selection of the respondent No. 4 as successful tenderer dated 02.08.2023 is set aside and the matter is remitted for fresh selection. - HELD THAT: - Having found the disqualification unjustified, the Court set aside the impugned selection in favour of respondent No. 4 and directed the respondent authorities to reconsider the petitioner's bid along with other eligible bids. The Court mandated that the respondent authority undertake a fresh selection and issue necessary settlement orders for the remaining period of the term, to be completed within one week from receipt of a certified copy of the order. [Paras 8]

Selection of respondent No. 4 set aside; respondent authorities to make fresh selection and issue settlement orders within one week.

Final Conclusion: The petition is allowed: the disqualification of the petitioner's bid for non-submission of a GST clearance certificate is held unsustainable; the selection in favour of respondent No. 4 is set aside and the authorities are directed to reconsider and make a fresh selection within one week.

Penalty under Section 129(3) of the UPGST Act - non-filling of Part B of the e-way bill - absence of intention to evade tax - technical defect in e-way bill - quashing of departmental and appellate orders

Penalty under Section 129(3) of the UPGST Act - non-filling of Part B of the e-way bill - absence of intention to evade tax - technical defect in e-way bill - Whether the penalty imposed under Section 129(3) of the UPGST Act for non-filling of Part B of the e-way bill is sustainable where there is no intention to evade tax and the defect is technical - HELD THAT: - The Court found on the material placed before it that the department failed to demonstrate any intention on the part of the petitioner to evade tax, and that the omission was technical in nature. The petitioner relied on precedents including M/S Roli Enterprises and earlier decisions of this Court considering non-filling of Part B of the e-way bill, which hold that mere non-filling of Part B, without proof of intent to evade tax, does not warrant imposition of penalty under Section 129(3). Applying that principle, and noting the absence of any defect in the consignment or documentary discrepancy, the Court concluded that the statutory penal power could not be exercised in the present facts. The appellate order affirming the penalty was therefore also unsustainable. [Paras 5, 6, 7, 8]

Penalty under Section 129(3) set aside and consequential departmental and appellate orders quashed for lack of intention to evade tax where the omission to fill Part B was a technical defect

Final Conclusion: The writ petition is allowed; the orders dated April 22, 2021 and November 20, 2021 are quashed and set aside, and the respondents are directed to return the security to the petitioner within six weeks.

Typographical error in show cause notice - transitional input tax credit entitlement - assessee's burden to establish input tax credit - right to disclosure and cross-examination in assessment proceedings - principles of natural justice in assessment proceedings

Typographical error in show cause notice - principles of natural justice in assessment proceedings - Discrepancy between CGST amount in the show cause notice and the assessment order does not by itself warrant interference. - HELD THAT: - The show cause notice's table indicated CGST liability as zero while the assessment order records a specific CGST liability; on examination the notice otherwise discloses CGST liability in its recital. The Court recorded that there appears to be some basis to conclude the table error is typographical but that it is neither necessary nor desirable in these proceedings to record conclusive findings. This discrepancy, viewed in the context of the proceedings and the opportunity afforded to the petitioner to be heard, does not justify exercise of the Court's discretionary jurisdiction to interfere with the assessment orders. [Paras 6]

Typographical discrepancy noted but insufficient to invalidate the assessment or to warrant interference.

Transitional input tax credit entitlement - assessee's burden to establish input tax credit - Claim for transitional ITC may be tested by the assessing officer and demand for further documents does not constitute grounds for interference by writ jurisdiction. - HELD THAT: - The impugned orders record that the taxpayer was asked to produce documents to verify entitlement to transitional ITC. The Court reiterated that entitlement to transitional ITC must be established by the assessee and that ITC claimed provisionally may require verification at the end of the assessment period. Where the assessing officer considers the documents insufficient and calls for further proof, such steps fall within the assessment process and do not call for interference under Article 226. [Paras 7]

Assessment authority entitled to require further documents; no interference with the assessment on this ground.

Right to disclosure and cross-examination in assessment proceedings - principles of natural justice in assessment proceedings - Refusal to furnish certain third party reports and to permit cross examination did not amount to breach of natural justice requiring interference in assessment proceedings. - HELD THAT: - The assessment was triggered by an inspection report and statements; the respondent formed an opinion of unlawful availing of ITC. The Court observed that the cited authority (Thilagarathinam Match Works) concerned inquiry proceedings following a charge memo and is not comparable to assessment proceedings. The Court emphasised that natural justice principles are flexible, that the primary obligation to establish eligibility for ITC lies on the assessee, and that, on the facts, the cumulative circumstances did not justify exercise of discretionary jurisdiction to quash the assessments for failure to permit cross-examination or to provide all third party documents. [Paras 8]

No violation of natural justice found on the facts; no interference on account of non provision of certain documents or refusal to allow cross examination.

Final Conclusion: Writ petitions dismissed; petitioner left free to pursue statutory appeals which the appellate authority may decide uninfluenced by observations in this order; no order as to costs.

Show cause notice - audi alteram partem - authority cannot travel beyond the show cause notice - natural justice - quashing of orders for violation of procedural fairness

Show cause notice - authority cannot travel beyond the show cause notice - audi alteram partem - natural justice - Impugned penalty/order was based on a ground not pleaded in the show cause notice and whether such action is impermissible. - HELD THAT: - The Court held that the appellate and adjudicating authorities imposed penalty on a ground-expiry of the e-Way Bill-which was not the ground of detention or specified in the show cause notice. Relying on established precedents, including Commissioner of Customs, Mumbai -v- Toyo Engineering Ltd. , Commissioner of Central Excise, Bhubaneshwar -v- Champdany Industries Ltd. , and Commissioner of Central Excise, Chandigarh -v- Shital International , the Court reiterated the settled principle that an authority cannot build a new case or advance fresh grounds in the order which were not the foundation of the show cause notice. The requirement to confine action to the matters notified in the show cause notice is integral to the principle of audi alteram partem and to avoid violation of natural justice. As the petitioner had no opportunity to meet the new ground, the orders suffered from procedural illegality and had to be set aside. [Paras 3, 12, 13]

Impugned orders quashed for being beyond the scope of the show cause notice and violating principles of natural justice.

Quashing of orders for violation of procedural fairness - Whether the amount deposited by the petitioner should be refunded consequent to quashing of the impugned orders. - HELD THAT: - Having quashed the impugned orders for being founded on grounds not disclosed in the show cause notice, the Court directed restitution by ordering refund of the amount deposited by the petitioner within a specified period, with consequential reliefs to follow. [Paras 14]

Amount deposited to be refunded within four weeks; consequential reliefs to follow.

Final Conclusion: Writ petition allowed; impugned orders dated July 24, 2018 and August 20, 2019 quashed for exceeding the scope of the show cause notice and violating principles of natural justice; amounts deposited to be refunded within four weeks and consequential reliefs ordered.

Exemption from Goods and Services Tax - show cause notice - action under Section 73 of the CGST Act - pre-determined adjudication - judicial interference with ongoing adjudication - opportunity of personal hearing - assessment of exemption claims on evidence

Judicial interference with ongoing adjudication - pre-determined adjudication - show cause notice - Maintainability of writ challenging the show cause notice and claim that adjudication is pre-determined. - HELD THAT: - The Court examined the petitioner's contention that the assessing authority had taken a pre-determined view in issuing the show cause notice and that, therefore, the writ petition was maintainable under the principle in Siemens Ltd. The Court found that the issuance of a show cause notice followed investigative steps and that material adverse to the petitioner was supplied enabling a substantive reply and hearing. The petitioner's plea that adjudication would be futile did not justify judicial intervention at this stage. The High Court declined to interrupt the ongoing adjudicatory process and held that the assessing authority must adjudicate the matter after considering the petitioner's submissions and evidence. [Paras 7, 10, 11]

Writ petition challenging the show cause notice is not entertained; the Court will not pre-empt the adjudication and will not stay or quash the notice at this stage.

Exemption from Goods and Services Tax - assessment of exemption claims on evidence - opportunity of personal hearing - action under Section 73 of the CGST Act - Whether the petitioner is entitled to exemption from GST and the course to be adopted for deciding that question. - HELD THAT: - The Court held that the central question of whether the supplies received or made by the petitioner are exempt from GST is one for the assessing authority to decide on the basis of the evidence and notifications relied upon by the petitioner. The petitioner had filed a detailed reply and availed one hearing; the Court directed the assessing authority to examine all arguments and documents, including the exemption notifications, and to issue a fresh notice for personal hearing. The adjudicatory authority must reach a conclusion on entitlement to exemption; if it concludes the petitioner is exempt, the show cause notice must be dropped. [Paras 10, 11]

Issue of entitlement to GST exemption remitted to the assessing authority for fresh consideration after affording personal hearing and examining all evidence and notifications.

Final Conclusion: The writ petition is disposed of without interfering with the ongoing adjudication; the assessing authority is directed to issue a fresh personal hearing notice, consider the petitioner's submissions and documents on exemption from GST, and decide the show cause notice on merits, with the matter remitted for fresh consideration.

Disallowance of input tax credit under Section 16(2)(c) of the CGST Act - Burden of proof under Section 155 of the CGST Act - Credibility of invoices and supplier GSTIN - Interest and penalty for excess claim of input tax credit - Judicial interference in assessment orders - Right of appeal under Section 107 of the CGST/SGST Act

Disallowance of input tax credit under Section 16(2)(c) of the CGST Act - Burden of proof under Section 155 of the CGST Act - Credibility of invoices and supplier GSTIN - Interest and penalty for excess claim of input tax credit - Validity of the assessment order denying input tax credit and levying interest and penalty for excess ITC claim. - HELD THAT: - On scrutiny of the petitioner's returns, discrepancies were noted between GSTR-3B and GSTR-2A and the petitioner was called upon to explain. The petitioner ultimately failed to produce credible documentary evidence in respect of certain inward supplies: the invoices did not contain the suppliers' GSTINs and lacked supplier seals. The assessing authority found that the petitioner did not discharge the statutory burden under Section 155 of the CGST Act to prove payment/receipt and authenticity of the supplier bills. In view of Section 16(2)(c), where the conditions for entitlement to input tax credit are not satisfied, the credit claimed can be denied. The High Court found no error of law in the assessment authority's conclusion denying input tax credit to the extent claimed, and in levying interest and penalty consequential to the excess claim, and therefore declined to interfere with the assessment order. The Court, however, recorded that the petitioner may pursue statutory appellate remedy under Section 107 and directed that any such appeal be decided on merits without being influenced by extraneous observations in the writ proceedings. [Paras 3, 4]

Writ petition dismissed; assessment order denying the input tax credit and imposing interest and penalty is upheld, subject to the petitioner's right to appeal under Section 107.

Final Conclusion: The High Court dismissed the writ petition and declined to interfere with the assessment order which denied the claimed input tax credit and imposed interest and penalty, while permitting the petitioner to file an appeal under Section 107 to be adjudicated on merits by the appellate authority.

Notice under Section 61 of the Karnataka Goods and Services Tax Act, 2017 - failure to consider statutory reply/representation - direction to decide representation within a specified time - liberty to file additional reply and documents - judicial intervention for non-consideration of submissions

Failure to consider statutory reply/representation - direction to decide representation within a specified time - liberty to file additional reply and documents - Respondent to consider the petitioner's reply dated 15.12.2022 to the notice dated 08.12.2022 and pass appropriate orders within a stipulated time; petitioner granted liberty to file additional material. - HELD THAT: - The Court recorded that the petitioner had been served with a notice under Section 61 of the KGST Act relating to returns for financial year 2017-18 and that the reply dated 15.12.2022 (Annexure-C) furnished by the petitioner had not been considered and no orders had been passed. In view of the non-consideration, the Court directed the respondent to address the petitioner's grievance by considering the said reply and passing appropriate orders thereon within one month from receipt of the order. The Court also permitted the petitioner to file additional replies or documents, which the respondent is required to consider while passing orders. These directions effectuate judicial intervention solely to secure adjudication of the pending representation and do not decide the merits of the underlying tax dispute. [Paras 3, 4]

The respondent is directed to consider the petitioner's reply dated 15.12.2022 and pass appropriate orders within one month; petitioner given liberty to submit additional material.

Final Conclusion: Writ petition disposed by directing the tax authority to consider and decide the petitioner's reply dated 15.12.2022 to the Section 61 notice (relating to FY 2017-18) within one month, with liberty to the petitioner to file additional documents; otherwise the petition is disposed.

Time-bar for refund claims under Section 54(1) of the CGST Act - writ jurisdiction to direct reconsideration of a time-barred refund application - maintainability of mandamus to compel consideration of belated refund claim

Time-bar for refund claims under Section 54(1) of the CGST Act - writ jurisdiction to direct reconsideration of a time-barred refund application - Petition seeking a writ of mandamus to direct the assessing authority to consider a belated refund application (Ext.P4) was not entertainable where an earlier refund claim had been rejected as time barred under Section 54(1). - HELD THAT: - The petitioner had earlier filed an application for refund which was rejected on 17.12.2020 as not filed within the two year period prescribed by Section 54(1) of the CGST Act. A subsequent application dated 9.3.2022 was filed seeking reconsideration. The High Court found no basis to exercise writ jurisdiction to direct the authority to reconsider an order where the claim for refund was plainly out of time, and the petitioner sought a mandamus to compel consideration of a belated application. In these circumstances the writ petition lacked merit and there was no ground for judicial intervention to override the statutory time bar applicable to refund claims.

Writ petition dismissed; pending interlocutory application, if any, dismissed.

Final Conclusion: The High Court dismissed the writ petition seeking a direction to the assessing authority to consider a belated refund application, finding no grounds to interfere with the rejection of the earlier claim as time barred under Section 54(1) of the CGST Act.

Maintainability of writ petition in absence of statutory appellate tribunal - conditional deposit for entertainment of second appeal under Section 112(8)(b) of the CGST/SGST Act, 2017 - abeyance of recovery/further demand pending compliance with deposit direction

Maintainability of writ petition in absence of statutory appellate tribunal - Writ petition entertained because no GST Appellate Tribunal has been constituted and there is no alternate forum to challenge the appellate order. - HELD THAT: - The petitioner approached the High Court challenging assessment and appellate orders on the ground that the State has not constituted the GST Appellate Tribunal, leaving no statutory forum to file a second appeal. The Court accepted that factual position and thus found the writ petition maintainable as the petitioner lacked the statutory appellate remedy. [Paras 1]

Writ petition is maintainable in the absence of the GST Appellate Tribunal and is accordingly entertained.

Conditional deposit for entertainment of second appeal under Section 112(8)(b) of the CGST/SGST Act, 2017 - abeyance of recovery/further demand pending compliance with deposit direction - Direction issued for deposit of 20% of the remaining tax in dispute as mandated by Section 112(8)(b), and further demand to be kept in abeyance until compliance and disposal of the writ petition. - HELD THAT: - The Court reproduced the requirement of Section 112(8)(b) which mandates a further deposit equal to twenty per cent of the remaining amount of tax in dispute as a condition for entertaining a second appeal. The petitioner offered to deposit 20% within two weeks. The Court directed that upon such deposit being made, further demand of the tax assessed shall be kept in abeyance until the writ petition is disposed. The Court also clarified that failure to make the deposit within the stipulated time would leave the revenue free to enforce recovery. [Paras 2]

Petitioner directed to deposit 20% of the remaining tax in dispute within two weeks; on compliance, further demand shall be kept in abeyance until disposal of the writ petition; failure to deposit permits enforcement of demand.

Final Conclusion: The High Court entertained the writ petition because no GST Appellate Tribunal exists; it directed the petitioner to deposit 20% of the remaining tax in dispute within two weeks as contemplated by Section 112(8)(b), and ordered that further recovery shall be held in abeyance pending disposal of the petition, with liberty to the authorities to enforce the demand if the deposit is not made.

Unsigned order is no order - signature requirement for orders (manual or digital) - inapplicability of Section 160 to cure absence of signature - inapplicability of Section 169 to dispense with signature - quashing of unsigned orders and remand for fresh decision

Unsigned order is no order - inapplicability of Section 160 to cure absence of signature - inapplicability of Section 169 to dispense with signature - quashing of unsigned orders - Validity of the impugned FORM GST 07 order dated 04.08.2023 in view of absence of signature - HELD THAT: - Following the coordinate-bench precedents reproduced in the judgment, the Court held that an order uploaded without a manual or digital signature is invalid. The Court accepted the legal proposition that omission of a signature is not covered by the expression "mistake, defect or omission" contemplated by Section 160 and therefore Section 160 cannot validate an unsigned order. Similarly, Section 169, which permits making decisions or notices available on the common portal, does not permit dispensing with the requirement of a signature. Applying these principles to the present case, the impugned FORM GST 07, having not been signed either manually or digitally, is legally ineffective and was quashed on that ground without adjudication on the merits. [Paras 7, 8, 10, 12]

Impugned FORM GST 07 dated 04.08.2023 is quashed on the ground that it was not signed; Sections 160 and 169 do not cure the absence of signature.

Signature requirement for orders (manual or digital) - quashing of unsigned orders and remand for fresh decision - Consequential directions following quashing: requirement to pass fresh signed orders and timeline - HELD THAT: - As a consequence of quashing the unsigned order, the Court directed the authority to pass fresh orders in accordance with law. The Court recalled prior directions given to the Chief Commissioner to issue necessary instructions that orders must be signed manually or digitally before being uploaded. The immediate consequence in the present matter is that fresh orders are to be passed expeditiously, the Court specifying a preferably four week period from receipt of this order for compliance. The Court expressly avoided entering upon the merits of the impugned order or deciding the separate contention that the order was based on a ground not pleaded in the show cause notice. [Paras 8, 11, 12]

Authority directed to pass fresh, signed orders in accordance with law preferably within four weeks; no decision on merits or on the contention of new grounds in the impugned order.

Final Conclusion: Writ petition allowed in part: the unsigned FORM GST 07 is quashed and the authorities are directed to pass fresh signed orders in accordance with law, preferably within four weeks; the Court has not adjudicated the merits or the contention regarding divergence from the show cause notice.

Reopening of assessment - Reasons recorded for initiating proceedings u/s 148 - unexplained subscription to assessee's capital of assessee - as decided by HC [2017 (9) TMI 1589 - DELHI HIGH COURT] reasons to believe contained the names of the very same five companies which were initially disclosed by the Petitioner during the assessment proceedings. The number of shares subscribed to by the said companies is the same and the amount received has been disclosed by the Assessee. There is no new material which has been found or mentioned in the reasons to believe which were not contained in the information provided by the Assessee prior to the conclusion of assessment under Section 143 (3) - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

Doctrine of mutuality - taxability of interest income from funds invested with non-members - exemption for mutual associations - HELD THAT:- It is common ground that the issue arising for consideration is covered by the judgment of this court in Secunderabad Club [2023 (8) TMI 925 - SUPREME COURT]

Reopening of assessment under Section 147/148 - reason to believe - change of opinion not a ground for reopening - share premium as capital receipt not income for relevant assessment year - tangible material / live link requirement for formation of reason to believe - borrowed satisfaction by Assessing Officer vitiates reopening - non-applicability of post-facto amendments (Sections 2(24)(xvi), 56(2)(viib) and proviso to Section 68) to earlier assessment years

Change of opinion not a ground for reopening - reopening of assessment under Section 147/148 - reason to believe - Reopening of assessment was based on mere change of opinion because the Assessing Officer had raised queries on share premium during scrutiny and had received and considered the assessee's replies. - HELD THAT: - The Court found that during scrutiny assessment the AO had specifically called for details and documentary evidence regarding share premium and the assessee replied with valuation report, FIRC and statutory compliance documents which were on record when the assessment order under section 143(3) was passed. Relying on Aroni Commercials Ltd., the Court held that a query raised and replied to during assessment is a matter considered by the AO even if not expressly discussed in the assessment order. Consequently, reopening the assessment on the same issue amounts to a mere change of opinion by the AO and does not satisfy the jurisdictional requirement of a fresh reason to believe that income chargeable to tax has escaped assessment. [Paras 8, 9, 11]

Impugned notice quashed as being founded on mere change of opinion.

Share premium as capital receipt not income for relevant assessment year - non-applicability of post-facto amendments (Sections 2(24)(xvi), 56(2)(viib) and proviso to Section 68) to earlier assessment years - Receipt of share premium on issue of fresh shares did not constitute income chargeable to tax for AY 2009-10 and subsequent legislative amendments relied upon by Revenue were not applicable to that year. - HELD THAT: - The Court noted authority (including Vodafone India Services and SLS Energy) concluding that receipt of share capital including premium is a capital receipt and, as the amendments widening the definition of income and provisions addressing premium were effective only from assessment year 2013-14 (and the proviso to Section 68 operative later), there was no legal basis to treat the share premium as income for AY 2009-10. Since the statutory amendments were not retrospective to the year in question, the AO lacked a basis to form a reason to believe that income had escaped assessment on this ground. [Paras 10, 11, 12]

Reopening cannot be sustained on the premise that share premium constituted taxable income for AY 2009-10.

Borrowed satisfaction by Assessing Officer vitiates reopening - tangible material / live link requirement for formation of reason to believe - The AO acted on borrowed satisfaction and lacked tangible material or a live link justifying formation of his own reason to believe; such reliance on superior's communication renders reopening invalid. - HELD THAT: - The Court observed that the reasons recorded show the reopening was prompted by a communication from superior officers and a list of companies, rather than the AO's independent application of mind. Citing Shodiman Investments and the requirement that reasons must show material forming the basis of the belief with a rational connection, the Court concluded the reasons were conjectural and did not exhibit the requisite live link between material and formation of belief. Therefore the jurisdictional threshold under Section 147 was not met. [Paras 13, 14]

Reopening vitiated as based on borrowed satisfaction and lacking tangible material.

Final Conclusion: The writ is allowed: the notice under Section 148 read with Section 147 for AY 2009-10 and the order rejecting objections are quashed and set aside because reopening was based on mere change of opinion, relied on inapplicable amendments and was founded on borrowed satisfaction without tangible material.

Exemption under Section 11(1A) - holding of capital asset under trust wholly for charitable or religious purposes - transfer date and assessability of capital gains - effect of possession and sale deed execution on determination of assessment year

Exemption under Section 11(1A) - holding of capital asset under trust wholly for charitable or religious purposes - transfer date and assessability of capital gains - Assessee entitled to exemption under Section 11(1A) for the capital gain on sale of the trust property. - HELD THAT: - The Tribunal correctly held that the trust remained owner of the property and that the sale was completed by execution of the sale deed on 20 April 2007, with the Charity Commissioner having granted permission for the sale. The date of transfer for assessment purposes was taken as AY 2008-09 and the Assessing Officer accepted that the transfer occurred in that year. Because legal possession and transfer were effected in AY 2008-09, the capital asset was to be regarded as held by the trust wholly for charitable purposes until the date of sale. Consequently, the conditions of Section 11(1A) were satisfied: the net sale consideration was invested in permitted long term bank deposits and thus the capital gains were deemed applied for charitable purposes and exempt to the extent provided by the provision. The Tribunal's conclusion that the exemption applied was therefore sustainable.

Tribunal's allowance of exemption under Section 11(1A) upheld; assessee entitled to claim the benefit for AY 2008-09.

Final Conclusion: The appeal is dismissed. No substantial question of law arises as the Tribunal rightly held that the sale was effected in AY 2008-09, the trust remained the holder of the capital asset until transfer, and the conditions of Section 11(1A) for exemption were satisfied.

Reopening of assessment under Section 148-invalid if based on change of opinion - reasons to believe that income has escaped assessment - large share premium-subject matter of assessment proceedings - query raised during assessment and reply furnished-deemed consideration by Assessing Officer

Reopening of assessment under Section 148-invalid if based on change of opinion - large share premium-subject matter of assessment proceedings - query raised during assessment and reply furnished-deemed consideration by Assessing Officer - Reopening of assessment for AY 2014-15 was not justified and the notice and consequent assessment and proceedings were liable to be quashed. - HELD THAT: - The court found that the subject of large share premium had been expressly raised and actively considered during the original assessment proceedings: notices under section 142(1) were issued, detailed replies and valuation certificates were filed by the petitioner, and the assessment order recorded selection for complete scrutiny to verify large share premium. Reliance was placed on the settled principle that when a query is raised during assessment and the assessee furnishes a reply, that query is part of the material considered by the Assessing Officer while completing assessment; a subsequent reopening premised on disagreement with the earlier conclusion amounts to a change of opinion which does not constitute valid "reason to believe" that income has escaped assessment. In view of this determinative finding the court did not proceed to examine other contentions such as determination of fair market value. [Paras 6, 8, 9, 10]

Reopening notice dated 22nd March 2019, the order disposing objections dated 6th January 2022, the impugned assessment order dated 31st March 2022, the notice of demand and the show cause notice for penalty were quashed.

Final Conclusion: The petition was allowed: the reassessment proceedings for AY 2014-15 were held to be a mere change of opinion and therefore invalid, and the impugned notices and assessment/order arising from the reopening were quashed.

Reopening of assessment beyond four years and proviso to Section 147 - failure to truly and fully disclose material facts - reopening under Section 148 - change of opinion versus failure to disclose - reliance on audit objections by Assessing Officer to form belief for reassessment - duty of assessee to disclose primary facts - Assessing Officer's independent evaluation of law and facts

Reopening of assessment beyond four years and proviso to Section 147 - failure to truly and fully disclose material facts - Validity of the notice under Section 148/Section 147 (proviso) for AY 2015-16 issued more than four years after the end of the assessment year - HELD THAT: - The notice dated 27 March 2021 was issued more than four years after the end of AY 2015-16 and thus attracted the proviso to Section 147 which permits reassessment beyond four years only where there has been a failure to truly and fully disclose material facts. The reasons recorded for reopening show that the AO's belief was founded on information and documents already on record (Form 3CD, audit qualifications, financial notes and computations) and not on any non-disclosure of primary facts by the assessee. The material relied upon was drawn from records filed by the assessee and the assessment proceedings had earlier elicited and considered the same particulars. In absence of any allegation or finding of failure to fully and truly disclose material facts, reopening beyond four years is impermissible and the notice must be quashed. [Paras 5, 7, 9, 12]

Impugned notice and consequent order quashed as reopening beyond four years was not justified by any failure to truly and fully disclose material facts.

Reliance on audit objections by Assessing Officer to form belief for reassessment - Assessing Officer's independent evaluation of law and facts - Whether the AO can validly form a belief to reopen assessment solely on the basis of audit objections - HELD THAT: - The Court reaffirmed that an AO must himself evaluate the legal effect of audit objections; he cannot simply adopt or be coloured by the audit party's opinion to form a belief that income has escaped assessment. Where the recorded reasons show that the reopening was founded on audit objections and the AO relied on those objections without independent application of law and facts beyond the material already before him, the reopening cannot be sustained. Consequently, reopening based on audit objections that merely restate matters on record and do not demonstrate nondisclosure is invalid. [Paras 8]

Reopening founded solely on audit objections without independent evaluation by the AO is not a valid basis for reassessment.

Reopening under Section 148 - change of opinion versus failure to disclose - duty of assessee to disclose primary facts - Whether issues now relied upon for reopening were considered during original assessment and whether the reopening amounted to an impermissible change of opinion - HELD THAT: - The record shows that the AO had issued detailed queries under Section 142(1) during assessment and the assessee furnished primary details and explanations which were considered in the assessment proceeding (with some disallowances made). Judicial authority and the Division Bench precedent were applied to hold that where queries were raised and the assessee replied, the AO is deemed to have considered those matters during original assessment; a subsequent reopening on the same points constitutes change of opinion. Since the assessee had disclosed the primary facts and responded to audit/assessment queries, the present reopening is merely a change of opinion and not a case of failure to disclose. [Paras 7, 10]

Reopening is vitiated as it is based on a change of opinion concerning matters that were raised and considered during original assessment.

Final Conclusion: The Writ is allowed: the notice under Section 148 and the order rejecting objections are quashed because reopening beyond four years was not supported by any failure to truly and fully disclose material facts, the AO impermissibly relied on audit objections without independent evaluation, and the matters relied upon had been raised and responded to in the original assessment, amounting to an impermissible change of opinion.

Bonafide satisfaction - assumption of jurisdiction to reopen assessments - reassessment proceedings under Section 148 - survey of a third party as source of information - disallowance under Section 40A(3) - purchases outside the books of account

Bonafide satisfaction - assumption of jurisdiction to reopen assessments - Valid assumption of jurisdiction to initiate reassessment proceedings under the amended law requires a bonafide satisfaction and not the traditional 'reason to believe'. - HELD THAT: - The Court observed that under the amended statutory regime the Assessing Authority is no longer required to record a 'reason to believe' and that a bonafide satisfaction as to escapement of income suffices for valid assumption of jurisdiction. This principle governed the review of the present notice and formed the determinative test for legitimacy of initiating reassessment proceedings in this case (paras 7 and 11). [Paras 7, 11]

Assumption of jurisdiction challenged in the petition is to be judged by the test of bonafide satisfaction, which the Court accepted as the applicable standard.

Survey of a third party as source of information - reassessment proceedings under Section 148 - purchases outside the books of account - Whether information obtained from a third-party survey about substantial cash purchases furnishes cogent material to constitute a bonafide satisfaction for issuing notice under Section 148. - HELD THAT: - The Court noted that a survey conducted against the third party M/s Bait-Al-Tamurat produced information that the petitioner had cash purchases valued at a specified amount. The petitioner's reply did not establish that those purchases were paid through banking channels or that such purchases did not occur. In absence of any challenge to the existence of the survey information and lacking material to satisfy the authority that payments were through banking channel, the Court found that the material disclosed by the survey was sufficient for the authority to reach a bonafide satisfaction to issue the reassessment notice. The Court clarified that quantification and detailed verification (such as establishing what part of purchases were paid through banking channel) remain matters for the reassessment process (paras 8-10). [Paras 8, 9, 10]

Information from the third-party survey constituted cogent material upon which a bonafide satisfaction to reopen assessment could be formed; initiation of reassessment was not vitiated on that ground.

Disallowance under Section 40A(3) - purchases outside the books of account - Whether the newly articulated ground (purchases outside books of account) raised in the order under Section 148A(d) precludes reassessment or required consideration prior to issuance of notice. - HELD THAT: - The Court observed that the rejection order under Section 148A(d) introduced an additional ground that was not the basis of the initial show cause notice. However, the Court did not decide the merits of that contention. Instead, it held that the petitioner's objections, including contentions about payments through banking channels and accounting records, must be examined on merits during the reassessment proceedings. The Court therefore left those pleas to be adjudicated by the revenue authorities afresh with opportunity of hearing, without being prejudiced by observations in the order (paras 5, 6, 10, 11). [Paras 5, 6, 10, 11]

The merits of the new ground and the petitioner's factual contentions are not decided; they are remitted to be considered on merits in the reassessment proceedings with opportunity of hearing.

Final Conclusion: Writ petition challenging initiation of reassessment for Assessment Year 2016-17 dismissed: the Court held that under the amended law a bonafide satisfaction suffices to assume jurisdiction, the survey information from a third party furnished cogent material for such satisfaction, and factual objections (including contention as to payments through banking channels and newly raised grounds) are left open for fresh consideration in reassessment proceedings.

Direct Tax Vivad Se Vishwas Act, 2020 - pendency on the specified date - specified date (31st day of January, 2020) - appellant (definition under the DTVSV Act) - service of tribunal order and knowledge of disposal - strict compliance with scheme conditions

Pendency on the specified date - service of tribunal order and knowledge of disposal - Direct Tax Vivad Se Vishwas Act, 2020 - strict compliance with scheme conditions - Whether the petitioner was entitled to have its Form 1 and 2 under the DTVSV Act accepted on the basis that its appeals were pending as on the specified date - HELD THAT: - The Court examined the statutory definition of "appellant" under the DTVSV Act and the requirement that an appeal or petition be pending on the specified date (31st January 2020) to qualify for the scheme. The petitioner had filed Forms on 22nd December 2020 claiming that the Tribunal's orders dated 7th May 2019 and 4th June 2019 were not served and that the appeals were therefore pending on the specified date. The Court found that the petitioner was aware of the Tribunal's disposal and that the Tribunal's records, including a registry letter and the acknowledgement of dispatch, indicated that the order dated 4th June 2019 was issued to the assessee on 19th August 2019. Even if physical service were disputed, the petitioner could not treat the appeal as pending on the specified date merely because a certified copy was obtained later. Allowing the petitioner's contention would frustrate the statutory cut-off and render the scheme's temporal requirement nugatory. The Court further relied on the principle that benefits under a statutory scheme must be availed in strict conformity with its terms, as applied by the Supreme Court in the cited precedent regarding timely compliance with scheme conditions. [Paras 9, 10, 11, 12, 14]

The petitioner's application under the DTVSV Act was rightly rejected because no appeal was pending on the specified date and strict compliance with the scheme's cut-off could not be excused.

Final Conclusion: The petition is dismissed; the rejection of the petitioner's application under the DTVSV Act is upheld and notice is discharged.

Breach of natural justice - non-supply of material/documentary evidence - procedure under Section 148A of the Income Tax Act, 1961 - reopening of assessment based on borrowed satisfaction - remand for fresh decision after supplying documents

Procedure under Section 148A of the Income Tax Act, 1961 - breach of natural justice - non-supply of material/documentary evidence - reopening of assessment based on borrowed satisfaction - Validity of the order dated 30.03.2023 under Section 148A(d) and notice dated 31.03.2023 under Section 148 in view of alleged non-supply of relevant documents and compliance with principles of natural justice. - HELD THAT: - The Court examined the petitioner's objection to the Section 148A(b) notice and the materials supplied by the Assessing Officer. The petitioner had specifically objected that the notice was issued on the basis of information from the investigation wing without independent application of mind and that certain documents relied upon (including the cheque book and statement of the third party) were not supplied, with a request for opportunity to cross-examine. The record showed correspondence indicating that documents were purportedly supplied via ITBA on 17/18 February 2023 and by post, but the department later acknowledged that only part of the attachments were transmitted electronically and some documents were sent by post. Having regard to these facts, the Court found that the enquiry suffered from flaws and that the principle of natural justice and the procedural requirements of Section 148A were not followed in full rigor. For these reasons the order under Section 148A(d) and the consequent notice under Section 148 could not stand. [Paras 5, 6, 7]

The order dated 30.03.2023 under Section 148A(d) and the notice dated 31.03.2023 under Section 148 are set aside; the matter is remitted to the Assessing Officer to pass a fresh order after supplying all relevant documents including the enquiry report dated 08.03.2021 to the petitioner.

Remand for fresh decision after supplying documents - Ancillary administrative directions following setting aside of the order and notice. - HELD THAT: - On setting aside the order and notice, the Court directed that the Assessing Officer shall pass a fresh order only after providing the petitioner with the entire relevant documentary material (expressly including the enquiry report dated 08.03.2021). The Court also directed the petitioner to inform the faceless unit regarding the order and recorded the departmental letter dated 19.10.2023 on the record. [Paras 7, 9, 10]

Matter remanded to the Assessing Officer for fresh decision after full supply of documents; petitioner directed to inform the faceless unit; departmental letter dated 19.10.2023 taken on record.

Final Conclusion: The High Court set aside the Section 148A(d) order dated 30.03.2023 and the Section 148 notice dated 31.03.2023 for failure to comply fully with natural justice and the procedural requirements of Section 148A, and remitted the matter to the Assessing Officer to decide afresh after supplying all relevant documents including the enquiry report dated 08.03.2021; administrative directions were given to inform the faceless unit and departmental correspondence was recorded.

Foreign tax credit - mandatory versus directory filing requirement - interpretation of rule 128(9) of the Income tax Rules, 1962 - relation between DTAA and domestic rules/procedures - allowance of foreign tax credit where supporting documents are filed before assessment/processing

Relation between DTAA and domestic rules/procedures - foreign tax credit - Whether the INDO USA DTAA displaces or overrides the filing requirement prescribed by rule 128(9) of the Income tax Rules, 1962 for claiming foreign tax credit. - HELD THAT: - The Tribunal held that the INDO USA DTAA (Article 25 and Article 26) prescribes entitlement to credit but does not itself prescribe the domestic procedural filing requirements for claiming that credit. Article 26's non discrimination clause does not nullify the Central Government's power to prescribe administrative requirements under domestic law. In absence of any specific filing obligation in the DTAA, the domestic scheme of the Income tax Act and the rules framed thereunder govern the procedure for claiming FTC; consequently the DTAA does not in general prevail over a domestic procedural rule unless the treaty itself contains an inconsistent charging or rate provision. [Paras 9, 10, 11]

The DTAA does not override or nullify the filing requirement under rule 128(9); domestic rules govern procedural compliance for claiming foreign tax credit where the treaty is silent on such procedures.

Interpretation of rule 128(9) of the Income tax Rules, 1962 - mandatory versus directory filing requirement - Whether the time limit in rule 128(9) for furnishing Form No. 67 and supporting certificates is mandatory (fatal if missed) or directory. - HELD THAT: - Having examined rule 128(1), rule 128(8) and rule 128(9) and noting that the rule making power under section 295(1)(ha) was employed to prescribe procedure, the Tribunal concluded that while filing the requisite form and certificates is essential to the substance of the FTC claim, the prescribed time limit in rule 128(9) is directory. The Tribunal reasoned that the mandatory purpose of rule 128(1) is to allow FTC, and a temporal provision that defeats that substantive object should be read harmoniously as directory where the rule prescribes no consequence for non compliance within the time limit. Reliance was placed on analogous precedent treating time limits without prescribed consequences as directory. [Paras 8, 13, 14, 15]

The requirement to furnish Form No. 67 and supporting certificates is substantive, but the time limit fixed by rule 128(9) is directory rather than mandatory.

Allowance of foreign tax credit where supporting documents are filed before assessment/processing - foreign tax credit - Whether a belated filing of Form No. 67 and certificates after the due date under section 139(1), but before processing/assessment, entitles the assessee to foreign tax credit. - HELD THAT: - Applying the view that the time limit is directory, and following precedent which permits acceptance of requisite forms filed during assessment proceedings and before final assessment, the Tribunal held that filing Form No. 67 and supporting documents any time before the return is processed or before the final assessment is made constitutes sufficient compliance of rule 128(9). The Tribunal observed that no prejudice arises to revenue where the documents are on record prior to processing and that the procedural rule should not defeat the substantive entitlement to FTC. [Paras 14, 16]

Belated filing of Form No. 67 and supporting certificates, if made before processing of the return or before the final assessment, is sufficient compliance and entitles the assessee to foreign tax credit.

Final Conclusion: The Tribunal allowed the appeal: the DTAA does not displace domestic procedural requirements, the time limit in rule 128(9) is directory, and belated filing of Form No. 67 with supporting certificates before processing or final assessment suffices to claim foreign tax credit for AY 2019 20.

Addition under section 68 - unexplained credits - genuineness of sale of shares - admission of additional evidence under Rule 46A - remand report and verification under section 133(6) - distinction between share allotment and sale of shares

Addition under section 68 - unexplained credits - genuineness of sale of shares - admission of additional evidence under Rule 46A - remand report and verification under section 133(6) - distinction between share allotment and sale of shares - Deletion of the addition made under section 68 treating amounts received on sale of shares as unexplained credits - HELD THAT: - The Assessing Officer treated receipts on account of sale of shares as unexplained credits and made an addition under section 68. The assessee filed additional evidence under Rule 46A which led to a remand report; the remand report records that purchasers confirmed the payments were for purchase of shares and supported their position with bank statements, financial statements and income-tax returns in response to notices under section 133(6). The shares were acquired at the same price at which they were sold, and the Department had not disputed the original investment in the shares in the relevant earlier year. The Tribunal (on coordinate-bench reasoning) held that transactions of sale of shares at cost, supported by purchaser confirmations and documentary proof obtained on remand, cannot be treated as unexplained credits under section 68. The CIT(A)'s reliance on precedents concerning allotment of shares and receipt of share application money was inapposite because those cases concerned different facts (receipt of application money/premium), whereas the present case pertains to sale of existing investment. Applying these principles, the addition was not sustainable and was deleted. [Paras 6, 7]

Addition under section 68 deleted and the appeals allowed on this ground.

Final Conclusion: On the facts and in view of the remand verification and documentary confirmations of genuine sale of shares at cost, the addition treated as unexplained credit under section 68 was deleted and the appeals are allowed.

Revisionary power under section 263 - exemption under section 54B - user test for agricultural land under section 54B - absence of inquiry by the Assessing Officer - condonation of delay owing to COVID-19 extension of limitation

Condonation of delay owing to COVID-19 extension of limitation - Application for condonation of 525 days' delay in filing the appeal before the Tribunal was allowed and the appeal admitted for adjudication on merits. - HELD THAT: - The Tribunal noted that the revisionary order of the Pr. CIT was dated and served on 24.02.2020 and the statutory period for filing the appeal was sixty days; the appeal was filed on 01.10.2021 resulting in a delay of 525 days. The Tribunal observed that the Hon'ble Supreme Court had ordered suspension/extension of limitation by its Suo Motu proceedings beginning 23.03.2020 and that such extension was ultimately continued up to 28.02.2022 by M.A. No.21 of 2022 dated 10.01.2022. Consequently, the COVID-19 period deemed excluded for limitation purposes and the delay attributed to that period was to be excluded when quantifying delay. In view of that extension, the Tribunal condoned the delay and admitted the appeal for adjudication on merits. (See para 4.) [Paras 4]

Delay condoned and appeal admitted for adjudication on merits.

Revisionary power under section 263 - exemption under section 54B - user test for agricultural land under section 54B - absence of inquiry by the Assessing Officer - The Pr. CIT's exercise of revisionary jurisdiction under section 263 to set aside the assessment on the ground that exemption under section 54B was wrongly allowed is upheld. - HELD THAT: - The Pr. CIT found that the Assessing Officer had allowed exemption under section 54B though the land sold had been converted to non-agricultural status prior to sale and, critically, no inquiries were made by the AO to ascertain whether the land had been used for agricultural purposes for the two years immediately preceding the transfer. The Tribunal examined section 54B which requires that the capital gain arise from transfer of land which, in the two years immediately preceding the transfer, was being used by the assessee for agricultural purposes, and that reinvestment be in agricultural land. The assessee's counsel conceded that no inquiries had been conducted by the AO and no documents were placed on file to show cultivation or agricultural use for the requisite two-year period. Given the absence of basic inquiry and evidence by the AO to satisfy the statutory user condition, the Tribunal found no infirmity in the Pr. CIT's conclusion that the assessment order was erroneous and prejudicial to the revenue for having allowed an apparently ineligible claim of exemption. The Pr. CIT's order directing fresh assessment after proper inquiry and verification was therefore confirmed. (See paras 7-15, particularly para 15.) [Paras 15]

Pr. CIT's order under section 263 confirmed; assessment set aside for fresh inquiry and verification regarding eligibility under section 54B.

Final Conclusion: The Tribunal condoned the delay in filing the appeal by excluding the COVID-19 extension period and, on merits, upheld the Pr. CIT's exercise of jurisdiction under section 263 to set aside the assessment for fresh inquiry because the AO failed to verify the statutory user requirement for claiming exemption under section 54B; the assessee's appeal is dismissed.

Allocation of head office corporate expenses to eligible units for deduction under sections 80IB/80IC - Characterisation of advertisement/brand building expenditure as revenue or capital - Double disallowance arising from allocation of sales commission-verification and rectification - Adjustment of inventory/purchases/sales under Section 145A (CENVAT accounting) - Additional depreciation on assets used for less than 180 days under Section 32(1)(iia) - Exclusion of retention money from revenue where not accrued - Capital character of sales tax incentives - Applicability of Rule 8D to determine disallowance under Section 14A - Allowability of club membership/entrance fees as business expenditure

Allocation of head office corporate expenses to eligible units for deduction under sections 80IB/80IC - Whether 50% allocation of head office corporate expenses and related depreciation, as adopted by the assessee, should be accepted for computing deduction under sections 80IB/80IC. - HELD THAT: - The Tribunal followed the coordinate bench decisions in the assessee's own case for earlier years and found no change in circumstances warranting departure. The assessee had consistently allocated 50% of corporate/head office expenses (including advertisement and depreciation) to eligible units, certified by the assessee's accountant, and the Revenue failed to produce cogent material to justify a different allocation. Accordingly the CIT(A)'s directions accepting the assessee's allocation and directing the AO to follow the same were upheld; the AO's allocation of 100% was not sustained. The same reasoning was applied to computation under both section 80IB and 80IC. [Paras 9, 10, 40, 43]

Assessee's 50% allocation of head office corporate expenses and proportionate depreciation accepted; AO's 100% allocation rejected.

Characterisation of advertisement/brand building expenditure as revenue or capital - Whether the advertisement/brand building expenditure is capital in nature or revenue expenditure. - HELD THAT: - Following the coordinate bench and the Honourable Bombay High Court authority relied upon by the co ordinate bench, the Tribunal held that the advertisement/brand building expenditure is revenue in nature. The CIT(A)'s deletion of the addition was held to be correct and the AO was directed to delete the addition after considering any depreciation allowance already granted. [Paras 13, 15]

Expenditure on advertisement/brand building is revenue expenditure; addition deleted.

Double disallowance arising from allocation of sales commission-verification and rectification - Whether the alleged double disallowance in respect of sales commission requires rectification. - HELD THAT: - The Tribunal noted that the CIT(A) had upheld the commission allocation to the section 80IB unit but accepted that if this resulted in double disallowance, the AO must verify the position. The matter was restored to the file of the AO with directions to examine whether double disallowance has occurred and to rectify by deleting any duplicate disallowance after giving the assessee an opportunity to demonstrate the double allocation. [Paras 16, 18, 19]

Issue restored to the AO for verification and rectification if double disallowance is found.

Applicability of Rule 8D and Section 14A - Whether Rule 8D could be applied to determine the disallowance under Section 14A for the impugned assessment year. - HELD THAT: - The CIT(A) directed that Rule 8D did not apply to the impugned year and that the AO must make any disallowance on a reasonable basis, in line with the Honourable Bombay High Court decision considered by the CIT(A). The Tribunal found no infirmity in that direction and, following the coordinate bench, dismissed the AO's ground challenging the CIT(A)'s approach. [Paras 38, 39]

Rule 8D held not applicable for the year; AO directed to compute any Section 14A disallowance on a reasonable basis.

Allowability of club membership/entrance fees as business expenditure - Whether entrance fees and subscriptions paid to clubs (as incurred for employees) are allowable as business expenditure under Section 37(1). - HELD THAT: - The Tribunal observed that the Supreme Court's decision in the cited authority establishes that club membership fees for employees are business expenses. The CIT(A)'s deletion of the AO's disallowance was therefore upheld and the AO's appeal on this ground dismissed. [Paras 34, 36, 37]

Club membership/entrance fees for employees are allowable business expenditure; disallowance deleted.

Adjustment of inventory/purchases/sales under Section 145A (CENVAT accounting) - Whether the assessee's computation under Section 145A, and the inclusion/exclusion made, was correct and required revision. - HELD THAT: - The Tribunal found the additional ground arising from facts on record and observed that Section 145A requires adjustment across opening stock, purchases, sales and closing stock; an isolated adjustment to opening/closing stock is contrary to that provision. The matter was restored to the AO to examine the computation in accordance with Section 145A and grant adjustment if the assessee's claim is found correct, with opportunity of hearing if not. [Paras 24, 25]

Computation under Section 145A restored to AO for examination and correction as per law.

Additional depreciation on assets used for less than 180 days under Section 32(1)(iia) - Whether additional depreciation of 10% is allowable for assets put to use for less than 180 days in the previous year, and whether remaining 10% can be claimed in the next year. - HELD THAT: - The Tribunal found the assessee eligible for additional depreciation under Section 32(1)(iia) for assets put to use for less than 180 days and allowed 10% in the impugned year, directing the AO to grant such additional depreciation; the balance 10% was held to be allowable in the subsequent year. [Paras 26, 27]

Additional depreciation at 10% on eligible assets used for <180 days allowed; balance 10% to be claimed in next year.

Exclusion of retention money from revenue - Whether retention money retained under contract (not presently payable) should be excluded from income where sales are recognized on percentage completion method. - HELD THAT: - Following the coordinate bench decision in the assessee's own case and the jurisdictional High Court authority, the Tribunal held that retention money not yet accrued need not be taxed in the year the bill is raised under percentage completion accounting. The matter was restored to the AO to examine the retention sums offered for taxation and, if the assessee's claim is correct, to reduce the said amount from income and include it when the retention price attains finality. [Paras 29, 30]

Retention money excluded from income for the year if not accrued; AO to verify and adjust accordingly.

Capital character of sales tax incentives - Whether sales tax incentives received by the Dadra unit are capital in nature and require special treatment. - HELD THAT: - The Tribunal noted facts on record and that an identical issue in the assessee's earlier year was restored to the AO; respectfully following the coordinate bench, the Tribunal restored the matter to the AO for consideration with similar directions, permitting verification and quantification under the normal provisions. [Paras 31]

Issue restored to AO for fresh consideration of sales tax incentive claim in accordance with law.

Assessment officer's cross appeal on multiple allocation issues under sections 80IB/80IC - Whether the AO's appeals challenging the CIT(A)'s directions on allocation (including acceptance of 50% allocations, travelling expenses, depreciation) are maintainable. - HELD THAT: - Each ground in the AO's cross appeal largely mirrored issues decided in favour of the assessee by the coordinate bench and the CIT(A). The Tribunal found no reason to depart from those decisions, accepted the CIT(A)'s approach on acceptance of allocations made by the assessee (including travelling expenses and depreciation allocations), and dismissed the AO's appeal in its entirety. [Paras 40, 41, 42, 43, 44]

AO's cross appeal dismissed; CIT(A)'s directions accepting the assessee's allocations affirmed.

Allowability of foreign tax credit-verification against DTAA - Whether credit for foreign tax on dividend income from a foreign company should be allowed. - HELD THAT: - The CIT(A) directed the AO to verify the claim in accordance with the provisions of law and the Double Taxation Avoidance Agreement between India and Malaysia and to quantify the allowable credit. The Tribunal found no infirmity in that direction and restored the matter to the AO for verification and quantification. [Paras 20]

Matter restored to AO to verify and grant foreign tax credit in accordance with DTAA and law.

Claim for deduction of education cess on income tax, DDT and FBT - Whether education cess debited to profit and loss account on taxes (income tax, DDT, FBT) is allowable as deduction. - HELD THAT: - The assessee did not press this ground during hearing; the Tribunal therefore dismissed the ground without admission. [Paras 23, 28]

Ground not pressed and dismissed.

Final Conclusion: For A.Y. 2007 08 the Tribunal partly allowed the assessee's appeal and dismissed the AO's cross appeal: it accepted the assessee's 50% allocation of head office expenses (including advertisement and related depreciation) for computing deductions under sections 80IB/80IC; held advertisement/brand building expenditure to be revenue in nature; restored multiple technical and verification issues (double disallowance of sales commission, Section 145A computation, sales tax incentive, foreign tax credit and retention money) to the AO for examination/rectification in accordance with law; allowed additional depreciation on assets used for less than 180 days at 10% for the year; held Rule 8D inapplicable for the year for Section 14A purposes and affirmed allowability of club membership fees as business expenditure.

Revisional jurisdiction under section 263 - Requirement of independent examination of records by the CIT before invoking revisional powers - Validity of reference to Transfer Pricing Officer (TPO) - Requirement to refer to TPO in accordance with CBDT Instruction No.3/2016 - Time-line for TPO under section 92CA(3A) - Effect of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and related Office Memorandum on TP time bar - Invalid reference is no reference - Erroneous and prejudicial to the interest of Revenue

Revisional jurisdiction under section 263 - Requirement of independent examination of records by the CIT before invoking revisional powers - Whether the Commissioner exercised revisional jurisdiction under section 263 merely on the proposal of the Assessing Officer or after independent examination of records - HELD THAT: - Section 263(1) mandates that the CIT call for and examine records and form an independent opinion before holding an order to be erroneous and prejudicial to revenue. A proposal from the Assessing Officer may initiate consideration, but the CIT must independently examine the record and apply his mind dehors that proposal. In the present case the CIT's show cause and impugned order record that the records were examined and contain expressions indicating prima facie satisfaction after such examination. The Tribunal finds on the material on record that the CIT applied his mind and did not exercise revisional power in a merely mechanical manner based solely on the AO's proposal; therefore the exercise of power under section 263 was not invalid on the ground urged by the assessee. [Paras 6, 7]

CIT validly exercised revisional jurisdiction under section 263 after independent examination of records; the challenge that the order was passed merely on the AO's proposal is rejected.

Validity of reference to Transfer Pricing Officer (TPO) - Requirement to refer to TPO in accordance with CBDT Instruction No.3/2016 - Time-line for TPO under section 92CA(3A) - Effect of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and related Office Memorandum on TP time bar - Invalid reference is no reference - Erroneous and prejudicial to the interest of Revenue - Whether the reference made by the Assessing Officer to the TPO was valid and, if invalid as time barred, whether the assessment becomes erroneous and prejudicial so as to justify revision under section 263 - HELD THAT: - Section 92CA read with CBDT Instruction No.3/2016 requires that a reference to the TPO be made in accordance with prescribed approvals and timelines. Section 92CA(3A) and the Office Memorandum relied upon clarify that the TPO must pass its order at any time before 60 days prior to the expiry of limitation for completion of assessment; for AY 2018 19 the TP order deadline was 31/07/2021 and TOLA did not extend this TP deadline. Here the AO obtained prior approval on 09/03/2021 but delayed making the reference until 20/09/2021; the TPO returned the reference as invalid/time barred relying on the Office Memorandum. Such a reference, made after the prescribed TP time bar, is ineffective and in law is treated as no reference. The AO thereafter completed assessment without valid TP proceedings and in breach of mandatory provisions, rendering the assessment order erroneous and prejudicial to the interest of revenue. Consequently the CIT was justified in invoking section 263 to rectify the defect. [Paras 8, 9, 10, 11]

The reference to the TPO was time barred and thus invalid; the resulting assessment was erroneous and prejudicial to revenue and warranted revisional action under section 263.

Final Conclusion: The Tribunal upholds the CIT's order under section 263 for Assessment Year 2018 19: the CIT properly exercised independent revisional jurisdiction, and the Assessing Officer's time barred reference to the TPO rendered the assessment erroneous and prejudicial to the revenue, justifying revision; the appeal is dismissed.

Limited scrutiny (CASS) and scope of inquiry - conversion of limited scrutiny into complete scrutiny and requirement of prior approval - presumptive taxation under section 44AD - presumptive taxation under section 44AE - addition based on presumption without concrete evidence - double taxation/double inclusion of deemed income

Limited scrutiny (CASS) and scope of inquiry - conversion of limited scrutiny into complete scrutiny and requirement of prior approval - Validity of assessment proceedings where scrutiny was initiated as limited scrutiny (CASS) and whether Assessing Officer exceeded the limited scope without prior approval to convert into complete scrutiny. - HELD THAT: - The Tribunal noted that the notice under section 143(2) was issued for limited scrutiny to examine whether contract receipts/fees were correctly offered to tax. The Assessing Officer, upon receiving the assessee's submissions and Form 26AS, discovered the nature of income (business under sections 44AD and 44AE) only after the assessee's responses and issued questionnaires accordingly. On these facts the Tribunal held that the Assessing Officer did not traverse beyond the limited scrutiny mandate, because the additional enquiries arose directly from material and disclosures furnished during the limited scrutiny process. Accordingly, there was no failure to obtain prior approval for conversion into complete scrutiny and no invalidation of the assessment order on that ground. [Paras 6]

Ground dismissed; assessment not vitiated for alleged conversion of limited scrutiny without prior approval.

Presumptive taxation under section 44AD - presumptive taxation under section 44AE - addition based on presumption without concrete evidence - double taxation/double inclusion of deemed income - Sustainability of additions made by Assessing Officer: addition under section 44AD for alleged undisclosed profit from contract work and addition under section 44AE for transport income. - HELD THAT: - The Tribunal examined the assessment record and found that the assessee's contractual receipts were reflected in Form 26AS and that transport receipts were acknowledged in the assessment order. The Assessing Officer had computed a 37% profit rate based on the assessee's own return figures but then, on assumptions, worked back to a larger turnover and added income on the basis that deemed profits under section 44AE were not included - despite no material to displace the assessee's contention that the declared profit already comprised income from both businesses. The Tribunal concluded that the Assessing Officer's computations and resulting additions rested on presumptions unsupported by concrete evidence and were internally inconsistent. In absence of any record material contradicting the assessee's position, the additions made under sections 44AD and 44AE were found unsustainable. [Paras 7]

Additions deleted; grounds allowed.

Final Conclusion: The appeal is partly allowed: the challenge to validity of assessment on limited-scrutiny conversion is dismissed, while additions made under the presumptive schemes (sections 44AD and 44AE) are deleted for lack of evidential basis.

Change of qualifying criteria mid-way - examination qualifying criteria - benefit of a declaratory judgment to similarly situated persons - Customs Brokers Licensing Regulations, 2013 - duty of public authorities to act consistently after judicial declaration

Change of qualifying criteria mid-way - examination qualifying criteria - Customs Brokers Licensing Regulations, 2013 - Whether the respondents could refuse to grant the Customs Brokers License to the petitioner on the ground that the minimum qualifying marks for the oral examination were increased from 50 to 60 after the examination process had begun. - HELD THAT: - The Court found on the materials that the petitioner had cleared the written examination and, after a failed first oral attempt, obtained 52 marks in the second oral attempt. The respondents denied the licence on the basis that the minimum pass marks for the oral examination had been increased to 60. This Court had earlier, by Order dated 18-2-2022, held that the respondents could not change the qualifying criteria mid-way and had directed issuance of licences to candidates similarly placed who had secured between 50-60 marks. Applying the settled principle that once a court has declared the legal position those similarly situated are entitled to the benefit of that declaration without each having to litigate afresh, the respondents were under a duty to extend the relief of the said order to the petitioner. The respondents could not legitimately apply the enhanced criterion retrospectively to defeat candidates who had been assessed under the earlier criterion when the recruitment process had commenced.

The petition is allowed; the respondents are directed to grant the petitioner a Customs Brokers License in accordance with the Court's Order dated 18-2-2022 and similar cases.

Final Conclusion: The writ petition is allowed and the respondents are directed to issue the Customs Brokers License to the petitioner in light of the earlier order dated 18-2-2022; pending applications, if any, stand disposed of.

Prematurity of writ petition - Jurisdiction to issue show cause notice by proper officer - Effect of appellate remand on proceedings under the Customs Act - Obligation to file reply to show cause notice and adjudicate on merits - Recall and re-assessment in compliance with remand order

Prematurity of writ petition - Maintainability of the writ petition challenging the impugned show cause notice at the interlocutory stage. - HELD THAT: - The Court found the challenge to the show cause notice premature. The petition sought to prohibit the respondent from proceeding under the impugned notice before the statutory and adjudicatory processes were exhausted. Having considered the submissions, the Court concluded that the petitioner must first file a reply to the show cause notice and pursue the statutory forumalities; therefore the writ was not maintainable at this stage and was liable to be dismissed as premature. [Paras 7, 8]

Writ petition dismissed as premature with liberty to file reply to the show cause notice within 30 days.

Jurisdiction to issue show cause notice by proper officer - Whether the decision in N.C. Alexender precludes issuance of the impugned show cause notice to the Commissioner of Customs II. - HELD THAT: - The Court examined the relevance of N.C. Alexender and observed that that decision addressed the jurisdiction of DRI to issue show cause notices and that the apparent defect noted earlier has been cured by statutory amendment in the Finance Act, 2022. Consequently, the cited authority was held to be inapposite to the present challenge and did not bar the respondent from issuing the impugned notice to the Commissioner of Customs II. The petitioner was therefore required to engage with the notice rather than seek pre-emptive relief. [Paras 7]

The N.C. Alexender decision is not a ground to quash the notice; the petitioner must file a reply and the challenge is not sustainable at this stage.

Effect of appellate remand on proceedings under the Customs Act - Recall and re-assessment in compliance with remand order - Obligation to file reply to show cause notice and adjudicate on merits - Direction for further proceedings in light of the Appellate Commissioner's remand and the manner in which the respondent must proceed. - HELD THAT: - The Appellate Commissioner had remanded the matters to the lower authority directing recall of the impugned Bills of Entry and re-assessment after examining eligibility for benefit under the specified notification, and directing the appellant to produce relevant documents. The High Court required the respondent to receive the petitioner's reply to the impugned show cause notice, to consider the remand order of the Appellate Commissioner, and thereafter to dispose of the show cause notice and re-assess strictly in accordance with law on merits. The Court did not adjudicate the merits of eligibility but directed the respondent to proceed with adjudication in conformity with the remand. [Paras 4, 8]

Respondent directed to dispose of the impugned show cause notice having regard to the Appellate Commissioner's remand and to pass orders on merits in accordance with law after the petitioner files a reply.

Final Conclusion: The writ petition is dismissed as premature; petitioner is granted liberty to file a reply to the impugned show cause notice within 30 days, and the respondent is directed to consider the reply, take into account the Appellate Commissioner's remand, and dispose of the show cause notice and re-assess the matters on merits strictly in accordance with law.

Regular bail - non-bailable offence - detention amounting to conviction before punishment - factors for bail where investigation is continuing and custody has been prolonged - conditions of bail - bond and sureties - conditions of bail - cooperation with investigation, prohibition on tampering or intimidating witnesses, travel restraint

Regular bail - detention amounting to conviction before punishment - factors for bail where investigation is continuing and custody has been prolonged - conditions of bail - cooperation with investigation, prohibition on tampering or intimidating witnesses, travel restraint - conditions of bail - bond and sureties - Petitioner entitled to regular bail subject to strict conditions - HELD THAT: - Petitioner, arrested in connection with alleged concealment and smuggling of gold and in custody since 19-5-2023, had remained detained for over 54 days while investigation continued. Although the offence had been treated as non-bailable and investigation required further corroboration, the Court held that continued detention beyond that period would amount to pre-emptive punishment. Having regard to the elapsed period of custody, the earlier grant of bail to the petitioner's wife and the need to guard against deprivation of liberty without trial, the Court exercised its discretion under the procedure for regular bail and ordered release on bail subject to specific and strict conditions. The conditions include execution of a bond with two solvent sureties to the satisfaction of the jurisdictional court, cooperation with the investigation and appearance when required, prohibition on intimidating witnesses or tampering with evidence, prohibition on committing similar offences while on bail, and restraint on leaving India without court permission. The jurisdictional Court is empowered to consider cancellation of bail on violation of these conditions. [Paras 8, 9]

Bail allowed on execution of bond and two solvent sureties and subject to conditions of cooperation with investigation, non-tampering/intimidation, non-commission of similar offences and court permission for foreign travel; jurisdictional court may cancel bail if conditions are violated.

Final Conclusion: Bail application allowed: petitioner to be released on bail on furnishing bond and sureties and observing enumerated conditions; violation of conditions to invite cancellation proceedings before the jurisdictional Court.

Condonation of delay - stay petition - suspension of enforcement proceedings during pendency of intra judicial remedies - opportunity of being heard - expeditious disposal of pending petitions

Expeditious disposal of pending petitions - opportunity of being heard - Third respondent directed to consider and dispose of Exts. P12 (stay petition) and P13 (delay petition) after affording hearing, within three months. - HELD THAT: - The High Court, after noting that Exts. P12 and P13 were pending before the third respondent, ordered that those petitions be considered and disposed of in accordance with law and as expeditiously as possible, imposing a time limit of three months from receipt of certified copy of the judgment. The court further mandated that the petitioner be afforded an opportunity of being heard before any decision is taken on those petitions. [Paras 4]

Directs disposal of Exts. P12 and P13 within three months with an opportunity of hearing.

Condonation of delay - stay petition - If delay is condoned and a conditional stay is proposed, the third respondent must record reasons for such condonation and for imposing conditions. - HELD THAT: - The court stipulated that in the event the third respondent chooses to condone the delay and consider the stay petition, and if a conditional order of stay is proposed, the reasons for condoning the delay and for granting any conditional stay must be explicitly stated in the order. The direction requires reasoned decision making when relief is granted despite delay. [Paras 4]

Requires reasoned recording of grounds where delay is condoned and a conditional stay is proposed.

Suspension of enforcement proceedings during pendency of intra judicial remedies - All further proceedings pursuant to Ext P7 are deferred until orders are passed on Exts P12 and P13. - HELD THAT: - Pending the third respondent's disposal of the stay and delay petitions, the High Court ordered that all further proceedings arising from Ext P7 shall stand deferred. The order operates as a temporary suspension of any action under Ext P7 until the specified petitions are adjudicated. [Paras 4]

Stays further proceedings under Ext P7 until Exts. P12 and P13 are disposed of.

Final Conclusion: Writ petition disposed by directing the third respondent to decide the pending stay and delay petitions (Exts. P12 and P13) after hearing the petitioner and within three months; any condonation of delay and/or conditional stay must be reasoned; meanwhile further proceedings under Ext P7 are stayed until those petitions are disposed of.

Prior approval of the Adjudicating Authority for institution of legal proceedings by the liquidator - Scope of blanket authorization granted to liquidator to prosecute litigation on behalf of the corporate debtor - Ratification / ex post facto approval of proceedings instituted by the liquidator

Prior approval of the Adjudicating Authority for institution of legal proceedings by the liquidator - Scope of blanket authorization granted to liquidator to prosecute litigation on behalf of the corporate debtor - Ratification / ex post facto approval of proceedings instituted by the liquidator - Whether the Writ Petition filed by the liquidator was covered by the earlier liberty granted by the Adjudicating Authority and whether I.A. No.1081 of 2023 seeking ratification/ex post facto approval should be allowed. - HELD THAT: - The Tribunal noted that Section 33(5) of the Code requires prior approval of the Adjudicating Authority for instituting legal proceedings by a liquidator, and that the liquidator had earlier sought and obtained permission by filing I.A. No.405 of 2021. The Adjudicating Authority's order dated 28.04.2022 allowed IA No.405/2021 and granted the liquidator liberty to defend the litigations listed in the compliance affidavit (Annexure C 2). When the liquidator filed the Writ Petition to protect the corporate debtor's interest, an objection was taken that no specific prior approval for that writ had been obtained. The Tribunal held that, in spirit and connotation, the earlier order gave the liquidator authority to prosecute the listed proceedings and that the Adjudicating Authority ought to have clarified that the Writ Petition was covered by that permission. Consequently the impugned order dismissing I.A. No.1081/2023 was unsustainable. The Tribunal set aside the impugned order and allowed I.A. No.1081/2023, holding that the proceedings initiated by the liquidator (Writ Petition C.W.J.C. No.13042 of 2022) were fully covered by the approval granted in I.A. No.405/2021 dated 28.04.2022.

I.A. No.1081 of 2023 is allowed; the impugned order dated 29.11.2023 is set aside and the Writ Petition filed by the liquidator is held to be covered by the earlier approval granted in I.A. No.405/2021.

Final Conclusion: The appeal is allowed; the order of the Adjudicating Authority dated 29.11.2023 is set aside and I.A. No.1081 of 2023 is allowed, holding that the Writ Petition filed by the liquidator was covered by the prior liberty granted by the order dated 28.04.2022 in I.A. No.405/2021; the appeal is disposed of accordingly.

Interpretation of 'proceedings relating to any offence under this Act before a Court' in Section 8(3)(a) of the PMLA - continuation of retention of seized property beyond 365 days - Explanation to Section 8(3) and stay of investigation - strict construction of draconian seizure provisions - deprivation of property and Article 300A

Interpretation of 'proceedings relating to any offence under this Act before a Court' in Section 8(3)(a) of the PMLA - continuation of retention of seized property beyond 365 days - strict construction of draconian seizure provisions - Whether the expression 'the proceedings relating to any offence under this Act before a Court' in Section 8(3)(a) of the PMLA permits continuation of retention of documents/property beyond 365 days where the proceeding taken cognizance earlier does not relate to the person or property from whom/which the items were seized. - HELD THAT: - The Court held that the phrase in Section 8(3)(a) must be read in harmony with the scheme of the Act and in light of provisions governing attachment, seizure, retention and adjudication. Sections 5, 17, 20, 21 and 8 show that provisional attachment/seizure/retention become final only upon proceedings before the Special Court in relation to the property or person from whom the property was seized. The power to seize/retain is draconian and therefore requires strict construction. A generic or expansive reading that any proceeding relating to any offence under the Act (even when unrelated to the seized property or the person from whom it was taken) would indefinitely extend retention would render Section 8(3)(a) confiscatory and incompatible with Article 14. Accordingly, only a proceeding pending before the Special Court that is in relation to the seized property or the person from whom it was seized (including a supplementary complaint that specifically brings the seized material or the person within its ambit) will extend the 365 day period prescribed under Section 8(3)(a). Applying this principle, the Adjudicating Authority's order permitting retention for investigation/adjudication ran its statutory period of 365 days and, in absence of any proceedings before the Special Court in relation to the seized items or the petitioner, the statutory cap operated to lapse the retention obligation. [Paras 25, 35, 37, 43]

The Court construed Section 8(3)(a) to require that proceedings pending before a Special Court must relate to the seized property or the person from whom it was seized to extend retention beyond 365 days; in the present case no such proceedings existed and the statutory period expired.

Explanation to Section 8(3) and stay of investigation - deprivation of property and Article 300A - Whether interim writ petitions, orders restraining coercive action, or other civil proceedings (including petitions challenging summons or attachment) operate as proceedings 'relating to any offence under this Act before a Court' or otherwise extend retention under the Explanation to Section 8(3). - HELD THAT: - The Court held that the Explanation to Section 8(3) applies only where the investigation is stayed by a Court; an interim order restraining coercive action against a person does not amount to a stay of investigation for the purpose of the Explanation. Similarly, writ petitions or other challenges to actions under the Act are not 'proceedings relating to any offence under this Act before a Court' within Section 8(3)(a) and therefore cannot be invoked to extend statutory retention. Further, continuation of seizure beyond the statutory period absent qualifying proceedings would amount to deprivation of property without authority and violate Article 300A; consequently, lapse of the 365 day period mandates return of the seized items unless a qualifying proceeding before the Special Court exists or a contrary competent court order is in force. [Paras 38, 44, 50, 51, 52]

Writ petitions, restraint orders against coercive action and similar challenges do not extend the 365 day retention period under Section 8(3)(a) or its Explanation; absent qualifying proceedings before the Special Court, retention lapses and seized property must be returned to the person from whom it was seized.

Final Conclusion: The petition is allowed: the Court directed immediate return of the documents, digital devices and other property seized on 19-20 August 2020, the statutory retention period having expired and no proceedings before the Special Court relating to the seized items or the petitioner subsisting to lawfully extend retention; the order is subject to any contrary order of a competent Court.

Mandatory pre-deposit under Section 35F as made applicable to service tax - dismissal of appeal for non-compliance of pre-deposit - remand for decision on merits after compliance with pre-deposit

Mandatory pre-deposit under Section 35F as made applicable to service tax - dismissal of appeal for non-compliance of pre-deposit - remand for decision on merits after compliance with pre-deposit - Impugned order of the Commissioner (Appeals) dismissing the appeal for non-compliance with the mandatory pre-deposit and whether the matter should be remanded for adjudication on merits after compliance. - HELD THAT: - The Commissioner (Appeals) dismissed the appellant's appeal solely because the appellant had not made the mandatory pre-deposit prescribed by Section 35F of the Central Excise Act, 1944 as applied to service tax. Prior to filing the appeal before this Tribunal the appellant made a pre-deposit equal to 10% of the tax demanded, thereby complying with the statutory pre-deposit requirement. Since the Commissioner (Appeals) has not dealt with the merits of the appeal, and the prerequisite pre-deposit has now been furnished, the appropriate course is to set aside the dismissal and remit the matter to the Commissioner (Appeals) for adjudication on merits. The Tribunal directed the Commissioner (Appeals) to decide the appeal within two months from receipt of the certified copy of the Tribunal's order.

Impugned order set aside; matter remanded to the Commissioner (Appeals) for decision on merits after noting that the appellant has made the requisite pre-deposit; Commissioner (Appeals) directed to decide the appeal within two months.

Final Conclusion: The appeal is allowed by way of remand: the order dismissing the appeal for non-compliance with the pre-deposit requirement is set aside, and the Commissioner (Appeals) is directed to decide the appeal on merits within two months after receipt of the certified copy, the Tribunal having noted that the appellant has now complied with the pre-deposit requirement.

Business Auxiliary Services - promotion or marketing or sale of goods produced or provided by the client - service tax liability on sales incentives, advertisement and publicity reimbursements - franchisee's activities vis-a -vis trademark/royalty arrangements

Business Auxiliary Services - promotion or marketing or sale of goods produced or provided by the client - service tax liability on sales incentives, advertisement and publicity reimbursements - Sale incentives, advertisement and publicity amounts received by the franchisee are not taxable as Business Auxiliary Services - HELD THAT: - The Tribunal examined the franchise agreement and the nature of amounts received from the brand owner and concluded that the incentives and reimbursements were received in the context of the appellant's manufacture, marketing and sale of Aquafina under a franchise/license arrangement. Applying the definition of Business Auxiliary Services and construing earlier precedents, the Tribunal held that the appellant's activities-providing dispensers/jars, waiver of jar security, sales executive incentives and related expenses-were in furtherance of promoting and selling the appellant's own manufactured product under the licence and did not amount to promotion or marketing of goods "produced or provided by the client" so as to attract BAS. The Tribunal found the issue to be no longer res integra in view of the cited authorities and followed the line of decisions holding that such receipts are not exigible to service tax as BAS, and therefore set aside the demand made on that basis. [Paras 4]

Demand of service tax on the sale incentives, advertisement and publicity receipts qua Business Auxiliary Services is set aside.

Service tax interest and penalties - consequence of setting aside primary demand - Liability for interest and penalties consequential to the set aside service tax demand - HELD THAT: - The Tribunal held that because the primary demand for service tax was set aside on merits, the consequential demands for interest and for penalties under the Finance Act also fall away. The Tribunal therefore declined to sustain the interest and penalties imposed in the impugned order. [Paras 4, 5]

Demand of interest and penalties imposed along with the service tax is set aside.

Final Conclusion: Appeal allowed: the adjudicated demand of service tax for April 2007 to March 2012 on the appellant's receipt of sales incentives and reimbursement of advertisement/publicity expenses, classified as Business Auxiliary Services, is quashed; consequential interest and penalties are also set aside.

Principles of natural justice - ex parte decision for want of hearing - invalidity of consolidated notice fixing multiple hearing dates - personal hearing and adjournment limits under Section 33A - remand for fresh consideration after hearing

Principles of natural justice - ex parte decision for want of hearing - invalidity of consolidated notice fixing multiple hearing dates - Impugned ex parte order of the Commissioner (Appeals) is invalid for having been passed without affording a reasonable opportunity of hearing and on the basis of a consolidated notice fixing three dates of hearing. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) proceeded ex parte without affording the appellant a reasonable opportunity of hearing. The notice of hearing issued in one consolidated communication fixing three dates of hearing was held to be contrary to the principles governing personal hearings and adjournments. Reliance was placed on the reasoning in the cited High Court decision that an adjudicating authority must fix one date at a time and that issuing a consolidated notice fixing multiple dates suffers from legal infirmity; treating absence on those dates as satisfaction of statutory adjournment limits is impermissible. In consequence, the ex parte impugned order could not stand and required interference to secure compliance with natural justice and the prescribed hearing/adjournment procedure.

Impugned ex parte order is set aside and the matter is remanded to the Commissioner (Appeals) for fresh decision after affording reasonable opportunity of hearing.

Final Conclusion: Both appeals are allowed by way of remand; the Commissioner (Appeals) is directed to decide the appeals on merits after giving the appellant a reasonable opportunity of hearing and to pass a reasoned order within three months from receipt of the certified copy of this order.