TaxTMI Updates e-Newsletter
Feb 10,2023

Principles of natural justice - personal hearing - non-speaking order - input tax credit reconciliation - verification under Section 16 of TNGST Act, 2017 - adherence to departmental circular - remand for fresh consideration

Principles of natural justice - personal hearing - non-speaking order - Whether the impugned Assessment Order is vitiated by breach of the principles of natural justice and is a non speaking order requiring interference. - HELD THAT: - The Court found that the petitioner, due to medical ailments supported by medical certificates, did not respond to the show cause notice and that no personal hearing was afforded or recorded in the impugned Assessment Order. The Assessment Order did not address the petitioner's Annual Return for 2018 19 where the petitioner himself had reversed input tax credit, and the order fails to demonstrate application of mind to those records. For these reasons the Court concluded that the principles of natural justice were not complied with and the order is non speaking in relation to the Annual Return. [Paras 11]

Impugned Assessment Order quashed insofar as it is vitiated by breach of principles of natural justice and is non speaking.

Input tax credit reconciliation - verification under Section 16 of TNGST Act, 2017 - adherence to departmental circular - remand for fresh consideration - personal hearing - Whether the matter must be remanded to the assessing authority for fresh consideration including verification of ITC claims in accordance with Section 16 and the instructions in Circular No.1/2023 TNGST, dated 04.01.2023, and after affording a personal hearing. - HELD THAT: - The Court observed that the Assessment Order does not make it clear whether the Assessing Officer carried out the enquiries set out in Clause 4 of the departmental Circular-namely, verification of possession of tax invoices or other documents, receipt of goods or services, payment to the supplier, reversal under sections 17/18, and availing within the time prescribed under Section 16(4). Although the Circular post dates some proceedings, the Court held that the procedures and safeguards reflected therein ought to have been followed and noted that the Annual Return indicated voluntary reversal of ITC by the petitioner. In view of the lack of specific, reasoned findings and absence of personal hearing, the proper course is to remit the matter for fresh consideration on merits with directions to the respondent to adhere to Section 16 requirements, the departmental Circular, and to afford a personal hearing before passing final orders. [Paras 10, 11]

Matter remanded to the respondent for fresh consideration on merits in accordance with law, with directions to afford personal hearing and to follow the verification procedures indicated in Circular No.1/2023 TNGST, dated 04.01.2023.

Final Conclusion: The impugned Assessment Order dated 16.06.2022 is quashed and the matter is remitted to the respondent for fresh consideration on merits; the respondent shall afford a personal hearing and comply with the verification requirements under Section 16 and the instructions in Circular No.1/2023 TNGST, dated 04.01.2023, and pass final orders within twelve weeks from receipt of this order.

Provisional attachment under section 83 - protection of government revenue as a prerequisite for attachment - requirement of recorded opinion and due application of mind before attachment - CBEC guidelines on provisional attachment (23.02.2021) - FORM GST DRC-22 and FORM DRC-01A procedural compliance - extraordinary nature of attachment and need to avoid hampering normal business

Provisional attachment under section 83 - requirement of recorded opinion and due application of mind before attachment - CBEC guidelines on provisional attachment (23.02.2021) - Validity of the order provisionally attaching the petitioner's bank account under section 83 of the Gujarat GST Act, 2017 - HELD THAT: - The Court found that provisional attachment under section 83 is a draconian and extraordinary power which must be exercised sparingly and only after formation of a recorded opinion based on tangible material that attachment is necessary to protect revenue. The CBEC guidelines dated 23.02.2021 prescribe that the basis for such opinion be recorded, the attachment not be routine or mechanical, and care be taken so that normal business activities are not hampered. In the present case the authority attached the petitioner's bank account without following the prescribed procedure (including issuance of FORM DRC-01A before attachment), and the material on record did not show the requisite application of mind and recorded reasoning as mandated by the statute and the guidelines. In view of these deficiencies and the established jurisprudence requiring strict compliance with statutory conditions for valid attachment, the provisional attachment order was held to be unsustainable and was quashed and set aside. [Paras 7, 9]

Order of provisional attachment of the petitioner's bank account dated 18.05.2022 under section 83 is quashed and set aside.

Extraordinary nature of attachment and need to avoid hampering normal business - FORM GST DRC-22 and FORM DRC-01A procedural compliance - protection of government revenue as a prerequisite for attachment - Consequent relief and interim directions regarding release of the bank account and protection of specific tax amounts pertaining to the relevant tax periods - HELD THAT: - Balancing the interest of revenue with the hardship caused to the petitioner, the Court directed release of the bank account while safeguarding the Government revenue in respect of identified tax liabilities for the tax periods concerned. The Court declined to consider computation of interest and penalty at this stage because the procedural requirements for attachment had not been followed; it preserved the respondent's right to proceed in accordance with law. The Bank was directed to permit operation of the account except that specified sums linked to the tax periods 2018-19 and 2019-20 were not to be released pending crystallization of liability or appellate orders; for other amounts the petitioner was directed to furnish a bond as security before the authority. [Paras 9, 11, 12]

Bank account released subject to restraint that the Bank shall not permit withdrawal of specified tax amounts for 2018-19 and 2019-20; remaining recovery to be secured by bond and authority may proceed in accordance with law.

Final Conclusion: Writ petition allowed in part: the provisional attachment of the petitioner's bank account dated 18.05.2022 is quashed and set aside for failure to comply with statutory conditions and CBEC guidelines; the bank account is released subject to reservation of specified tax amounts for 2018-19 and 2019-20 and without prejudice to the respondent authority's lawful recourse after following prescribed procedure.

Cancellation of GST registration for non-filing of returns - limitation for filing first appeal under Section 107 of the CGST Act - condonation of delay and extended period for filing appeal - remand for fresh consideration with opportunity of hearing - absence of GST Tribunal under Section 109 leaving the assessee without alternative remedy

Cancellation of GST registration for non-filing of returns - limitation for filing first appeal under Section 107 of the CGST Act - Validity of the order cancelling the petitioner's GST registration and of the appellate authority's dismissal of the appeal as barred by limitation. - HELD THAT: - The Court followed its earlier decision in M/s. Chenna Krishnama Charyulu Karampudi v. Additional Commissioner (Appeals-1) and subsequent consistent decisions, holding that where registration is suo motu cancelled for non-filing of returns and no Tribunal exists under Section 109, dismissing an appeal on limitation grounds may leave the assessee without an effective remedy. In the circumstances and without expressing any opinion on the merits, the High Court found it appropriate to set aside the cancellation order and the appellate order dismissing the appeal and to remit the matter for fresh consideration by the primary authority so that the petitioner's grievance may be reconsidered after affording an opportunity of hearing. [Paras 6, 7]

Order cancelling GST registration and appellate dismissal for limitation set aside; matter remitted for fresh consideration.

Remand for fresh consideration with opportunity of hearing - condonation of delay and extended period for filing appeal - Scope and directions of the remand to the primary authority. - HELD THAT: - On remand respondent No.4 (the primary authority) is required to reconsider the petitioner's case and pass a fresh order in accordance with law after affording a reasonable opportunity of hearing. The Court expressly recorded that, in the remand proceedings, the petitioner is entitled to submit all applicable GST returns as per the statute. The direction to remit was given to ensure effective adjudication in the absence of a constituted Tribunal and without adjudicating the merits of the cancellation itself. [Paras 7]

Remand directed with instruction that respondent No.4 afford reasonable opportunity of hearing and permit submission of returns; fresh order to be passed in accordance with law.

Final Conclusion: The cancellation order dated 10.12.2020 and the appellate order dated 11.01.2023 are set aside; the matter is remitted to the primary authority for fresh consideration after hearing and with liberty to the petitioner to submit returns as per law.

Inspection under Section 67 of the TNGST/CGST Act, 2017 - Jurisdiction to issue show-cause/intimation arising from inspection - Prematurity of writ against pre-decisional intimation - Opportunity of personal hearing and filing of reply before final adjudication - Remand for fresh consideration and decision on merits by the competent adjudicating authority - Proposed penalty under Section 74 of the TNGST/CGST Act, 2017

Inspection under Section 67 of the TNGST/CGST Act, 2017 - Jurisdiction to issue show-cause/intimation arising from inspection - Prematurity of writ against pre-decisional intimation - Opportunity of personal hearing and filing of reply before final adjudication - Validity of the authorisation for inspection and the consequential intimation letters and whether the writ petition seeking to quash them is maintainable at the present stage. - HELD THAT: - The impugned authorisation dated 21.12.2022 authorised inspection under Section 67 and, pursuant thereto, the inspecting officer issued intimation letters dated 07.01.2023 pointing out defects and proposing tax, interest and penalty (including a proposal under Section 74). No final order has been passed; the petitioner was afforded an opportunity to reply within 15 days and a personal hearing. In these circumstances the challenge by way of writ at the pre-decisional stage is premature. The disputed question as to the competence of the inspecting officer/second respondent to issue the intimation letters and other contentions raised by the petitioner must be considered and decided by the third respondent in the course of final adjudication after receiving the petitioner's reply and hearing him. Accordingly the writ petition cannot be entertained on merits at this stage and the matter is remitted to the competent adjudicating authority for fresh decision on merits. [Paras 7, 8]

Petitioner directed to file reply to the intimation letters within two weeks; third respondent directed to decide the matter on merits after considering the reply and granting personal hearing, within four weeks; writ petition disposed as premature.

Final Conclusion: Writ petition dismissed as premature and disposed by mandating that the petitioner submit a reply to the intimation letters and that the competent authority decide the matter on merits after hearing within the stipulated timelines; no costs.

Service of notice under Section 142(1) and service requirement - opportunity of hearing - technical glitch of web portal - assessment under Section 147 read with Section 144B - quashing of assessment for breach of procedure - relegation for fresh consideration from stage of issuance of notice - National Faceless Assessment Centre procedure

Service of notice under Section 142(1) and service requirement - technical glitch of web portal - opportunity of hearing - Assessment quashed for lack of effective service of the Section 142(1) notice due to non-availability on the income-tax web portal, resulting in denial of opportunity of hearing. - HELD THAT: - The court found that the notice dated 21.2.2022 under Section 142(1) was not available on the income-tax web portal and that the department's affidavit did not satisfactorily explain the specific averments of non-service. Given the department's reliance on electronic service and filing through the web portal, a technological failure that prevents the assessee from accessing the notice prejudices the assessee's statutory right to be heard. Because the assessment order dated 30.3.2022 under Section 147 read with Section 144B was passed after issuance of that notice, but without ensuring the assessee had the opportunity to respond due to the portal unavailability, the assessment was invalidated for breach of the procedural requirement to afford a hearing. [Paras 14]

The assessment order was held to be non-est and liable to be quashed for breach of the service requirement and denial of opportunity of hearing.

Quashing of assessment for breach of procedure - relegation for fresh consideration from stage of issuance of notice - National Faceless Assessment Centre procedure - The matter was remanded to the assessing authority to proceed afresh from the stage of issuance of the Section 142(1) notice, with directions as to further conduct of proceedings. - HELD THAT: - Recognising that the scheme of assessment and appellate remedies operates through the National Faceless Assessment Centre, the court quashed the impugned assessment and directed that the proceedings be restored to the point of issuance of the Section 142(1) notice dated 21.2.2022. The petitioner was permitted to tender a reply within two weeks of service of notice; subsequent stages were directed to be decided by the concerned officer in accordance with law, affording the petitioner an opportunity to be heard. The court clarified that none of its observations shall prejudice the parties and confined its interference to the procedural defect caused by non-availability of the notice on the portal. [Paras 15]

Proceedings set aside and remitted to the authority to continue from the issuance of the Section 142(1) notice, with the petitioner to file reply within two weeks and the authority to decide further stages afresh in accordance with law.

Final Conclusion: The assessment order dated 30.3.2022 under Section 147 read with Section 144B was quashed for failure to effectively serve the Section 142(1) notice on the web portal, thereby denying the assessee an opportunity of hearing; proceedings are remitted to the assessing authority to proceed from issuance of the 21.2.2022 notice, the petitioner to file a reply within two weeks, and further action to be taken in accordance with law.

Quashing of assessment notices - faceless assessment procedure - non-compliance with Standard Operating Procedure for Assessment Unit - Clause N.1.3 (minimum timeframe) - Section 144B(6)(xi) of the Income Tax Act - de novo assessment in accordance with law

Quashing of assessment notices - non-compliance with Standard Operating Procedure for Assessment Unit - Clause N.1.3 (minimum timeframe) - faceless assessment procedure - Validity of the notices and assessment order impugned on the ground that the Assessing Officer proceeded without taking into account the petitioner's reply and without affording the minimum timeframe mandated by the AU SOP. - HELD THAT: - The petition record established that the petitioner filed its return and responded to notices, including a reply dated 08.12.2022, yet a show-cause notice dated 09.12.2022 was issued without regard to that reply and with a timeframe shorter than the seven-day minimum required by Clause N.1.3 of the AU Standard Operating Procedure dated 03.08.2022. The SOP was framed in consonance with the scheme under Section 144B(6)(xi) of the Act. The failure to adhere to the SOP and to consider the petitioner's existing reply constituted a legal defect in issuance of the impugned instruments, warranting their quashing. [Paras 14]

Impugned notices and the assessment order quashed for non-compliance with the AU SOP and for proceeding without regard to the petitioner's reply.

De novo assessment in accordance with law - Section 144B(6)(xi) of the Income Tax Act - Whether the Assessing Officer may re-examine the matter after the defects are cured. - HELD THAT: - The Court granted liberty to the Assessing Officer to undertake a fresh assessment exercise de novo, subject to compliance with the legal requirements and the AU SOP, including giving the noticee the minimum timeframe mandated by Clause N.1.3. The direction preserves the Department's power to reassess but requires that any further proceedings conform to the procedure and timeframes prescribed by law and the SOP. [Paras 14]

Assessing Officer permitted to carry out a de novo assessment, strictly in accordance with law and the SOP.

Final Conclusion: The writ petition is allowed: the impugned notices and the assessment order for AY 2021-2022 are quashed for failure to comply with the AU SOP (Clause N.1.3) and for issuing proceedings without regard to the petitioner's reply; liberty granted to the Assessing Officer to proceed afresh in accordance with law.

Maintainability of settlement application - pre-condition of deposit of admitted tax under Section 245C - adjustment of tax by utilisation of seized cash/credit in PD account - reliance on departmental communication/estoppel by representation - restoration of settlement application and remand for adjudication on merits

Pre-condition of deposit of admitted tax under Section 245C - adjustment of tax by utilisation of seized cash/credit in PD account - reliance on departmental communication/estoppel by representation - maintainability of settlement application - Whether the Settlement Commission rightly rejected the settlement application as not maintainable for want of full deposit of the admitted tax when the petitioner had relied on departmental communication about balances in its PD account and had made subsequent remittance. - HELD THAT: - The Court held that the petitioner had been led to the legitimate belief, by the Principal Commissioner's letter dated 17.12.2018, that specified amounts in the PD account enured to its credit and therefore the petitioner adjusted tax liability by drawing on those balances and remitted a substantial amount. The Settlement Commission accepted adjustment in its admission order. When the Department later, in Form 2B, asserted that certain deposits did not enure to the petitioner's benefit, that correction was communicated only thereafter. On these facts the petitioner promptly made further remittance. The Court found that the confusion arose from the departmental communication and that the petitioner's conduct amounted to substantial and adequate compliance with the statutory pre-condition in Section 245C. The Commission's rejection for want of maintainability on the basis that admitted tax had not been fully deposited was therefore not justified in the circumstances and required interference. [Paras 6, 7, 11, 12]

The rejection of the settlement application for want of maintainability on the ground of non-deposit of admitted tax was set aside insofar as the petitioner had relied on the departmental communication and had made prompt additional remittance on being informed otherwise; this constituted substantial compliance with the pre-condition.

Restoration of settlement application and remand for adjudication on merits - maintainability of settlement application - Whether the settlement application should be restored to the Settlement Commission for fresh hearing on merits. - HELD THAT: - Having set aside the impugned order which had rejected the application as not maintainable, the Court directed that the settlement application be restored to the file of the Settlement Commission (Interim Board). The Commission is to hear the petitioner afresh and dispose of the application on merits expeditiously, taking into account the position regarding adjustment of seized cash and the subsequent remittance made by the petitioner. [Paras 13]

The impugned order is set aside and the settlement application is restored to the Settlement Commission for expeditious disposal on merits.

Final Conclusion: Writ petition allowed: the Settlement Commission's order rejecting the application for want of maintainability is set aside; the settlement application is restored to the Settlement Commission (Interim Board) which is directed to hear and dispose of it on merits expeditiously. No costs.

Genuineness of purchases - summons under section 131 - remand under Rule 46A - verification of documents - admission of additional evidence - deletion of additions

Genuineness of purchases - summons under section 131 - verification of documents - admission of additional evidence - deletion of additions - Whether the Commissioner (Appeals) was justified in deleting the additions made by the Assessing Officer in respect of purchases from Balaji Chain & Co. and Bengali Chain & Co. after remand and verification - HELD THAT: - The Tribunal accepted the factual findings recorded by the CIT(A) on remand that relevant documents were on record and that the Assessing Officer was afforded an opportunity to verify them in terms of Rule 46A. During remand the AO issued summons under section 131 and received confirmations and supporting material: sales bills, bank statements, PAN details and ledger/account copies. An authorised representative of Bengali Chain & Co. appeared and produced documents; the proprietor of Balaji Chain & Co. appeared and furnished statements and documentary proof. The Tribunal held that no adverse inference could be drawn against the assessee merely because the proprietor of one supplier did not personally appear where an authorised representative had appeared and all requisite documents were produced. On these verifications the CIT(A) concluded, and the Tribunal agreed, that the purchases were genuine and that the AO's additions were not justified. [Paras 6, 7, 8]

Findings of the CIT(A) on genuineness of purchases after remand and verification are upheld and the additions deleted.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) deleting the additions in respect of the purchases is upheld.

Proviso to section 147 requiring failure to disclose fully and truly all material facts for reopening after four years - Validity of reassessment notice issued after four years where contested items were disclosed in books of account - Distinction between non-disclosure and mere incorrectness of claim

Proviso to section 147 requiring failure to disclose fully and truly all material facts for reopening after four years - Disclosure in profit and loss account versus non-disclosure in return - Validity of reassessment notice issued after four years where contested items were disclosed in books of account - Reassessment proceedings initiated by issuance of notice under section 148 after four years were invalid and liable to be quashed. - HELD THAT: - The original assessment under section 143(3) was completed on 26-02-2013 and the notice under section 148 was issued on 29-03-2017, i.e., after the four-year period from the end of the relevant assessment year had elapsed. The proviso to section 147 (as applicable) requires that for reopening after four years the Assessing Officer must show failure by the assessee to disclose fully and truly all material facts necessary for assessment. The reasons recorded relied on the assessee's claim of deduction of Rs.30,000 as TDS and Rs.11,00,000 as provision for NPA. Both items were disclosed in the profit and loss account and were not undisclosed in the return. The fact that the Assessing Officer reached a different conclusion on the allowability of those claims does not equate to a failure by the assessee to disclose fully and truly all material facts. The Assessing Officer was obliged to consider those disclosed items while completing the original assessment; mere possibility of escapement of income arising from an alternative view on those disclosed claims does not satisfy the statutory threshold for reopening beyond four years. Therefore the reassessment initiation was without jurisdiction and is quashed. [Paras 4, 5]

Reassessment initiation under section 148 was invalid; notice and proceedings quashed.

Final Conclusion: Appeal allowed; reassessment proceedings initiated by the notice dated 29-03-2017 quashed as invalid for want of the requisite failure to disclose fully and truly all material facts; other grounds rendered infructuous.

Extension of return filing due date - Explanation 2(a)(ii) to section 139(1) - applicability to persons whose accounts are audited - interpretation of 'person' for the purpose of due date extension - deduction under section 80IA(7) - carry forward of short-term capital loss

Extension of return filing due date - Explanation 2(a)(ii) to section 139(1) - applicability to persons whose accounts are audited - interpretation of 'person' for the purpose of due date extension - deduction under section 80IA(7) - carry forward of short-term capital loss - Entitlement to deduction under section 80IA(7) and to carry forward of short-term capital loss despite return being filed after the original due date but before the Board's extended due date. - HELD THAT: - The assessee-HUF filed its return on 10-09-2019, after the original due date of 31-08-2019 but before the Board's Order dated 27-09-2019 which extended the due date to 31-10-2019 for persons falling under Explanation 2(a) to section 139(1). The CIT(A) held that the extension did not apply to an HUF, treating an HUF as not being a 'person' covered by Explanation 2(a)(ii). The Tribunal rejected that interpretation, holding that Clause (a)(ii) covers any person whose accounts are required to be audited (which may include an individual, HUF or body corporate). Because the assessee-HUF's accounts were required to be audited, the assessee fell within Explanation 2(a)(ii) and was entitled to the extended due date. Consequently, the return was held to be filed within time under the extended date and the benefit of deduction under section 80IA(7) and the carry forward of the short-term capital loss could not be denied on the ground of late filing. [Paras 4, 5]

The assessee-HUF is entitled to the benefit of the Board's extension of the due date and therefore to the deduction under section 80IA(7) and to carry forward the short-term capital loss; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the Board's extension of the return filing due date applied to the assessee-HUF (being a person whose accounts were auditable under Explanation 2(a)(ii) to section 139(1)), and therefore the disallowance of deduction under section 80IA(7) and denial of carry forward of short-term capital loss for being allegedly time-barred was set aside.

Treatment of capital gain as business income - nature of income: investor versus trader - exemption under section 10(38) of the Income Tax Act, 1961 - SEBI price manipulation findings - unlawful gain treated as income from unlawful activity - allocation between investment and trading portfolios

Treatment of capital gain as business income - nature of income: investor versus trader - SEBI price manipulation findings - unlawful gain treated as income from unlawful activity - allocation between investment and trading portfolios - exemption under section 10(38) of the Income Tax Act, 1961 - Whether the profit from sale of Pyramid Saimira Theatre Ltd shares should be treated as long-term capital gain eligible for exemption under section 10(38) or as business income, and whether the addition could be restricted to the unlawful gain computed by SEBI. - HELD THAT: - The Tribunal accepted the CIT(A)'s factual finding that the assessee maintained distinct investment and trading portfolios and that the PSTL shares were shown under the investment head in Schedule 4 of the balance sheet and were held for more than two years before sale. Although SEBI found the assessee guilty of price manipulation and computed an unlawful gain, the Assessing Officer's case before taxation did not allege that the entire claimed long term capital gain was not genuine on account of forgery; rather the AO sought to characterise the gains as business income relying on factors such as frequency of transactions, use of shares as security, multiple trading accounts and lack of separate demat accounts. The Tribunal held that on the record the CIT(A) was justified in treating the bulk of the profit as long term capital gain eligible for exemption under section 10(38), while restricting the addition to the amount of unlawful gain quantified by SEBI which the assessee had been directed to disgorge. The Tribunal found no infirmity in confining the taxability to the unlawful gain as income from unlawful activity and dismissing the Revenue's challenge to the CIT(A)'s order. [Paras 9]

The CIT(A)'s conclusion that the profit (except the unlawful gain computed by SEBI) is long term capital gain eligible for exemption under section 10(38), and that the addition be restricted to the unlawful gain treated as income from unlawful activity, is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s order restricting the addition to the unlawful gain computed by SEBI and treating the balance as exempt long term capital gain is confirmed. The assessee's cross objection is dismissed as infructuous.

Penalty under section 271(1)(c) - Explanation 5A to section 271(1)(c) - percentage completion method v project completion method - revised return filed post-search - debatable issue doctrine for levy of penalty - deeming fiction of concealment

Penalty under section 271(1)(c) - revised return filed post-search - Deletion of penalty under section 271(1)(c) in respect of income declared in the revised return filed after a search - HELD THAT: - The Tribunal held that the Assessing Officer had not invoked the specific deeming fiction contained in Explanation 5A to section 271(1)(c) and that the assessee had filed a revised return declaring the impugned income which was accepted and processed in assessment. In that factual matrix the Revenue's general reliance on the provisions of section 271(1)(c) without invoking Explanation 5A was insufficient to sustain the penalty. The Tribunal therefore found no justification to interfere with the Commissioner (Appeals)'s deletion of the penalty and rejected the Revenue's contention that filing the revised return post-search by itself warranted levy of penalty. [Paras 5, 6, 7]

Penalty under section 271(1)(c) deleted and Revenue's appeal dismissed.

Explanation 5A to section 271(1)(c) - percentage completion method v project completion method - debatable issue doctrine for levy of penalty - deeming fiction of concealment - Whether change from project completion method to percentage completion method and related findings seized during search attract penalty under Explanation 5A - HELD THAT: - The Tribunal examined that the seized architect's certificate merely indicated that conditions for applying the percentage completion method were fulfilled and did not show entries of inadmissible expenses or unaccounted receipts. It further observed that for the assessment year in question percentage completion was a debatable accounting method (Section 43CB became mandatory only from AY 2017-18) and that penalties under section 271(1)(c) are not leviable on debatable issues of accounting treatment. Given that Explanation 5A was not applied by the Assessing Officer and the disputed income was reflected in an accepted revised return, the Tribunal held that the change in method and the seized material did not establish concealment or furnishing of inaccurate particulars within the scope of Explanation 5A. [Paras 5, 6, 11]

Change of accounting method in the facts of the case did not attract Explanation 5A; no penalty on the debatable accounting issue.

Final Conclusion: The appellate tribunal dismissed the Revenue's appeal and upheld the deletion of penalty under section 271(1)(c) for AY 2016-17, concluding that Explanation 5A was not invoked by the Assessing Officer, the revised return declaring the income was accepted, and the change from project completion to percentage completion was a debatable accounting issue which did not warrant levy of penalty.

Remand for factual verification - Onus of proof on the assessee - Treatment of unpresented cheques as income - Power of Assessing Officer to summon third parties for inquiry - Deletion of addition set aside

Remand for factual verification - Onus of proof on the assessee - Power of Assessing Officer to summon third parties for inquiry - Treatment of unpresented cheques as income - Whether the addition treated as deemed income on account of cheques alleged to represent commission should be restored to the file for fresh verification of facts and summoned inquiry. - HELD THAT: - The Tribunal found that material factual questions remained unresolved and required fresh examination by the Assessing Officer. The questions identified for verification were whether the assessee returned the unpresented cheques to the payer, whether any amount was received in lieu of returning the cheques, and whether any part payment in respect of the commission/brokerage was received in any other form. The Tribunal placed primary onus on the assessee to establish the factual position but directed that the Assessing Officer take appropriate action in accordance with law, including summoning the payer-company and any other persons, to unearth the real transactions. Given these lacunae in the factual matrix, the Tribunal held that the deletion by the Commissioner could not be finally sustained without such inquiry and consequently remitted the matter for fresh consideration. [Paras 4]

Matter remitted to the Assessing Officer for fresh factual verification and inquiry; primary onus on the assessee; AO empowered to summon the payer-company and other persons as necessary.

Final Conclusion: The Tribunal allowed the Revenue's appeal for statistical purposes, set aside the finality of the deletion, and remitted the issue to the Assessing Officer for directed factual verification concerning the unpresented cheques and any payments received, with the assessee bearing primary onus.

Allowability of deduction under section 35(1)(ii) - bogus donations / accommodation entries - doctrine of fraud - onus of proof on the assessee to prove genuineness of donations - reliance on investigative report and admission before Settlement Commission - natural justice inapplicable where fraud is established

Allowability of deduction under section 35(1)(ii) - bogus donations / accommodation entries - onus of proof on the assessee to prove genuineness of donations - reliance on investigative report and admission before Settlement Commission - doctrine of fraud - natural justice inapplicable where fraud is established - Deduction claimed under section 35(1)(ii) in respect of alleged donations to the School of Human Genetics and Population Health is not allowable as the donations were held to be bogus and the assessee failed to prove their genuineness. - HELD THAT: - The Assessing Officer relied on the report of the Directorate of Investigation, Kolkata and on the organisation's own application before the Settlement Commission which indicated that the NGO arranged accommodation entries for bogus donations and refunded amounts after charging service charges. Despite opportunities, the assessee did not produce persons or evidence from the organisation to rebut these findings. The Tribunal accepted that the assessee failed to discharge the onus of proving genuineness of the donations and participated in the fraudulent scheme. Having concluded that fraud was established on the material placed on record, the Tribunal held that the doctrine of fraud applies and, consequently, principles of natural justice invoked by the assessee do not alter the outcome. The earlier authorities cited by the assessee were distinguished as those decisions did not involve allegations of repayment of donations in cash or involvement of the donee in fraudulent activities. For these reasons the Tribunal upheld the disallowance of the deduction. [Paras 8, 9]

The orders of the lower authorities disallowing the deduction under section 35(1)(ii) were affirmed and the assessee's appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal for assessment year 2013-14, upholding the disallowance of the deduction claimed under section 35(1)(ii) on the ground that the donations were bogus, the assessee failed to prove their genuineness, and the doctrine of fraud applied.

Reopening of assessment beyond four years - proviso to section 147-failure to disclose fully and truly all material facts - reasons recorded under section 148 - explanation (1) to section 148-scope - quashing of reassessment proceedings

Reopening of assessment beyond four years - proviso to section 147-failure to disclose fully and truly all material facts - reasons recorded under section 148 - Validity of reopening assessment under section 148/147 where assessment was reopened beyond four years on the ground of escapement of income due to excess depreciation claimed - HELD THAT: - The Tribunal found that during the original scrutiny assessment the Assessing Officer had issued notices under section 143(2) calling for, and had received, the fixed asset schedule and supporting details relating to additions and depreciation. The assessment was completed under section 143(3) after examining those details. Reopening the assessment beyond four years requires, under the proviso to section 147, a demonstrable failure by the assessee to disclose fully and truly all material facts. The reasons recorded for reopening merely recited a failure to disclose and asserted escapement because of a higher rate of depreciation claimed, but did not and could not demonstrate that the assessee had withheld or failed to furnish the material particulars called for during scrutiny. On the materials (including the fixed asset schedule and invoices produced during the scrutiny), it was held that there was no sufficiency of evidence of failure to disclose so as to justify reopening; consequently the notice under section 148 was invalid and the reassessment proceedings were rightly quashed. [Paras 8, 9]

Notice under section 148 is invalid because there was no failure to disclose fully and truly all material facts; reassessment quashed.

Explanation (1) to section 148-scope - precedent applicability - Applicability of explanation (1) to section 148 and cited precedents (including CIT v. Lucas TVS Ltd.) to sustain reopening in the facts of this case - HELD THAT: - The Tribunal held that the reliance placed by the Revenue on explanation (1) to section 148 and on cited decisions such as CIT v. Lucas TVS Ltd. did not apply to the facts of the case. The Department's contention that explanation (1) validated reopening was not sustainable because the essential factual prerequisite of failure to disclose material facts during the original assessment was not demonstrated. Accordingly, those authorities were found inapplicable and could not cure the deficiency in the reasons for reopening. [Paras 8, 9]

Explanation (1) to section 148 and the authorities relied upon do not validate the reopening on the facts; the precedents are inapplicable.

Final Conclusion: Both appeals by the Revenue are dismissed; reassessment proceedings under section 148/147 for AYs 2009-10 and 2010-11 are quashed as the reopening beyond four years was invalid for want of failure to disclose fully and truly all material facts.

Limited Scrutiny - scope of limited scrutiny - CBDT Instruction F.No.225/402/2018/ITA.II dated 28.11.2018 - revision under section 263 of the Income-tax Act - prejudicial to the interest of revenue - conversion to complete scrutiny

Limited Scrutiny - scope of limited scrutiny - CBDT Instruction F.No.225/402/2018/ITA.II dated 28.11.2018 - revision under section 263 of the Income-tax Act - prejudicial to the interest of revenue - Whether the revision under section 263 setting aside the assessment on grounds beyond the issue for which the case was selected under CASS 'Limited Scrutiny' is sustainable. - HELD THAT: - The Tribunal found it was an admitted fact that the assessment was selected under CASS as a 'LIMITED SCRUTINY' matter confined to verification of cash deposits. Interest payments debited in the profit and loss account (vehicle loan interest, overdraft interest and HDB Finance interest) were unrelated to the limited issue of cash deposits and therefore outside the scope of the limited scrutiny selection. Reliance was placed on para 3 of the CBDT Instruction F.No.225/402/2018/ITA.II dated 28.11.2018 which permits widening the scope of pending CASS 2017/2018 limited scrutiny cases only where credible material is received from law enforcement/intelligence/regulatory authorities and only with prior administrative approval of the Pr. CIT/CIT; absent such material and approval the Assessing Officer was not empowered to examine additional issues. The Tribunal followed coordinate-bench decisions applying the same instruction and held that the Principal Commissioner could not treat the assessment order as erroneous and prejudicial to revenue by invoking section 263 to expand enquiry into matters beyond the limited scope in the absence of the procedural prerequisites in the CBDT Instruction. Consequently, the revision order under section 263 was quashed and the appeal allowed. [Paras 6, 7]

The section 263 revision order setting aside the assessment insofar as it sought to examine issues beyond the CASS 'Limited Scrutiny' selection was quashed and the assessee's appeal allowed.

Final Conclusion: The Tribunal held that where an assessment has been taken up for CASS 'Limited Scrutiny' to verify specified cash deposits, the Assessing Officer (and consequently the Pr. CIT in revision under section 263) cannot validly expand inquiry into unrelated issues without compliance with the CBDT instruction permitting widening only upon credible information from specified agencies and prior administrative approval; the revision order was therefore quashed and the appeal allowed.

Bogus long term capital gains / accommodation entries - test of human probability - fraud vitiates everything / transaction void ab initio - onus on assessee to prove genuineness of transactions - addition as unexplained cash credit

Onus on assessee to prove genuineness of transactions - bogus long term capital gains / accommodation entries - addition as unexplained cash credit - Claim for exemption of capital gains under section 10(38) held to be not genuine and addition upheld. - HELD THAT: - The Assessing Officer found that the appellant's claimed long term capital gains arose from purchases and sales of shares that formed part of a documented modus operandi operated by entry providers and supported this by investigation material and statements. The appellant, despite being afforded opportunity and being supplied copies of statements from the entry provider, failed to substantiate the genuineness of the transactions. The Commissioner (Appeals) confirmed the assessment invoking the doctrine of human probability. The Tribunal, having considered the material on record and the authorities relied upon below, agreed that the assessee did not discharge the burden to prove the transactions were genuine; consequently the sale proceeds were rightly treated as unexplained credit and brought to tax. [Paras 8]

The finding that the claimed exemption under section 10(38) was not established is upheld and the addition as unexplained cash credit is confirmed.

Fraud vitiates everything / transaction void ab initio - test of human probability - Principle that fraud vitiates judicial and quasi judicial acts applied to hold the transactions void ab initio and to sustain the addition. - HELD THAT: - The Tribunal applied the settled legal principle that transactions induced by fraud are void ab initio and that a party who withholds material information and thereby plays fraud on quasi judicial authorities cannot invoke principles of natural justice to retain benefits flowing from such transactions. Having found that the appellant deliberately withheld information within his exclusive knowledge and that the transactions were sham accommodation entries, the Tribunal held the principle of fraud applicable and therefore endorsed the conclusion that the transactions were void and the addition sustainable. [Paras 9, 10]

The transactions are held to be void ab initio on the principle that fraud vitiates everything; the addition is therefore sustained and the appeal dismissed.

Final Conclusion: The appeals are dismissed: the assessee failed to prove the genuineness of claimed long term capital gains; the addition as unexplained credit is confirmed and the transactions are held void ab initio on the principle that fraud vitiates everything.

Taxability of refunded/repayed amounts - income not retained is not taxable - revised return adjustment for refunded amount - effect of Confidentiality and Non Compete Agreement and subsequent MOU - each assessment year is a separate unit - tax treatment where refund is by way of settlement pursuant to MOU

Taxability of refunded/repayed amounts - income not retained is not taxable - revised return adjustment for refunded amount - effect of Confidentiality and Non Compete Agreement and subsequent MOU - Whether the amount of Rs. 80,50,000 refunded to the employer can be excluded from the assessee's income for the year and allowed as deduction in the revised return. - HELD THAT: - The Tribunal accepted the assessee's case that he had originally received a severance/non compete package which was included in the original return, and that a dispute subsequently led to execution of an MOU and repayment of Rs. 80.5 lakhs to the employer. The refund was effected pursuant to the MOU and attendant settlement of non compete obligations. The Tribunal held that an amount which is not retained by the assessee and has been refunded pursuant to the contractual settlement cannot be treated as taxable income of the assessee for the year in which it is not retained. Applying the principle that taxability depends on actual receipt/retention and having regard to the nature of the repayment under the MOU, the Tribunal concluded that the refunded amount is not assessable as salary and the reduction claimed in the revised return is permissible. The Tribunal also noted and followed precedent holding that refunds made to comply with contractual or statutory obligations are not assessable as income.

The refund of Rs. 80,50,000 is not taxable and the deduction claimed in the revised return is allowed; the assessment authorities' disallowance is set aside.

Final Conclusion: Appeal allowed: the Tribunal set aside the CIT(A)'s order and held that the Rs. 80.5 lakh refunded pursuant to the MOU is not assessable as income in Assessment Year 2016-17 and the revised return adjustment is to be given effect.

Nature of royalty - satellite transmission services - royalty under Explanation II to section 9(1)(vi) - Article 12(3) of India - USA DTAA - not taxable in India - recurring issue and stare decisis

Satellite transmission services - nature of royalty - royalty under Explanation II to section 9(1)(vi) - Article 12(3) of India - USA DTAA - recurring issue and stare decisis - Receipts from Satellite Transmission Services are not in the nature of royalty and therefore are not taxable in India for assessment year 2019-20. - HELD THAT: - The Tribunal noted that the question whether amounts received for Satellite Transmission Services constitute 'royalty' has been a recurring issue in the assessee's case from AY 2006-07 onwards and has been consistently decided in favour of the assessee by the Tribunal and upheld by the Hon'ble Jurisdictional High Court. In the immediately preceding assessment year the Tribunal, following its prior consistent decisions and the High Court's orders, held that such receipts are not taxable as royalty. As there is no factual distinction in the present year, the Tribunal respectfully followed the coordinate Bench and the Hon'ble High Court and applied the settled view that the receipts do not fall within the ambit of royalty as contemplated by Explanation II to section 9(1)(vi) of the Act and Article 12(3) of the India-USA DTAA. Consequently, the addition treating the receipts as royalty was deleted.

Addition treating receipts from Satellite Transmission Services as royalty is deleted; such receipts are not taxable in India for AY 2019-20.

Final Conclusion: Appeal allowed; amounts received for Satellite Transmission Services are not taxable as royalty in India for assessment year 2019-20 and the addition made by the assessing authority is deleted.

Jurisdiction of Directorate of Revenue Intelligence to issue show cause notice - principles of natural justice in quasi judicial adjudication - pre deposit requirement under section 129E of the Customs Act - availability of efficacious alternative remedy by statutory appeal - power of appellate authority to remand for fresh adjudication and to accept securities in lieu of pre deposit

Jurisdiction of Directorate of Revenue Intelligence to issue show cause notice - Validity of show cause notices issued by officers of the Directorate of Revenue Intelligence - HELD THAT: - The Court applied binding authority in M/s. Cannon India Ltd. v. Commissioner of Customs and held that show cause notices issued by the DRI were invalid insofar as the DRI officers lacked the statutory entrustment as a 'proper officer' to exercise the functions under the Customs Act. The judgment in Cannon establishes that only an officer of customs specifically assigned the relevant functions by the Board or Commissioner (or functions entrusted by the Central Government under section 6) can issue such notices; a contrary delegation by the Board in the manner criticised in Cannon is invalid. The Court therefore concluded that the proceedings initiated by the Additional Director General of DRI issuing the show cause notices are prima facie without authority of law. [Paras 23]

Show cause notices issued by the DRI in these matters are prima facie invalid for want of jurisdiction as explained in M/s. Cannon India Ltd.

Principles of natural justice in quasi judicial adjudication - Whether there was a gross violation of natural justice in adjudication of the show cause notice and imposition of penalty - HELD THAT: - The Court examined service and hearing chronology and the material on record and was not convinced prima facie that there was a gross breach of natural justice. It observed that notices and personal hearing dates appear to have been served and that the petitioner did not participate in adjudication. The Court noted that issues relating to denial of cross examination and admissibility of statements under section 108/138B can be agitated and examined by the appellate/quasi judicial authorities and that cross examination is not an absolute right but depends on whether prejudice would be caused in the facts of each case. [Paras 35, 36]

No prima facie finding of a gross violation of natural justice was made; the factual and legal contentions on natural justice are to be considered in the appellate proceedings.

Pre deposit requirement under section 129E of the Customs Act - availability of efficacious alternative remedy by statutory appeal - power of appellate authority to remand for fresh adjudication and to accept securities in lieu of pre deposit - Appropriate relief in writ jurisdiction where statutory appeal with pre deposit is available but petitioner alleges inability to make pre deposit and challenges impugned orders - HELD THAT: - The Court declined to enter into the merits in writ jurisdiction because an efficacious statutory appeal remedy exists. Balancing the statutory requirement of pre deposit and the petitioner's plea of inability to pay, the Court directed that petitioners be permitted to approach the appellate authority on furnishing the pre deposit within a stipulated period. The Court authorised the appellate authority, if requested, to consider attached property or confiscated goods as adequate security for the purpose of pre deposit, if permissible under law. The appellate authority was directed to issue notice on the dedicated e mail or registered address provided and, upon appearance, to decide the appeal on merits and, if appropriate, remand for fresh adjudication or receipt of evidence. The Court expressly refrained from disturbing the original adjudication (OIO) itself and preserved the rights of parties in the appellate forum. [Paras 24, 38, 39]

Petitioners permitted to approach the appellate authority after furnishing the pre deposit within four weeks; appellate authority may consider attached property as security and may remand for fresh consideration where appropriate.

Final Conclusion: Writ relief was refused on merits; however, petitioners were permitted to pursue the statutory appellate remedy by making the requisite pre deposit within four weeks, with the appellate authority directed to consider any request to treat attached property as security and to proceed to decide the appeals or remand for fresh adjudication as appropriate, while preserving parties' rights.

Limitation for initiating revocation proceedings against a customs broker - requirement of issuance of notice within ninety days from receipt of an offence report - treatment of a subsequent show cause notice as an offence report - liability of a customs broker where it did not act for the exporters in question

Requirement of issuance of notice within ninety days from receipt of an offence report - limitation for initiating revocation proceedings against a customs broker - treatment of a subsequent show cause notice as an offence report - Whether the revocation proceedings and notice were barred by the statutory ninety-day period measured from the date of receipt of the Offence Report. - HELD THAT: - Regulation 17(1) of the Customs Brokers Licensing Regulations, 2018 (similarly Regulation 20(1) of CBLR 2013) mandates that a notice for revocation or imposition of penalty must be issued within ninety days from the date of receipt of an offence report. The court found that the DRI had forwarded the Offence Report by letter dated 16.02.2015 and that the proceedings impugned in the petition treated a later show cause notice (dated 22.10.2019) as if it were the offence report. The respondent did not dispute that the show cause notice dated 22.10.2019 arose out of the original Offence Report dated 16.02.2015. Because the notice invoking revocation was issued beyond the prescribed ninety-day period measured from 16.02.2015, the statutory time-limit for initiating revocation proceedings was not complied with and the impugned revocation could not be sustained. [Paras 21, 22, 23]

Proceedings for revocation were time-barred as the notice was issued beyond ninety days from the date of receipt of the Offence Report and therefore the revocation order cannot be sustained on that ground.

Liability of a customs broker where it did not act for the exporters in question - Whether the petitioner had acted as the Customs Broker for the exports under the offending shipping bills and thereby committed breaches warranting revocation of its licence. - HELD THAT: - The earlier decision of the Customs, Excise and Service Tax Appellate Tribunal found that the petitioner was not engaged by the exporters in respect of the impugned exports and therefore did not contravene the provisions relied upon for suspension or revocation. The respondent did not dispute those factual findings before this Court. The High Court recorded that it was undisputed that the petitioner had not acted as a Customs Broker in respect of the exports under the offending shipping bills. Given that the revocation was predicated on the petitioner having acted as broker for those shipments, and that factual premise is absent, the impugned revocation lacks foundation on merits as well. [Paras 11, 24]

The petitioner did not act as Customs Broker in respect of the offending shipments; the factual basis for revocation is therefore absent.

Final Conclusion: The petition is allowed: the impugned order revoking the petitioner's Customs Broker licence is set aside because (i) the revocation proceedings were initiated beyond the ninety-day period from the Offence Report and (ii) the petitioner in any event had not acted as Customs Broker for the offending shipments; parties to bear their own costs.

Power to relax under Rule 7A of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - drawback under Section 74 of the Customs Act, 1962 - prescribed time for filing drawback claims under Rule 5(1) - non-speaking / cryptic order - remand for fresh consideration and personal hearing

Non-speaking / cryptic order - Power to relax under Rule 7A of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - remand for fresh consideration and personal hearing - Validity of the impugned orders rejecting the petitioner's request for relaxation under Rule 7A by the first respondent. - HELD THAT: - The Court found that the impugned orders are cryptic and non-speaking because they do not record reasons for rejecting the petitioner's explanations for delay in filing the drawback claim and do not demonstrate that the first respondent considered the material placed before it. In view of the absence of reasoned consideration of the petitioner's pleaded unavoidable circumstances, the orders rejecting relief under Rule 7A cannot stand and must be quashed. The matter is remitted to the first respondent for fresh consideration on merits and in accordance with law, with a direction to give due consideration to the petitioner's written submissions dated 03.11.2022 and to afford one personal hearing before passing a reasoned final order within eight weeks from receipt of the judgment. [Paras 7, 9, 10]

Impugned orders dated 24.11.2022 quashed; matter remanded to the first respondent for fresh, reasoned consideration and one personal hearing, to be decided within eight weeks.

Drawback under Section 74 of the Customs Act, 1962 - prescribed time for filing drawback claims under Rule 5(1) - Whether the petitioner satisfies the statutory requirements for claiming drawback under Section 74 of the Customs Act, 1962. - HELD THAT: - The Court recorded that it is not in dispute that the petitioner has satisfied the statutory requirements under Section 74 for entitlement to duty drawback and that the re-exportation occurred within the period contemplated by Section 74. The sole controversy requiring fresh adjudication before the first respondent is whether the petitioner has demonstrated sufficient cause to warrant relaxation of the time limits under Rule 7A, and not entitlement under Section 74 itself. [Paras 5, 9]

Petitioner's compliance with the statutory requirements under Section 74 is accepted as not in dispute; only the claim for time-relief under Rule 7A requires fresh adjudication.

Improvement of record by respondents before the Court - non-speaking / cryptic order - Whether respondents could rely upon or improve the impugned order by placing additional documents before the High Court when the first respondent had not considered them. - HELD THAT: - The Court rejected the respondents' attempt to rely upon or supplement the record with documents in these writ petitions where the first respondent had not considered those documents in the impugned orders. Improvement of the impugned non-speaking orders by respondents before this Court was disallowed; the appropriate course directed is fresh consideration by the original authority after affording hearing and considering the material presented to it. [Paras 8]

Respondents cannot cure a non-speaking order before this Court by placing documents here; the first respondent must consider the material afresh as part of the remand.

Final Conclusion: The writ petitions are allowed in part: the impugned non-speaking orders rejecting Rule 7A relief are quashed and the matter is remitted to the first respondent for fresh, reasoned consideration of the petitioner's written submissions and evidence, after affording one personal hearing; final orders to be passed within eight weeks. No costs.

Refund of Extra Duty Deposit - unjust enrichment - provisional assessment and Extra Duty Deposit paid pending SVB proceedings - application under Section 27 of the Customs Act - limitation - effect of appellate order and duty to give effect to orders of appellate authority - exclusion of limitation period pursuant to Supreme Court orders in Suo Motu Writ Petition (Civil) No.3 of 2020 - entitlement to interest on delayed refund

Application under Section 27 of the Customs Act - limitation - effect of appellate order and duty to give effect to orders of appellate authority - The respondent mischaracterised the petitioner's written request dated 22.07.2022 as a fresh application under Section 27 and rejected it as time barred; the request was a continuation of the original refund application filed on 19.02.2019 and therefore not barred by limitation. - HELD THAT: - The Court recorded that the petitioner had originally filed an application for refund of EDD on 19.02.2019 which was partly rejected by an order dated 20.06.2019. The Commissioner (Appeals) subsequently set aside that rejection by order dated 09.04.2021. The petitioner's communication of 22.07.2022 was a request to give effect to the appellate order and to process the existing refund application, not a new application under Section 27. Treating the 22.07.2022 communication as a fresh, time barred application ignored the continuance of the original proceedings and the natural consequence of the appellate order, and was therefore legally unsustainable. [Paras 11, 12, 15]

The impugned finding that the 22.07.2022 request was a fresh application barred by limitation was set aside; the request was to give effect to the earlier application and appellate order.

Unjust enrichment - provisional assessment and Extra Duty Deposit paid pending SVB proceedings - The Commissioner (Appeals) correctly accepted the petitioner's contention that refund of EDD could not be denied on the ground of unjust enrichment once the appellate authority set aside the rejection; the respondents' reliance on unjust enrichment as a bar to the refund was not sustained in the appellate order and required processing of the refund claim. - HELD THAT: - The factual matrix-imports assessed provisionally with EDD paid pending SVB valuation proceedings-led to the petitioner's claim that EDD was a deposit and the doctrine of unjust enrichment did not defeat refund once the valuation proceedings concluded favourably. The Court noted that the Commissioner (Appeals) accepted this contention and directed grant of the refund. Having accepted the appellate decision, the authorities were bound to process the original refund claim in accordance with that decision rather than advance the unjust enrichment objection anew in a manner that nullifies the appellate direction. [Paras 6, 7, 12]

The appellate acceptance that the refund could not be denied on unjust enrichment ground stands and the refund claim must be processed accordingly.

Exclusion of limitation period pursuant to Supreme Court orders in Suo Motu Writ Petition (Civil) No.3 of 2020 - obligation of authority to act notwithstanding applicants' failure to cite binding Supreme Court orders - The respondent's contention that the petitioner failed to quote the Supreme Court orders excluding the COVID period from limitation was unfounded; authorities are bound to apply such Supreme Court directions even if applicants do not cite them, and the question of quoting those orders therefore did not justify rejection. - HELD THAT: - The respondent argued that the petitioner had not referred to the Supreme Court's order excluding 15.03.2020 to 28.02.2022 for computing limitation. The Court rejected this ground, holding that authorities are aware of and bound to apply the Supreme Court's directions and cannot insist that applicants must necessarily quote those orders to avail their benefit. Consequently, failure to cite the Supreme Court order did not furnish a valid legal basis to reject the petitioner's request. [Paras 13, 16, 17]

The reliance on the petitioner's failure to quote the Supreme Court orders did not justify rejection; the exclusion applies and the respondents cannot require applicants to invoke those orders.

Refund of Extra Duty Deposit - entitlement to interest on delayed refund - The respondent was directed to process the petitioner's refund claim forthwith in accordance with the appellate order and to consider entitlement to interest in accordance with law. - HELD THAT: - Given that the appellate order set aside the earlier denial of refund, the Court held that the natural and necessary consequence was for the authority to process the original refund application without further delay. The Court therefore set aside the impugned order and directed the respondents to give effect to the appellate direction within a specified short timeframe, also leaving open the question of interest to be determined in accordance with statutory and legal entitlement. [Paras 18, 19]

The impugned order was set aside; respondents directed to process the refund within two weeks and to consider interest as per law.

Final Conclusion: The writ petition is allowed. The order rejecting the petitioner's request to process the refund of Extra Duty Deposit was set aside; the authority is directed to process the original refund application and give effect to the appellate order within two weeks and to consider entitlement to interest in accordance with law.

Penalty under Customs law for representative of person in charge of conveyance - Vicarious liability of steamer agent under section 148 of the Customs Act, 1962 - Effect of setting aside primary adjudication on ancillary penalties - Waiver of pre deposit and procedural consequences under section 129E / restoration of appeal

Penalty under Customs law for representative of person in charge of conveyance - Effect of setting aside primary adjudication on ancillary penalties - Vicarious liability of steamer agent under section 148 of the Customs Act, 1962 - Whether the penalty imposed on the appellant, as steamer agent and representative of the person in charge of the conveyance, could be sustained after the Tribunal set aside the confiscation and duty findings against the principal noticees. - HELD THAT: - The Tribunal recognised that a steamer agent assumes responsibility under section 148 of the Customs Act, 1962 for compliance with chapter VI. However, the adjudicating authority's findings of confiscation and duty liability arising from misuse of ship stores and bunkers - which formed the substantive basis for invoking penalty under section 112 - had been set aside by the Tribunal in the appeals of the principal noticees. Once the primary findings of wrongdoing and consequent duty liability and confiscation ceased to stand, the justificatory foundation for imposing the penalty on the appellant also ceased. The Tribunal therefore concluded that there was no scope for sustaining the penalty against the representative when the underlying adjudication that generated the liability had been effaced, and on that basis set aside the impugned order and allowed the appeal. [Paras 8, 9]

Impugned order imposing penalty set aside and appeal allowed because underlying findings of confiscation and duty liability were set aside, removing basis for penalty on the representative.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned penalty order against the steamer agent, holding that where the primary adjudication imposing duty liability and confiscation on the principal has been set aside, the ancillary penalty against the representative cannot be sustained.

Title and transfer of immovable property - effect of unregistered instruments on conveyance - bona fide purchaser for value without notice - effect of restraint orders in winding up proceedings - control of assets by the Official Liquidator in winding up - reliance on a committee report as a determinative fact-finding

Title and transfer of immovable property - effect of unregistered instruments on conveyance - reliance on a committee report as a determinative fact-finding - The appellant has not acquired any right, title or interest in the property. - HELD THAT: - The Court accepted the Company Court's findings that title to the subject land never vested in Cogent Ventures (India) Ltd. because there was no registered document conveying any part of the subject land to it. The One Man Committee, appointed by the Company Court, rejected Cogent Ventures' claim and recorded that the documents did not disclose amounts spent or the physical work executed; Cogent Ventures did not challenge that report. The appellant's claimed derivation of title from Cogent Ventures therefore fails. The Agreement of Sale cum General Power of Attorney relied upon by the appellant does not itself convey title, and in any event could not cure Cogent Ventures' lack of title. The appellant's alleged payment through banking channels and possession, without a registered conveyance or successful challenge to the Committee's findings, did not establish a right in the property. [Paras 21, 22, 23, 25, 27]

Applications claiming title in favour of the appellant are without merit and are dismissed.

Effect of restraint orders in winding up proceedings - control of assets by the Official Liquidator in winding up - bona fide purchaser for value without notice - The property is under the control of the Official Liquidator and registrations or dealings in violation of the Company Court's restraint orders cannot confer rights on the appellant. - HELD THAT: - Winding up proceedings over the JVG companies resulted in appointment of a Provisional Liquidator and thereafter the Official Liquidator; the control of all assets vested with the Official Liquidator. The Company Court had passed restraint orders preventing registration of transfers relating to the subject survey numbers without its permission and directed notices on site to warn potential purchasers. Registration of documents in breach of those orders would not confer rights. The Official Liquidator had taken steps, including issuing notices to the appellant to vacate, and the learned Company Court rightly disbelieved the appellant's claim of ignorance of the restraint and protective steps taken by the Official Liquidator. [Paras 15, 17, 18, 24, 26]

The Official Liquidator's control over the subject land is upheld and the appellant cannot derive rights by registration or possession contrary to the Court's restraint orders.

Final Conclusion: The appeals are dismissed and the Company Court's order rejecting the appellant's applications is affirmed; all pending applications are disposed of.

Power of administrator to write down Additional Tier 1 (AT-1) bonds - effect of notified reconstruction scheme under Section 45 of the Banking Regulation Act, 1949 - timing requirement for activation of pre-specified trigger and point-of-non-viability under Clause 2.15 of the Master Circular and Clause 57 of the Information Memorandum - statutory flavour of contractual terms incorporating Master Circular and maintainability of writ under Article 226 - scope of Master Circular issued by RBI as having statutory recognition

Power of administrator to write down Additional Tier 1 (AT-1) bonds - effect of notified reconstruction scheme under Section 45 of the Banking Regulation Act, 1949 - timing requirement for activation of pre-specified trigger and point-of-non-viability under Clause 2.15 of the Master Circular and Clause 57 of the Information Memorandum - Whether the Administrator was competent to write down the AT-1 bonds after the Final Reconstruction Scheme came into force on March 13, 2020 and whether the write-down on March 14, 2020 was intra vires - HELD THAT: - The Court held that the Final Reconstruction Scheme came into force on March 13, 2020 and, by operation of Section 45(8) and (9), the bank stood reconstituted on that date. Clause 57 of the Information Memorandum and Clause 2.15 of the Master Circular indicate that the write-down/conversion pursuant to a reconstitution must be effected before the bank is reconstructed (i.e., prior to the appointed date). The Final Scheme, as sanctioned by the Central Government, did not contain the draft provision for automatic write-off of AT-1 bonds; that clause had been deleted after consideration of objections. Once the scheme came into force, the Administrator could not, on March 14, 2020 (after reconstitution), take the policy decision to write down the AT-1 bonds nor act beyond the authority conferred by the Final Scheme. The administrator therefore exceeded his powers by writing off the AT-1 bonds post-reconstitution, and the communication of March 14, 2020 recording that write-down is legally unsustainable. [Paras 86, 90, 95, 97]

The Administrator exceeded his authority in writing down the AT-1 bonds after the Final Reconstruction Scheme came into force on March 13, 2020; the write-down effected on March 14, 2020 is set aside.

Statutory flavour of contractual terms incorporating Master Circular and maintainability of writ under Article 226 - scope of Master Circular issued by RBI as having statutory recognition - Whether the writ petition under Article 226 was maintainable against contractual clauses in the Information Memorandum which are derived from the RBI Master Circular - HELD THAT: - The Court accepted that clauses of the Information Memorandum are drawn from and based upon the RBI Master Circular, which is issued under statutory powers and has statutory recognition. Where a contract incorporates statutory terms prescribed by a statute or statutory instrument, that contractual arrangement acquires a statutory flavour for the limited purpose of judicial review. In that light, challenges to the exercise of rights said to flow from such clauses are amenable to writ jurisdiction under Article 226. Consequently, the petitioners were entitled to invoke the extraordinary jurisdiction of the High Court to challenge the Administrator's action. [Paras 81, 100]

The writ petition is maintainable because the contractual clauses relied upon are based on the statutory Master Circular and thus admit judicial review under Article 226.

Final Conclusion: The communication dated March 14, 2020 and the decision to write off the Additional Tier 1 bonds are quashed and set aside; the order leaves open any further action permissible in law, and the Court's operative order is stayed for six weeks.

Principles of natural justice - opportunity of hearing - Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - moratorium - order of NCLAT - remand for fresh consideration - keeping assessment proceedings in abeyance

Principles of natural justice - opportunity of hearing - Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - Whether the impugned assessment order violated principles of natural justice by not granting a personal hearing as requested under Section 75(4) of the TNGST Act, 2017. - HELD THAT: - The Court found on the material on record that the petitioner had made a written request for personal hearing in its replies but no personal hearing was afforded in the impugned assessment proceedings. Section 75(4) requires that an opportunity of hearing be granted where such a request in writing is received or an adverse decision is contemplated. Failure to grant the requested personal hearing amounted to violation of the principles of natural justice. Consequently, the impugned assessment order could not stand and required quashing and remittance for fresh consideration after affording a personal hearing. [Paras 20, 21, 22]

Impugned assessment order quashed for violation of natural justice; matter remanded for fresh consideration after affording a personal hearing.

Moratorium - order of NCLAT - remand for fresh consideration - Whether the respondent failed to consider the petitioner's contention that the NCLAT order dated 15.10.2018 (claimed to be akin to a moratorium) precluded continuation of assessment proceedings. - HELD THAT: - The Court recorded that the petitioner had relied upon the NCLAT order and had raised this contention in its replies, but the assessing authority did not consider that contention in the impugned assessment order. The High Court did not express any view on the merits of whether the NCLAT order is equivalent to a moratorium under Section 14 of the IBC; instead the matter was remitted to the respondent to examine and decide the petitioner's contention on merits. The remand is for fresh consideration of that specific contention and any consequential determination required in accordance with law. [Paras 18, 19, 22]

Contention regarding the NCLAT order not considered by the respondent; issue remanded to the respondent for fresh consideration on merits.

Keeping assessment proceedings in abeyance - Whether the assessment proceedings should be kept in abeyance pending the outcome of the petitioner's reliance on the NCLAT order. - HELD THAT: - The Court rejected the petitioner's request to direct that assessment proceedings be kept in abeyance. It held that the question of abeyance is for the respondent to decide after considering the petitioner's contention regarding the NCLAT order. The Court directed the respondent to afford a personal hearing and pass a reasoned final order within twelve weeks from receipt of the judgment. [Paras 23]

Request to keep proceedings in abeyance rejected; respondent to consider abeyance issue and pass final orders after personal hearing within twelve weeks.

Remand for fresh consideration - Whether consequential recovery notice issued pursuant to the quashed assessment order should stand. - HELD THAT: - Because the impugned assessment order was quashed and remanded for fresh consideration, the consequential recovery notice arising from that order was also quashed. The matter therefore requires fresh adjudication by the respondent consistent with the directions to afford personal hearing and consider the petitioner's contentions, including any claim based on the NCLAT order. [Paras 22, 24]

Consequential recovery notice quashed in view of quashing of the impugned assessment order; matter to be reconsidered afresh.

Final Conclusion: The impugned assessment order is quashed for breach of natural justice and remitted to the assessing authority for fresh consideration on merits after affording a personal hearing; the request to keep proceedings in abeyance was declined and the consequential recovery notice is quashed. The respondent is directed to pass final orders after hearing the petitioner within twelve weeks.

Resolution Plan binding effect - pre-approval claims filed prior to CIRP - statutory dues as secured creditors - power to set aside attachment orders - remand for fresh consideration

Pre-approval claims filed prior to CIRP - Resolution Plan binding effect - Whether the impugned order dated 10.02.2021 of the Adjudicating Authority setting aside attachment orders should be upheld or set aside in light of the facts that the Income Tax Department filed Form B claims prior to approval of the resolution plan and the terms of the approved resolution plan - HELD THAT: - The Appellate Tribunal examined that the Income Tax Department had placed claims by filing Form B dated 14.11.2017 for the two assessment years which were outstanding prior to admission of CIRP and that the Resolution Professional had communicated about those claims and treated them as contingent liabilities. The Tribunal noted decisions of the Supreme Court emphasising that resolution plans must meet statutory requirements and that statutory dues of the Government may constitute secured claims which cannot be ignored. On the basis that these relevant facts and the ratio in State Tax Officer v. Rainbow Papers Limited (supra) were not considered by the Adjudicating Authority while passing the impugned order, the Tribunal concluded that the impugned order could not stand without rehearing the parties and taking those aspects into account. [Paras 19]

Impugned order dated 10.02.2021 is set aside; matter remitted to the Adjudicating Authority for fresh consideration after hearing the parties and in light of the Rainbow Papers ratio and the facts regarding the pre-CIRP claims.

Statutory dues as secured creditors - power to set aside attachment orders - remand for fresh consideration - Whether the Adjudicating Authority should be directed to reconsider the attachment and related reliefs after treating the Government dues as statutory/secured claims and applying the Supreme Court's observations - HELD THAT: - The Tribunal observed that the dues in question are government dues and, applying the Supreme Court's reasoning in the Rainbow Papers judgement, such dues may amount to secured claims which the resolution plan and adjudicating process must address. Because the Adjudicating Authority did not consider these facts and the cited Supreme Court authority, the Tribunal directed that the Adjudicating Authority hear both parties afresh, consider the factual position (including that Form B was filed prior to approval of the plan and payments already made under the plan), and pass fresh orders expeditiously. The Tribunal thereby remitted the dispute for fresh adjudication rather than deciding the substantive entitlement on the merits itself. [Paras 19]

Matter remitted to the Adjudicating Authority with directions to hear the parties and pass fresh orders considering that the dues are government/statutory claims and the Rainbow Papers ratio.

Final Conclusion: The NCLAT set aside the NCLT order of 10.02.2021 and remitted the matter to the Adjudicating Authority for fresh consideration of the Income Tax Department's pre CIRP claims and the applicability of the Supreme Court's decision in the Rainbow Papers case; parties to be heard and fresh orders passed expeditiously. No order as to costs.

Liability to pay Interim Resolution Professional's fees - non-speaking order - remand for fresh consideration - opportunity of hearing before adjudicating authority - Regulation 33 (expenses of Interim Resolution Professional to be fixed by applicant and reimbursed by committee)

Liability to pay Interim Resolution Professional's fees - Regulation 33 (expenses of Interim Resolution Professional to be fixed by applicant and reimbursed by committee) - opportunity of hearing before adjudicating authority - Whether the appellant can be held liable to pay the IRP's fee and whether the Adjudicating Authority's ex-parte, non-speaking order directing payment should stand - HELD THAT: - The Tribunal examined whether the Adjudicating Authority correctly directed the appellant to pay the IRP's fee notwithstanding that the appellant's claim was not admitted by the IRP and the CoC consisted of financial creditors. The Tribunal found that the Adjudicating Authority's order was cryptic and non-speaking and did not take into account the material facts and contentions placed on record by the appellant. In view of the absence of reasons and the appellant's non-representation before the Adjudicating Authority, the matter requires fresh consideration on merits after affording the appellant an opportunity of hearing. The Tribunal therefore set aside the impugned order and restored I.A. No. 851(AHM)2021 for fresh decision by the Adjudicating Authority, directing that a speaking order be passed after hearing the parties and considering the relevant facts, including the effect of Regulation 33 and the position taken by the IRP regarding the appellant's claim. [Paras 11, 12, 13]

Impugned order set aside; I.A. No. 851(AHM)2021 restored and remanded to the Adjudicating Authority for fresh adjudication after affording opportunity of hearing and passing a speaking order.

Final Conclusion: Appeal allowed; the cryptic ex-parte order directing payment of the IRP's fee is set aside and the application for payment is remitted to the Adjudicating Authority to be decided afresh after hearing the appellant and passing a speaking order.

Extended period of limitation - reverse charge liability for services received from a foreign service provider - payment of service tax prior to levy - benefit under Section 73(3) of the Finance Act, 1994 - penalty under service tax law - normal period demand with interest

Extended period of limitation - payment of service tax prior to levy - Indian National Shipowners - Demand for service tax for the extended period prior to levy set aside - HELD THAT: - The Tribunal found that the question of taxability of reverse charge on services received from a foreign service provider was not free from doubt and had been the subject of authoritative decision in Indian National Shipowners. The appellant had paid service tax even for periods prior to the date of levy and had filed ST-3 returns declaring the payments. In these circumstances the Tribunal held that demand for the extended period (earlier period) is not sustainable and set aside the same. Having considered the appellant's reliance on the position that taxability was unsettled and noting the payments and returns filed, the Tribunal allowed relief in respect of the extended period demand.

Extended period demand set aside; demand for extended period held not sustainable.

Benefit under Section 73(3) of the Finance Act, 1994 - payment of service tax prior to show cause notice - Reliance on Section 73(3) and prior payment justified relief from extended period demand - HELD THAT: - The appellant contended that since the entire service tax along with interest was paid prior to issuance of the show cause notice, benefit under Section 73(3) should apply and penalties should not follow. The Tribunal accepted this position for the purposes of setting aside the demand for the extended period and noted the earlier payment of tax and interest. On this basis the extended period demand was set aside and the Tribunal declined to impose penalties in the facts and circumstances of the case.

Appellant entitled to relief under Section 73(3) in the circumstances; penalties set aside.

Normal period demand with interest - payment of service tax - Demand for the normal period (if any) sustained, with interest - HELD THAT: - The Tribunal clarified that while demands relating to the extended period were set aside, any demand relatable to the normal period remains sustainable. The Tribunal therefore modified the impugned order to the extent of deleting extended period demands but upheld the demand for the normal period, directing that it be sustained along with interest.

Normal period demand sustained; interest to be paid as applicable.

Jurisdiction - taxability - reverse charge liability for services received from a foreign service provider - Jurisdictional competence and substantive taxability not decided and left open - HELD THAT: - The Tribunal expressly refrained from considering the merits on jurisdiction and taxability after deciding the limitation and payment issues. Having set aside the extended period demand and addressed the consequences of prior payments, the Tribunal did not adjudicate the contested questions regarding which Commissionerate had jurisdiction to issue the show cause notice or whether the arrangement amounted to taxable franchise service on reverse charge. Those matters were therefore not decided by the Tribunal in this order.

Jurisdiction and taxability left undecided; not considered in this order.

Final Conclusion: The appeal is partly allowed: demands raised for the extended period are set aside and penalties are deleted in the facts and circumstances; demands, if any, in respect of the normal period are sustained with interest. Questions of jurisdiction and substantive taxability were not decided.

Exemption for services consumed wholly within Special Economic Zone - substitution of notification with retrospective effect - refund route versus direct exemption for SEZ supplies - non-chargeability of supplies to SEZ under the SEZ Act

Substitution of notification with retrospective effect - exemption for services consumed wholly within Special Economic Zone - refund route versus direct exemption for SEZ supplies - non-chargeability of supplies to SEZ under the SEZ Act - Whether service tax demand on services provided to a SEZ unit for the period 03.03.2009 to 20.05.2009 is sustainable in view of amendments to the exemption notification and the SEZ Act. - HELD THAT: - The Tribunal found that Notification No. 9/2009-ST (dated 03.03.2009) was amended by substitution through Notification No. 15/2009-ST (dated 20.05.2009) wherein sub paragraph (c) was substituted to provide that services consumed wholly within the SEZ are exempt without requiring the refund route. The substitution of the earlier sub paragraph is an amendment by way of substitution and, therefore, operates retrospectively from the date of the original notification; consequently the substituted sub paragraph (c) applies to services rendered between 03.03.2009 and 20.05.2009. Applying that substituted provision, the appellant's erection, commissioning and installation services, being wholly consumed in the SEZ, fall within the exemption. Independently and without prejudice, the Tribunal held that under the SEZ Act supplies of goods and services to a SEZ unit or developer are not chargeable to duty or service tax; accordingly, even if the notification route were irrelevant, such supplies to the SEZ would not be taxable. Reliance placed on earlier Tribunal decisions supporting refund/exemption where services are received and consumed within SEZ was noted and followed. On these grounds the service tax demand, interest and penalties as confirmed in the impugned order were held unsustainable. [Paras 4, 5]

Demand of service tax in respect of services provided to authorised operations of the SEZ for the period 03.03.2009 to 20.05.2009 set aside; appeal allowed.

Final Conclusion: The impugned order confirming service tax, interest and penalties on services provided to the SEZ during 03.03.2009 to 20.05.2009 was set aside on the ground that the substituted provision of the exemption notification applies retrospectively to exempt services consumed wholly within the SEZ, and alternatively because supplies to SEZ units are not chargeable to service tax under the SEZ Act; appeal allowed.

Interest on delayed refund - commencement of interest under the DVAT Act - application of the explanation to Section 42 of the DVAT Act - laches and delay in seeking judicial remedy - extension of limitation by Suo Motu Writ Petition (Civil) No.3 of 2020

Interest on delayed refund - commencement of interest under the DVAT Act - application of the explanation to Section 42 of the DVAT Act - entitlement to interest on the refund of excess tax withheld for the fourth quarter of the year 2013-14 and the period from which such interest is payable - HELD THAT: - The court accepted that the petitioner was entitled to the refund of excess tax and that a return (and revised return) constitutes an application for refund to be processed by the authorities. Relying on the statutory scheme as elucidated in IJM Corporation Berhad, the court recorded that interest under the DVAT Act is payable where a refund is not paid within the statutory period and that the explanation to Section 42 excludes periods of delay attributable to the assessee. There was no material to show the petitioner was responsible for any part of the delay. The parties agreed, and the court directed, that interest shall commence from two months after 15.01.2015 (i.e., after the revised return) and continue up to the date of actual refund, to be computed in accordance with law.

Petitioner entitled to interest on the withheld refund for the fourth quarter of 2013-14, to be computed from two months after 15.01.2015 until the date of refund.

Laches and delay in seeking judicial remedy - extension of limitation by Suo Motu Writ Petition (Civil) No.3 of 2020 - whether delay on the part of the petitioner in approaching the court disentitled it to interest on the refund - HELD THAT: - The court rejected the respondent's contention that the petitioner's belated filing disentitled it to interest. The Supreme Court decision invoked by the respondent (concerning limitation in service matters) was found inapplicable. The court noted endemic delays by the DVAT authorities in processing refunds and observed the petitioner had received notices and could not be expected to approach the court immediately after the default assessment. Further, the court directed exclusion of the two-year period up to 28.02.2022 pursuant to the Supreme Court's suo motu orders extending limitation. In these circumstances the court concluded that the petitioner's delay did not preclude the grant of interest.

Petitioner's delay in approaching the court does not disentitle it from claiming interest; period of limitation extension is to be excluded when computing any relevant limitation.

Final Conclusion: The petition is disposed of by directing the respondents to process the petitioner's claim for interest in accordance with law, interest to be computed from two months after 15.01.2015 until the date of refund; respondents are further directed to take expeditious steps to process pending refund claims.