TaxTMI Updates e-Newsletter
Feb 12,2025

Challenge to assessment order in Form GST DRC-07 - challenge on various grounds, including the ground that the said proceedings did not contain a DIN number - HELD THAT:- A Division Bench of this Court in the case of M/s. Cluster Enterprises Vs. The Deputy Assistant Commissioner (ST)-2, Kadapa [2024 (7) TMI 1512 - ANDHRA PRADESH HIGH COURT], on the basis of the circular, dated 23.12.2019, bearing No.128/47/2019-GST, issued by the C.B.I.C., had held that non-mention of a DIN number would mitigate against the validity of such proceedings.

Another Division Bench of this Court in the case of Sai Manikanta Electrical Contractors Vs. The Deputy Commissioner, Special Circle, Visakhapatnam [2024 (6) TMI 1158 - ANDHRA PRADESH HIGH COURT], had also held that non-mention of a DIN number would require the order to be set aside.

In view of the aforesaid judgments and the circular issued by the C.B.I.C., the non-mention of a DIN number in the order, which was uploaded in the portal, requires the impugned order to be set aside.

This Writ Petition is disposed of setting aside the impugned proceedings, dated 17-10-2024 issued by the 1st respondent, with liberty to the 1st respondent to conduct fresh assessment, after giving notice and by assigning a DIN number to the said order.

Permissibility under Rule 86A of the Orissa Goods and Services Tax Rules, 2017 - appropriating future input tax credit (ITC) by inserting a negative balance in the electronic credit ledger - HELD THAT:- Reference made to Laxmi Fine Chem [2024 (5) TMI 509 - TELANGANA HIGH COURT] regarding view taken on initiation of appropriate recovery proceedings, as otherwise the blocking will automatically come to an end after a period of one year, thereby making available to the dealer to debit in the electronic ledger on availing available therein, input tax credit. Thus, the blocking serves purpose of being security for revenue on recovery.

Petition disposed off.

Challenged the Order passed that the petitioner had filed only reply, Not supported by materials or invoices - Defects found in monthly return - Issued show notice - Petitioner ready and willing to pay the disputed tax - HELD THAT:- Following the recent judgment delivered by this Court in the case of M/s. K. Balakrishnan, Balu Cables vs. O/o. the Assistant Commissioner of GST & Central Excise [2024 (6) TMI 713 - MADRAS HIGH COURT]. Additionally, petitioner is ready and willing to pay 25% of the disputed tax and that he may be granted one final opportunity before the adjudicating authority to put forth their objections to the proposal, to which, the learned Government Pleader appearing for the respondent does not have any serious objection.

Thus, the writ petition stands disposed of on the following terms.

The impugned order is set aside.

Seizure of cash from the premises by the officers attached to the GST Department of the State in the course of proceedings initiated under Section 74 of the CGST/SGST Act - HELD THAT:- There are force in the submissions of the learned Senior counsel for the appellants that the initial seizure of cash from the premises of the appellant being illegal, the continued retention of it by the GST Department of the State, and the handing over of the cash to the Income Tax Department, cannot be seen as legal acts merely because the money was now handed over to the Income Tax Department pursuant to a requisition sent by them under Section 132A of the IT Act. The initial seizure of the cash by the GST Department was blatantly illegal since it was without the authority of law. This salutary principle that prevents the expropriation of property or tax from a citizen without the authority of law finds expression in Articles 265 and Article 300A of the Constitution of India.

Conclusion - There are no hesitation to hold that the cash amount seized from the premises of the appellants cannot be retained either by the GST Department of the State or the Income Tax Department prior to a finalisation of respective proceedings initiated by them.

Appeal disposed off.

Setting aside assessment order - pre-deposit of disputed tax - verification and adjustment of pre-deposit - treatment of assessment order as show cause notice - remand for fresh adjudication - lifting of provisional attachments on compliance - restoration of order on non-compliance - affording opportunity of hearing

Setting aside assessment order - pre-deposit of disputed tax - Impugned order dated 22.08.2024 was set aside subject to deposit of 25% of the disputed taxes. - HELD THAT: - By consent the High Court set aside the assessment order and directed the petitioner to deposit 25% of the disputed tax within four weeks from receipt of the order. The court accepted the parties' agreement that payment of 25% would be the condition for granting further adjudicatory opportunity and for interim relief from recovery measures. The direction to deposit was made with provision for adjustment of amounts already recovered or pre-deposited towards the 25% figure. [Paras 6]

Impugned order set aside on condition that petitioner deposits 25% of disputed taxes within four weeks, with prior payments adjusted against that sum.

Verification and adjustment of pre-deposit - time-bound compliance and intimation - Procedure and timeline for verification of prior payments, intimation of balance, and completion of payment compliance were prescribed. - HELD THAT: - The assessing authority was directed to verify amounts already recovered or paid and to intimate the balance (if any) to the petitioner within one week of receipt of the order; the petitioner was to pay any remaining sum within three weeks of such intimation. The entire verification and intimation exercise was to be completed within four weeks from receipt of the order, ensuring time-bound adjustment and compliance. [Paras 6]

Assessing authority to verify payments, intimate balance within one week, and complete the verification/intimation process within four weeks; petitioner to pay any remaining balance within three weeks of intimation.

Lifting of provisional attachments on compliance - restoration of order on non-compliance - Provisional recovery measures including bank attachments were to be lifted upon compliance with the deposit condition; failure to comply would result in restoration of the impugned order. - HELD THAT: - The court directed that any bank account attachments or garnishee proceedings would be lifted/withdrawn once the petitioner complied with the payment condition. Conversely, non-compliance with the deposit direction within the stipulated period would lead to restoration of the impugned assessment order. This balanced interim relief with a clear sanction for failure to meet the condition. [Paras 6]

Attachments to be lifted on compliance with payment; impugned order to be restored if petitioner fails to deposit 25% within the prescribed time.

Treatment of assessment order as show cause notice - remand for fresh adjudication - affording opportunity of hearing - On deposit of 25%, the impugned assessment order would be treated as a show cause notice and the matter remanded for fresh consideration after the petitioner files objections; respondent to consider objections and pass orders after affording hearing. - HELD THAT: - The court directed that upon compliance with the deposit condition the assessment order will be treated as a show cause notice. The petitioner must submit objections with supporting material within four weeks of receipt of the order; if objections are filed, the respondent must consider them and pass orders in accordance with law after giving a reasonable opportunity of hearing. The court made clear that failure either to comply with the deposit requirement or to file objections within the stipulated period would result in restoration of the assessment order, thus remanding the matter for fresh adjudication contingent on compliance. [Paras 6]

Upon payment of 25% and filing of objections within four weeks, the assessing authority shall reconsider the case treating the assessment as a show cause notice and decide after hearing; failure to comply or file objections results in restoration of the order.

Final Conclusion: Writ petition disposed of by setting aside the assessment order for assessment year 2019-20 on conditions: petitioner to deposit 25% of disputed tax (with prior payments adjusted) within prescribed timelines, attachments to be lifted on compliance, and the assessment order to be treated as a show cause notice for fresh adjudication after petitioner files objections; non-compliance will restore the impugned order.

Reassessment under section 147 - assessment under section 144 - penalty under section 271(1)(c) - credit of tax deducted at source - deduction under section 80C - dismissal for non-prosecution - opportunity of hearing - remand for fresh adjudication

Dismissal for non-prosecution - Form 35 - opportunity of hearing - Ld. CIT(A) erred in dismissing the appeal for non-prosecution on the ground that Form 35 and related documents were not filed - HELD THAT: - The Tribunal found the CIT(A)'s observation that the assessee had not filed Form 35 and grounds of appeal to be incomprehensible and without substance, noting that the assessee produced copies of Form 35 and statement of facts before the Tribunal with an acknowledgement dated 05.03.2024. Having regard to the material placed on record, the First Appellate Authority's dismissal for non-prosecution on the stated ground could not be sustained and required setting aside so that the appeal process can continue with due opportunity to the assessee to be heard. [Paras 8]

CIT(A)'s order dismissing the appeal for non-prosecution on the ground of non-filing of Form 35 is set aside.

Reassessment under section 147 - assessment under section 144 - credit of tax deducted at source - deduction under section 80C - remand for fresh adjudication - Whether the assessment made under section 144 read with section 147 was sustainable without allowing TDS credit and eligible deductions - HELD THAT: - The assessee had not filed ROI and AO proceeded to make assessment under section 144 based on amounts shown in Form 26AS, but did not grant credit of TDS appearing in Form 26AS nor consider claimed deductions under section 80C. The Tribunal noted the documented existence of TDS reflected in Form 26AS and found perversity in the AO's omission to allow the legitimate TDS credit and eligible deductions. In the interest of substantial justice and after observing that the assessee should be afforded reasonable opportunity to place evidence and submissions, the Tribunal set aside the impugned assessment and restored the matter to the file of the AO for verification and fresh adjudication allowing consideration of TDS credit and deductions as per law. [Paras 7, 8, 9]

Assessment is set aside and restored to the file of the AO for fresh adjudication after verification and after giving the assessee opportunity to produce evidence for TDS credit and deductions.

Penalty under section 271(1)(c) - consequential relief - remand for fresh adjudication - Whether the penalty order under section 271(1)(c) could be sustained independently when the quantum assessment is set aside and remanded - HELD THAT: - The Tribunal held that the penalty appeal is consequential to the quantum assessment. Since the assessment has been set aside and remanded for fresh adjudication, the appellate order confirming penalty cannot stand independently. Accordingly, the Tribunal set aside the CIT(A)'s order on the penalty and restored the matter to the AO so that penalty, if any, may be considered afresh in the light of the re-assessed facts and any TDS credit or deductions admitted on reconsideration. [Paras 11]

Penalty order is set aside and the matter remanded to the AO for reconsideration consequent to the remand of the assessment.

Final Conclusion: Appeals are partly allowed for statistical purposes: the CIT(A) order dismissing the appeal is set aside; the assessment under section 144/147 is set aside and restored to the AO for fresh adjudication allowing verification of TDS credit and section 80C deductions with opportunity to the assessee; the penalty matter being consequential is likewise set aside and restored to the AO.

Addition on-money receivedon sale of flats / units -modus operandi - extrapolation on the basis of loose papers found during the course of search - evidential value - incriminating documents as well as evidences collected during the course of search and survey action -addition made by the Assessing Officer and sustained by the Ld. CIT(A) being on guesswork and surmises - employee whose statement was recorded joined the service in 2018 whereas the addition has been made for a period prior to his joining the services - None of the employees in whose handwriting the diary maintained was found was either questioned or examined.

HELD THAT:- The decision of Hon’ble Bombay High Court in the case of Harish Textile Engrs. Ltd. vs. DCIT [2015 (11) TMI 287 - BOMBAY HIGH COURT] relied on by the Ld. CIT-DR is concerned, we find in that case the extrapolation on the basis of loose papers found during the course of search was upheld by the Hon’ble Bombay High Court. However, it is seen that the assessee in that case has accepted that it has received on-money whereas in the instant case the director / partner of the assessee firm has completely denied to have received any such on-money. Further, neither he was confronted subsequently nor any of the buyers / customers who are identifiable were examined/confronted either by the Investigation Wing during the course of search or post-search enquiries or by the Assessing Officer at the time of assessment proceedings. So far as the decision of Hon'ble Supreme Court in the case of Pooran Mal vs. Director of Inspection [1973 (12) TMI 2 - SUPREME COURT] is concerned, there is absolutely no dispute to the fact that evidences can be used but the same has to be corroborated.

In the present case, the managing partner of the assessee firm has denied to have received any such on-money and no further questions were asked either to the managing partner or to any of the customers to whom the flats / shops have been sold and who were identifiable.

We are of the considered opinion that extrapolation cannot be made on account of receipt of on-money for sale of shops in respect of which no evidence was found during the course of search and no enquiry or investigation was conducted either by the search party during the course of search or post-search enquiries or by the AO during the course of assessment proceedings.

Since in the instant case, admittedly, not a single question was put to Mr. Subhash Goel about the statements of the employees and the incriminating documents which relate to the sale of pent house has actually not been sold, most of the flats were sold to the persons other than the persons whose names were appearing in the loose sheets towards sale of the said very flats and the buyers are unrelated parties and since the Ld. CIT(A) in the case of other partner of the joint venture has already deleted the addition on account of such on-money received on sale of flats in the project Ganga Acropolis, we are of the considered opinion that no addition is called for in the hands of the assessee. Accordingly, the addition made by the AO for assessment year 2017-18 being share of the assessee on account of extrapolation is deleted. Decided in favour of assessee.

Reopening of assessment u/s 147 - independent application of mind v/s borrowed satisfaction - Addition u/s 68 - AO merely reproduced the report of ADIT (Inv.) and came to the conclusion that income had escaped assessment - HELD THAT:- In the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd.[2017 (5) TMI 1428 - DELHI HIGH COURT] held that mere reproduction of Investigation report in reasons recorded initiation of reassessment proceedings u/s 148 is illegal in the absence of link between tangible material and formation of belief that income has escaped assessment.

The crucial link between information made available to the AO and the formation of belief was absent. The reasons to believe recorded were not reasons but only conclusions and a reproduction of the conclusion in the Investigation Report received from the ADIT (Inv.) and held it to be a borrowed satisfaction.

In the case on hand also AO merely reproduced the report of ADIT (Inv.) and came to the conclusion that income had escaped assessment. To justify this action he also noted that in the return filed by the assessee for the AY 2012-13 the assessee has reported income from other sources only to the extent of Rs. 6,10,072/-. However, the return filed by the assessee clearly show that apart from income from other sources of Rs. 6,10,072/- the assessee had exempt income of Rs. 15,26,571/- which was completely ignored by the Assessing Officer.

Reopening of assessment in this case merely based on report of the ADIT (Inv.) without making any independent enquiry by the AO is nothing but borrowed satisfaction.

Even on merits also the creditor’s bank statements and the confirmation, PAN details, etc. show that all these transactions were made through banking channels and the assessee had repaid the credits through banking channels. Therefore, the credits in the bank cannot be assessed as unexplained credits. Appeal of the assessee is allowed.

Reopening of assessment -Assessment carried out without issuing any notice u/s 143(2) -Treating credits in the account of the assessee as income of the assessee from unexplained sources - HELD THAT:- The assessment order in this case is totally cryptic. Even though the assessment order has been passed u/s 144 of the Act still, AO was supposed to discuss as to the relevant transactions and should have also correlate the same with the books of account of the assessee as well as bank account of the assessee and should have mentioned at least as to from whom the assessee has received the unexplained cash credits etc.

Even the most peculiar point is that on identical reasons, the assessment for assessment year 2012-13 was reopened, however, in the assessment order, no additions were made on this issue. Even the assessee had duly filed objections in this respect but the Assessing Officer failed to decide the objections and passed the impugned cryptic assessment order - reopening of the assessment in this case was bad in law and the same is liable to be quashed on this score alone. Even on merits, the impugned additions are not sustainable.

No notice u/s 143(2) has been issued before passing the impugned assessment order - DR could not bring out any evidence on the file to show that any notice u/s 143(2) of the Act was ever issued to the assessee. The assessee having duly taken the aforesaid plea that no notice u/s 143(2) of the Act was issued to the assessee and there is a complete silence about it in the assessment order, which duly proves that no notice u/s 143(2) of the Act has ever been issued to the assessee in this case.

The Hon’ble Supreme Court in the case of ‘ACIT vs. Hotel Blue Moon’ [2010 (2) TMI 1 - SUPREME COURT] held that the issue of notice u/s 143(2) is sine qua non to assume jurisdiction to proceed with the assessment in a case. The assessment carried out without issuing any notice u/s 143(2) of the Act in such cases will be bad in law.

Assessee appeal allowed.

Revision u/s 263 - lack of enquiry and consequently non-disallowance of unaccounted purchases made in cash of Rs. 5,83,99,000/- by not invoking the provision of section 40A(3) - HELD THAT:- AO has framed assessment after considering the seized material which depicts that cash sales made by assessee AO estimated the profit rate after considering the facts of the case that the ledger account named MT &01 Chintu Capital found during the search on JBL Group of cases mixed the transaction relating to various parties which include assessee.

It means that the cash payment of different transactions mentioned in seized ledger are trading receipts which was carried during the course of business and as such only the gross profit on unaccounted sales/purchases can be added as taxable income of the assessee. The AO has rightly added the same and there is no further scope of disallowance by invoking the provisions of section 40A(3) of the Act.

Even, Amman Steel & Allied Industries [2015 (11) TMI 395 - MADRAS HIGH COURT] has considered the same issue and ratio laid down that the addition made u/s 40A(3) of the act is faulted for the reason that the AO himself has estimated the income by estimating the gross profit.

AO, while completing assessment has taken one of the view which is plausible one, as taken by various High Courts, as noted above, that once profit is estimated on purchases, no disallowance can be resorted to by invoking the provisions of Section 40A(3) of the Act. In our view, this is the only possible view.

But, if we consider that there are two views possible, even then, the revision proceedings u/s 263 of the Act cannot be initiated. If two views were possible and when the AO has accepted one of the view which is a plausible one, it is not appropriate on the part of the PCIT to exercise his power u/s 263 of the Act solely on the ground that apart from estimating profit, the AO has to invoke provisions of Section 40A(3) of the Act.

As held in the case of Malabar Industrial Co. Ltd.[2000 (2) TMI 10 - SUPREME COURT] and Vimgi Investment P. Ltd. [2007 (2) TMI 176 - DELHI HIGH COURT] once a plausible view is taken, it is not open to the PCIT to exercise the power u/s 263 of the Act.

As in the present case the AO, after considering the facts of unaccounted purchases made by the assessee in cash has estimated the profit rate, the PCIT wants revision of the same under Section 263. Whether the PCIT is right in directing the AO to invoke the provisions of Section 40A(3) for making disallowances of cash purchases.

Provisions of section 40A(3) of the Act cannot be invoked in the given facts and circumstances of the present case for the reason that the AO himself has estimated the profit rate on the cash purchases made by assessee. Once cash purchases are estimated by applying gross profit rate and income is taxed, no further disallowance u/s 40A(3) of the Act is possible.

The reason for the same is that when income of the assessee is computed applying flat gross profit rate and when no deduction is allowed in regard to the purchases of the assessee, there is no need to invoke the provisions of section 40A(3).

We also noted above that it is clear from the facts of the case that on the date when PCIT passed revision order u/s 263 of the Act, the view taken by the AO while framing assessment was in consonance with the view taken by various High Courts as noted above - Appeals of the Assessee are allowed.

Validity of assessment u/s 153A on mechanical and consolidated approval of 153D - HELD THAT:- Considering the fact that the Ld. ACIT accorded the approval u/s 153D of the Act on the very same day wherein consolidated single approval has been granted for different Assessment Years and on the very same day of according the sanction, the assessment orders were passed, thus by following the ratio laid down in the case of SEH Realtors Pvt. Ltd.[2024 (7) TMI 1562 - ITAT DELHI] we allow the Additional Grounds of Appeal of the respective Appeal challenging the assessment order which was framed based on the invalid approval accorded u/s 153D of the Act. Assessee appeal allowed.

Receipt of on-money for sale of shops - loose papers found during the course of search and statements recorded of sales manager relied upon - case the extrapolation on the basis of loose papers found during the course of search - HELD THAT:- A perusal of the statement so recorded shows that after denial of Shri Anuj Goel regarding the receipt of any on-money from any of the customers, no effort has been made by the Revenue to confront Shri Anuj Goel regarding the discrepancies found between two forms. We further find none of the persons to whom the shops/flats were sold have ever been examined by the search party during the course of search or post-search enquiry or by the Assessing Officer during the course of assessment proceedings. It is also an admitted fact that nothing is brought on record to show that any of the buyer to whom the flats have been sold are related to the assessee.

We find the Hon’ble Madras High Court in the case of CIT vs. S. Khader Khan Son [2007 (7) TMI 182 - MADRAS HIGH COURT] has held that section 133A of the Act does not empower any ITO to examine any person on oath. Therefore, the statement recorded u/s 133A of the Act has no evidentiary value and any admission made in such statement cannot be made the basis for addition.

Hon’ble Kerala High Court in the case of Paul Mathews & Son vs. CIT [2003 (2) TMI 25 - KERALA HIGH COURT] has held that the provisions of section 133A of the Act does not empower any ITO to examine any person on oath and the statement recorded u/s 133A of the Act has no evidentiary value.

So far as the question of extrapolation for three assessment years is concerned, as stated earlier, neither the key person Shri Anuj Goel was confronted in his statement u/s 132(4) of the Act regarding the receipt of on-money nor any of the customers to whom the shops have been sold were either examined by the search party at the time of search or post-search enquiries nor any effort was made by the Assessing Officer to ascertain the sale of shops at higher price to the concerned buyers. It is also an admitted fact that no cash or valuables or any entry relating to any other expenditure out of such on-money was found during the course of search. Under these circumstances, we are of the considered opinion that addition for all the 3 years by extrapolating is not justified.

In the instant case the director/partner of the assessee firm has completely denied to have received any such on-money. Neither he was confronted subsequently nor any of the buyers/customers who are identifiable were examined/confronted either by the Investigation Wing during the course of search or post-search enquiries or by the AO at the time of assessment proceedings.

So far as the decision of Hon'ble Supreme Court in the case of Pooran Mal vs. Director of Inspection [1973 (12) TMI 2 - SUPREME COURT] there is absolutely no dispute to the fact that evidences can be used but the same has to be corroborated.

We are of the considered opinion that extrapolation cannot be made on account of receipt of on-money for sale of shops in respect of which no evidence was found during the course of search and no enquiry or investigation was conducted either by the search party during the course of search or post-search enquiries or by the AO during the course of assessment proceedings. Thus, the grounds raised by the assessee are partly allowed for all the three years.

Validity order u/s 250 - TDS u/s 194C or 194I - payment of External Development Charges (‘EDC’) - demand u/s 201(1)/201(1A) - change the provision of law on which the assessment was made - order on Section 194C instead of Section 194I thereby changing the provision of law of the transaction basis which assessment/verification was concluded while passing the impugned order.

HELD THAT:- As per the provision of Section 251 of the Act, the powers of CIT(A) in the Appeal filed under section 250 of the Act are co-terminus with that of the AO, due to which CIT(A) has power of enhancement of assessment and penalty and can also reduce the amount of refund which AO also can do.

The said power can be exercised by the CIT(A) only when there is an existence of enforceable order of the AO and which should have been impugned before the CIT(A).

When there is no existence of the Order of the AO, which has been quashed by the Hon'ble High Court, the question of exercising the power confirmed under section 251 of the Act doesn’t arise. In the present case the Ld. CIT(A) directed the AO to re-compute the demand raised considering the applicability of TDS rate of 2% as per Provisions of Section 194C of the Act by sitting on the Judgment of the Hon’ble Jurisdiction High Court wherein the Hon’ble High Court has quashed the very order of the AO dated 25/03/2022.Thus, Ld. CIT(A) committed grave error in directing the A.O. to re-compute the demand. Appeal of the Assessee is allowed.

Validity of assumption of jurisdiction u/s 147 - reasons to believe or reason to suspect - cash deposits unexplained - HELD THAT:- AO did not have any material with him much less tangible material to form a belief that income of the assessee had escaped assessment in respect of cash deposits made in Nainital Bank Account. Hence, reopening of assessment deserved to be quashed on this count itself.

Even though no return of income has been filed by the assessee still the fact of cash deposits made in the bank account could merely reflect “reason to suspect” and cannot be by any stretch of imagination directly become “reason to believe” for the AO.

The assessee having not filed his return of income regularly and having made cash deposit in the bank account which is beyond the maximum amount not chargeable to tax, may be subjected to fall within ambit of “reason to suspect”.

But such suspicion of the AO should have to be converted into “reason to believe” pursuant to AO making preliminary enquiries by way of issuance of notice u/s 142(1) to the assessee calling for return of income or calling for explanation for cash deposit prior to issuance of notice u/s 148 of the Act.

This procedure was admittedly not followed by the AO in the instant case. Hence, the fact of cash deposits made by the assessee, in our considered opinion, would only result in “reason to suspect” and not “reason to believe”. It is trite law that no assessment could be reopened merely on the basis of “reason to suspect”. Assessee appeal allowed.

Addition u/s 68 - advances received from its holding company -onus to prove the identity, creditworthiness and genuineness of the transaction -admission additional evidences - HELD THAT:- Since the relevant information is already submitted by the assessee in the form of additional evidences before the CIT (A) which CIT(A) has failed to acknowledge the same. In the result, we are inclined to allow the above claim made by the assessee.

Inventory list, which is listed at Item No.3 the assessee has submitted that these are additional costs incurred by the assessee which assessee has inadvertently listed as separate item of inventory which is otherwise should have been apportioned. Since this requires certain verification we deem it fit and proper to remit this issue back to the file of AO with limited direction to verify the correctness of the claim of the assessee.

Addition made u/s 68 observed that the assessee has received advances from its holding company for purchase of the abovesaid lands and invested the funds received from its holding company in the inventories and the inventories were actually acquired by the assessee in FY 2005-06, 2006-07 & 2007-08 and assessee has carried on the above inventories until the current assessment year without there being any movement.

Since the funds were invested in earlier assessment year and also assessee has shown the source of the above funds, there is no requirement for initiation of section 68 under the present circumstances.

We observed that the transaction under consideration is made by the assessee section 68 cannot be invoked - Decided in favour of assessee.

Validity of Assessment order u/s 153A - absence of incriminating material found during the search - HELD THAT:- By respectfully following the ratio laid in the case of Abhisar Buildwel [2023 (4) TMI 1056 - SUPREME COURT] considering the fact that no incriminating materials/documents or any other evidence was found or seized during the course of search proceedings which resulted in additions against the Assessee, we find merit in appeal of the Assessee. Accordingly, we quash the assessment order and the order of the Ld. CIT(A).

Validity of assessment u/s 153A - Mechanical approval granted u/s 153D - HELD THAT:- The department could hardly dispute in this factual backdrop that the foregoing learned prescribed authority had approved the AO’s section 153D proposal vide common note on 27.03.2014 in a mechanical manner without giving due consideration to the entire search/scrutiny records enclosed therewith.

We accordingly quote cases Shiv Kumar Nayyar [2024 (6) TMI 29 - DELHI HIGH COURT], Anuj Bansal [2024 (7) TMI 852 - SC ORDER] and MDLR Hotels (P.) Ltd. . [2024 (8) TMI 1138 - DELHI HIGH COURT] to quash the impugned assessment framed by AO in assessee’s case u/s 153A of the Act for this precise reason. Assessee appeal allowed.

Characterization of receipt - rental income earned - taxable under the head house property or profit and gains from business and professions - HELD THAT:- We find that the main business of the assessee is manufacturing and trading of carpets, and rental income is only a side activity.

The contention of the ld. counsel for the assessee that since the assessee has been offering the rent received to tax under the head house property since 2007, the rule of consistency has to be followed in the income tax proceedings unless there are compelling/convincing reasons for deviating from the view consistently being held, has substance.

Nothing has been brought on record by the A.O. or the ld DR before us to prove that there is any variation in the facts of the case as compared to the earlier or subsequent years wherein the rental income has been assessed to tax under the head House Property. We are therefore, of the considered view that since there is no change in the facts of the case, the rule of consistency applies in accordance with case of Radhaswami Satsang [1991 (11) TMI 2 - SUPREME COURT]

Thus, no infirmity in the well-reasoned order of the ld. CIT(A) holding that the rental income is to be taxed under ‘Income from House Property”. Decided against revenue.

Addition u/s 68 - bogus share capital and share premium - Identity, genuineness and creditworthiness of the shareholders not proved - CIT(A) deleted addition - HELD THAT:- Assessing Officer made the addition u/s 68 of the Act even though the assessee has submitted the relevant details and claims in respect of identity of the shareholder, confirmation from the shareholder, bank statement and statement of affairs as well as ITR from the shareholder.

CIT(A) correctly deleted the addition by observing that the AO has failed in his duty since neither it had done any further enquiry nor he had asked the assessee to substantiate its claim by submitting documents such as bank statement of Saroj Devi and Tilak Raj and other relevant details of these persons. He deleted the addition by observing that as far as assessee is concerned, assessee has submitted all the relevant documents and also proved the source of source of the amount invested in the assessee’s company as share capital as required by the amended provisions of section 68 of the Act. After considering the facts on record, we do not see any reason to disturb the abovesaid findings. Accordingly, ground no.i raised by the Revenue is dismissed.

Assessee has taken unsecured loan from 9 parties - CIT (A) came to the conclusion that assessee has proved the conditions imposed u/s 68 that assessee has found identity, creditworthiness and genuineness of the transactions. Further, he observed that the Assessing Officer has merely rejected the submissions of the assessee on the basis of doubt without bringing any material to discredit the document or information on record. Further he observed that the provisions of section 68 of the Act as existed at that point out time there is no requirement of proving the source of source in the case of loan transactions. Accordingly, he deleted the addition made by the Assessing Officer.

We are not inclined to disturb the findings of the ld. CIT (A). Accordingly, ground no.ii(a) is dismissed.

Addition of interest expenses on unsecured loan u/s 68 - Since we have already deleted the addition made by the Assessing Officer on unsecured loan, we are not inclined to allow the same. Accordingly, ground no.ii(b) raised by the Revenue is dismissed.

Disallowance of interest made by way of reduction in WIP, it is also relating to disallowance of interest expenditure - Since we have already deleted the addition on unsecured loan, this interest expenditure also allowed.

Addition u/s 14A read with Rule 8D based on the investment which has yielded the exempt income during the year - CIT (A) partly allowed the ground raised by the assessee on the basis of exempt income i.e. dividend received by the assessee from the investment which has actually yielded exempt income. He came to the conclusion on the basis of decision of JSW Energy Limited [2015 (5) TMI 823 - BOMBAY HIGH COURT] and Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] After considering the factual matrix in this case, we observed that ld. CIT (A) has rightly applied the provisions of section 14A read with Rule 8D by relying on the settled position of law. Accordingly, ground no.iii is dismissed.

Admission of additional evidences by the CIT (A) without seeking remand report from the AO - we observed that u/s 250(4) of the Act, the Commissioner (Appeals) has power to dispose off any appeal after making such an enquiry as he thinks fit or he was given reference option in case he thinks proper to remand the issue back to the Assessing Officer. Therefore, Commissioner (Appeals) has power to make such call. Further we observed that Rule 46A(4) gives right to the Commissioner (Appeals) to direct the production of any document or examination any witness to enable him to dispose off the appeal and also having power to enhancement of the assessment or penalty. Therefore, the above provisions and rule gives ample power to CIT (A) to make the call and it is not necessary that he has to remand the matter back to the Assessing Officer, it is only an additional power of reference given to him. Therefore, we are inclined to dismiss ground no.iv raised by the Revenue.

Assessment u/s 153A beyond the limitation period - HELD THAT:- In the given case, the search was conducted on 1.12.2018. The relevant searched assessment year is AY 2019-20. Therefore, the relevant AYs for the purpose of 4th Proviso would be, 7th year –AY 2013-14, 8th year –AY 2012-13 and 9th year - AY 2011-12. The argument of the Ld AR that the year under consideration is the only year falls within the ambit of 4th proviso of section 153A is not correct, also the escapement of income exceeding 50 lakhs covers the period of 7th year to 10th year, it has to be seen covering all the years from 7th to 10th year. The arguments of the Ld AR are not acceptable considering the facts on record.

Document found during the search - We observe that the document found in the search contains the details of cheque transactions and even the assessee has submitted that this relates to Farm related details for which it was submitted that this is out of agriculture income. This shows that the cheque payments were not disputed and transactions described in the loose sheets were explained by the assessee, therefore, the loose sheets cannot be termed as dumb documents as submitted by the Ld AR relying on case of V.C.Shukla [1998 (3) TMI 675 - SUPREME COURT] and reliance of on the case of Sunil Kumar Sharma [2024 (2) TMI 116 - KARNATAKA HIGH COURT] Hence, the submissions of the Ld AR on the aspect of quality of the loose papers found during the search as dumb documents cannot be accepted.

Addition u/s 69A - The onus is on the assessee to explain the nature of income as reflected in the loose sheets captioned as Farm Account which was seized. This was not properly explained by the assessee. The details found in sheets shows that the funds pertaining to Farm account without specifically mentioning the nature of transactions thereon. Hence the cash transactions reflected thereon become undisclosed income in the hands of the assessee for AY 2011-12.

But it is pertinent to note that these amounts which are treated as undisclosed income of the assessee would be available as a cash source for explaining the future investments or outgoings. In view of the above discussion, the findings of the AO that the funds invested in the Farm House is not justified and the funds spent and involved in the Farm Account shows that the assessee has generated funds which can be considered as undisclosed money u/s 69A.Therefore, we hold that only the addition of undisclosed money earned by the assessee could be taxed in the facts and circumstances of the case as unexplained money u/s 69A.

Treatment of cash found during the search - cash found during the search was the main item found in the locker along with the details of loan given to various parties - HELD THAT:- We observe that the assessee has declared the cash found during the search as additional income in his return of income and also submitted the information and source of the same.

AO also acknowledged the same and it was submitted that the assessee was handling the cash for commission from various persons, however, the AO himself rejected the same and treated the cash found and transactions carried on by the assessee as business. Since the assessee himself declared the above cash as additional income and explained the nature of transactions, the fact is that the assessee whether maintained the cash for a fees or as treated by the AO as assessee’s own cash and meant for financial transactions, it clearly indicate that the cash found during the search is relating to the business carried by the assessee.

Therefore, the addition can be made as income under the head income from business or profession and not under the head income from other sources. Hence it cannot be treated as income falling within the nature of section 68, 69 to 69D of the Act so as to apply the tax rate prescribed in section 115BBE.

Addition based on the loose papers found during search operation - CIT(A) sustained the actual transaction of Rs. 86,00,000/- instead of Rs. 1,75,00,000/- As assessee has maintained transactions meticulously and mentioned the transaction amounts in lakhs. However, some entries found wherein it was mentioned in numbers as 20, 10 & 25 without there being clear information and also there is no details of the persons to whom such amounts were given. If it is in lakhs definitely, it would have formed part of the transactions. Therefore, we are inclined to accept the findings of the ld. CIT (A) and accordingly ground raised by the Revenue is dismissed.

Coming to the ground raised by the assessee, after considering the nature of transactions and information available on record, we observe that these are financial transactions made by the assessee which corroborates with various information available on the material found during search, therefore, we are inclined to sustain the above addition. Accordingly, ground no.1(b) raised by the assessee is dismissed.

Addition u/s 68 - addition of peak credit - HELD THAT:- Material available on record is a running account sheet maintained by the assessee for the purpose of deposit and removal of cash in the locker. Since it is a running account, the AO has taken only the total receipts which are mentioned on the left hand side and treated the same as undisclosed income u/s 68 - The approach of the AO cannot be accepted.

The information found during the search has to be appreciated the way it is maintained, the transactions contained are receipts as well as payment and it carried the closing balance of the respective dates. Therefore, we are inclined to accept the findings of the ld. CIT (A) that it is a running account and only peak credit has to be considered for addition. Accordingly, we are inclined to accept the findings of the CIT (A).

Issue of cheques which was found in the possession of the assessee which are not encashed - Unless the cheques are encashed or acted upon, the transaction is not complete. The cheques are issued meant for transaction and if it is not acted upon then the relevant paper may be live but it has no transaction value until it is transacted. Mere guarantee for giving loan also has to be established by making proper investigation. As observed by the Ld CIT(A), the AO has not made any investigation further, therefore, the mere presence of blank cheque without there being any evidence to show that the assessee has earned any income or made capital transaction with the presence of above cheques, the same cannot be treated income of the assessee.

Adjustment of cash found during the search with the tax demand raised after completion of the assessment - No doubt the cash was found during search and the assessee also declared the same as additional income in his return of income and it is a fact on record that the tax liability was determined only after completion of assessment on 25.09.2021. Ld. CIT (A) rejected the submissions of the assessee. However, in our considered view, the cash was lying with the Revenue from the date of search and the tax liability no doubt determined only after completion of the assessment, therefore, from that date of determination of the tax liability, the tax credit may be given to the assessee. Accordingly, we direct the Assessing Officer to determine the charging of interest u/s 234B after making the above adjustment on the date of determining the tax liability on completion of the assessment on 25.09.2021

Classification of imported goods - Joss Powder for usage in their finished goods known as Jigged Powder - to be under Chapter sub-heading 1211 9029 as against the Appellant’s claim that the product was classifiable under 4401 30 00 or not - it was held by CESTAT that 'There are no proper evidence being brought in by the Customs Department to adopt new classification under CET 12119029, particularly when even the Test Reports obtained from CRL do not support the view of the Department.'

HELD THAT:- No case is made out for interference with the impugned order.

The Appeals are, accordingly, dismissed.

Summary order. Appeals dismissed for gross inordinate delay (220 days) as not satisfactorily explained; impugned order not interfered with and appeals dismissed on merits. Pending applications disposed of.

Issuance of SCN issued by the Director General of Foreign Trade (DGFT) u/s 14 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) and subordinate law thereunder - Essar availed of the benefits under the Foreign Trade Policy 2004-2009 (FTP) by furnishing information, making declarations and relying on certificates, that were allegedly wrong - HELD THAT:- A careful scrutiny of the Impugned SCN shows that it does not allege any mis-statement other than the assertion by Essar that the SFIS File was in conformity with the SFIS. Such an approach in the Impugned SCN is directly in the teeth of the DB Judgement, and is completely untenable.

There are no hesitation in holding that the Impugned SCN is covered by res judicata, and is unreasonable and arbitrarily attempts to re-open an issue already closed. The Recovery Notices having been quashed, the Impugned SCN is a circumvention of the effect of such quashing.

Petition disposed off.

Requirement of show cause notice before confiscation and penalty - oral show cause notice only by conscious and informed waiver - right to personal hearing as facet of natural justice - invalidity of standard printed waiver forms - release of detained goods where show cause notice not issued within statutory period - detention contrary to law where statutory notice and hearing absent - administrative review of detention/release forms and procedures by CBIC - storage charges to be borne by person from whom goods detained

Requirement of show cause notice before confiscation and penalty - oral show cause notice only by conscious and informed waiver - right to personal hearing as facet of natural justice - invalidity of standard printed waiver forms - Whether the printed standard form signed by the petitioner could be treated as an oral show cause notice and as a valid waiver of written SCN and personal hearing in compliance with the statutory requirement. - HELD THAT: - The Court held that the printed request form, which records a triple waiver (that an oral SCN has been received, that no written SCN is wanted and that personal hearing is waived), cannot be treated as compliance with the statutory requirement. A waiver of the right to a written notice or personal hearing must be a conscious and informed declaration; a traveller signing a standard printed form cannot be expected to effect such an informed waiver. Section 124 permits an oral SCN at the request of the person concerned, but such a waiver must be in the form of a proper, conscious declaration and even then an opportunity of hearing ought to be afforded. Reliance on a pre-printed blanket waiver thus violates principles of natural justice and cannot be held to constitute service of a valid SCN. [Paras 13, 14, 16, 17, 19]

Printed standard waiver cannot be treated as an oral show cause notice or as a valid waiver of written SCN and personal hearing; therefore no valid SCN was deemed issued.

Release of detained goods where show cause notice not issued within statutory period - detention contrary to law where statutory notice and hearing absent - storage charges to be borne by person from whom goods detained - administrative review of detention/release forms and procedures by CBIC - Whether the detention and subsequent Order-in-Original are sustainable in the absence of a valid show cause notice and hearing, and what relief and administrative directions follow. - HELD THAT: - Applying the principle that confiscatory action cannot be taken without compliance with the notice and hearing requirements, and noting precedent that goods must be released if no SCN is issued within the prescribed period, the Court concluded that the detention was contrary to law and the impugned Order-in-Original (dated 29.11.2024) was unsustainable. Consequential relief was granted by setting aside the Order-in-Original and directing release of the detained goods. The Court imposed that storage charges be borne by the petitioner. Additionally, the Court directed that the matter be placed before CBIC for review and revision of detention receipts, request-for-appraisal forms and related procedures to ensure compliance with natural justice and prescribed procedure for issuance of SCNs after detention. [Paras 18, 19, 20, 21, 23]

Order-in-Original set aside; detained goods released to petitioner; petitioner to bear storage charges; matter referred to CBIC to review and revise forms and procedures.

Final Conclusion: The Court held that the pre-printed waiver-form did not satisfy the statutory and natural justice requirements for service of a show cause notice; absent a valid SCN and hearing the detention and ensuing Order-in-Original were set aside, the detained goods were ordered released (storage charges to be borne by the petitioner), and CBIC was directed to review and amend the relevant forms and procedures.

Smuggling - Direction to respondent to release the Gold ornaments inappropriately seized by the respondent officials - Whether the Baggage Rules, 2016, are ultra vires the Customs Act, 1962, particularly concerning the inclusion of articles "carried on the person"? - violation of principles of natural justice - HELD THAT:- The real fact is that all the jewels were worn by the petitioners at the time of arrival. But the same not been stated in the confiscation notice, which was issued based on the falsely created Mahazar, wherein it was stated as if it was concealed under the sleeves and brought illegally by the petitioner.

Therefore, the falsification of the records, such as preparation of the Mahazar, stands confirmed by virtue of reflecting the false informations in the confiscation orders. Based on their own statement, they had clearly proved that the Mahazar was prepared with false information, in order to, fix the petitioners into the case for ulterior notice for the reasons better known to them. This Court suspects that the officials have orchestrated this entire episode in order to divert the attention of the others for the benefit of somebody else.

When the provision of the Rule is beyond the scope of the provisions of the Act, only the provision of the Act will prevail over the Rules. Thus, the word “carried on the person up to Rs. 50,000/-” is clearly beyond the scope of the Act and it cannot be given any effect since it is contrary to the provisions of the Statute. Thus, it has to be construed only for the articles, which have not been mentioned in Annexure-1 and carried in the accompanied baggage of a passenger. In such case, the application of Baggage Rules, 2016, would not arise. Thus, the jewelery worn by the passenger will not fall within the provisions of the Baggage Rules, 2016.

The Doctrine of ultra vires states that the Rule making body must function within the purview of the Rule making authority conferred on it by the parent Act. As the body of making rules or regulations, there is no inherent power of its own to make rules, but such power arise only from the Statute and hence, it must necessarily function within the purview of the Statute - In the present case, the Rule making body had made the Baggage Rules as if they are having inherent power of its own to make rules beyond the scope of the Statutes, and they have incorporated the word “carried on the person”.

Since this Court has held that the provision “as carried on the person” of the Baggage Rules, 2016 is ultra vires, the detention of gold under the Baggage Rules, 2016, in the present case would not apply, unless and otherwise if it is secreted in person, for which, the proceedings shall be initiated under Section 101 of the Customs Act, 1962, however, that is not the present case, except to the extent of false charges framed by the officials against the petitioner.

Conclusion - i) The confiscation orders were passed without issuing the show cause notice; ii) No proper opportunity of personal hearing was provided to the petitioner prior to the passing of confiscation orders; iii) Since the Mahazar was prepared with false information to foist a false case against the petitioners, the confiscation orders were also passed, as an ex parte order, with the false information available in the said Mahazar. iv) The manner, in which the jewellery was brought by the petitioners, as stated in the Mahazar is that it was brought under the sleeve, however, in the affidavit, it was clearly stated that the petitioners worn the jewellery at the time of arrival. Due to the said contradiction of the respondent, it is clear that there was a change in the stand of the respondents with regard to the manner, in which the gold was carried by the petitioners, from proceedings to proceedings.

This writ petition is allowed and the confiscation orders dated 24.04.2024 is quashed. The respondents are directed to release the goods of the petitioners within a period of 7 days from the date of receipt of copy of this order.

Maintainability of petition - availability of alternative remedy of appeal before the Appellate Authority before approaching the Court under Article 226 of the Constitution of India - principles of natural justice - HELD THAT:- Even litigant has a statutory remedy of appeal before the Appellate Authority, in that event in the ordinary course writ is not maintainable with certain exceptions, one of the exceptions is violation of principles of natural justice. Insofar as providing principle of natural justice is concerned, it is available in the statute namely sub-section (4) of Section 75 of Central Goods and Services Tax Act, 2017. Reading of the aforementioned statutory provision, it is crystal clear that before passing any adverse order an opportunity shall be provided to such person against whom adverse orders are likely to be passed.

The respondents submitted that before passing impugned order show cause notice has been issued insofar as proposed adverse order passed. Assuming that show cause notice was issued in respect of adverse order, insofar as paragraph no. 5.0 of the impugned order, in that event there is no reference in the impugned order insofar as issuance of show cause notice and so also seeking petitioner’s explanation. Assuming that show cause notice was issued in that event there should have been a statement by the author of the impugned order dated 19.03.2024 to the extent that show cause notice was issued on a particular date, however, petitioner has failed to furnish his reply. In the absence of such material one has to draw inference that impugned order dated 19.03.2024 is in violation of sub-section (4) of Section 75 of Central Goods and Services Tax Act, 2017.

Conclusion - The impugned order was in violation of the principles of natural justice as outlined in Section 75(4) of the Act.

Matter is remanded to the concerned authority to proceed in accordance with law, such exercise shall be completed within a period of six months from the date of receipt of this order, after adherence to the respective provisions - Petition allowed by way of remand.

Seeking grant of bail - smuggling of currency notes of U.S. Dollars - violation of provisions of section 77 of the Customs Act, 1962 and Foreign Exchange Management Regulations, 2000 and Foreign Exchange Management Act, 1999 - HELD THAT:- The applicant was intercepted by the D.R.I. officials at CCS International Airport, Lucknow and from the other co-accused persons, the gold bullion was recovered, whereas the applicant is connected with the present matter as the D.R.I. is said to be collected the evidence of conversations in between Ratnesh Pandey, one of the co-accused person and the present applicant, but, the fact remains that there is no strong evidence that in consonance with the conversations, any transaction has ever been done or the D.R.I. has failed to place any evidence that those conversations were specifically with respect to the offence, which is said to be committed.

Though, it has been held by the Hon'ble Apex Court in the case of Romesh Chandra Mehta Vs State of West Bengal [1968 (10) TMI 50 - SUPREME COURT] that the custom officers are not the police officers and the statement recorded under section 108 of the Act,1962, is admissible in evidence, though there seems to be no quarrel regarding the same, whereas the further issue is that can the statement of an accused recorded under section 108 of the Act,1962, blindly be accepted without any corroboration of other evidences? Infact, the admissibility of an evidence is one aspect of the matter and the conviction can lead only on the basis of the confessional statement recorded under section 108 of the Act,1962 is the other aspect of the matter and the answer would be no.

This court is of the opinion that the confessional statement of an accused recorded under section 108 of the Act, 1962, cannot blindly be accepted unless it is corroborated by any independent evidence/material as the same would not lead to conviction. The examination of confessional statement of the accused is essentially required so as to find out that the same is not taken under coercion or under extraneous influences. The trial court has also to be conscious enough while examining the correctness and voluntariness of the nature of the statement of the accused.

Conclusion - Considering the submissions of learned counsel of both sides, nature of accusation and severity of punishment in case of conviction, nature of supporting evidence, prima facie satisfaction of the Court in support of the charge, reformative theory of punishment and considering larger mandate of the Article 21 of the Constitution of India and, without expressing any view on the merits of the case, this is found to be a fit case of bail.

Bail granted subject to fulfilment of conditions imposed - Bail application allowed.

Transaction value - rejection of declared value under Valuation Rule 12 - sequential application of Valuation Rules 3 to 9 - valuation on the basis of similar goods under Valuation Rule 5 - self-assessment and reassessment under Section 17 - requirement of evidence to justify declared value

Transaction value - rejection of declared value under Valuation Rule 12 - requirement of evidence to justify declared value - The propriety of rejecting the declared transaction value and reassessing value where the importer did not furnish evidence and contemporaneous imports showed significantly higher values. - HELD THAT: - The Tribunal upheld the Deputy Commissioner's rejection of the declared transaction value under Valuation Rule 12 after the proper officer, exercising powers under Section 17(4) of the Act, sought supporting material through the ICES system and received no substantiating evidence. Valuation Rule 12 permits rejection where the proper officer has reasonable doubt about the truth or accuracy of the declared value and, following such rejection, Rule 3(1) ceases to apply so that valuation proceeds sequentially under Rules 4 to 9. The record showed the declared unit value was significantly lower than contemporaneous assessed values of similar imports; in the absence of any response or documentary justification from the appellant, the rejection was justified and the reassessment validly proceeded on alternative valuation rules. [Paras 3, 5, 10, 11, 16]

The rejection of the declared transaction value under Valuation Rule 12 and consequent reassessment was lawful and is upheld.

Valuation on the basis of similar goods under Valuation Rule 5 - sequential application of Valuation Rules 3 to 9 - Whether valuation could be determined by reference to contemporaneous imports of similar goods (Valuation Rule 5) where identical goods were not available. - HELD THAT: - The Deputy Commissioner found no contemporaneous imports of identical goods (Rule 4), and therefore applied Valuation Rule 5 to determine value by reference to similar goods. The Tribunal accepted that approach: where Rule 4 cannot be applied because identical goods are absent, valuation must proceed to Rule 5 and may be based on contemporaneous imports of similar goods. The 15 Bills of Entry relied upon constituted contemporaneous imports of similar copper scrap birch/cliff and satisfied the requirement for application of Rule 5. [Paras 5, 12, 13, 16]

Valuation by reference to contemporaneous imports of similar goods under Valuation Rule 5 was appropriate and correctly applied.

Transaction value - rejection of declared value under Valuation Rule 12 - Whether proof of a fabricated invoice or a relationship between buyer and seller is necessary before rejecting the declared value. - HELD THAT: - The Tribunal rejected the appellant's contention that the invoice must be shown to be fake or that buyer-seller relatedness must be established before rejection. Valuation Rule 12 does not require proof of fraud or related-party relationship; it requires only that the proper officer have reasonable doubt about the declared value based on enumerated indicia (for example, significantly higher values for identical or similar goods). Consequently, absence of evidence of fabrication or relatedness does not preclude rejection where reasonable doubt exists and no justification is furnished. [Paras 15]

It is not necessary to prove a fake invoice or related-party transaction before rejecting the declared value; reasonable doubt alone suffices.

Classification of scrap under ISRI standards - valuation on the basis of similar goods under Valuation Rule 5 - Whether different consignments of copper scrap can be treated as similar goods for valuation purposes. - HELD THAT: - The Tribunal held that scrap is classified according to ISRI standards and distinct types of copper scrap (such as birch/cliff) are recognised in the market. Accordingly, copper scrap birch/cliff imported in contemporaneous consignments can be treated as similar goods for valuation under Rule 5; the Deputy Commissioner therefore correctly considered only imports of birch/cliff during the relevant period in determining value. [Paras 14]

Copper scrap birch/cliff may be treated as similar goods for valuation purposes and such classification justified the comparison relied upon.

Final Conclusion: The Tribunal dismissed the appeal, upholding the Deputy Commissioner's rejection of the declared transaction value under Valuation Rule 12, the subsequent valuation under Valuation Rule 5 by reference to contemporaneous imports of similar copper scrap birch/cliff, and the Commissioner (Appeals)'s order affirming that reassessment.

Classification of imported aircraft engine - to be classified under Customs Tariff Item 8716 39 00 of the First Schedule to the Customs Tariff Act, 1975 or under CTI 8609 00 00? - period from April, 2018 to March, 2019 - HELD THAT:- The aircraft engine stands, and its units are primed and paint-protected with a resistant enamel. They are specifically designed to support an engine with or without the Engine Build Unit. The aircraft engine stands majorly comprise of a base, a cradle set and caster wheels for ease of movement of the stand with engine on it. The cradle supports the engine and is mounted to the base through a shock attenuation system which is critical to the safe transporting of engines. The cradle is of unique shape and holds the engine in a manner that the engine is safely secured while it is being transported and that it is not damaged due to shock. The shock attenuation system dampens shock loads introduced to the engine during transport. With the help of caster wheels, the aircraft engine stand along with engine is able to move within the shop only on smooth surfaces and for very small distances.

An engine stand is specially designed for safely transporting the aircraft engine by different modes of transport i.e., by land, air and sea. The engine stand comprises of a cradle (holder), a base and four caster wheels. The cradle holds the engine safely and prevents impact of any shock or jerk to the aircraft engine during transportation. An engine is kept on engine stand even while it is getting repaired in the repair shop or during installation/removal from the aircraft. An engine stand allows limited mobility within the repair workshop for adjustment of direction for easy access to all sides of the engine. It is, therefore, moved along with the engine right from its loading on to a truck, vessel or aircraft till the time it is unloaded and even during repairs.

If an engine is to be transported from one airport to another by road, engine stand cannot be used as a trailer for transportation. Engine stand, in such a case, is placed on another truck and tied properly and then transported on a road worthy truck. Engine stand cannot even enable movement of the engine from the bay area of the airport to the repair workshop. This is because the weight of engine stand is approximately 2.5T and with the engine it is approximately 5T or more. It is, therefore, difficult for manpower to move the engine safely even till the repair workshop. The caster wheels on the engine stand only enable smooth movement of the engine within the repair workshop - an engine stand, being a composite machine, has to be classified basis the component that gives the essential character to it, i.e., cradle (container).

It would be seen from judgment of the Supreme Court in G. CLARIDGE & COMPANY LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [1991 (2) TMI 112 - SUPREME COURT] that the term “container” was given a narrow interpretation to mean a receptacle in which articles are covered or enclosed because the term “container” was preceded by the type of containers like boxes, cartons and cases, which are all closed containers.

In the present case, CTH 8609 does not use the term ‘boxes’ or ‘cartons’. In fact, in terms of HSN Explanatory Notes to CTH 8609, all packing receptacles specially designed and equipped for carriage by one or more modes of transport are covered under this Heading. HSN Explanatory Notes to CTH 8609 also give various examples of containers that can get covered within the Heading. One example at paragraph (4) is also of an open container. Thus, so far as CTH 8609 is concerned, there is no good reason to apply the narrow meaning of the term “container” as against the broad meaning as discussed by the Supreme Court in G. Claridge & Company Ltd.

In view of the provisions of rule 3(b) of the GI Rules, aircraft engine stand would merit classification under CTI 8609 00 00.

Conclusion - The air craft engine stand imported by the appellant would deserve classification under CTI 8609 00 00 and not under CTI 8716 39 00, as claimed by the department.

The impugned order dated 30.01.2020 passed by the Principal Commissioner, therefore, deserves to be set aside and is set aside - appeal allowed.

Separation of functions - Bias and reasonable apprehension of predetermination - Principles of natural justice - Summary procedure in disciplinary proceedings - Audit record as basis of NFRA inquiry - Vicarious liability of audit firms - Retrospective operation and vested rights - Article 20(1) - criminal punishment exclusion - Rule 11 NFRA - show cause notice requirements

Vicarious liability of audit firms - Retrospective operation and vested rights - Article 20(1) - criminal punishment exclusion - Validity of Section 132 of the Companies Act and challenged NFRA Rules insofar as they impose disciplinary liability on firms and individual partners and operate with respect to audits completed before NFRA's constitution - HELD THAT: - The Court upheld the constitutional validity of Section 132 and the NFRA Rules. Section 132 does not create a novel species of misconduct; it adopts the definition of "professional or other misconduct" from the Chartered Accountants Act and therefore does not retrospectively impose a new penal liability or offend Article 20(1). The statutory scheme contemplates liability of both firms and their partners for professional misconduct; that vicarious exposure is consistent with the nature of audit engagements and not arbitrary. The presumption against retrospective operation is not breached because Section 132 formalizes an enforcement framework rather than criminalizes prior conduct afresh. [Paras 228, 233, 337, 338, 339]

Section 132 and the challenged NFRA Rules are valid; challenges based on vicarious liability, retrospective operation and Article 20(1) are rejected.

Summary procedure in disciplinary proceedings - Principles of natural justice - Audit record as basis of NFRA inquiry - Rule 11 NFRA - show cause notice requirements - Whether the summary procedure under NFRA Rules (including restriction to the audit file and exclusion of oral evidence/cross-examination) violates principles of natural justice - HELD THAT: - The Court held that summary procedure per se is not unconstitutional. Rule 11 requires adherence to principles of natural justice and mandates service of a SCN with particulars, supporting documents and indication of proposed action; NFRA inquiries typically arise from oversight/review or suo motu investigations rather than adversarial private complaints, and are therefore premised on the audit record. Where proceedings are founded on audit documentation and AQRRs, exclusion of oral testimony and cross-examination is not inherently arbitrary; cross-examination becomes necessary only if the authority relies on oral statements whose truth is disputed. The NFRA must, however, ensure procedures are fair, provide requisite disclosures, and afford hearing opportunities where warranted. [Paras 259, 270, 271, 273, 274]

The summary procedure and limitation to the audit record do not by themselves violate natural justice provided Rule 11's disclosure and hearing safeguards are respected; denial of cross-examination is not an absolute rule and depends on whether oral testimony is relied upon.

Separation of functions - Bias and reasonable apprehension of predetermination - SCNs: the scar of pre-determination - Whether NFRA's Executive Body authoring AQRR/SAQRR/AQRR-based findings and thereafter using the same composition to decide to initiate disciplinary proceedings violated the statutory separation of functions and the principles against bias, rendering SCNs and resulting orders vitiated - HELD THAT: - The Court found that the Companies Act and NFRA Rules envisage performance of NFRA functions through divisions and a structural separation so that monitoring/review does not conflate with adjudicatory initiation. The evidence before the Court showed the Executive Body prepared the AQRRs/SAQRRs, approved them and the same body thereafter examined those findings and issued SCNs and conducted hearings. Those AQRR findings were cast in conclusive language and thus carried an appearance of finality; relying on and acting upon such self-authored conclusive reports created a reasonable apprehension of predetermination and impaired the appearance of impartiality. The doctrine of necessity did not justify the arrangement because the statutory scheme provided for divisions and a separable structure; accordingly the procedure adopted here failed the test of neutrality and fairness. [Paras 301, 316, 328, 331, 340]

Proceedings in which the same Executive Body authored review reports and then initiated and decided to pursue disciplinary action were tainted by reasonable apprehension of bias; the impugned SCNs and specified final orders are quashed.

Separation of functions - Remand for fresh consideration - Appropriate remedial direction after finding procedural infirmity in how NFRA conducted review-to-discipline process - HELD THAT: - While sustaining the statutory scheme, the Court held that the specific acts complained of were procedurally invalid and therefore quashed the impugned SCNs and identified final orders. The Court permitted NFRA to re-open or re-initiate proceedings if it so chooses, but insisted that any decision to commence disciplinary action must be taken independently by members of NFRA who were disconnected and disassociated from the process of audit review and the drafting/approval of the AQRRs/SAQRRs. The AQRRs/SAQRRs may be treated as prima facie material but not as definitive adjudicative conclusions; fresh notices, if issued, must be by a differently constituted division. [Paras 340, 341, 342, 343]

Impugned SCNs and specified final orders quashed; NFRA may initiate fresh proceedings but only after an independent division/discrete complement (unconnected to the prior review authorship) forms the requisite belief and issues fresh notices.

Final Conclusion: Section 132 and the challenged NFRA Rules are upheld as constitutionally valid and not retroactive in a punitive sense; the NFRA summary procedure and reliance on audit records are lawful so long as Rule 11's disclosure and hearing safeguards are observed. However, in the present matters the Executive Body both authored conclusive AQRR/SAQRR findings and then used those same findings to initiate disciplinary action, creating a justifiable apprehension of predetermination. The impugned show-cause notices and specified final orders are quashed; NFRA may, if it so elects, re-initiate proceedings afresh, but any decision to commence disciplinary action must be taken independently by a division or complement of members disconnected from the prior audit-review and report authorship.

Authority or jurisdiction to invoke the corporate guarantee after the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - admission of claim filed by the Respondent based on the invoked guarantee - applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) regarding the moratorium on invocation of guarantees.

HELD THAT:- This Tribunal while considering the aforesaid issue referred to and relied on judgment of the Hon’ble Supreme Court in Ghanshyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited [2021 (4) TMI 613 - SUPREME COURT] as well as judgment of this Tribunal in Edelweiss Asset Reconstruction Company Ltd. vs. Orissa Manganese and Minerals Ltd. [2019 (6) TMI 639 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI]. This Tribunal ultimately held that the corporate guarantee could have been invoked prior to commencement of the CIRP. In paragraphs 27, 28, 29 and 30 of the judgment, following has been held that 'In the instant case, the CIRP commencement date of the ‘Corporate Debtor’ is 27/01/2020 and the Appellant had recalled the entire redemption amount with respect to debentures on 25/03/2020 subsequent to the initiation of CIRP. The Adjudicating Authority recorded that the Corporate Guarantee was invoked on 07/04/2020. The claims were filed by the Appellants on 10/02/2020. This Tribunal is of the earnest view that the Appellants cannot Claim the amounts in the CIRP of the ‘Corporate Debtor’ who is a ‘Corporate Guarantor’ on the basis of the Deed of Guarantee which was never invoked as on the date of filing of the Claims.'

When the Respondent having invoked the guarantee on 18.09.2020 i.e. subsequent to initiation of the CIRP, on the basis of said invocation no claim could have been accepted in the CIRP.

The Respondent could not have been invoked the guarantee given by the corporate debtor on 18.09.2020. The said invocation cannot be base for any claim to be admitted in the CIRP it having not matured. It is not necessary to examine the contention that the claim of the Respondent has to be treated to have been filed on 23.10.2020 and not on 13.10.2021.

Conclusion - i) The invocation of a corporate guarantee after the initiation of the CIRP is prohibited under the moratorium imposed by Section 14 of the IBC. ii) Claims based on such impermissible invocation cannot be admitted in the CIRP.

Appeal allowed.

Entitlement to abatement granted by the learned Commissioner - assessee has not satisfied the necessary conditions of the N/N. 1/2006-ST dated 01.03.2006 - HELD THAT:- The learned Commissioner vide impugned order finds that the demands in both SCNs were raised without considering the applicable abatement under N/N. 1/2006-ST dated 01.03.2006 which was admissible to the noticee and that the noticee was eligible for the said abatement.

The learned Commissioner has not only held that the assessee is eligible for abatement but has also quantified the abatement available to the assessee. Having acknowledged the presence of material and labour components in the services provided by the assessee to the oil companies, it was not open to the learned Commissioner to disregard the classification claimed by the assessee under ‘Works Contract Service’.

Conclusion - The impugned order is not sustainable as for as the categorization of works under various other heads than ‘Works Contract Service’ is concerned; therefore, the same is liable to be set aside.

Appeal allowed.

Refund claim - requirement to reverse the Cenvat credit to claim refund, in terms of N/N. 27/2012-CE(NT) dated 18.06.2012 - non-fulfilment of condition of para 2(h) of the N/N. 27/2012-CE(NT) dated 18.06.2012 - HELD THAT:- Admittedly, in this case the appellant has debited Cenvat credit in their books of accounts which shows reversal of Cenvat credit. Although they have transferred Cenvat credit to Tran-1 for the period January 2017 to June 2017 but same was also reversed in June 2018. Therefore, it will be treated as that they have reversed the Cenvat credit. If there any delay on the part of the appellant that is only a technical lapse and the substantial benefit of the notification should not be denied for such technical lapse.

The refund claim filed by appellant cannot be rejected on these technical grounds as held by the Tribunal in the case of LIGHTSPEED INDIA PARTNERS ADVISORS LLP VERSUS COMMISSIONER CENTRAL TAX (APPEALS) NEW DELHI ADVISORS LLP [2021 (12) TMI 621 - CESTAT NEW DELHI] wherein this Tribunal observed that 'the Commissioner (Appeals) has miserably failed to observe that with the introduction of the GST Act filing of ST-3 return was absolutely done away due to which there was no other possible way with the appellant to debit and to reflect the existing credit in its ST-3 return. The Notification No. 27/2012 dated 18.6.2012 with its condition No 2(h), to my opinion, was applicable only during the period prior to GST regime. Since the GST regime has done away with the ST 3 return, there remain no provision in GST system to reflect the refund claim in the CENVAT credit balance. The only option was to show its reversal in the Books of accounts. Such reversal still amounts to non availment of Credit and refund whereof remains eligible.'

Conclusion - The appellant is rightly claimed the refund in terms of Notification No. 27/2012-CE(NT) dated 18.06.2012 and entitled for the refund as the appellant has satisfied the conditions of the Notification No. 27/2012-CE(NT) dated 18.06.2012.

The impugned order set aside - appeal allowed.

Admissibility of Cenvat credit in respect of the ‘Tower’, ‘Shelter’, ‘Electric Setup’, other electronic items and prefabricated shelters for provision of output/telecommunication services - Admissibility of Cenvat credit of input service used for erection of such tower - Issuance of SCN.

Admissibility of Cenvat credit in respect of the ‘Tower’, ‘Shelter’, ‘Electric Setup’, other electronic items and prefabricated shelters for provision of output/telecommunication services - HELD THAT:- The dispute between both the decisions has been finally settled by the Hon’ble Supreme Court in the case of Bharti Airtel [2024 (11) TMI 1042 - SUPREME COURT] that credit is admissible and the decision of Hon’ble Bombay High Court has been set aside. Hon’ble Supreme Court held 'We, therefore, agree with the conclusion arrived at by the Delhi High Court that towers and shelters (PFBs) support the BTS/antenna for effective transmission of mobile signals and thus enhance their efficiency and since these articles are components/accessories of BTS/antenna which are admittedly “capital goods” falling under Chapter 85 within sub-clause (i) of Rule 2(a)(A) of CENVAT Rules, these items consequently are covered by the definition of “capital goods” within the meaning of sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of CENVAT Rules.' - there are no reason for the denial of the said credit.

Admissibility of Cenvat credit of input service used for erection of such tower - HELD THAT:- As the Hon’ble Supreme Court has considered these goods as capital goods/inputs in the provision of output service the credit in respect of erection of these goods could not have been denied. As the services have been used for provision of output services either directly or indirectly the CENVAT credit could not have been denied - these services are squarely covered by Rule 2 (l) of the CENVAT Credit Rules, 2004 and hence the credit of service tax paid in respect of these services would be admissible to the appellant.

Issuance of SCN - HELD THAT:- There are no merits in the said appeal for the reason that the Show Cause Notice would not have been issued in respects of the amount already paid by the party prior to the issuance of Show Cause Notice in terms of Section 73(3) of the Finance Act, 1994. There are no merits in the appeal filed by the Revenue.

Appeal allowed.

Condonation of delay in filing SLP - Refund of excise duty paid under protest against demand created on alleged manufacture and clearance of Zarda Scented Tobacco - applicability of principles of Unjust Enrichment if the Central Excise Duty has been paid under Compounded Levy Scheme, made applicable in terms of Section 3-A of the Central Excise Act, 1944 - it was held by High Court that 'Once the entire goods cleared by the assessee were only Branded Chewing Tobacco cleared at the M.R.P. rate, the presumption of passing on the disputed duty liability (on the Zarda Scented Tobacco) never arose.'

HELD THAT:- There is a delay of 129 days in filing the Special Leave Petition which has not been satisfactorily explained.

The Special Leave Petition is accordingly dismissed on the ground of limitation.

Interest on the refund of the Cenvat credit that was reversed following the issuance of SCN - refund amount should be treated as a revenue deposit or not - HELD THAT:- Apparently and admittedly, there is no written protest ever raised by the appellant for reversing the said amount of credit.

It is also an apparent fact that initially the entire amount was held to have been wrongly availed credit. However, this Tribunal vide final order dated 04.07.2011 has partly allowed the availment of Cenvat credit and ordered reversal of the remaining directing the Commissioner (Appeals) to re-quantifying the amount of reversal of Cenvat credit. In view of those directions, the amount of the eligible Cenvat credit to the appellant was quantified. However, the Cenvat credit of such amount, for which the refund claim was filed was held to be ineligible Cenvat credit and thus was ordered to be reversed by the appellant and got reversed also. The said amounts stand appropriated by the adjudication order - Also for the reason that the amount of credit reversed was the same amount as was proposed to be reversed vide the six show cause notices. This reversal to my opinion amounts to appropriation. Appropriation is the act of setting aside money for a specific purpose. The reversal of this amount by the appellant on his own post issuance of show cause notice proposing the said reversal is therefore nothing but the appropriation of the amount towards duty.

The bare perusal of the provision reveals that the liability of interest on delayed refunds vis-à-vis amount of duty arises only when the amount is not refunded within three months from the date of receipt of the application/claim. Since admittedly the refund claim was sanctioned within three months from the date of respective application, the appellant is held not entitled to claim interest on the amount of refund.

Though the Hon’ble Madras High Court in the case M/s Pricol Ltd [2015 (3) TMI 735 - MADRAS HIGH COURT] has held that a consistent view is being taken by the courts that any amount which is deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under protest but as already observed above, there is no evidence of the reversal of Cenval credit to have been made under protest rather the same is held to be an act appropriation on part of the appellant i.e. reversing the utilized amount of Cenvat credit for the reason that the appellant was alleged to not to be entitled for the said credit. In the given circumstances, the entire case laws as relied upon by the appellant is held not applicable to the present case.

Conclusion - In the absence of evidence, the amount is treated as appropriated duty, not eligible for interest under Section 11BB if refunded within the statutory period.

All the four appeals are hereby dismissed.

Penalty on co-noticees when the main party's case is settled under the SVLDR Scheme, 2019 - HELD THAT:- This Court finds that in the matter of Prakash Steelage Ltd [2024 (11) TMI 468 - CESTAT AHMEDABAD], the matter went in favor of the appellants after various decisions were considered.

It was held in the case that 'the penalties imposed on the co-noticees in a case where the main noticee against whom the demand is confirmed, the case is settled under SVLDRS then in respect of other co-noticees penalty will not sustain even if they have not filed a declaration under SVLDRS-2019'.

Conclusion - The penalties imposed on co-noticees should be set aside if the main party's case is settled under the SVLDR Scheme, 2019.

The appeal is liable to be accepted. Accordingly, appeal is allowed.

Cenvat credit eligibility - extended period of limitation - filing of ER-1 returns as bar to invocation of extended period - suppression of facts - reversal of ineligible Cenvat credit with interest

Extended period of limitation - filing of ER-1 returns as bar to invocation of extended period - suppression of facts - Extended period of limitation could not be invoked for denial of Cenvat credit for the period April 2015 to March 2017 where ER-1 returns were filed regularly, but could be invoked for April 2017 to June 2017 for which ER-1 returns were not filed. - HELD THAT: - The Tribunal relied on the principle that credits reflected in statutory ER-1 returns and in the assessee's records, detected subsequently by audit, do not by themselves establish suppression, wilful misstatement or intent to evade duty sufficient to invoke the extended period. Applying the reasoning in M/s Nalwa Steel and Power Ltd. (supra), minor discrepancies in supporting documents do not convert bona fide credit claims into fraud or suppression where returns were regularly filed. Conversely, where ER-1 returns were not filed for April 2017 to June 2017, the adjudicating authority was justified in invoking the extended period for that sub-period. [Paras 6, 7, 8]

Extended period demand is unsustainable for April 2015 to March 2017 but is sustainable for April 2017 to June 2017.

Cenvat credit eligibility - reversal of ineligible Cenvat credit with interest - Appellant is liable to reverse the ineligible Cenvat credit for the period April 2015 to June 2017 along with interest. - HELD THAT: - While the Tribunal held that the extended period could not be invoked except for April 2017 to June 2017, it nonetheless found that the contested credits were ineligible and therefore required reversal. The adjudication on the merits of ineligibility was sustained subject to the limitation ruling, and the appellant was directed to reverse the ineligible credit and pay interest thereon. [Paras 8, 9]

Ineligible Cenvat credit for April 2015 to June 2017 must be reversed with interest; extended period limitation applies only to April 2017 to June 2017.

Final Conclusion: The appeal is partly allowed: demands based on extended period are set aside except for April 2017 to June 2017; the appellant must reverse the ineligible Cenvat credit for April 2015 to June 2017 and pay interest; appeal disposed of accordingly.

Process amounting to manufacture or not - process undertaken by the appellant on the received gas - recovery with interest and penalty - HELD THAT:- The issue involved in the present case is identical as was involved in the earlier appeal of the appellant decided by this Tribunal in M/S. SURYA AIR PRODUCTS PVT. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, CHANDIGARH [2018 (5) TMI 1450 - CESTAT CHANDIGARH]. The decision of this Tribunal for the earlier period has been upheld by the Hon’ble Apex Court in COMMISSIONER OF CENTRAL EXCISE AND S.T. CHANDIGARH VERSUS M/S. SURYA AIR PRODUCTS PVT. LTD. [2024 (7) TMI 1312 - SC ORDER] where it was held that 'In the instant case, the process involved is that the gas received by the appellant through the pipeline has some accumulation of moisture and in order to remove the same from the gas, the compressor has an inbuilt system of drying the moisture. The treatment employed by the respondent-herein is oil filtration for the removal of moisture from gas by drying the inbuilt system of compressing gas into the cylinders. The said process, in our view, does not amount to a manufacturing process.'

Conclusion - The appellant's process of preparing the gas cylinders for sale did not amount to manufacturing under the Central Excise Tariff Act.

The impugned order is not sustainable in law and is set aside - appeal allowed.

Dishonour of Cheque - Suit for recovery of damages/compensation on account of defamation, mental pain, agony, harassment, tension and financial loss caused to the appellant/plaintiff due to the filing of false litigation - HELD THAT:- In the present case, there is no evidence to show that any damage or harassment was caused to the plaintiff. The learned Trial Court has observed that the amount has been granted on account of defamation and mental pain and agony; whereas there is nothing on record to show that the plaintiff was defamed. In fact, there was no evidence to show that any damage or harassment had been caused to the plaintiff. It must be remembered that the institution of a legal proceeding by the defendant against the plaintiff maliciously and without reasonable and probable cause is actionable in tort on proof of damage either to his reputation or to his property. In the present case, the petitioner/plaintiff has failed to prove any damage either to his reputation or to his property or to his person.

The learned first Appellate Court upon detailed appraisal of the evidence and pleadings on record held that the proceedings instituted by the defendant against the plaintiff upon dishonouring of the cheque were not instituted on the basis of some malice. As such, the learned first Appellate Court correctly held that there was no malicious prosecution/false and frivolous litigation instituted on the part of the defendant against the plaintiff. Mere acquittal of the plaintiff in criminal case would not imply that there was malicious prosecution by the defendant against the plaintiff. As such, no ground was made out for granting the damages.

Learned lower appellate Court found that image of the plaintiff was not lowered nor any news regarding filing of complaint under Section 138 of the Negotiable Instrument Act was ever got published by the defendant. It was in this background that the suit of the plaintiff was dismissed - no ground is made out to interfere in the judgment and decree dated 30.09.2024 passed by the learned First Appellate Court.

Conclusion - The court found no merit in the plaintiff's claims of defamation, mental pain, and financial loss due to false litigation. The lack of evidence supporting these claims led to the dismissal of the suit in the second appeal.

The present regular second appeal is hereby dismissed.