TaxTMI Updates e-Newsletter
Feb 24,2020

Regular bail - exercise of judicial discretion in granting bail - nature and gravity of offence - personal bond with surety - conditional bail requiring deposit - cooperation with investigation - surrender of passport as bail condition - restriction on leaving India without trial court permission - periodic reporting to police as bail condition - trial court not to be influenced by appellate prima facie observations - application of Sanjay Chandra precedent

Regular bail - exercise of judicial discretion in granting bail - nature and gravity of offence - Applicant enlarged on regular bail in respect of offence registered under CGST Act. - HELD THAT: - Having considered the material on record, the facts, the nature and gravity of the allegations and the role attributed to the accused, and without delving into evidence in detail, the High Court exercised its discretion to grant regular bail. The Court noted the period of detention and adverted to the law in Sanjay Chandra, applying established principles on bail while balancing liberty against the gravity of the offence. On that basis the Court concluded that this was a fit case for enlargement on bail. [Paras 5, 6, 7]

Bail granted and the application allowed.

Personal bond with surety - conditional bail requiring deposit - surrender of passport as bail condition - periodic reporting to police as bail condition - restriction on leaving India without trial court permission - Grant of bail subject to specified conditions including bond, surety, periodic reporting, passport surrender, deposit undertaking and restrictions on travel. - HELD THAT: - The Court ordered release on execution of a personal bond with one surety of like amount and imposed conditions aimed at securing attendance and preventing misuse of liberty. The applicant is required to surrender passport, not leave India without prior permission of the trial court, mark presence monthly at the police station for six months, furnish and not change residence without permission, and file an undertaking to deposit a specified sum with the respondent within a stipulated period. The Court permitted the trial court to modify or relax conditions in accordance with law and retained the option for the Sessions Judge to act on any breach. [Paras 6, 8, 9]

Bail to be subject to the enumerated conditions, including execution of bond and compliance with deposit undertaking.

Cooperation with investigation - departmental recovery - trial court not to be influenced by prima facie observations - Departmental remedies available and the Trial Court shall not be influenced by the High Court's prima facie observations. - HELD THAT: - The Court observed that departmental action for recovery and penalty remains open to the revenue and that the applicant has undertaken to cooperate in the investigation. Additionally, the High Court expressly directed that at trial the Trial Court must not be influenced by the prima facie observations recorded in this bail order, thereby preserving the trial court's independent adjudicatory role. [Paras 6, 10]

Departmental recovery/penalty proceedings remain open; trial court to decide on merits uninfluenced by this order.

Final Conclusion: The petition is allowed; the applicant is directed to be released on regular bail on execution of the prescribed bond and fulfilment of the stated conditions, subject to the trial court's jurisdiction to vary conditions and to take action on any breach.

Settlement commission order - additional income which was disclosed during the course of the hearing - HELD THAT:- The nature and extent of delay and the issues involved, we are of the view that it would be appropriate and proper, in the interests of justice, for the writ petition to be heard on merits by the High Court, subject to payment of costs, which would be a condition precedent. The High Court ought not to have dismissed the petition on the ground of delay. The appellant raises issues which are worthy of consideration on merits.

We accordingly order and direct that conditional on the appellant paying a sum quantified at ₹ 3,00,000 to the second respondent, by way of costs, withing a period of six weeks from today, the judgment and order of the High Court [2018 (8) TMI 577 - BOMBAY HIGH COURT] shall stand set aside and the writ petition shall stand restored to the file of the High Court for disposal on merits. In the event that the appellant fails to pay the costs, as directed, the benefit of this order shall not be available.

Re-opening / re-assessment under Section 147 - reason to believe - first proviso to Section 147 - failure to disclose full particulars - Explanation (1) to Section 147 - interference at notice stage - adequacy versus sufficiency of reasons

Re-opening / re-assessment under Section 147 - reason to believe - adequacy versus sufficiency of reasons - interference at notice stage - Validity of the reassessment notice dated 29.03.2019 and the legality of entertaining writ relief against issuance of that notice. - HELD THAT: - The Court considered whether the AO's stated "reason to believe" that income had escaped assessment justified interference at the notice stage. Having regard to the settled principle that interference with reassessment notices is appropriate only in exceptional cases, and noting that the re-assessment proceedings impugned had culminated in an assessment order which was being contested before the appellate authority, the Court declined to exercise writ jurisdiction. The Court recorded that the adequacy or sufficiency of the material relied upon by the AO is not ordinarily examinable at the notice stage and that the assessee was afforded opportunity to explain the transactions; the factual and legal contentions could be agitated before the statutory appellate forum. Consequently the challenge to the notice was not entertained by way of writ petition. [Paras 15, 18, 28]

Challenge to the reassessment notice dated 29.03.2019 and attendant objections not interfered with by writ; appeal dismissed as not maintainable at this stage, with liberty to pursue statutory remedies.

First proviso to Section 147 - failure to disclose full particulars - Explanation (1) to Section 147 - re-opening / re-assessment under Section 147 - Whether observations of the Single Judge on the scope of provisions (including the proviso and Explanation (1) to Section 147) would preclude the appellate authority from considering the merits. - HELD THAT: - The Court noted the appellant's apprehension that observations in the Single Judge's order might unduly fetter the statutory appellate forum. The Court clarified that the Single Judge's remarks were confined to the limited question of whether interference at the notice stage was warranted and expressly recorded that no opinion was expressed on the merits. It held that the appellate authority remains free to examine both factual and legal issues afresh and is not bound by the Single Judge's observations made in the context of declining writ relief. [Paras 17, 28]

Observations made by the Single Judge are confined to the question of writ-stage interference and shall not bind the appellate authority; the appellant is free to agitate all factual and legal points before the statutory forum.

Final Conclusion: The appeal is dismissed as not maintainable; writ-stage interference with the reassessment proceedings was declined and the assessee is left to pursue the statutory appellate remedy, the appellate authority being untrammelled by the Single Judge's limited observations.

Failure to disclose fully and truly all material facts - reopening assessment - reassessment jurisdiction under Section 147/148 of the Income Tax Act - limitation for reassessment beyond four years - change of opinion - reasons to believe - bald assertion insufficient to justify reopening

Failure to disclose fully and truly all material facts - bald assertion insufficient to justify reopening - reassessment jurisdiction under Section 147/148 of the Income Tax Act - Validity of notice under Section 148 seeking reassessment beyond four years where assessee had made disclosures during original assessment proceedings. - HELD THAT: - The Court examined the material on record and found that the assessee had furnished a list of flat owners and a letter dated 20th February, 2015 during the assessment proceedings and that the assessment order accepted the return. The impugned reasons for reopening contained only a bald assertion of non-disclosure without specifying which material facts were withheld. The proviso to Section 147 permits reopening beyond four years only if there was failure to disclose fully and truly all material facts; this precondition must be prima facie established. On the material before it the Court held that the Revenue failed to establish even prima facie that there was such failure and that merely asserting nondisclosure, without particulars, is insufficient to sustain a notice under Section 148 beyond the four-year period. [Paras 13, 15, 16, 18]

Impugned notice dated 29th March, 2019 and the order dated 17th December, 2019 are quashed and set aside for failure to establish requisite nondisclosure to justify reopening beyond four years.

Reopening assessment - change of opinion - reasons to believe - Whether the reassessment notice was sustainable as a mere change of opinion or based on sufficient material warranting reopening. - HELD THAT: - Although the petitioner argued that the impugned action amounted to a mere change of opinion and the Revenue relied on case-law concerning sufficiency of material, the Court did not embark on an enquiry into the correctness or sufficiency of the material underpinning the 'reasons to believe'. The Court's determination turned on the absence of any prima facie establishment of failure to disclose fully and truly all material facts; consequently it was unnecessary to and the Court did not assess whether the impugned notice represented only a change of opinion. [Paras 22, 23]

Court did not examine sufficiency of material or resolve whether there was mere change of opinion because reopening failed on the threshold requirement of proved nondisclosure.

Final Conclusion: The petition is allowed; the notice dated 29th March, 2019 under Section 148 and the order dated 17th December, 2019 rejecting objections are quashed and set aside for failure of the Revenue to establish prima facie that the assessee failed to disclose fully and truly all material facts necessary for assessment for Assessment Year 2012-13.

Reopening of assessment - Notice under Section 148 of the Income Tax Act - jurisdiction to reopen assessment - notice to the correct person - condition precedent - null and void

Notice under Section 148 of the Income Tax Act - notice to the correct person - condition precedent - null and void - Validity of notices issued under Section 148 in the name of a deceased assessee for reopening assessment - HELD THAT: - The Court found on the record that the assessee, Mrs. Bhadravati Ranjit Canji, had died prior to issuance of the impugned notices. Relying on the Division Bench decision in Sumit Balkrishna Gupta Vs. Assistant Commissioner of Income-Tax, Circle 16(2), Mumbai , the Court accepted that issuance of a notice under Section 148 is foundational to acquiring jurisdiction to reopen an assessment. The requirement that such notice be issued in the name of the correct person is not merely procedural but is a condition precedent to confer jurisdiction. Where the notice is issued in the name of a dead person, it is ineffective and vitiates the reopening process. Applying that principle to the present facts, the Court held the notices dated 26.3.2019, show cause notice dated 9.12.2019 and the letter dated 9.12.2019 to be null and void. The Court, however, clarified that the Revenue remains free to issue a fresh notice in accordance with law if the statutory requirements of Sections 147/148, including limitation, are satisfied. [Paras 4, 5, 6]

Impugned notices issued in the name of the deceased assessee are quashed as null and void; liberty granted to issue fresh notice in accordance with law and limitation.

Final Conclusion: The petition is allowed; the impugned notices issued in the name of the deceased assessee are quashed, subject to the Revenue's right to issue fresh notice in accordance with law and limitation. No order as to costs.

Attachment of bank account - revocation of coercive action - uploading of assessment order on CPC - adjustment of refund against demand - opportunity to explain before adjustment

Attachment of bank account - revocation of coercive action - uploading of assessment order on CPC - Whether the freezing/attachment of the petitioners' bank accounts would continue and what remedial steps should follow the discovery of a communication gap in uploading the assessment order. - HELD THAT: - The Court recorded that the department has revoked the order freezing the petitioners' bank accounts by communication dated 10.02.2020 and placed that communication on record. The freezing arose because an assessment order reflected that no tax was payable for the relevant assessment year but that order had not been uploaded on the Central Processing Center (CPC), producing a communication lapse which led to a notice being issued and, on non-response, coercive action. Once the lapse was realized, the department itself revoked the attachment and undertook to upload the order dated 29.03.2017 on the website. The Court observed that prompt uploading of orders and completion of digitization would avoid such instances and treated the matter of freezing/attachment as suitably redressed in view of the revocation and the department's undertaking. [Paras 3, 4, 5, 6]

The attachment/freezing of the petitioners' bank accounts stands revoked and the department is directed to upload the assessment order on the CPC website at the earliest; the freezing issue is thereby suitably redressed.

Adjustment of refund against demand - opportunity to explain before adjustment - Whether refunds due to the petitioners should be adjusted in consequence of the communication lapse and what procedural protection the petitioners are entitled to. - HELD THAT: - The Court noted that an initial adjustment of refunds to the limited extent of Rs. 27,250/- had been made and that further refunds may be liable to similar adjustment because of the miscommunication. The Court directed that the petitioners may immediately communicate their version to the authorities and recorded an expectation that any further adjustments would be made only after due consideration of the petitioners' explanation. The direction thus ensures procedural fairness by requiring authorities to consider the petitioners' representation before proceeding with further adjustments. [Paras 7, 8, 9]

Further adjustments of refunds shall be taken only after the petitioners submit their explanation and the authorities consider it; petition disposed of on these terms with no order as to costs.

Final Conclusion: The Court disposed of the petition by recording revocation of the bank account attachment, directing prompt uploading of the assessment order on the CPC website, and requiring authorities to consider the petitioners' explanation before making any further adjustments to refunds; no order as to costs.

Exemption under Section 10(23A) - continuity of exemption upon formation of a new State Bar Council - statutory consequence of State reorganisation and succession - requirement of specific exemption order versus substantive entitlement - scope of administrative circulars in writ proceedings - mandate of the Advocates Act regarding single Bar Council for a State

Exemption under Section 10(23A) - continuity of exemption upon formation of a new State Bar Council - statutory consequence of State reorganisation and succession - mandate of the Advocates Act regarding single Bar Council for a State - State Bar Council of Chhattisgarh was entitled to exemption in terms of Section 10(23A) for the impugned earlier years including assessment year 2004-05 despite absence of a fresh exemption certificate issued specifically in its name. - HELD THAT: - The Court accepted that the State of Chhattisgarh was carved out of undivided Madhya Pradesh and that, under the Advocates Act, only one Bar Council exists for each State. The Bar Council which previously enjoyed exemption for the undivided State was split by operation of the reorganisation statute, producing a separate statutory Bar Council for Chhattisgarh. The formation of the new State Bar Council was a statutory consequence of reorganisation; the requirement of filing a fresh application for exemption was treated as a procedural formality and did not extinguish the substantive entitlement to exemption. Applying these principles, the Single Judge's conclusion that the Chhattisgarh State Bar Council was entitled to exemption for the previous years (including the year 2004-05) was upheld as correct and sustainable, and interference was declined.

The entitlement to exemption under Section 10(23A) was declared to extend to the Chhattisgarh State Bar Council for the earlier years including 2004-05; the assessment and denial were set aside.

Scope of administrative circulars in writ proceedings - Circular No. 3/2018 (monetary limits) did not apply to writ matters and was not relevant to the adjudication of this writ appeal. - HELD THAT: - On inquiry, the Court noted that paragraph 11 of the Circular expressly excluded writ matters from the monetary limits set out therein. The Appellant's reliance on the Circular was therefore misplaced, and the Court held the Circular inapplicable to the present writ proceedings.

The Circular No. 3/2018 was held not to be relevant or applicable to the writ petition.

Final Conclusion: The appeal is dismissed. The High Court's judgment allowing the writ petition and declaring the Chhattisgarh State Bar Council entitled to exemption (including for earlier years such as 2004-05) is upheld; the departmental challenge and reliance on the CBDT circular were rejected.

Validity of reopening under section 148 read with section 147 of the Income tax Act - Jurisdictional fact for reopening assessment - Assessment/reassessment where reasons recorded remain unacted upon - Permissibility of assessing other income when the basis for reopening ceases to exist - Deductibility of brokerage where payment has been assessed in hands of recipient

Validity of reopening under section 148 read with section 147 of the Income tax Act - Jurisdictional fact for reopening assessment - Assessment/reassessment where reasons recorded remain unacted upon - Quashment of reassessment proceedings where no addition was made on the basis stated in the reasons recorded in the notice under section 148 and the AO proceeded to assess other income. - HELD THAT: - The Tribunal found that the reassessment order dated 8.11.2011 is vitiated because the Assessing Officer, after issuing notice under section 148, accepted that the income which formed the basis of the reasons to believe had not escaped assessment (the alleged violation of section 54F being offered to tax for AY 2011 12) and, notwithstanding that, made no addition on that basis but proceeded to make an addition already made in the original assessment. Reliance was placed on consistent authorities holding that where the jurisdictional fact on which reopening was based ceases to exist or is accepted by the AO, he cannot proceed to assess other income unrelated to the reasons recorded. Applying that principle to the facts, since no fresh addition was made on the matters mentioned in the reasons recorded in the section 148 notice and the alleged escapement was in fact offered to tax, the reassessment was held to be illegal and void. [Paras 11, 16, 18]

Reassessment proceedings under section 143(3) r.w.s. 147/148 are quashed and set aside as illegal.

Deductibility of brokerage where payment has been assessed in hands of recipient - Effect of pending appeal against original assessment on consequential relief in reassessment - Claim for deduction of brokerage paid to DSP Finprint Ltd was not adjudicated on merits and left without decision as infructuous. - HELD THAT: - The Tribunal declined to adjudicate the substantive claim for deduction of brokerage because the reassessment proceedings have been quashed and the impugned addition of long term capital gain remains the subject matter of an appeal pending before the CIT(A) arising from the original assessment. Given that the legal issue enabling assessment has been set aside, the question of allowing the brokerage deduction is academic at this stage and was therefore not decided on merits. [Paras 19]

Ground raised on merits dismissed as infructuous; entitlement to deduction to be determined in the pending proceedings arising from the original assessment.

Final Conclusion: The appeal is allowed on the legal ground: the reassessment framed under section 143(3) r.w.s. 147/148 is quashed as illegal because the AO did not act on the reasons recorded in the section 148 notice and those reasons had ceased to operate; the claim for brokerage deduction was not decided as it is rendered infructuous by the quashment and remains to be considered in the pending appeal against the original assessment.

Condonation of delay - preference for substantial justice over technical objections - absence of presumption of mala fides in unexplained delay - restoration of appeals for adjudication on merits - setting aside ex parte dismissal for delay

Condonation of delay - preference for substantial justice over technical objections - absence of presumption of mala fides in unexplained delay - Delay in filing appeals before the Commissioner of Income Tax (Appeals) was condoned and the ex parte dismissal for delay was set aside. - HELD THAT: - The Tribunal examined the factual explanation that the assessee, an NRI, had relied on counsel and that the assessment order had been served at the assessee's residence and passed through intermediaries, resulting in a delay of 491 days in filing the appeals. Applying the established principle that courts should, unless mala fides or culpable negligence is writ large, prefer deciding matters on merits rather than dismissing them on technical grounds, the Tribunal relied on authoritative decisions emphasising that every day's delay must be explained in a commonsense manner and that there is no presumption of deliberate delay. In view of these considerations and the bonafide explanation furnished, the Tribunal found it appropriate in the interests of justice to condone the delay and to set aside the ex parte dismissal by the CIT(A). [Paras 14]

Delay condoned; ex parte dismissals set aside and appeals allowed to proceed.

Restoration of appeals for adjudication on merits - setting aside ex parte dismissal for delay - Matters remitted to the CIT(A) for fresh adjudication on merits. - HELD THAT: - Having condoned the delay and set aside the summary dismissals, the Tribunal restored the remaining grounds raised by the assessee to the file of the CIT(A) for adjudication on merits. The CIT(A) was directed to decide the issues afresh by passing a speaking order so that the dispute is determined on substantive grounds rather than on the procedural bar of limitation. [Paras 14]

Remaining grounds restored to the CIT(A) for fresh, reasoned adjudication on merits.

Final Conclusion: For Assessment Year 2014 15 the delay in filing the appeals is condoned, the ex parte dismissals by the CIT(A) are set aside and the appeals are restored to the file of the CIT(A) for fresh adjudication on merits; appeals are partly allowed for statistical purposes.

Validity of notice under section 143(2) - assumption of jurisdiction under section 147 - reopening assessment by notice under section 148 - admission of additional grounds of appeal - condonation of delay in filing appeals - quashing reassessment where notice under section 143(2) issued on same date as return

Admission of additional grounds of appeal - Admission of the assessee's additional ground challenging the validity of notice u/s. 143(2). - HELD THAT: - The Tribunal admitted the additional ground as it was legal in nature and relied upon precedents including the Supreme Court decision in NTPC vs. CIT to allow admission despite the same not having been raised before the CIT(A). The Tribunal held that the contention was purely legal and therefore admissible for determination at this stage.

Additional ground no.1 was admitted for adjudication.

Condonation of delay in filing appeals - Whether the delay of 49 days in filing the appeals should be condoned. - HELD THAT: - The assessee explained delay by reference to business lull, lack of staff, and late receipt of the CIT(A) orders (received from a building guard in February 2019). The Tribunal, balancing the statutory right to appeal against the reasons given and notwithstanding the Revenue's objections, exercised its discretion in the interest of justice to condone the delay and admit the appeals.

Delay of 49 days in filing both appeals was condoned and the appeals were admitted.

Validity of notice under section 143(2) - assumption of jurisdiction under section 147 - reopening assessment by notice under section 148 - quashing reassessment where notice under section 143(2) issued on same date as return - Validity of the notice issued under section 143(2) dated 21.6.2016 issued on the same day the assessee filed a letter treating the earlier return as response to the section 148 notice, and consequence for the reassessment. - HELD THAT: - The Tribunal examined the sequence: original return processed u/s 143(1); notice u/s 148 issued on 28.3.2016; assessee thereafter submitted on 21.6.2016 that the original return be treated as the return in response to the section 148 notice; a notice u/s 143(2) was issued on 21.6.2016 (the same day). Relying on the Delhi High Court precedent in Director of Income Tax v. Society for Worldwide Interbank Financial Telecommunications and consistent ITAT decisions, the Tribunal held that a notice under section 143(2) cannot be issued contemporaneously with or prior to examination of the return and that issuance of the section 143(2) notice on the same date as the letter treating the earlier return as response indicated that the AO had not validly applied independent mind before assuming jurisdiction u/s 147. On that basis the Tribunal concluded the section 143(2) notice was invalid, vitiating the reassessment made under section 147 read with section 143(3), and accepted the assessee's legal challenge.

Notice dated 21.6.2016 u/s 143(2) held invalid; reassessment proceedings quashed and the addition deleted.

Final Conclusion: The Tribunal condoned the delay in filing the appeals, admitted the additional legal ground challenging the section 143(2) notice, and on merits held the notice dated 21.6.2016 to be invalid; consequentially the reassessment was quashed and the additions deleted, with other contentions rendered academic.

Revisional jurisdiction under Section 263 - Erroneous and prejudicial to the interest of Revenue - Non-application of mind / perfunctory assessment - Obligation to make inquiry into abnormally large pending expenses - Verification of genuineness and business connection of expenses - Duty to examine TDS compliance on claimed payments

Revisional jurisdiction under Section 263 - Non-application of mind / perfunctory assessment - Erroneous and prejudicial to the interest of Revenue - Validity of Pr.CIT's exercise of revisional power under s.263 to set aside the assessment where the AO allegedly completed assessment without proper inquiry into abnormally large pending expenses. - HELD THAT: - The Tribunal examined the show cause notice, revisional order and the assessment records. The Pr.CIT observed that pending revenue expenses shown by the assessee were abnormally high (nearly 36% of total direct expenses) in the context of a completed project with over 90% sales, and that no such pending expenses existed in the preceding year. A review of the assessment file and order sheet revealed no discernible inquiry, no recorded deliberation on the ledger details filed by the assessee, and a cryptic assessment order accepting returned income. Proceedings before the AO were found to be perfunctory and lacking application of mind on a core fact-sensitive issue which materially affected taxable income. Given the wide amplitude of s.263, where an order is found to be erroneous and prejudicial to Revenue because of lack of requisite inquiry, the Revisional Commissioner was justified in setting aside the assessment to enable fresh inquiry. The Tribunal rejected the assessee's reliance on precedents where AO had in fact made relevant inquiries or where no failure of inquiry was shown, holding that those decisions were distinguishable. [Paras 9]

The Pr.CIT was justified in invoking s.263 to set aside the assessment for want of proper inquiry; the appeal is dismissed on this ground.

Verification of genuineness and business connection of expenses - Duty to examine TDS compliance on claimed payments - Whether the Pr.CIT could raise, in the revisional proceedings, the related facet of TDS deduction and require verification of genuineness and business connection of the pending expenses. - HELD THAT: - The Tribunal noted the objection that the Pr.CIT should have given a separate opportunity before raising TDS compliance as an issue. It observed that inquiry into TDS deduction is integrally connected to and subservient to the core enquiry into the bonafides of the claimed pending expenses. While separate opportunity might have been preferable, the facet is organically linked to the main issue and its inclusion in the revisional order did not vitiate the exercise of revisional power. The assessee is free to rebut these contentions before the AO during the fresh proceedings directed by the Pr.CIT. [Paras 9]

The objection is declined; the Pr.CIT was entitled to require verification of TDS aspects as part of the enquiry into the genuineness of the pending expenses.

Remand for fresh inquiry and verification - Scope of the directions following setting aside of the assessment - whether the matter is remitted for fresh consideration. - HELD THAT: - The Tribunal recorded that the revisional order cancels and sets aside the assessment and directs the AO to make requisite enquiries and verifications into the pending expenses, their genuineness, business nexus and TDS compliance. The assessee is not precluded from supporting its case afresh before the AO; objective material exists at the threshold to warrant such further inquiry. The Tribunal thus treated the matter as remanded for fresh adjudication by the AO in accordance with law. [Paras 9]

The assessment is set aside and the matter is remitted to the AO for fresh inquiries and verification as specified by the Pr.CIT.

Final Conclusion: The Tribunal affirms the Pr.CIT's exercise of revisional jurisdiction under s.263, holding that the AO had framed a perfunctory assessment without requisite inquiry into disproportionately large pending expenses; the revisional order setting aside the assessment and remitting the matter to the AO for fresh verification (including genuineness, business nexus and TDS compliance) is upheld and the assessee's appeal is dismissed.

Reopening of assessment - right to be heard / opportunity of being heard - valuation report and adoption of departmental valuation - classification of agricultural income as income from other sources - addition on account of inadequate drawings / household expenses - requirement of speaking and reasoned order - remand for fresh decision

Reopening of assessment - right to be heard / opportunity of being heard - Ground No.2 (validity of reopening) was not pressed; grounds 1, 3 and 4 were treated as general and not separately adjudicated. - HELD THAT: - The assessee's counsel expressly abandoned Ground No.2 relating to validity of reopening in all four years during hearing; the Tribunal accordingly recorded that ground as not pressed and rejected it on that basis. Grounds 1, 3 and 4 were general in nature and the assessee did not seek distinct adjudication on them, so the Tribunal did not decide those grounds on merits. [Paras 4]

Ground No.2 rejected as not pressed; Grounds 1, 3 and 4 not separately adjudicated.

Valuation report and adoption of departmental valuation - requirement of speaking and reasoned order - remand for fresh decision - The CIT(A)'s cryptic acceptance of the Assessing Officer's adoption of the departmental valuation for ascertaining construction cost was set aside and remanded for fresh decision. - HELD THAT: - The Tribunal examined the CIT(A)'s order and found the decision on the valuation issue to be terse and insufficiently reasoned - the CIT(A) noted conflicting valuation reports (departmental valuation and a PWD report claimed by the assessee) but disposed of the matter by a short concluding paragraph without adequate reasoning. Given the lack of a speaking and reasoned order and the competing material before the CIT(A), the Tribunal considered it appropriate to set aside the CIT(A)'s order and restore the matter to the file of the CIT(A) for a fresh adjudication after affording reasonable opportunity to both sides. No comment was made on the merits pending that fresh decision. [Paras 6, 7]

Order of CIT(A) set aside on this point and remanded for a speaking and reasoned decision after opportunity to both parties; ground No.5 allowed for statistical purposes.

Classification of agricultural income as income from other sources - requirement of speaking and reasoned order - remand for fresh decision - The CIT(A)'s dismissal of the assessee's claim of agricultural income as unsupported was set aside and remanded for fresh consideration. - HELD THAT: - The Tribunal found the CIT(A)'s treatment of the agricultural income claim to be cryptic. Although the CIT(A) recorded that mere possession of land without documentary evidence of cultivation and related receipts/expenditure was insufficient, the record also contained the assessee's written submissions regarding earlier years which the CIT(A) referred to. In view of the inadequate reasoning, the Tribunal restored the issue to the CIT(A) for a fresh, speaking and reasoned decision after affording reasonable opportunity to the parties. The Tribunal made no pronouncement on the merits. [Paras 8, 9]

Order of CIT(A) set aside on this point and remanded for fresh decision; ground No.6 allowed for statistical purposes.

Addition on account of inadequate drawings / household expenses - requirement of speaking and reasoned order - remand for fresh decision - The issue of additions made on account of alleged inadequate drawings was remanded to the CIT(A) for fresh adjudication with directions to allow the assessee to place on record particulars of the husband's income and any drawings made by him for household expenses. - HELD THAT: - The Assessing Officer had estimated household drawings; the assessee contended that household expenses should be considered on a family basis and that income of the husband (a pensioner) was not taken into account. The CIT(A) observed absence of income particulars of the husband but issued a brief conclusion. As the Tribunal was remanding other connected issues for de novo consideration, it directed that the CIT(A) decide this aspect afresh after the assessee furnishes evidence and details regarding the husband's income and any drawings, and after providing reasonable opportunity to both sides. The Tribunal refrained from expressing any view on the merits. [Paras 10]

Order of CIT(A) set aside on this point and remanded for fresh decision with direction to consider evidence of the husband's income and drawings; ground No.7 allowed for statistical purposes.

Final Conclusion: All four appeals are partly allowed for statistical purposes: the Tribunal admitted the delayed appeals, rejected ground No.2 as not pressed and, finding the CIT(A)'s orders on valuation, agricultural income and inadequate drawings to be cryptic, set aside those parts of the CIT(A)'s order and restored the matters to the file of the CIT(A) for fresh, speaking and reasoned decisions after giving reasonable opportunity to both parties for Assessment Years 2005-06 to 2008-09.

Addition on account of unexplained investment - shortage of stock treated as suppressed sales and addition of estimated gross profit - deletion of addition where stock shortfall already accounted by gross profit estimate - penalty under section 271(1)(c) - obligation to specify limb (concealment of income or furnishing inaccurate particulars)

Addition on account of unexplained investment - shortage of stock treated as suppressed sales and addition of estimated gross profit - Deletion of addition made as unexplained investment of Rs. 60,77,044/- where physical stock was found short and gross profit on suppressed sales had already been estimated and added. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that where physical stock is found less than the stock shown in books, the appropriate presumption is that the stock was sold outside the books and the permissible addition is the estimated gross profit on such suppressed sales. Because the Assessing Officer had already made an addition of the estimated gross profit in the original assessment, there could be no separate addition for unexplained investment in respect of the same stock shortfall. The CIT(A)'s reliance on precedents treating stock-shortage as suppressed sales and permitting only gross-profit additions was held to be reasonable and not amenable to interference. [Paras 5, 6]

The addition under unexplained investment was deleted and the Revenue's grounds on this point were dismissed.

Penalty under section 271(1)(c) - obligation to specify limb (concealment of income or furnishing inaccurate particulars) - Deletion of penalty levied under section 271(1)(c) where the Assessing Officer failed to specify which limb of the clause was alleged to be contravened at the time of initiation and levy of penalty. - HELD THAT: - The Tribunal agreed with the CIT(A) that the assessment order and the penalty order did not specify whether the penalty was being imposed for 'concealment of income' or for 'furnishing inaccurate particulars of income', thereby creating ambiguity. Relying on binding decisions cited, the Tribunal held that the Assessing Officer must indicate the specific limb (or clearly state that both limbs are alleged) when initiating and imposing penalty under section 271(1)(c) so that the assessee can know the precise charge and prepare a defence. The absence of such specification rendered the penalty order unsustainable in law and liable to be deleted. [Paras 11, 12]

The penalty imposed under section 271(1)(c) was deleted and the CIT(A)'s order in favour of the assessee was sustained.

Final Conclusion: Both Revenue appeals for A.Y.2008-09 were dismissed: the addition on account of unexplained investment was deleted because the stock-shortage had been addressed by an earlier gross-profit addition, and the penalty under section 271(1)(c) was deleted because the Assessing Officer failed to specify the limb of the clause when initiating and levying penalty.

Revisionary power under section 263 - Erroneous and prejudicial to the interests of the revenue - Application of mind by the Assessing Officer - Scope of inquiry under section 142(1) - Material on record required for satisfaction - Deduction under section 54F and section 54EC and conditions for allowance

Revisionary power under section 263 - Erroneous and prejudicial to the interests of the revenue - Application of mind by the Assessing Officer - Scope of inquiry under section 142(1) - Material on record required for satisfaction - Deduction under section 54F and section 54EC and conditions for allowance - Validity of the Pr. Commissioner's exercise of jurisdiction under section 263 in setting aside the assessment order for AY 2011-12 on the ground that the assessment was erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal examined the scope of section 263 and the well established tests governing its exercise, including that the Commissioner must be satisfied that the AO's order is both erroneous and prejudicial to the revenue and must have material on record to reach that satisfaction. The Tribunal analysed the questionnaire issued under section 142(1) and found it did not address the specific matters raised by the Commissioner in the 263 proceedings (receipt of interest, TDS credit, substantial claimed 'dastavej' expense, claim of investment in new house and deposits claimed under capital gains exemptions, and eligibility of REC bond claim). The questionnaire called for general details and copies of sale/purchase deeds but did not require the AO to enquire into computation or allowability of capital gains deductions or verification of the receipts and bonds relied upon. Given this omission, the Tribunal concluded that the assessment order was passed without adequate inquiry or application of mind on the determinative issues, and therefore the Commissioner had material basis to form satisfaction under section 263 that the assessment was erroneous and prejudicial to the revenue. Applying the principles that not every loss of revenue or difference of view justifies revision, but where the AO has not made inquiries and appears to have accepted entries mechanically, revision is permissible, the Tribunal found no error in the Pr.CIT's action in setting aside the assessment and directing a fresh assessment and verification on the issues identified in the 263 notice. [Paras 7, 8, 9, 10, 11]

Pr. Commissioner validly invoked section 263; the assessment was set aside and the Tribunal dismissed the assessee's appeal.

Final Conclusion: The Tribunal upheld the Pr. Commissioner's exercise of jurisdiction under section 263 for Assessment Year 2011-12, finding the assessment to have been framed without adequate inquiry and therefore erroneous and prejudicial to revenue; the appeal is dismissed and the direction for fresh assessment and verification is sustained.

Allowability of payment to Special Purpose Vehicle as business expenditure under section 37(1) - distinction between punitive penalty and compensatory payment - mine closure obligation as an ascertainable liability and not a contingent liability - verification and year-wise computation of mine closure obligation by Assessing Officer

Allowability of payment to Special Purpose Vehicle as business expenditure under section 37(1) - distinction between punitive penalty and compensatory payment - Deletion of addition made by the Assessing Officer in respect of payments made pursuant to the Supreme Court directions (contributions/compensation to SPV/Monitoring Committee) was upheld and treated as allowable business expenditure under section 37(1). - HELD THAT: - The Tribunal followed the coordinate-bench reasoning in the assessee's own cases for earlier assessment years and the Supreme Court regime categorising leases and prescribing payments. The payments retained/transferred under the Monitoring Committee/SPV arrangement were held to be compensatory and proportionate to extra mining outside sanctioned areas and were required to resume mining operations; though labelled "penalty," their character was remedial/compensatory rather than punitive. Applying that ratio, the Tribunal found no reason to treat the payments as punitive disallowable under section 37, and therefore sustained the deletion of the addition made by the AO. [Paras 4, 5]

Addition relating to payment to SPV/compensation deleted; grounds 1 and 3 of the Revenue dismissed.

Mine closure obligation as an ascertainable liability and not a contingent liability - verification and year-wise computation of mine closure obligation by Assessing Officer - Deletion of the disallowance of the claim for mine closure obligation was sustained on the view that the obligation is an ascertainable liability, but the quantum must be verified year-wise and recomputed by the Assessing Officer after receipt of relevant data. - HELD THAT: - Relying on consistent precedent in the assessee's own cases, the Tribunal held that mine closure obligation constitutes an ascertainable liability deductible in the year in which it is provided for, not a mere contingent liability. However, the ascertainable quantum has to be determined on a year-wise basis and verified with supporting data. Following prior orders, the assessee was directed to furnish the required particulars and the AO was directed to verify and recompute the allowance, permitting pro rata adjustment if the assessee fails to provide year-wise break-up. [Paras 5, 6]

Deletion of the addition relating to mine closure obligation upheld subject to verification and recomputation by the AO after the assessee furnishes year-wise data; appeal dismissed on this ground.

Final Conclusion: Revenue's appeal for AY 2015-16 is dismissed: the Tribunal upheld the CIT(A)'s deletion of the addition relating to payments under the Supreme Court/Monitoring Committee/SPV arrangement as allowable business expenditure and sustained the deletion relating to mine closure obligation while directing year-wise verification and recomputation by the Assessing Officer.

Validity of notice under section 274 - Penalty under section 271(1)(c) - concealment of particulars versus furnishing inaccurate particulars - Requirement of specific charge for audi alteram partem - Jurisdiction to impose penalty - satisfaction of AO versus issuance of statutory notice - Effect of defective or generic show-cause notice on penalty proceedings - Non-curability of defective notice by participation or by reference to assessment order

Validity of notice under section 274 - Penalty under section 271(1)(c) - concealment of particulars versus furnishing inaccurate particulars - Requirement of specific charge for audi alteram partem - Whether a notice issued under section 274 read with section 271(1)(c) that does not specify which limb of section 271(1)(c) is invoked (concealment of particulars of income or furnishing inaccurate particulars) vitiates the penalty proceedings and prevents imposition of penalty. - HELD THAT: - The Tribunal held that section 274 uses mandatory language obliging the authority to give the assessee a reasonable opportunity of being heard, which requires the notice to state the specific charge so that the assessee may meet it. The two limbs of section 271(1)(c) have distinct meanings and, where the notice is issued in a standard/pro forma manner without striking off irrelevant limbs or without stating which limb is pressed, it indicates non-application of mind and renders the notice defective. Such defect is not a formal irregularity but one affecting the assessee's right to a fair hearing under the doctrine of audi alteram partem; accordingly a defective notice in this respect vitiates the penalty proceedings and any resultant penalty cannot be sustained. The Tribunal relied on the reasoning of decisions treating such notices as invalid and applied the principle that taxing or penal provisions must be strictly construed in favour of the assessee where two constructions are possible. [Paras 9]

Notice under section 274 that fails to specify which limb of section 271(1)(c) is invoked is invalid and the penalty imposed pursuant thereto is unsustainable; the penalty is deleted.

Jurisdiction to impose penalty - satisfaction of AO versus issuance of statutory notice - Non-curability of defective notice by participation or by reference to assessment order - Effect of defective or generic show-cause notice on penalty proceedings - Whether the Assessing Officer's recorded satisfaction (or reference to the assessment order) suffices to confer jurisdiction to levy penalty despite a defective notice under section 274, and whether defects in the notice are cured by the assessee's participation or by other provisions such as section 292B. - HELD THAT: - The Tribunal accepted that the jurisdictional condition to initiate penalty proceedings originates from the AO's satisfaction, but held that such satisfaction alone is not enough to culminate in a valid penalty unless followed by proper initiation and issuance of a statutory notice under section 274 specifying the charge. The requirement of a clear notice is mandatory (the statute uses 'shall') and cannot be treated as mere formality. The Tribunal rejected the contention that participation by the assessee during proceedings or discernibility of the charge from the assessment order cures a defective notice; nor would section 292B rescue a notice that is not in substance in conformity with the statutory intent. Consequently, defects of the kind here considered cannot be regularized by participation or by relying on the assessment order. [Paras 9]

AO's satisfaction without issuance of a specific statutory notice under section 274 does not validate penalty proceedings; defects in the notice are not cured by participation or by reference to the assessment order and therefore the penalty cannot be sustained.

Final Conclusion: For the assessment years in controversy the Tribunal allowed the appeals, holding that the penalty proceedings and the penalties confirmed by the first appellate authority were vitiated because the notices under section 274 did not specify which limb of section 271(1)(c) was invoked; consequently the penalties were deleted and the appeals were allowed.

Show Cause Notice - adjudication proceedings - interim payment of Merchant Overtime Charges - protection from recovery of Cost Recovery Charges - payments under protest to abide adjudication

Show Cause Notice - adjudication proceedings - Direction to issue a Show Cause Notice and to conclude adjudication proceedings within specified timeframes. - HELD THAT: - The Court recorded the respondents' undertaking that, because the petitioner had disputed the demand notices, the respondents would issue a Show Cause Notice to commence adjudication within four weeks and would conclude the adjudication within four months from receipt of the petitioner's reply. Given that the impugned demand notices are precursors to adjudication and not immediately executable, the Court declined to adjudicate the merits at this stage and directed that the adjudication process be carried out by the respondents in accordance with the stated timelines. All substantive contentions are therefore to be determined in those adjudication proceedings. [Paras 3, 8, 9]

Show Cause Notice to be issued within four weeks and adjudication to be completed within four months from receipt of the reply; merits reserved for adjudication.

Interim payment of Merchant Overtime Charges - protection from recovery of Cost Recovery Charges - payments under protest to abide adjudication - Interim regime for payment of Merchant Overtime Charges (MOT) and protection in respect of Cost Recovery Charges (CRC) during pendency of adjudication. - HELD THAT: - The Court continued its earlier interim order protecting the petitioner from recovery of CRC while directing payment of MOT during the pendency of the petition. It was noted that the petitioner has paid MOT in compliance with the interim order and has paid certain charges under protest. The Court held that the interim arrangement shall continue until the respondents dispose of the adjudication proceedings, and that payments of MOT made during the pendency of the petition and adjudication and any CRC paid under protest shall abide by the final orders in the adjudication proceedings. The Court therefore preserved the petitioner's rights to contest the liability to pay these charges on merits before the adjudicating authority. [Paras 6, 7, 8]

Petitioner to continue payment of MOT during pendency without prejudice to contesting liability; CRC remains protected; payments under protest to abide final adjudication.

Final Conclusion: The petition is disposed by recording the respondents' undertaking to issue a Show Cause Notice within four weeks and to conclude adjudication within four months; interim arrangement preserved whereby MOT is payable during pendency while CRC recovery remains stayed, and all merits are kept open for determination in the adjudication proceedings; no order as to costs.

Appeal against order passed under section 110A of the Customs Act, 1962 - maintainability of appeal - authority of the Officer passing order under section 110A - validity of seizure under section 110 - detention and demurrage charges - limitation

Appeal against order passed under section 110A of the Customs Act, 1962 - maintainability of appeal - Preliminary objection regarding maintainability of an appeal against the order dated 17 June 2019 passed by the Superintendent of Customs under section 110A - HELD THAT: - The Court, noting its earlier decision in Commissioner of Customs, Import-I v. S.S. Offshore Pvt. Ltd., treated the impugned order dated 17 June 2019 (Exhibit-H) as an order passed under section 110A of the Customs Act and accepted the preliminary contention that an appeal lies against such an order. The petitioner, on instructions, undertook to file the appeal before the Appellate Authority and was granted liberty to do so. The Court expressly left open all substantive contentions raised by the petitioner - including challenges to the authority of the Officer who passed the order, the validity of the seizure under section 110, and claims concerning detention and demurrage charges - for determination by the Appellate Authority. The respondents offered not to raise a limitation objection if the appeal is filed within two weeks; the Tribunal/Appellate Authority was directed to take note of that stand. [Paras 2, 3, 4, 5]

Petition disposed of by permitting the petitioner to file an appeal against the order dated 17 June 2019 as an order under section 110A, leaving all substantive issues open for the Appellate Authority; respondents will not object to limitation if the appeal is filed within two weeks.

Final Conclusion: The petition is disposed of with liberty to the petitioner to file an appeal against the Superintendent of Customs' order dated 17 June 2019 as an order under section 110A; substantive issues are left open for the Appellate Authority, and respondents have undertaken not to urge limitation if the appeal is instituted within two weeks.

Confiscation for smuggled goods - onus on Revenue to prove smuggling - evidentiary value of report from a non-accredited laboratory - requirement of proper sampling of seized goods - conditional release of seized goods for non-human consumption subject to regulatory intimation

Evidentiary value of report from a non-accredited laboratory - onus on Revenue to prove smuggling - Whether the Revenue discharged the burden of proving that the seized betel nuts were smuggled goods relying on the ARDF certificate. - HELD THAT: - The Tribunal found that the Department's case rested entirely on the report of the Arecanut Research and Development Foundation (ARDF). As ARDF was not an accredited laboratory, the report could not, by itself, establish legal liability that the goods were smuggled. The Tribunal reiterated the settled principle that the onus to prove that goods are smuggled lies heavily upon the Revenue and that a certificate which does not opine on smuggling and which comes from a non-accredited institution cannot substitute for the necessary evidentiary proof. In the absence of corroborative evidence establishing smuggling, the adjudicating authority's confirmation could not be sustained and the appellate authority's reversal was held to be justified. [Paras 8, 9]

Revenue failed to prove that the goods were smuggled; reliance on the ARDF certificate (non-accredited) is insufficient to sustain confiscation.

Requirement of proper sampling of seized goods - conditional release of seized goods for non-human consumption subject to regulatory intimation - Whether the goods and vehicle should remain confiscated or be released subject to conditions imposed by the Commissioner (Appeals). - HELD THAT: - The Commissioner (Appeals) had observed that representative samples were not properly drawn and, applying identical reasoning in precedent, set aside the adjudication and ordered release of the betel nuts for purposes other than human consumption, with prior intimation to agencies enforcing food laws such as FSSAI or Plant Quarantine. The Tribunal sustained that order because the Department had not proved smuggling and the procedural infirmity in sampling further weakened the case for confiscation. Consequently the appellate direction for conditional release, with prior notice to relevant regulatory agencies, was upheld. [Paras 6, 9]

Adjudication order confirming confiscation is set aside; goods may be released for non-human consumption purposes subject to prior intimation to appropriate regulatory agencies.

Final Conclusion: The appeal filed by Revenue is rejected; the order of the Commissioner (Appeals) setting aside the confiscation is sustained because the Revenue failed to prove smuggling and relied on a report from a non-accredited laboratory, and the conditional release directed by the Commissioner (Appeals) is upheld.

Rejection of declared value under Rule 12 of the Customs Valuation Rules - Determination of transaction value under Rule 3(1) of the Customs Valuation Rules - Sequential application of Rules 4 to 9 after rejection of declared value - Onus shifts upon discrepancy in description - Remand for fresh appreciation of evidence

Rejection of declared value under Rule 12 of the Customs Valuation Rules - Determination of transaction value under Rule 3(1) of the Customs Valuation Rules - Sequential application of Rules 4 to 9 after rejection of declared value - Whether the adjudicating authority could re-determine the assessable value under Rule 3(1) without first rejecting the declared transaction value under Rule 12 and then proceeding sequentially through Rules 4 to 9. - HELD THAT: - The Tribunal found that Rule 12 provides the procedure for rejection of the declared value where the proper officer has reasonable doubt about its truth or accuracy and that, upon such rejection, valuation must proceed sequentially under Rules 4 to 9. Rule 3(1) operates subject to Rule 12; if the declared transaction value is in doubt and rejected under Rule 12, the value cannot be determined under Rule 3(1). The adjudicating authority applied the price in the proforma invoice under Rule 3(1) despite recording misdescription and doubts, without following the rejection procedure and sequential valuation mandated by Rule 12. The Commissioner's approach therefore amounted to a procedural and legal error in determining value without first completing the enquiry envisaged by Rule 12 and, if necessary, resorting to Rules 4-9. [Paras 6, 7]

The adjudicating authority erred in applying Rule 3(1) without rejecting the declared value under Rule 12 and following the sequential valuation mechanism; the impugned valuation is set aside for reconsideration.

Onus shifts upon discrepancy in description - Remand for fresh appreciation of evidence - Whether there was mis-declaration of the yacht's description and whether the appellants' bonafides and declared value require fresh appreciation. - HELD THAT: - The Tribunal noted competing contentions: appellants relied on documents (owner's manual, builder's certificate, type certificate) said to have been filed with the Bill of Entry to show the correct model and bona fide error; the Commissioner recorded that the discrepancy was noticed during examination and that documents were obtained by investigation. The Tribunal observed that neither party produced conclusive proof on the record before it to substantiate their claims. Given the absence of conclusive findings and evidence at the adjudication stage, the Tribunal found it appropriate to remit the matter so that the Original Authority may properly appreciate the available documents and evidence, determine whether a mis-declaration occurred, and if so whether it was deliberate with intent to evade duty or a clerical/typographical error. [Paras 4, 8]

The question of mis-declaration, the appellants' bonafides, and related valuation aspects are remanded to the Original Authority for fresh appreciation of evidence and determination of intent; all issues are kept open.

Final Conclusion: The impugned order is set aside and the matter is remitted to the adjudicating authority for fresh appreciation of the evidence and correct application of the Customs Valuation Rules (including Rule 12 and, if applicable, the sequential application of Rules 4-9); all issues are kept open.

Coverage of legacy dispute resolution scheme to confiscation and redemption fine - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - release of goods on payment of redemption fine - object of the scheme to provide full and final settlement

Coverage of legacy dispute resolution scheme to confiscation and redemption fine - release of goods on payment of redemption fine - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Whether the proposed confiscation falls within the scope of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and whether the Scheme covers cases where goods are liable to be released upon payment of a redemption fine in lieu of confiscation. - HELD THAT: - The Court recorded a prima facie view that the legacy Scheme should be sufficiently broad to encompass not only demands of duty but also situations where goods may be released on payment of a redemption fine as an alternative to confiscation. The Court observed that excluding such cases could result in only partial relief under the Scheme and thereby frustrate its object of providing full and final settlement of legacy disputes. In light of this view, the Court did not decide the question on merits but directed the respondents to consider the legal position and place their response on record. The petitioner was permitted to file a rejoinder before the next date.

Respondents directed to examine whether the proposed confiscation is covered by the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and to place their response on record within four weeks; rejoinder permitted; matter listed for further consideration.

Final Conclusion: Notice issued; matter not finally adjudicated on merits. The Court directed the respondents to consider and respond to whether confiscation (and release of goods upon payment of redemption fine) falls within the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, with a further listing for hearing after exchange of responses.

Exemption from service tax under the Special Economic Zones Act - export of services from a Special Economic Zone / Free Trade Warehousing Zone - overriding effect of the SEZ Act over other laws and rules - place of provision of services and Service Tax Rules - remand for production of documentary evidence on reimbursable expenses

Exemption from service tax under the Special Economic Zones Act - export of services from a Special Economic Zone / Free Trade Warehousing Zone - overriding effect of the SEZ Act over other laws and rules - place of provision of services and Service Tax Rules - Whether storage and warehousing services provided by the appellant from within the FTWZ to foreign service recipients are exports exempt from service tax - HELD THAT: - The Tribunal held that Section 26 of the SEZ Act grants exemption from duties and taxes, including service tax, on services provided from a Special Economic Zone or Unit to any place outside India, and Section 51 gives the SEZ Act overriding effect over other laws. Consequently the definitions of "service" and "export" in the SEZ Act govern the situation of units in FTWZ/SEZ. Where the unit is located in the FTWZ, the service recipient is located abroad and consideration is received in convertible foreign currency, the activity falls within the export concept under the special SEZ legislation. In these circumstances the revenue cannot invoke the Finance Act/service tax Place of Provision Rules to defeat the statutory exemption conferred by the SEZ Act. Applying that determinative legal principle, the demand of service tax on consideration received for storage and warehousing services was set aside. [Paras 5]

Demand of service tax on consideration received in respect of Storage and Warehousing services provided from the FTWZ to foreign recipients is set aside.

Remand for production of documentary evidence on reimbursable expenses - Whether amounts collected by the appellant as CFS charges, demurrage, customs duty recoveries and similar receipts are taxable or are merely reimbursements - HELD THAT: - The Tribunal noted that the appellant failed to furnish before the adjudicating authority the documentary evidence necessary to establish that certain collected amounts were mere reimbursements. Observing that the appellant should be afforded an opportunity to produce supporting documents, the Tribunal did not decide the merits on taxable character but remanded the matter to the adjudicating authority for fresh consideration limited to verification of documentary proof and reexamination of the demand on those charges/services. [Paras 5]

Demand relating to other services/amounts was remanded to the adjudicating authority for reconsideration upon production and verification of documents.

Final Conclusion: The appeal is partly allowed: the demand of service tax on storage and warehousing services provided from the FTWZ to foreign recipients is set aside; the assessments in respect of other contested amounts are remanded to the adjudicating authority for fresh consideration.

Cenvat credit on inputs used in fabrication of capital goods - user test for classification as inputs - Cenvat credit on input services - nexus of services with manufacturing activity - effect of invoice address vis-a -vis place of receipt of services - admissibility of invoices under Rule 9(2) of Cenvat Credit Rules, 2004 - precedential effect of a Larger Bench decision when set aside by a High Court

Cenvat credit on inputs used in fabrication of capital goods - user test for classification as inputs - precedential effect of a Larger Bench decision when set aside by a High Court - Cenvat credit on cement and various steel items used in setting up the new factory and for fabrication of foundations and structures of capital goods. - HELD THAT: - Denial of credit was founded solely on the Larger Bench decision in Vandana Global Ltd . The Tribunal noted that that Larger Bench decision has been set aside by the High Court and therefore cannot be relied upon to deny credit. The materials before the Tribunal showed that the cement and steel items were used in fabrication of capital goods and in construction of structures without which manufacturing could not commence. Applying the user test, as applied in Singhal Enterprises Pvt Ltd , the Tribunal held that items employed in fabrication and construction of capital goods/embedded structures qualify as inputs for the purpose of availment of Cenvat credit. On these findings the impugned disallowance of credit on those inputs was set aside. [Paras 8]

Appellant entitled to avail Cenvat credit on the cement and steel items used in fabrication of capital goods; impugned denial set aside.

Cenvat credit on input services - nexus of services with manufacturing activity - effect of invoice address vis-a -vis place of receipt of services - admissibility of invoices under Rule 9(2) of Cenvat Credit Rules, 2004 - Cenvat credit on various input services availed for setting up the new factory where invoices were raised to the appellant's office but services were received at the factory. - HELD THAT: - The sole ground for denial was that invoices bore the address of the Nandyal office whereas services were received at the factory. The revenue did not contend that the services were not used in the course of manufacturing. Relying on the principle that credit is admissible where services are availed in the course of business of manufacture (as in Ultratech Cements Ltd ), the Tribunal held that invoice address alone cannot defeat entitlement to credit. The Tribunal also observed that the invoices contained the particulars required by Rule 9(2) of the Cenvat Credit Rules, 2004 and that certain corrections on the invoices were not a valid reason to deny credit. Accordingly, credit on the input services was allowed. [Paras 9]

Appellant entitled to avail Cenvat credit on the input services; denial based on invoice address and minor corrections set aside.

Final Conclusion: The appeal is allowed; the impugned order denying Cenvat credit on the specified inputs and input services is set aside and the appellant is entitled to consequential relief.

Security deposit for registration of transporters - amendment of registration certificate - distinction between branch office and go-down - registration of transporter under Section 22 of the TVAT Act - memorandum supersession and applicability

Security deposit for registration of transporters - amendment of registration certificate - memorandum supersession and applicability - distinction between branch office and go-down - Legality of the demand that the petitioner deposit Rs. 12,00,000 as security for amending its registration to include an additional go-down. - HELD THAT: - The Court considered Section 22 of the TVAT Act and Rule 17 of the Tripura VAT Rules, 2005, which distinguish between addresses of branch offices and addresses of go-downs in registration applications. The Commissioner's Memorandum dated 20.07.2015 prescribes security amounts and expressly provides nil security for "Amendment of registration other than inclusion of branch office of transporters" while prescribing Rs. 12,00,000 where a branch office is registered. The earlier Memorandum dated 17.11.2011 relied upon by respondents had been superseded by the 20.07.2015 Memorandum. There is no material on record to treat the additional go-down sought to be included as a branch office; the department's affidavit equating a go-down with a branch office manifests a misconception of law, and the inquiry report does not support classification of the site as a branch. Consequently, insisting on the security deposit of Rs. 12,00,000 for the proposed inclusion of a go-down was impermissible and contrary to the applicable Memorandum and the statutory/regulatory scheme governing transporter registration and amendments. [Paras 8, 9, 10, 11, 12]

Impugned communication demanding security deposit of Rs. 12,00,000 for amendment to include the go-down is set aside.

Amendment of registration certificate - registration of transporter under Section 22 of the TVAT Act - Procedure to be followed for the petitioner to seek amendment of registration in light of supersession of TVAT by GST. - HELD THAT: - The Court noted that the TVAT Act has been superseded by the GST regime and that the rules and regulations under GST for amendment of a transporter's registration were not before it. The Court therefore permitted the petitioner to file a fresh application for amendment under the prevailing GST rules; such application is to be examined by the GST authorities according to the law and regulations then applicable. The Court's conclusion that the additional go-down is not a branch office was left to operate as a legal finding for consideration by the GST authorities while processing the fresh application. Timelines were directed: application within four weeks and disposal preferably within three months. [Paras 13]

Petitioner permitted to make a fresh application for amendment under the GST regime; authorities to examine it in accordance with prevailing rules, with the Court's finding that the go-down is not a branch office to be kept in view.

Final Conclusion: The communication demanding deposit of security for including an additional go-down in the transporter's registration is quashed; the petitioner may file a fresh application under the GST regime, which shall be considered by the appropriate authorities in accordance with existing rules, bearing in mind the Court's finding that the site is not a branch office.

Section 138 of the Negotiable Instruments Act, 1881 - Section 269SS of the Income Tax Act, 1961 - penalty under Section 271D of the Income Tax Act, 1961 - presumption under Section 139 of the Negotiable Instruments Act, 1881 - inherent power under Section 482 of the Code of Criminal Procedure, 1973 - statutory breach not rendering contract void unless statute so provides - summoning stage: no testing of merits

Section 269SS of the Income Tax Act, 1961 - penalty under Section 271D of the Income Tax Act, 1961 - statutory breach not rendering contract void unless statute so provides - Effect of a loan/advance made in cash in excess of the limit prescribed by Section 269SS on the validity and enforceability of the underlying transaction and on proceedings under Section 138 of the Negotiable Instruments Act, 1881. - HELD THAT: - The Court examined Section 269SS and the scheme of Chapter XXB and observed that breach of Section 269SS attracts the penal consequence provided under Section 271D but does not, by itself, render the loan or deposit void. Absent an express provision declaring such transactions void, a contract or loan made in contravention of Section 269SS remains binding between the parties and recoverable by legal process. Consequently, violation of Section 269SS does not oust the operation of statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881, nor does it automatically bar prosecution under Section 138. The Court relied on the principle that, unless a statute expressly declares a contract void, a contravening contract does not become unenforceable merely because it infringes a statutory prohibition that prescribes a penalty. [Paras 8, 12, 13, 14]

Breach of Section 269SS renders the offender liable to penalty under Section 271D but does not invalidate the loan or preclude initiation or continuance of proceedings under Section 138 of the Negotiable Instruments Act, 1881.

Section 138 of the Negotiable Instruments Act, 1881 - presumption under Section 139 of the Negotiable Instruments Act, 1881 - summoning stage: no testing of merits - inherent power under Section 482 of the Code of Criminal Procedure, 1973 - Whether the summoning order under Section 138 dated 16.01.2013 is vitiated for want of judicial application of mind or on account of disputed factual allegations, and the scope of High Court's exercise of inherent jurisdiction under Section 482 in that regard. - HELD THAT: - The Court held that at the summoning stage the magistrate need only be satisfied that the basic ingredients of an offence under Section 138 are prima facie made out; the merits of disputed allegations are not to be tested. The respondent had established prima facie the ingredients required for summoning and the statutory presumptions under Section 139 operate in his favour. It is impermissible for the High Court, under Section 482, to enter into a detailed factual inquiry or reappraisal of evidential disputes which are triable by the trial court. The Court also noted that the extraordinary powers under Article 226/Section 482 must be exercised with caution and are appropriate only in categories exemplified in Bhajan Lal, none of which were found to apply so as to require quashing of the proceedings in the present case. [Paras 19, 20, 21, 22, 23]

The summoning order was not vitiated; the High Court will not reappraise disputed facts at the Section 482 stage and the complaint discloses a prima facie case under Section 138.

Inherent power under Section 482 of the Code of Criminal Procedure, 1973 - Effect of failure to raise the plea regarding violation of Section 269SS in earlier proceedings. - HELD THAT: - The Court observed that the applicant had not raised the contention based on Section 269SS in his earlier criminal miscellaneous petition and that no explanation was furnished for this omission. While noting this procedural lapse, the Court nevertheless proceeded to consider the legal proposition and rejected it on merits. The Court emphasised that absence of earlier reliance on a plea is a relevant factor but did not make it the sole basis for dismissal. [Paras 7]

The omission to press the Section 269SS plea earlier was noted but was not decisive; the plea was considered on merits and rejected.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed; the trial court proceedings and the summoning order dated 16.01.2013 stand, and the dismissal is without prejudice to the applicant's right to raise his contentions on merits before the trial court.