TaxTMI Updates e-Newsletter
Feb 26,2021

Rectification of mistake - eligibility to opt for Notification No.2/2019-Central Tax (Rate) - composition taxpayer - self payment of tax under Notification No.2/2019 - advance ruling

Rectification of mistake - composition taxpayer - eligibility to opt for Notification No.2/2019-Central Tax (Rate) - self payment of tax under Notification No.2/2019 - Rectification of Para 2 of the Advance Ruling to correct the finding on the applicant's eligibility to opt for Notification No.2/2019 and its status as a composition taxpayer. - HELD THAT: - On examination of the GST returns filed by the applicant, the authority found that the applicant was a regular taxpayer and had filed GSTR-3B returns discharging applicable taxes up to 31.03.2019, and therefore was not a composition taxpayer until that date. The applicant chose to avail the benefit of Notification No.2/2019-Central Tax (Rate) effective from 01.04.2019 and has been discharging the relevant tax by self-payment through PMT-08. The authority noted that the benefit under the notification may be availed from the beginning of the financial year (or from the date of registration where applicable), and in the present case the applicant availed the notification effective from 01.04.2019. In view of these findings, the earlier ruling's statement that the applicant was registered as a composition taxpayer was incorrect and required rectification.

Para 2 of the Advance Ruling KAR ADRG 28/2020 dated 23/04/2020 is rectified to remove the erroneous finding that the applicant was a composition taxpayer and to recognise that the applicant availed Notification No.2/2019 effective from 01.04.2019 by self-payment.

Final Conclusion: The Authority rectified the earlier advance ruling to correct an apparent mistake: the applicant was not a composition taxpayer up to 31.03.2019 and validly availed the benefit of Notification No.2/2019 with effect from 01.04.2019, paying tax by self-assessment through PMT-08.

Anticipatory bail under Section 438 CrPC - non-bailable economic offence under the CGST Act (offences under Section 132) - absence of reasonable apprehension of arrest - effect of part deposit of alleged tax liability on grant of anticipatory bail - seriousness of offence and loss to the exchequer as a factor in bail adjudication - reliance on custodial interrogation of co-accused and ongoing investigation

Anticipatory bail under Section 438 CrPC - non-bailable economic offence under the CGST Act (offences under Section 132) - absence of reasonable apprehension of arrest - effect of part deposit of alleged tax liability on grant of anticipatory bail - seriousness of offence and loss to the exchequer as a factor in bail adjudication - reliance on custodial interrogation of co-accused and ongoing investigation - The anticipatory bail application filed by Navneet Singh is dismissed. - HELD THAT: - The court found that the allegations against the company involve collection of CGST from clients and non-deposit of the same with the government, constituting a non-bailable economic offence under Section 132 of the CGST Act. A part deposit of the alleged liability does not alter the non-bailable character of the offence nor automatically entitle the accused to anticipatory bail. The prosecution informed the court that investigation is ongoing and the presence of the accused is required; the co-accused director has been arrested and remains in custody. The court accepted the prosecution's stance that there is no present contemplation of arrest of the applicant, and that mere issuance of summons does not create a reasonable apprehension of arrest warranting protection. Given the alleged huge loss to the exchequer, the seriousness of the offence and the stage of investigation, the court was not inclined to grant anticipatory bail. Reliance placed on decisions holding that economic offences causing revenue loss and ongoing investigations may weigh against pre-arrest relief was noted. On these grounds, the application under Section 438 CrPC was refused.

Application for anticipatory bail dismissed; application disposed of.

Final Conclusion: Anticipatory bail under Section 438 CrPC is refused: the allegations disclose a serious, non-bailable economic offence under the CGST Act, part deposit of liability does not convert the offence into a bailable one, the investigation is ongoing and a co-accused remains in custody, and there is no presently established reasonable apprehension of arrest sufficient to warrant protection.

Reasonable bail conditions and limits on onerous conditions - power to impose conditions under Section 438(2) and Section 437(3) of Cr.P.C. - protection of revenue balanced against individual liberty - security in lieu of cash deposit as alternative to satisfy revenue interest

Reasonable bail conditions and limits on onerous conditions - security in lieu of cash deposit as alternative to satisfy revenue interest - protection of revenue balanced against individual liberty - Modification of condition No.4 of the bail order dated 24.11.2020 to permit submission of security other than cash or bank guarantee in place of deposit of the remaining disputed ITC amount. - HELD THAT: - The Court found that the condition directing the applicant to deposit the remaining disputed ITC amount before the Department was harsh and unreasonable in the facts of the case. It noted that the applicant had already deposited a substantial part of the disputed amount and that investigation/enquiry was still pending; no criminal complaint had been filed, no proceedings under the demand and recovery provisions had been initiated, and no provisional attachment order under the Act had been made. Applying the established principle that conditions imposed under the bail provisions must be necessary, just and efficacious and must not be so onerous as to render bail illusory, the Court balanced the interest of revenue with the individual's right to personal liberty. Having regard to the applicant's undertaking and the need to safeguard government revenue, the Court held that directing submission of security equivalent to the remaining disputed amount, other than cash or bank guarantee, would adequately protect revenue while avoiding an unreasonable precondition to bail. The Court therefore modified the bail condition to permit submission of such security (in accordance with the undertaking filed) within a specified timeframe and recorded that failure to furnish the security would permit the Department to move for cancellation of bail. [Paras 22, 23, 24]

Condition No.4 of the bail order dated 24.11.2020 is modified to require the applicant to submit security other than cash or bank guarantee, equivalent to the remaining disputed ITC amount, in accordance with his undertaking, within the prescribed period; failure to furnish security will permit opposite party No.2 to seek bail cancellation.

Final Conclusion: The petition under Section 439(1)(b) is disposed of by modifying the impugned bail condition: instead of depositing the remaining disputed ITC amount in cash the applicant is directed to furnish security (other than cash or bank guarantee) equivalent to that amount as per his undertaking within the time fixed; non-compliance will entitle the Department to move for cancellation of bail.

Bail under Section 439 Cr.P.C. - wrongful claim of input tax credit - existence of actual movement of goods as defense to input tax credit allegations - classification of offence as bailable where wrongful claim is below Rs.5 crore - effect of tax evasion on the economy

Bail under Section 439 Cr.P.C. - wrongful claim of input tax credit - existence of actual movement of goods as defense to input tax credit allegations - classification of offence as bailable where wrongful claim is below Rs.5 crore - effect of tax evasion on the economy - Whether the accused petitioner should be released on bail in FIR No.IV (06) 248/ AE/ALWAR/2020 registered for alleged wrongful claim of input tax credit. - HELD THAT: - The Court considered the prosecution allegations and the defence contentions that the claimed input tax credit figures varied between initial application and the complaint, that several firms alleged to be bogus appeared on the Department portal and some continue to exist there, and that the petitioner was not in the management of any of the firms. The petitioner relied on evidence of actual movement of goods (toll naka receipt and matching truck numbers with e way bills), which, if accepted, would materially reduce the claimed input tax credit. The Union opposed bail on the premise that fake firms were used to claim input tax credit and stressed the broader economic harm of tax evasion. Balancing these factors, the Court found the defence contentions and material relied upon by the petitioner sufficient to grant bail, while noting the prosecution's objections. [Paras 7, 8]

Bail granted to the accused petitioner on furnishing a personal bond of Rs.1,00,000 with two sureties of Rs.50,000 each, subject to appearance on all hearing dates.

Final Conclusion: The High Court allowed the petition under Section 439 Cr.P.C. and directed release of the accused petitioner on the specified bail conditions, having found the defence contentions and material relied upon sufficient to grant bail despite prosecution objections.

Summary order. Petition seeking direction to open GST portal for filing TRAN-1 was not finally adjudicated; notice issued to respondents, counter-affidavit directed to be filed within four weeks, rejoinder within two weeks, and matter listed on 5th July, 2021.

Applicability of tax regime - transition from value-added tax to goods and services tax - taxation of work contracts - direction to administrative authority for final decision - stay of coercive action pending administrative decision - public interest

Applicability of tax regime - transition from value-added tax to goods and services tax - taxation of work contracts - Commissioner of Tax, Assam directed to determine whether the period of work carried out after the advent of the GST regime is taxable under the Assam Value Added Tax Act, 2005 or the Assam Goods and Services Tax Act, 2017. - HELD THAT: - The petitioner participated in a public tender for work-contracts that were extended beyond the original 90-day completion period. At the time of issuance of the work order AVAT, 2005 governed taxation of such contracts, but during the currency of the work the AGST Act, 2017 came into force. The Taxation Department acknowledged that the question of which regime applies to the continued period had not been decided by the authorities. Observing that uncertainty would prejudice public interest and impede the petitioner from discharging tax obligations, the Court directed the Commissioner of Tax to take a final decision on the applicable tax regime for the post GST period of the work and to notify the same. The Court fixed a one month timeline for the decision and recorded that the petitioner would be governed by that decision unless he elects to challenge it by due process.

Commissioner of Tax to decide within one month whether AVAT, 2005 or AGST, 2017 applies to the period of work after the advent of GST; decision to be notified and binding on the petitioner subject to legal challenge.

Direction to administrative authority for final decision - stay of coercive action pending administrative decision - public interest - Interim protection granted against coercive tax action until the Commissioner takes the aforesaid decision. - HELD THAT: - In view of the pending decision by the Taxation Department and the public interest implications of uncertainty over the applicable regime, the Court restrained the Taxation Department from taking coercive action against the petitioner for non payment of tax until the Commissioner issues the final decision. The Finance Department counsel undertook to bring the order to the Commissioner's notice. The petitioner is to comply with the notified decision thereafter or may assail it by following due procedure.

No coercive action to be taken against the petitioner for non payment of tax until the Commissioner issues the decision; counsel for the Department to inform the Commissioner of the order.

Final Conclusion: The High Court directed the Commissioner of Tax, Assam to decide within one month whether the post GST period of the extended works is governed by AVAT, 2005 or AGST, 2017, ordered notification of that decision, and granted interim protection against coercive tax action until the decision is taken; the petitioner may thereafter seek remedies available in law against the decision.

Transitional credit - Form GST TRAN-I - extension of time for submission of Form GST TRAN-I under Section 140 read with Rule 117 - technical glitches on GSTN portal - direction to produce server logs / access logs

Form GST TRAN-I - transitional credit - technical glitches on GSTN portal - Petition seeking direction to allow belated submission of Form GST TRAN-I and grant of transitional credit on account of alleged technical glitches in the GSTN portal - HELD THAT: - Petitioner claimed inability to submit Form GST TRAN-I by the extended cut-off date and thus loss of transitional credit for closing stock of the pre-GST regime. The Court did not adjudicate the merits of entitlement to transitional credit but treated the petition as requiring factual verification of attempts and the existence of technical glitches on the GSTN portal. Consequently, the Court directed the respondents to file affidavits addressing the factual contentions and, in particular, directed GSTN to disclose the petitioner's access/log details up to the cut-off date to show whether attempts to submit TRAN-I were made and to answer the plea of portal malfunctioning. The petitioner was permitted to file a reply to the affidavits.

Respondents (GSTN and State) ordered to file counter-affidavits within four weeks; GSTN to furnish log/access details up to the cut-off date; petitioner permitted to reply within one week thereafter; matter listed after five weeks for further consideration.

Final Conclusion: Petition not finally adjudicated on entitlement to transitional credit; respondents directed to file affidavits and GSTN directed to produce access/log information for factual verification, with further listing for disposal after compliance.

Principles of natural justice - opportunity of personal hearing - procedure for determination of tax under Section 75(4) of the Central Goods and Services Tax Act, 2017 - assessment proceedings under Sections 73 and 74 of the CGST Act

Principles of natural justice - opportunity of personal hearing - procedure for determination of tax under Section 75(4) of the Central Goods and Services Tax Act, 2017 - Whether failure to grant an opportunity of personal hearing before passing the impugned assessment order violated principles of natural justice and Section 75(4) of the CGST Act. - HELD THAT: - The Court held that Section 75(4), a general provision governing procedure for determination of tax, contemplates that a personal hearing must be granted where a specific request for such hearing is received from the person chargeable or where the officer contemplates an adverse decision against the person. Neither Sections 73 nor 74 expressly require a personal hearing in all cases, but the correct interpretation of Section 75(4) is that if the explanation offered by the assessee is accepted there is no necessity for a personal hearing; in all other cases the revenue is incumbent to afford an opportunity of personal hearing. The absence of a specific request does not absolve the officer from granting personal hearing when an adverse decision is contemplated; failure to do so amounts to breach of principles of natural justice. [Paras 4]

Court found that the impugned order suffered from violation of principles of natural justice for not affording personal hearing as required under Section 75(4) and set aside the order.

Opportunity of personal hearing - Remedial direction for further proceedings following the finding of violation of natural justice. - HELD THAT: - Having set aside the impugned order, the Court directed that the petitioner be heard in person on a specified date without further notice and ordered the assessing authority to consider any materials produced and pass a fresh order of assessment de novo within four weeks from the date of hearing. The direction mandates a fresh adjudicatory opportunity rather than merely quashing the assessment. [Paras 5]

Impugned order set aside; petitioner to be heard on 29.01.2021 and a de novo assessment order to be passed within four weeks of hearing.

Final Conclusion: Writ petition allowed: impugned assessment order set aside for failure to afford personal hearing as required by Section 75(4) CGST Act; matter remitted for personal hearing and de novo assessment within the time directed.

Invocation of Double Taxation Avoidance Agreement for determination of Dividend Distribution Tax liability - admissibility under proviso to section 245R(2) - pending proceedings before income-tax authorities - application for advance ruling filed prior to notice under section 143(2) - transaction designed prima facie for avoidance of income-tax

Pending proceedings before income-tax authorities - application for advance ruling filed prior to notice under section 143(2) - admissibility under proviso to section 245R(2) - Whether proviso clause (i) to section 245R(2) bars admission of the advance ruling application on the ground that the question was already pending before an income-tax authority. - HELD THAT: - The Authority examined the sequence of filing and the issue of notice under section 143(2). It applied its earlier view in Mitsubishi Corporation that questions in an advance-ruling application are to be treated as pending before income-tax authorities only when they are shown in the return and a notice under section 143(2) has been issued prior to filing of the advance ruling application. In the present case the application was filed on 29.03.2019 and the notice under section 143(2) for AY 2018-19 was issued only on 23.09.2019. On that factual basis the proviso clause (i) to section 245R(2) is not attracted and the objection based on pendency before the income-tax authority is overruled. [Paras 5]

Clause (i) of the proviso to section 245R(2) does not bar admission; the application was not pending before the income-tax authority when filed.

Transaction designed prima facie for avoidance of income-tax - admissibility under proviso to section 245R(2) - Whether proviso clause (iii) to section 245R(2) bars admission on the ground that the transaction or issue is prima facie designed for avoidance of income-tax. - HELD THAT: - The Authority noted that to invoke clause (iii) there must be material facts pointing to a prima facie design to avoid tax by illegal or improper means, such as sham or contrived devices. The Revenue did not produce any such necessary facts. Reliance was placed on Mustaq Ahmed and Star Television for the proposition that mere claim of treaty benefit or an attempt to minimise tax does not, by itself, establish a design to avoid tax. The application concerned interpretation of treaty provisions and their bearing on liability under section 115-O; absent evidence of a contrived device, clause (iii) cannot be invoked to reject the application at the threshold. [Paras 6, 7]

Clause (iii) of the proviso to section 245R(2) is not attracted; there is no prima facie design to avoid tax that would bar admission.

Invocation of Double Taxation Avoidance Agreement for determination of Dividend Distribution Tax liability - Whether the revised set of questions filed subsequently (seeking to invoke provisions of other DTAAs) should be admitted at the late stage. - HELD THAT: - The Applicant filed a revised set of questions during proceedings, including two additional questions of an academic nature and substitution/expansion of treaty references. The Revenue objected to admission of the revised questions on the ground of lateness and absence of fresh comments from the Principal CIT. The Authority, having regard to the objection and the stage at which the revisions were sought, declined to admit the revised questions, while leaving the applicant free to raise them during the merit hearing. [Paras 8, 9]

The revised questions filed at a late stage are not admitted; the original three questions are admitted for hearing.

Final Conclusion: The Advance Ruling Authority admitted the original three questions for hearing under section 245R(2). The proviso to section 245R(2) is neither attracted by clause (i) (no prior pendency when the application was filed) nor by clause (iii) (no prima facie design to avoid tax). The late-filed revised questions are not admitted; hearing date to be notified.

Addition under Section 68 - Disallowance under Section 69C - Genuineness of high seas sales / transactions - Reliance on customs documentation for verification of transactions - Re appreciation of factual evidence in statutory appeal under Section 260A

Addition under Section 68 - Genuineness of high seas sales / transactions - Re appreciation of factual evidence in statutory appeal under Section 260A - Whether the deletion by the ITAT of the addition made under Section 68 was vitiated in law and gives rise to a substantial question of law. - HELD THAT: - The High Court held that no substantial question of law arises from the Revenue's challenge to the Tribunal's deletion of the Section 68 addition. The Tribunal found that the Assessing Officer's approach was internally inconsistent because the assessee had worked out business income accepting the sales and purchases including high seas sales, and the mere contention that there was no net effect on business income did not justify invoking Section 68. The Tribunal independently examined the merits and accepted documentary evidence from customs authorities (approval of high seas sale agreements, clearance of goods and importer exporter codes) as establishing the genuineness of the high seas sales. Those findings were factual in nature and involved appreciation of material placed before the tax authorities; such factual appreciation could not be re opened under Section 260A. The court found no perversity in the Tribunal's reliance on government agency documents and its conclusion that documentary evidence proved the transactions beyond doubt. [Paras 10, 11, 12, 13]

Tribunal's deletion of the addition under Section 68 upheld; no substantial question of law warrants interference and the appeal is dismissed on this ground.

Disallowance under Section 69C - Reliance on customs documentation for verification of transactions - Whether the question of allowability of expenditure disallowed under Section 69C required fresh adjudication. - HELD THAT: - The Court noted that the Tribunal had restored the matter of allowability under Section 69C to the file of the Assessing Officer for fresh adjudication. The High Court did not interfere with that course: the Tribunal's remit to send the question back for verification and further adjudication was an appropriate exercise where documentary and other material required further consideration by the assessing authority. The court therefore left the issue of disallowance under Section 69C to be decided afresh by the Assessing Officer. [Paras 10]

Issue of allowability under Section 69C remanded to the Assessing Officer for fresh adjudication.

Final Conclusion: The High Court found no substantial question of law in the Revenue's challenge to the ITAT's deletion of the Section 68 addition, upheld the Tribunal's factual findings based on customs documentation, left the assessment on Section 69C to be reconsidered by the Assessing Officer, and dismissed the appeal.

Reference under Section 55A read with Section 50C for valuation - mandatory registration of agreement for sale under Section 17(1)(g) of the Registration Act - disputed questions of fact not amenable to exercise of writ jurisdiction - availability of alternate remedy by way of appeal to the Commissioner of Income Tax (Appeals) - preliminary valuation report relied upon where assessment time limit expires - guideline/market value adopted by assessing authority vis-a -vis declared sale consideration

Reference under Section 55A read with Section 50C for valuation - guideline/market value adopted by assessing authority vis-a -vis declared sale consideration - preliminary valuation report relied upon where assessment time limit expires - Validity of the reassessment/re-computation of long-term capital gains based on the District Valuation Officer's valuation reports and adoption of higher value by the assessing officer. - HELD THAT: - The Court examined whether the petitioner's contention that earlier negotiations and purported receipts during the father's lifetime established a lower sale consideration could invalidate the higher value adopted by the assessing officer. The agreements relied upon by the petitioner are unregistered and the bank passbook entries relied on do not, on their face, establish a concluded earlier sale of the specific properties. Given the absence of registered documents or other cogent proof that the earlier negotiated price reflected the true transaction value, the High Court held that it could not supplant the factual inquiry undertaken by the tax authorities. Further, where the assessment period was expiring, the assessing officer was entitled to complete assessment based on the preliminary valuation report produced on reference under Section 55A/50C. The Court therefore declined to quash the assessments on the basis of the unregistered agreements and banking entries produced before it, leaving the factual determination to the statutory authorities. [Paras 19, 20, 21]

Petitioner's challenge to the adoption of higher value was rejected for want of cogent, registered documentary proof; assessments upheld on this ground.

Mandatory registration of agreement for sale under Section 17(1)(g) of the Registration Act - disputed questions of fact not amenable to exercise of writ jurisdiction - availability of alternate remedy by way of appeal to the Commissioner of Income Tax (Appeals) - Whether the writ petitions were maintainable when disputed questions of fact existed and an alternate statutory remedy by appeal was available. - HELD THAT: - The Court observed that the controversies raised involve disputed questions of fact (existence and terms of earlier sale negotiations, adequacy of documentary proof, and linkage of bank transactions to the alleged earlier sale) which are more appropriately resolved by the income-tax authorities and appellate forum. Since the petitioner has an efficacious alternative remedy by way of appeal to the Commissioner of Income Tax (Appeals), the High Court refused to exercise writ jurisdiction to interfere with the assessment orders. The Court granted the petitioner liberty to prefer statutory appeals within thirty days and directed that the Commissioner (Appeals) decide them on merits uninfluenced by the Court's observations. Interim protection enjoyed during pendency of writ petitions was continued until disposal of such appeals if filed within the specified time. [Paras 21, 22, 23, 24]

Writ petitions dismissed for lack of merit and on account of alternate remedy; liberty granted to file appeals and interim protection continued subject to conditions.

Final Conclusion: Writ petitions dismissed; the assessments for Assessment Year 2013-2014 and Assessment Year 2014-15 are not interfered with by the High Court. Petitioner granted thirty days' liberty to file statutory appeals before the Commissioner of Income Tax (Appeals), which must be decided on merits; interim protection during the writ proceedings is continued until disposal of those appeals if filed within the time allowed.

Capital versus revenue treatment of expenditure on loose tools - nexus between interest bearing funds and interest free advances - capital versus revenue character of salaries paid for research and development - deductibility under Section 43B of the Income tax Act - actual payment rule - burden of proof on assessee to establish source of funds - remand for fresh adjudication by the Tribunal

Capital versus revenue treatment of expenditure on loose tools - burden of proof on assessee to establish source of funds - remand for fresh adjudication by the Tribunal - Claim for write off of expenditure relating to loose tools requires fresh adjudication by the Tribunal. - HELD THAT: - The Assessing Officer disallowed the write off because the assessee, despite opportunity, had not produced complete documentary details including material receipt register. The assessee contended before the Tribunal that it had produced a CD with the requested details, but the Tribunal did not record any finding on that contention and nonetheless allowed the claim. Given the Assessing Officer's specific reasoning and the unascertained factual position about production and verification of documents, the High Court held that the matter requires fresh adjudication by the Tribunal to determine whether the details were furnished and, on that factual foundation, whether the expenditure is revenue or capital in nature. The Court therefore quashed the Tribunal's relevant findings and remitted the issue for adjudication afresh. [Paras 6]

First substantial question quashed and remitted to the Tribunal for fresh adjudication.

Nexus between interest bearing funds and interest free advances - burden of proof on assessee to establish source of funds - remand for fresh adjudication by the Tribunal - Whether the interest free loans advanced to related concerns were from the assessee's own funds or from borrowed funds requires fresh determination by the Tribunal. - HELD THAT: - The Assessing Officer concluded that interest free loans were advanced out of borrowed funds. The assessee asserted that its own funds substantially exceeded the advances and that the loans were therefore out of internal funds, but the Tribunal did not record any finding resolving this factual contention. Because the Tribunal failed to determine whether the advances originated from own funds or borrowed funds, the High Court held that the question must be decided anew by the Tribunal after appropriate fact finding. [Paras 7]

Second substantial question quashed and remitted to the Tribunal for fresh adjudication.

Capital versus revenue character of salaries paid for research and development - remand for fresh adjudication by the Tribunal - The Tribunal's direction to the Assessing Officer to verify and allow salaries paid to employees engaged in R&D if found correct resolves the matter for present and the substantial question as framed does not presently arise. - HELD THAT: - The Tribunal did not finally characterize the entire salary expenditure as revenue or capital; instead it remanded to the Assessing Officer to verify payment of the specified salary amount and allow it if verified. The High Court observed that because the Tribunal has remanded the matter for factual verification, the substantial question of law framed by the Court does not require further consideration at this stage and the matter remains for determination on remand. [Paras 8]

Third substantial question rendered academic for now and remitted for verification as directed by the Tribunal.

Deductibility under Section 43B of the Income tax Act - actual payment rule - actual payment crystallises liability for deduction - Amount deposited towards property tax pursuant to court directions is allowable as deduction under Section 43B since the liability was crystallised and the sum was actually paid. - HELD THAT: - Section 43B permits deduction in the year of actual payment for sums payable by way of tax. The assessee, acting pursuant to court directions, paid the property tax amount. The Tribunal and the Commissioner (Appeals) had held that the liability was certain and the payment entitled the assessee to deduction. The High Court agreed with those findings, referred to binding authority, and held that the assessee is entitled to deduction for the property tax actually paid under Section 43B. [Paras 9]

Fourth substantial question answered in favour of the assessee; deduction under Section 43B allowed for the property tax actually paid.

Final Conclusion: The Tribunal's order is set aside only insofar as it decides the first and second substantial questions; those issues are remitted to the Tribunal for fresh adjudication. The Tribunal's remand concerning the salary payments stands and the substantial question on that aspect does not presently arise. The disallowance under Section 43B in respect of property tax is rejected and the deduction is allowed in favour of the assessee. Appeal disposed of accordingly.

Assessment against non-existent entity - effect of amalgamation - jurisdictional defect - Section 292B inapplicable to jurisdictional defects - no estoppel against law

Assessment against non-existent entity - effect of amalgamation - jurisdictional defect - Validity of assessment framed in the name of the amalgamating company which had ceased to exist on the date of the assessment order. - HELD THAT: - The Court held that once an amalgamation scheme is approved with effect from a specified date the amalgamating company ceases to exist for all legal purposes and, consequently, an assessment framed in its name thereafter is not a mere procedural irregularity but a jurisdictional nullity. Reliance was placed on the ratio of Spice Entertainment Ltd. and subsequent affirmations by the Supreme Court which establish that an assessment cannot be made on a 'dead person' and that the assessment must be completed in the hands of the successor/transferee where applicable. The facts show that the revenue authorities were duly informed of the merger yet proceeded to frame the assessment in the name of the dissolved entity; accordingly the assessment so framed is invalid. [Paras 11, 12]

Assessment framed in the name of the amalgamating company that had ceased to exist is invalid.

Section 292B inapplicable to jurisdictional defects - procedural defect vs jurisdictional defect - Whether the defect of framing assessment in the name of a non-existent entity can be cured under Section 292B of the Income-tax Act. - HELD THAT: - The Court applied established precedents to hold that Section 292B, which saves actions from being invalidated by mere mistakes, defects or omissions, cannot cure defects which are substantive and go to jurisdiction. The framing of an assessment against a non-existent entity is a substantive or jurisdictional defect and therefore not amenable to cure under Section 292B. The Court relied upon the reasoning in Spice Entertainment Ltd., allied High Court decisions and subsequent Supreme Court authority to affirm that Section 292B does not validate such an assessment. [Paras 11, 12]

Section 292B cannot cure the jurisdictional defect arising from assessment in the name of a non-existent entity.

No estoppel against law - participation by amalgamated entity - Effect of participation by the amalgamating/amalgamated entity in assessment proceedings on the validity of an assessment framed in the name of a dissolved company. - HELD THAT: - The Court held that participation by the appellant or its representatives in proceedings does not operate as an estoppel to cure the fundamental jurisdictional defect of framing an assessment in the name of an entity that has ceased to exist. Judicial precedent establishes that procedural participation cannot override the legal consequence that an assessment must be in the name of the successor where the predecessor has been dissolved; therefore participation does not validate an otherwise void assessment. [Paras 11, 12]

Participation by the amalgamated company does not cure or validate an assessment framed in the name of a non-existent amalgamating company.

Final Conclusion: The appeal is dismissed. The High Court affirms that an assessment framed in the name of an amalgamating company which had ceased to exist is void; Section 292B cannot cure this jurisdictional defect and participation by the successor does not estop the consequence. The ITAT's decision in favour of the assessee is upheld.

Treatment of discrepancy between bank statement of sundry debtors and books of account as income u/s 69B - bank statements as source of information not being conclusive proof without corroboration - burden on the revenue to prove undisclosed income by independent corroborative evidence - acceptance of audited books of account and ledger reconciliation as evidence - remand for consideration of additional evidence under Rule 46A

Treatment of discrepancy between bank statement of sundry debtors and books of account as income u/s 69B - bank statements as source of information not being conclusive proof without corroboration - burden on the revenue to prove undisclosed income by independent corroborative evidence - acceptance of audited books of account and ledger reconciliation as evidence - Validity of addition made u/s 69B on account of difference between sundry debtors shown in the Karur Vysya Bank statement and the assessee's books of account - HELD THAT: - The Tribunal upheld the deletion of the addition made by the Assessing Officer where the AO relied solely on a list of sundry debtors obtained from the bank which showed inflated balances compared to the assessee's books. The assessee produced audited books of account, ledger extracts and explanations that inflated debtor balances were furnished to the bank for securing higher credit facilities. The AO did not undertake independent verification or produce corroborative evidence to displace the books; no sales or purchases outside books were found and the AO had accepted sales and purchases recorded in the books. In these circumstances a bank statement, being only a source of information, cannot be treated as conclusive proof of undisclosed income under section 69B without independent corroboration; the burden to prove undisclosed income lies on the revenue. The Tribunal relied on analogous decisions of this Tribunal and higher courts to hold that mere inflation of statements furnished to banks for credit purposes does not, without supporting evidence, justify an addition under section 69B. [Paras 7]

Addition under section 69B on account of difference between bank debtor statement and books of account deleted; order of the CIT(A) upheld and revenue's appeal dismissed.

Remand for consideration of additional evidence under Rule 46A - admission and consideration of additional evidence by appellate authority - Whether the matter should be remitted to the Assessing Officer for reexamination because the assessee filed debtor confirmations and other documents before the CIT(A) - HELD THAT: - The Revenue contended that the CIT(A) relied on additional evidence furnished before the CIT(A) and, because such material constitutes additional evidence under Rule 46A, the matter should be remitted to the AO. The Tribunal examined the record and found that the CIT(A) did not decide the appeal on the basis of such additional evidence. As the deletion was not founded on the additional documents placed before the CIT(A), there was no requirement to remit the matter to the AO. Consequently, the request to remit the case for reexamination was rejected. [Paras 6]

Request to remit the matter to the Assessing Officer under Rule 46A rejected; no remand ordered.

Final Conclusion: The Tribunal condoned the delay in filing the revenue appeal, rejected the revenue's contention for remand, upheld the deletion of the addition made under section 69B as the bank statement alone, without corroborative evidence, could not displace audited books of account, and accordingly dismissed the revenue's appeal; the assessee's cross objections became infructuous and were dismissed.

Admission of additional evidence under Rule 46A of the Income tax Rules - addition under section 68 for unexplained income/credit entries - eligibility for capital gains exemption under section 54/54F - appellate authority's power to examine assessment record and remand report - deletion of additions on plausible explanation

Admission of additional evidence under Rule 46A of the Income tax Rules - appellate authority's power to examine assessment record and remand report - The validity of the ld. CIT(A)'s admission and consideration of additional evidence furnished by the assessee in the appellate proceedings. - HELD THAT: - The Tribunal held that the CIT(A) was entitled to admit and examine the documents because those documents had been placed on the assessment record, were sent to the Assessing Officer for a remand report, and the assessee filed a rejoinder stating that the documents had earlier been submitted to the AO but were not considered. The CIT(A) examined the assessment record (including the material identified as pages 11-40) and the remand report and found that the AO had not examined the evidence on merit. In those circumstances the CIT(A) could properly consider the material and assess the merits of the claim rather than mechanically rejecting the additional evidence. The Tribunal found no infirmity in the exercise of discretion by the CIT(A) in admitting and acting upon the evidence.

Admission and consideration of the additional evidence by the ld. CIT(A) upheld; no contravention of Rule 46A found.

Addition under section 68 for unexplained income/credit entries - eligibility for capital gains exemption under section 54/54F - deletion of additions on plausible explanation - Whether the additions made by the AO under section 68 in respect of sale proceeds of the plot and certain bank credits were sustainable in view of the documents and explanations produced by the assessee. - HELD THAT: - The Tribunal accepted the finding that the assessee, a co sharer to the extent of one fifth, produced the registered sale deed for the property and the bank statements showing receipt and treatment of the sale proceeds in a capital gains account. The assessee also produced the registered deed for purchase of a new residential property and evidence of investment from the capital gains account, satisfying the conditions for exemption under section 54/54F. The AO had the documents on record but did not examine them on merits and did not comment when the material was sent for remand. In view of the documentary proof on record and the plausible explanation, the additions made under section 68 were not sustainable and the CIT(A)'s deletion of those additions was proper.

Deletions of the additions made under section 68 in respect of the sale proceeds and bank credits upheld; assessee found eligible for relief under section 54/54F.

Deletion of additions on plausible explanation - addition in respect of interest in capital gains account - Sustenance of the addition made by the AO in respect of interest credited to the capital gains account. - HELD THAT: - The Tribunal noted that the interest was found within the capital gains account and that the assessee's explanation regarding the nature and treatment of those receipts was plausible in the light of the account entries and other documentary material. Given that the AO had not dealt with the documents on merits and that the CIT(A) examined the record and accepted the explanation, the Tribunal found no reason to interfere with the deletion of the addition relating to interest.

Deletion of the addition relating to interest in the capital gains account upheld.

Final Conclusion: The Revenue's appeal is dismissed; the order of the ld. CIT(A) deleting the additions and allowing the exemption claimed under the capital gains provisions is affirmed.

Re-opening of assessment and validity of notice under section 148 - disallowance under section 40(a)(ia) for failure to deduct TDS and applicability of second proviso to section 40(a)(ia) read with section 201(1) - restoration for verification of payee's return, tax payment and certificate from accountant - disallowance of business expenditure under section 37(1) and requirement of verification of genuineness - allowance of depreciation under section 32 on capital expenditure subject to verification - unexplained credits under section 68 and onus on assessee to prove identity, genuineness and creditworthiness - treatment of alleged bogus purchases and estimation of attributable profit (limited addition)

Re-opening of assessment and validity of notice under section 148 - Validity of the notice issued under section 148 for re-opening the assessment. - HELD THAT: - The assessee did not press the challenge to the section 148 notice. The Tribunal recorded that the issue was not pressed and accordingly decided the matter against the assessee being not pressed. [Paras 7]

Challenge to notice under section 148 dismissed in favour of the revenue as the issue was not pressed by the assessee.

Disallowance under section 40(a)(ia) for failure to deduct TDS and applicability of second proviso to section 40(a)(ia) read with section 201(1) - restoration for verification of payee's return, tax payment and certificate from accountant - Whether advertisement expenditure disallowed under section 40(a)(ia) on account of non-deduction of TDS should stand, having regard to the second proviso to section 40(a)(ia) read with section 201(1). - HELD THAT: - The Tribunal applied the law that the second proviso to section 40(a)(ia) (as read with section 201(1)) operates to treat tax as deemed deducted where the resident payee has furnished a return, taken the sum into account and paid tax thereon, subject to prescribed certificate. Following precedents and on facts similar to cited decisions, the Tribunal found it appropriate to remit the matter to the Assessing Officer for verification whether the payees had filed returns and paid tax and whether the conditions of the proviso are satisfied. The CIT(A)'s contrary finding was set aside and the AO was directed to make necessary verifications; if conditions are shown to be met, the disallowance is to be vacated. [Paras 9]

Finding of disallowance under section 40(a)(ia) set aside and matter restored to AO for verification; decided in favour of the assessee for statistical purposes.

Disallowance of business expenditure under section 37(1) and requirement of verification of genuineness - Disallowance of other business expenses under section 37(1) and whether those expenses are allowable. - HELD THAT: - The Tribunal observed that the AO did not adequately examine the claims, in particular expenses recorded under the erstwhile name of the assessee, and that facts and documents require verification. The CIT(A)'s confirmation of disallowance was set aside and the matter was restored to the AO to decide afresh after verifying relevant records and giving the assessee an opportunity of being heard. [Paras 10]

Disallowance under section 37(1) set aside and remitted to AO for fresh verification; issue treated in favour of the assessee for statistical purposes.

Allowance of depreciation under section 32 on capital expenditure subject to verification - Entitlement to depreciation under section 32 on amounts treated as capital expenditure. - HELD THAT: - Because the question of whether certain expenses are capital in nature was remitted to the AO (issue above), entitlement to depreciation is consequential and requires the AO's verification. The Tribunal directed that if amounts are held to be capital expenditure after verification, depreciation shall be allowable under section 32, and restored the matter to the AO with direction to afford the assessee an opportunity of being heard. [Paras 11]

Finding denying depreciation set aside and remitted to AO for verification; treated in favour of the assessee.

Unexplained credits under section 68 and onus on assessee to prove identity, genuineness and creditworthiness - Deletion of addition under section 68 in respect of share application money of certain investor companies. - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that the assessee had produced documents (PAN, confirmations, board resolutions, bank statements, returns and audited financials of applicants) sufficient to prove identity, genuineness and creditworthiness, and that the AO had not dislodged that material or made further enquiries (for example under section 133(6)). Reliance was placed on a series of decisions where identical investor companies and transactions were accepted. On appraisal the Tribunal found no grounds to interfere with the CIT(A)'s deletion of the addition under section 68 and therefore affirmed that deletion. [Paras 16]

Deletion of addition under section 68 affirmed in favour of the assessee.

Treatment of alleged bogus purchases and estimation of attributable profit (limited addition) - Whether addition in respect of alleged bogus purchases should be sustained at 100% or restricted to a limited percentage of purchases. - HELD THAT: - The Tribunal examined the CIT(A)'s reasoning that, although invoices, bank payments and ledger entries were produced, the assessee had not proved market-price conformity or delivery documents; nevertheless, following precedents (including decisions in the trade of diamonds) and considering industry practice and the assessee's gross profit, the CIT(A) estimated the attributable profit and restricted the addition to 5% of the alleged bogus purchases. The Tribunal, on the facts and in view of the assessee not appealing this issue and relevant precedents and reports, found no reason to interfere and affirmed the restriction to 5%. [Paras 18]

Addition for alleged bogus purchases restricted to 5% affirmed in favour of the assessee.

Final Conclusion: For A.Y. 2012-13 the Tribunal partly allowed the assessee's appeal: the challenge to the section 148 notice was not pressed (dismissed for assessee), the disallowance under section 40(a)(ia) was set aside and remitted to the AO for verification under the second proviso read with section 201(1), disallowance under section 37(1) and the question of depreciation under section 32 were remitted to the AO for fresh verification, while in the revenue appeal the deletion of addition under section 68 was affirmed and the restriction of addition for alleged bogus purchases to 5% was upheld; the appeals were otherwise disposed as recorded.

Deemed dividend under section 2(22)(e) - share sale versus loan characterisation - verification of transfer and documentary proof

Deemed dividend under section 2(22)(e) - share sale versus loan characterisation - verification of transfer and documentary proof - Whether the sum of Rs. 49,50,000/- received by the assessee is exigible to tax as deemed dividend under section 2(22)(e) or is consideration for sale of shares, and the resulting course of action. - HELD THAT: - The Tribunal noted that the assessee produced a share purchase agreement dated 12.9.2012, bank remittance confirmations and ledger entries evidencing receipt of Rs. 49,50,000/- as consideration for sale of 66,000 equity shares of M/s Victoria Steel Enterprises Ltd to M/s Tejdeep Engg. Enterprises (P) Ltd. Although the AO relied on the assessee's books (where the amount was shown under "unsecured loans") and treated the receipt as a running account loan, the Tribunal observed there is no positive evidence on record disproving the assessee's claim that the amount was sale consideration. The Tribunal therefore did not decide the question of taxability on the merits but directed the AO to verify the contention (including whether the transaction was completed and shares were transferred). If verification establishes the sale and transfer as claimed, the amount cannot be treated as deemed dividend under section 2(22)(e). The Tribunal accordingly allowed the appeal for statistical purposes and remitted the factual verification to the AO. [Paras 5]

Matter remitted to the Assessing Officer for verification of the sale and transfer; if the assessee's contention is verified, the addition under section 2(22)(e) shall be deleted; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the issue to the Assessing Officer to verify whether the receipt of Rs. 49,50,000/- was genuine sale consideration and whether the shares were transferred; if verified, the amount shall not be brought to tax as deemed dividend and the addition is to be deleted; appeal allowed for statistical purposes.

Reopening of assessment under section 147 - reasons to believe - application of mind - mechanical/borrowed satisfaction - information from investigation wing

Reopening of assessment under section 147 - reasons to believe - application of mind - mechanical/borrowed satisfaction - information from investigation wing - Validity of reopening the assessment for A.Y 2007-08 by the Assessing Officer under section 147 of the Income-tax Act. - HELD THAT: - The Tribunal found that the reasons to believe recorded by the Assessing Officer merely reproduced information received from the DGIT (Investigation) without any independent application of mind. The reasons did not specify the nature of the alleged accommodation entries nor demonstrate a link between tangible material and the formation of a bona fide belief that income chargeable to tax had escaped assessment. Reliance on the Investigation Wing's report, without further verification, examination or minimum elucidation by the A.O., amounted to acting on a borrowed satisfaction. In that factual backdrop the Tribunal held that the statutory requirement that the A.O. form an independent and bona fide reason to believe was not satisfied and therefore the notice issued under section 148 and the consequent reassessment under section 143(3) r.w.s. 147 could not be sustained. The Tribunal accordingly quashed the reassessment without adjudicating the merits of the additions. [Paras 8, 9, 10, 11]

Reopening held invalid; reassessment framed u/s 143(3) r.w.s 147 quashed for want of independent reasons to believe.

Final Conclusion: The appeal is allowed: reassessment for A.Y 2007-08 under section 147/143(3) is quashed as the Assessing Officer acted mechanically on information from the investigation wing without forming an independent bona fide belief.

Debit to provision account and applicability of tax deduction at source - deeming under Explanation (iv) to Section 194H - disallowance under Section 40(a)(ia) for failure to deduct TDS - capital expenditure versus revenue expenditure - enduring benefit test - concurrent findings of fact and perversity principle - consistency of treatment across assessment years and effect of prior unchallenged assessments

Debit to provision account and applicability of tax deduction at source - deeming under Explanation (iv) to Section 194H - disallowance under Section 40(a)(ia) for failure to deduct TDS - consistency of treatment across assessment years and effect of prior unchallenged assessments - Provisions of Section 194H and consequential disallowance under Section 40(a)(ia) do not apply to amounts debited to a provision account in the facts of this case, and the revenue's addition on that ground is not sustainable. - HELD THAT: - The Court examined the contention that Explanation (iv) to Section 194H treats any credit to an account (including a suspense or provision account) as income of the payee attracting TDS obligations and therefore that the assessee's debit to a provision should have attracted disallowance under Section 40(a)(ia). The tribunal's factual conclusion that the amounts were only provided on a matching basis, agents were not identified and no credit to agents' accounts had occurred was accepted. The Court applied the principle that where a consistent factual position has been adopted and permitted in earlier and subsequent assessment years without departmental challenge, it is not appropriate to depart from that position in a later year (as recognised in the cited Supreme Court authorities). On the facts, the department had not made additions in earlier years where similar provisions were made and TDS was not deducted; that consistency weighed against invoking Explanation (iv) and Section 40(a)(ia) in the present assessment. Having regard to the concurrent factual findings and the settled legal principle limiting re-opening of such a sustained position, the Tribunal's conclusion that TDS provisions were not attracted to the provision debited in the assessee's books was upheld. [Paras 8]

Addition under Section 40(a)(ia) on account of non-deduction of TDS in respect of the provisioned commission is rejected; first substantial question answered against the revenue.

Capital expenditure versus revenue expenditure - enduring benefit test - concurrent findings of fact and perversity principle - Consultancy fees paid for a profitability and cost reduction study are revenue expenditure and not capital expenditure, and the addition treating them as capital expenditure cannot be sustained. - HELD THAT: - The Commissioner (Appeals) and the Tribunal found that the consultancy fee was paid for studying and preparing strategies to reduce the assessee's cost of production and to improve sales and profitability, and that no new capital asset was created. The Court noted these concurrent findings of fact were unchallenged on the ground of perversity and invoked the settled principle that concurrent factual findings cannot be interfered with in an appellate review under Section 260A unless shown to be perverse. The Court therefore affirmed the Tribunal's conclusion that the expenditure did not result in creation of a new asset or fall within the ambit of capital expenditure, and that provisions such as Section 35D were not attracted. [Paras 9]

Addition disallowing consultancy charges as capital expenditure is rejected; second substantial question answered against the revenue.

Final Conclusion: Both substantial questions of law framed at admission were answered against the revenue and in favour of the assessee; the appeal is dismissed.

Computation of book profit under Section 115JB - addition of reversal of provision for bad and doubtful debts to book profit - retrospective amendment by Finance (No.2) Act, 2009 - proviso to clause (i) of Explanation I to Section 115JB(2) - doctrine that law does not require performance of an impossible act

Addition of reversal of provision for bad and doubtful debts to book profit - computation of book profit under Section 115JB - The Tribunal's disallowance of reduction claimed for amount credited as reversal of provision for bad and doubtful debts in computation of book profit under Section 115JB was set aside. - HELD THAT: - The Court applied the reasoning in the co ordinate Bench decision (ITA No.409/2014) and held that the assessee could not be required to add back provision for bad and doubtful debts in years prior to the insertion of clause (i) in Explanation to Section 115JB(2), because law does not compel performance of an impossible act. The assessee had demonstrated at the first available opportunity that even after adding back the provision the book profit remained negative, and therefore no adverse inference could be drawn against the assessee. Consequently, the Tribunal's disallowance to the extent it prejudiced the assessee was quashed. [Paras 8]

Answered in favour of the assessee; the Tribunal's contrary finding quashed.

Retrospective amendment by Finance (No.2) Act, 2009 - proviso to clause (i) of Explanation I to Section 115JB(2) - computation of book profit under Section 115JB - The effect of the retrospective insertion (Finance (No.2) Act, 2009) on computation of MAT book profit was considered and applied in favour of the assessee. - HELD THAT: - The Court noted that clause (i) in Explanation to Section 115JB(2) was inserted retrospectively from 01.04.2001 by Finance (No.2) Act, 2009, but reiterated that an assessee cannot be expected to give effect to a provision inserted later in years already elapsed. Applying the co ordinate Bench's earlier decision and the settled principle that law does not require performance of an impossible act, the Court held that the assessee could not be faulted for not having added back provisions in earlier years and that the amended scheme could not be used to draw adverse consequences where the assessee, at the first opportunity, showed book profits remained negative on addition. [Paras 8]

Answered in favour of the assessee; retrospective amendment did not justify the adverse treatment by the Tribunal.

Computation of book profit under Section 115JB - addition of reversal of provision for bad and doubtful debts to book profit - The Tribunal failed to appreciate that the assessee had added back provision for bad and doubtful debts for certain earlier years and thus ought to have granted deduction in respect of reversal at least to that extent. - HELD THAT: - The Court accepted the assessee's contention that where it had added back provisions in certain earlier assessment years, the reversal claimed should be allowed to the extent of such prior additions. Coupled with the finding that the assessee could not have added back earlier where the law was not then in force, and that adding back at the first opportunity still produced negative book profits, the Tribunal's refusal to allow the deduction to that extent was held to be unjustified. [Paras 8, 10]

Answered in favour of the assessee; deduction to the extent of earlier bona fide additions to be recognised and Tribunal's adverse findings quashed.

Final Conclusion: The appeal is allowed; the Tribunal's order dated 14.08.2020 insofar as adverse to the assessee is quashed and the substantial questions of law raised are answered in favour of the assessee, applying the reasoning of the co ordinate Bench decision mutatis mutandis.

Addition to income as unexplained cash credit under section 69 - burden on the assessee to explain source of cash deposits - reliability and cogency of evidence to establish source of cash deposits - inconsistent statements and lack of proof of creditworthiness as grounds for rejection - notice under section 148 and assessment on information of undisclosed deposits

Addition to income as unexplained cash credit under section 69 - burden on the assessee to explain source of cash deposits - reliability and cogency of evidence to establish source of cash deposits - inconsistent statements and lack of proof of creditworthiness as grounds for rejection - Whether the addition of the cash deposits to the assessee's income as unexplained cash credit was justified. - HELD THAT: - The Tribunal upheld the addition because the assessee had deposited cash into his bank account and failed to produce reliable and cogent evidence to explain the source. Although the assessee alleged the cash was received from a third party for procuring insurance policies and filed that third party's statement, the authorities noted material inconsistencies between the assessee's own statement and the third party's letter regarding dates and amounts. The assessee did not establish the creditworthiness of the alleged donor or produce corroborative evidence linking the deposits to the claimed transactions; premium receipts did not pertain to the alleged donor. On these facts the Tribunal held that the assessee did not discharge the burden of proof and the deposits remained unexplained, warranting addition under the relevant unexplained credit provision. [Paras 5, 6]

Addition of the impugned cash deposits was confirmed and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the addition of the cash deposits to the assessee's income as unexplained, concluding that the assessee failed to satisfactorily explain the source of the deposits.

Deduction under section 54F - one residential house - independent residential units - character of a building as a single residential house despite multiple units - reliance on coordinate bench decisions

Deduction under section 54F - one residential house - independent residential units - Whether the assessee was entitled to deduction under section 54F despite acquiring a building comprising multiple self contained units, or whether each unit/floor constituted a separate house disentitling the assessee to the deduction. - HELD THAT: - The Tribunal examined whether vertical or lateral division of a building into independently usable units converts the acquisition into more than "one" house for the purposes of section 54F. It held that a single stand alone building retains the character of "one residential house" even if it comprises several independent residential units or floors capable of separate occupation, and that such physical structuring does not, by itself, defeat the statutory requirement for investment in "a residential house." The Tribunal noted that reliance placed below on an ex parte decision (Ramaiah Harish ) was misplaced because that order had been recalled. The Tribunal applied the reasoning of a coordinate bench (Shri Bhatkal Ramarao Prakash ) which found on facts that the property, though bifurcated for legacy/share earmarking and having different door numbers and independently usable units, was one residential house; that factual conclusion was determinative. The Tribunal further recorded that co ordinate benches have consistently held that an independent building comprising multiple residential units does not lose the character of "one residential house" (Shri Chandrashekar Veerabhadraiah ), and that the revenue's reliance on decisions distinguishing "unit" from "house" was not decisive where the factual finding is that the property constitutes a single house. Applying these principles to the facts, the Tribunal concluded that the assessee's acquired building is "one residential house" within the meaning of section 54F and that the AO's reasoning to deny the deduction was unjustified. The Tribunal therefore set aside the CIT(A)'s order and directed restoration to the AO for allowance of the deduction in consequence of its legal and factual finding. [Paras 3, 6, 7]

Order of CIT(A) rejecting deduction under section 54F set aside; the building received by the assessee held to be one residential house and the matter restored to the AO for allowance of the deduction in accordance with the Tribunal's finding.

Final Conclusion: Appeal allowed: the Tribunal held that acquisition of an independent building comprising multiple residential units/floors may constitute "one residential house" for section 54F; the CIT(A)'s rejection was set aside and the issue remitted to the AO for compliance with this view.

Concealment of particulars of income - furnishing inaccurate particulars of income - vague and ambiguous notice under section 274 read with section 271(1)(c) - penalty under section 271(1)(c) - procedural validity of notice - revised return and bonafide inadvertent mistake - computation of book profit for tax under section 115JB

Vague and ambiguous notice under section 274 read with section 271(1)(c) - penalty under section 271(1)(c) - procedural validity of notice - Validity of the notice issued under section 274 read with section 271(1)(c) when it does not specify whether proceedings are for concealment or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal examined the show-cause notice and found it to be vague because it simultaneously alleged either concealment of particulars of income or furnishing of inaccurate particulars without specifying which limb of section 271(1)(c) was invoked. Reliance was placed on higher court decisions holding that a notice which fails to specify the precise charge under section 271(1)(c) is bad in law. Where the charge is not specifically framed, the person against whom penal consequences are contemplated is not made aware of the case to be met, rendering the proceedings unsustainable. On this basis the Tribunal held that penalty proceedings initiated under such an unspecified notice cannot be sustained. [Paras 11, 12, 13, 15]

Notice was vague and ambiguous for not specifying the limb of section 271(1)(c); penalty proceedings founded on that notice are not sustainable.

Furnishing inaccurate particulars of income - revised return and bonafide inadvertent mistake - computation of book profit for tax under section 115JB - Whether the omission to include exempt long-term capital gains in computing book profit amounted to concealment or furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal noted that the assessee had disclosed full particulars of the sale of shares and the long-term capital gain in the original return and had produced balance sheet and profit & loss account during assessment proceedings. The omission in computing book profit was described as a bonafide, inadvertent mistake which was rectified by filing a revised return; there was no questionnaire or specific query from the AO pointing out the error. The Tribunal applied precedents which hold that a mere mistake in computation, subsequently corrected and not resulting in tax evasion because the correct computation under section 115JB was accepted, does not constitute concealment or furnishing of inaccurate particulars warranting penalty. [Paras 8, 9, 16, 17, 19]

The omission was a bonafide inadvertent error rectified by revised return and did not amount to concealment or furnishing of inaccurate particulars; penalty is not leviable on that ground.

Final Conclusion: The Tribunal allowed the appeal: the penalty under section 271(1)(c) was deleted because the initiating notice was vague and ambiguous as to the charge under section 271(1)(c), and, on the facts, the omission in computing book profit was a bona fide inadvertent mistake rectified by a revised return and did not amount to concealment or furnishing inaccurate particulars of income.

Provisional release under section 110A of the Customs Act, 1962 - seizure of export consignment - judicial direction to adjudicating authority for expeditious decision

Provisional release under section 110A of the Customs Act, 1962 - seizure of export consignment - Direction to the adjudicating authority to consider and decide the petitioner's claim for provisional release of the seized export consignment under section 110A of the Customs Act within a specified short period. - HELD THAT: - The Court did not adjudicate the merits of the petitioner's claim for provisional release or express any opinion on the lawfulness of the seizure. Instead, relying on the respondents' undertaking that the adjudicating authority would consider all aspects, the Court directed that an adjudicating authority to be appointed by respondent No.2 shall pass an appropriate order on the petitioner's prayer for provisional release under section 110A of the Customs Act. The adjudicating authority is to take into consideration all relevant materials, including the Court's earlier order dated 10th February, 2021 referred to in the proceedings, and is required to decide the matter expeditiously within ten days from receipt of this order. [Paras 9, 10]

Adjudicating authority directed to decide the petitioner's application for provisional release under section 110A within ten days, considering all relevant materials including the Court's earlier order.

Final Conclusion: Writ petition is not decided on merits; the matter of provisional release of the seized export consignment is remitted to the adjudicating authority to be decided within ten days in accordance with law and taking into account the Court's earlier order.

Waiver of Cost Recovery Charges - opportunity of personal hearing - perusal of departmental records - application of CBEC circulars/bench mark for waiver - remand for fresh consideration

Waiver of Cost Recovery Charges - application of CBEC circulars/bench mark for waiver - opportunity of personal hearing - perusal of departmental records - remand for fresh consideration - Order rejecting the appellant's request for waiver was quashed and the matter remanded for fresh consideration after affording an opportunity of personal hearing and permitting perusal of records, with directions to apply the relevant CBEC circulars. - HELD THAT: - The court found that the adjudicating authority possessed power to grant waiver but the impugned order contained no analysis of the benchmark conditions laid down in the CBEC circulars relied upon by the Department. The appellant had sought waiver for the period March 2001 to December 2004, asserted limited handling of consignments and relied on prior payments; the Department admitted receipt of a portion of payment but proceeded to confirm demand without granting the appellant a personal hearing or permitting inspection of the officers' deployment records. In taxing matters, an opportunity of personal hearing is material to enable the assessee to place all available materials; absent such hearing and absent consideration of the benchmark criteria in the circulars, the adjudication was not sufficiently informed. The court therefore set aside the order and remanded the matter for a reasoned decision on merits after affording the authorized representative an opportunity to peruse the documents sought and after applying the relevant CBEC circulars; copies of documents need not be furnished but perusal must be permitted. The fresh decision was directed to be taken within a reasonable time, preferably four months. [Paras 13, 15]

The order dated 16.04.2008 is quashed and the matter is remitted to the second respondent to decide afresh after granting personal hearing, permitting perusal of records, applying the relevant CBEC circulars and passing a reasoned order within a reasonable time (preferably four months).

Final Conclusion: The Tax Case Appeal is allowed; the writ petition order is set aside, the second respondent's order dated 16.04.2008 is quashed and the matter remanded for fresh adjudication after affording personal hearing, permitting perusal of records and applying the relevant CBEC circulars, to be completed within a reasonable period (preferably four months).

Obligations of a Customs Broker under Know Your Customer (KYC) norms - requirement of authorization from principal for customs clearance - due diligence of a Customs House Agent (CHA) in verification of client information - scope of CHA's duty - not to conduct investigative verification or physical inspection absent triggering factors - liability of CHA for client's fraudulent/import-related misconduct in the absence of mens rea or connivance - revocation of customs broker licence, forfeiture of security and imposition of penalty - need for substantiated regulatory breach

Requirement of authorization from principal for customs clearance - obligations of a Customs Broker under Know Your Customer (KYC) norms - The Commissioner's finding that the appellant violated Regulation 10(a) by failing to obtain proper authorization for the export consignments was not sustainable. - HELD THAT: - Regulation 10(a) obliges a Customs Broker to obtain an authorisation from the firm by which he is employed and produce it when required. The Commissioner held that no proper authorization was produced and questioned authenticity because the authorisation was dated nine months prior to the invoices and was unsigned by a named signatory. The Tribunal/ Court examined the actual authorisation submitted by the appellant which was signed by Rakesh Kumar (the Director), and KYC documents including Aadhar and IEC were also on record. The Commissioner's rejection rested on presumption and on doubting ownership of the exporter without appreciating that the authorisation letter identified the signatory and that accompanying KYC documents had been submitted. The finding of violation of Regulation 10(a) therefore rested on an incorrect factual premise and could not stand. [Paras 25, 26, 27, 28]

Finding of breach of Regulation 10(a) by the Commissioner is set aside.

Due diligence of a Customs House Agent (CHA) in verification of client information - scope of CHA's duty - not to conduct investigative verification or physical inspection absent triggering factors - liability of CHA for client's fraudulent/import-related misconduct in the absence of mens rea or connivance - The Commissioner's conclusion that the appellant failed to discharge obligations under Regulations 10(d) and 10(e) (to advise client and exercise due diligence) was erroneous. - HELD THAT: - Regulation 10(d) requires advising clients to comply with law; Regulation 10(e) requires exercise of due diligence as to information imparted to a client. The Court applied established authority holding that a CHA is primarily a processing agent and is not obligated to conduct an exhaustive background inquiry or physical verification where IEC and prescribed KYC documents are produced and there are no indicia warranting deeper inquiry. The appellant had obtained and produced KYC documents (including IEC, PAN, Aadhar, incorporation documents) and had communicated with the exporter; there was no specific allegation of mens rea or proven connivance by the CHA. Reliance on precedents (including Kunal Travels and Shiva Khurana) was found persuasive and the Commissioner's contrary inference was rejected. Consequently, the findings of breach of Regulations 10(d) and 10(e) could not be sustained. [Paras 35, 36, 37, 38, 45]

Findings of violation of Regulations 10(d) and 10(e) are set aside.

Obligations of a Customs Broker under Know Your Customer (KYC) norms - due diligence of a Customs House Agent (CHA) in verification of client information - The Commissioner's finding that the appellant contravened Regulation 10(n) by failing to verify IEC, identity and functioning of the client at the declared address was not sustainable. - HELD THAT: - Regulation 10(n) requires verification of IEC, GSTIN, identity and functioning at the declared address using reliable documents. The Board Circular of 08.04.2010 prescribes KYC documents and states that any two of the listed documents suffice; it does not mandate physical inspection in all cases. The appellant had obtained and produced requisite KYC documents and had undertaken verification steps (communications, employee contact). The Commissioner's conclusion that the exporter was fictitious and that KYC was not done was factually incorrect in light of documents submitted and verifications from ROC/DGFT regarding incorporation and IEC. Established case law was applied to construe the CHA's duty as limited and not an investigatory one unless there are alerting circumstances. Therefore the finding of breach of Regulation 10(n) could not be maintained. [Paras 47, 48, 49, 50, 51]

Finding of violation of Regulation 10(n) is set aside.

Revocation of customs broker licence, forfeiture of security and imposition of penalty - need for substantiated regulatory breach - The revocation of the appellant's Customs Broker Licence, forfeiture of security deposit and imposition of penalty were not sustainable and the order dated July 5, 2019 was set aside. - HELD THAT: - The Commissioner's order of revocation, forfeiture and penalty was founded on findings of breaches of Regulations 10(a), 10(d), 10(e) and 10(n). As the Court found the factual basis for those breaches to be incorrect or unsupported-authorization and requisite KYC were on record, and the CHA's duties do not extend to intrusive investigative verification absent specific triggers-the punitive measures based on those findings could not be sustained. The Tribunal therefore held that the revocation/forfeiture/penalty must be set aside. [Paras 24, 42, 52]

Order revoking licence and imposing forfeiture and penalty is set aside; appeal allowed.

Final Conclusion: The Commissioner's order dated July 5, 2019 revoking the Customs Broker licence of M/s Transpeed Logistics Pvt. Ltd., forfeiting the security deposit and imposing penalty is set aside. The Tribunal found that the alleged violations of Regulations 10(a), 10(d), 10(e) and 10(n) were not made out on the record: the appellant had produced the authorisation and KYC documents, and a CHA's regulatory duties do not generally require intrusive physical verification or investigative inquiry in the absence of circumstances that would have put the CHA on notice of fraud or connivance.

Revocation of customs broker licence - forfeiture of security deposit - penalty under Customs Broker Licensing Regulations, 2018 - requirement of mens rea/knowledge or connivance for disciplinary action - duty to consider and distinguish judicial precedents - prohibition on denial of renewal pending inquiry

Revocation of customs broker licence - forfeiture of security deposit - penalty under Customs Broker Licensing Regulations, 2018 - requirement of mens rea/knowledge or connivance for disciplinary action - duty to consider and distinguish judicial precedents - Validity of the impugned order revoking the appellant's CHA licence, forfeiting the security deposit and imposing penalty under CBLR, 2018. - HELD THAT: - The Tribunal examined the Inquiry Report and the impugned order and found that the Department failed to produce any corroborative evidence or statements to establish that the appellant had information, knowledge or connived in the alleged overvaluation or misdeclaration. The Tribunal reiterated the settled legal position that proceedings under the CBLR require proof of mens rea or attributable involvement by the broker through active knowledge or connivance. The Tribunal noted that its earlier order dated 14/07/2020 had set aside the prior Commissioner's order and directed that the appellant be allowed to carry on business except at the relevant Commissionerate and that the inquiry be concluded expeditiously while taking into account controlling decisions relied upon by the appellant. The impugned order failed to consider or distinguish those authorities and in substance repeated the earlier order which had already been held unsustainable. For these reasons the Tribunal concluded that the revocation, forfeiture and penalty were not sustainable in law and set aside the impugned order.

Impugned order revoking licence, forfeiting security deposit and imposing penalty under CBLR, 2018 is set aside for want of legally admissible evidence of mens rea and for failure to consider controlling precedents.

Prohibition on denial of renewal pending inquiry - revocation of customs broker licence - Procedure to be followed regarding renewal of the appellant's CHA licence following setting aside of the revocation. - HELD THAT: - The Tribunal recorded that the appellant's CHA licence had expired. In view of setting aside the impugned revocation and related orders, the Tribunal directed the appellant to apply afresh for renewal. The Tribunal required the Commissioner to decide the renewal application de novo in accordance with law, thereby remitting the matter of renewal for fresh consideration rather than directing automatic reinstatement. The Tribunal's earlier observation that renewal should not have been denied while inquiry was pending underpinned the direction for fresh adjudication in accordance with applicable legal principles and precedents.

Appellant to apply afresh for CHA licence; Commissioner to decide the renewal application afresh in accordance with law.

Final Conclusion: The Tribunal set aside the Commissioner's order revoking the CHA licence, forfeiting the security deposit and imposing penalty for lack of evidence of knowledge/connivance and failure to consider precedents; the appellant is directed to apply afresh for licence and the Commissioner must decide renewal de novo in accordance with law.

Rectification of court order - contempt of court - force majeure plea in implementation of a resolution plan - conditions precedent under a resolution plan - role of the adjudicating authority under Section 31 of the Insolvency and Bankruptcy Code - exercise of contempt jurisdiction requires willful disobedience - time bound corporate insolvency resolution process under the IBC

Rectification of court order - role of the adjudicating authority under Section 31 of the Insolvency and Bankruptcy Code - Dismissal of the application for rectification of the order dated 18 June 2020. - HELD THAT: - The IA filed by DVI sought clarification/modification of the order of 8 June 2020 on the basis that it merely sought an extension to assess COVID 19 impact and did not seek to withdraw from the approved resolution plan. The Court examined the terms of DVI's IA and the record of antecedent proceedings and concluded that the IA substantively sought re negotiation of the resolution plan and reliefs which would have the effect of restraining implementation and invocation of bank guarantees. The Court also explained the statutory role of the adjudicating authority under Section 31 of the IBC - to satisfy itself that a CoC approved plan meets the requirements of Section 30 and has provisions for effective implementation - and held that the order of 8 June 2020 legitimately relegated the approval application to the NCLT to perform that function. Reading into that order a permission to re negotiate the plan after CoC approval was contrary to the record and to the statutory scheme. On these grounds the rectification application was without merit and was dismissed. [Paras 25, 26, 27, 28, 29]

IA No. 58156 of 2020 dismissed.

Contempt of court - exercise of contempt jurisdiction requires willful disobedience - force majeure plea in implementation of a resolution plan - Whether contempt proceedings against DVI should be pursued for alleged obstruction of implementation of the resolution plan. - HELD THAT: - The Court reviewed DVI's conduct after its IA was rejected on 18 June 2020, including continued reliance on COVID 19 related pleas (including assertions capable of supporting a force majeure defence), failure to furnish the second tranche of the performance bank guarantee, failure to nominate or participate in the IMC, and communications asserting termination under plan clauses. The Court reiterated the legal principles that contempt requires clear, willful disobedience and that mere assertion of legal rights ordinarily does not constitute contempt. Although the Court found DVI's conduct lacking in bona fides and observed that its actions had impeded the time bound resolution process under the IBC, it held that setting up untenable pleas or defaults, by itself, did not warrant invocation of the penal contempt jurisdiction in the facts of this case. Therefore, on balance and exercising circumspection in contempt matters, the Court declined to pursue contempt proceedings. [Paras 33, 36, 37, 38, 39]

Contempt Petition (C) No. 524 of 2020 dismissed (not expedient to pursue contempt).

Force majeure plea in implementation of a resolution plan - conditions precedent under a resolution plan - Whether DVI may set up a plea of force majeure in the pending appeal before the NCLAT. - HELD THAT: - In consequence of the dismissal of DVI's IA by this Court on 18 June 2020 and in view of the Court's findings on the substantive content of that IA, the Court directed that DVI shall not set up a plea for force majeure based on the COVID 19 pandemic in the proceedings pending before the NCLAT. The Court expressed no opinion on the merits of contentions concerning fulfillment of conditions precedent under the resolution plan, leaving such determinations to the appellate adjudicator where appropriate. [Paras 38, 39]

DVI shall not set up a plea of force majeure in the pending NCLAT appeal.

Time bound corporate insolvency resolution process under the IBC - role of the adjudicating authority under Section 31 of the Insolvency and Bankruptcy Code - Direction for expeditious disposal of DVI's appeal against NCLT approval of the resolution plan. - HELD THAT: - Recognising the time sensitivity intrinsic to the IBC framework and the disruption caused by the impugned conduct, the Court directed that the appeal filed by DVI against the NCLT order approving the resolution plan shall be peremptorily heard and disposed of by the NCLAT within one month from the date of the Supreme Court judgment. This is an interlocutory administrative direction to ensure prompt adjudication of issues left for the appellate forum and to honour the statutory emphasis on timeliness. [Paras 39, 40]

NCLAT directed to hear and dispose of DVI's appeal within one month.

Final Conclusion: The application for rectification is dismissed. The contempt petition is not pursued and stands dismissed; however, DVI is directed not to raise a force majeure plea in the NCLAT appeal, and the NCLAT is directed to hear and dispose of DVI's appeal against the NCLT approval within one month.

Eligibility to be resolution applicant under Section 29A - exemption under Section 240A for micro, small and medium enterprises from clauses (c) and (h) of Section 29A - inability of the corporate debtor to submit an expression of interest during CIRP - undischarged insolvent disqualification under clause (a) of Section 29A - relevant date for determination of MSME status under Section 240A is date of submission of Expression of Interest

Inability of the corporate debtor to submit an expression of interest during CIRP - eligibility to be resolution applicant under Section 29A - Validity of rejection of an EOI submitted on behalf of the corporate debtor itself after admission of CIRP. - HELD THAT: - The Tribunal found that once a corporate insolvency resolution process is admitted the corporate debtor is to be represented solely by the Resolution Professional and suspended directors have no authority to submit documents on its behalf. The EOI in the present case was submitted by the corporate debtor (M/s Bhandari Deepak Industries Pvt. Ltd.) itself and not in the individual capacity of its promoters. Section 240A exempts promoters of MSMEs from applicability of clauses (c) and (h) of Section 29A but does not permit the corporate debtor to submit an EOI for itself. The applicant did not dispute that the EOI was submitted by the corporate debtor or assert it was a clerical mistake. Therefore the Resolution Professional was entitled to reject an EOI submitted on behalf of the corporate debtor after commencement of CIRP. [Paras 8]

Rejection of the EOI submitted on behalf of the corporate debtor was lawful and is upheld.

Undischarged insolvent disqualification under clause (a) of Section 29A - Whether the EOI could be accepted despite the corporate debtor being an undischarged insolvent. - HELD THAT: - The Tribunal recorded that the corporate debtor is an undischarged insolvent and Clause (a) of Section 29A renders an undischarged insolvent ineligible to be a resolution applicant. Section 240A does not exempt any person, including MSMEs, from the disqualification under clause (a). Consequently, the corporate debtor remained ineligible to submit a resolution plan under Section 29A(a). [Paras 9]

EOI was rightly rejected on account of the corporate debtor being an undischarged insolvent.

Exemption under Section 240A for micro, small and medium enterprises from clauses (c) and (h) of Section 29A - relevant date for determination of MSME status under Section 240A is date of submission of Expression of Interest - Whether the corporate debtor qualified as an MSME for the purpose of exemption under Section 240A and the relevant date for that determination. - HELD THAT: - The Resolution Professional rejected the applicant's claim that the corporate debtor qualified as an MSME, relying on audited and provisional financial statements which showed investment in plant and machinery exceeding the MSME thresholds. The applicant produced a departmental certificate distinguishing productive and non-productive machinery, but the Tribunal held that the relevant date for determining exemption under Section 240A is the date of submission of the EOI (and not a later date). On the material before the RP as of the relevant date, the corporate debtor did not meet MSME limits; therefore the exemption under Section 240A could not be invoked to override the disqualifications in Section 29A(c) and (h). [Paras 10]

The RP correctly applied the relevant date and rejected the claim of MSME status; exemption under Section 240A was not available on the material before the RP.

Final Conclusion: The application is dismissed. The Resolution Professional did not act illegitimately in rejecting the EOI: (i) an EOI submitted by the corporate debtor itself after commencement of CIRP was not permissible; (ii) the corporate debtor, being an undischarged insolvent, was disqualified under Section 29A(a); and (iii) the corporate debtor did not qualify as an MSME on the relevant date to invoke Section 240A; interim orders stand vacated.

Regulation 7A - requirement of authorisation for assignment - authorisation for assignment (AFA) - Code of Conduct of insolvency professionals - obligation under Section 208 to abide by bye laws - disciplinary finding by insolvency professional agency

Regulation 7A - requirement of authorisation for assignment - authorisation for assignment (AFA) - disciplinary finding by insolvency professional agency - Show Cause Notice alleging acceptance of assignment after 31st December 2019 without valid AFA disposed of by IBBI. - HELD THAT: - The Disciplinary Committee (DC) considered that Regulation 7A requires an insolvency professional to hold a valid AFA to accept or undertake an assignment after 31st December, 2019, and noted the definitions and bye law mechanism for grant of AFA. It recorded that the IP had given written consent on 4th April, 2019 (prior to the cut off), was appointed by the AA on 16th July, 2020 and was granted AFA on 21st July, 2020. The DC also took into account the disciplinary order of the IP's insolvency professional agency which had considered the same issue and had not found the IP guilty of professional misconduct, reasoning that the written consent predated the cut off and the AA's appointment was based on that consent. In view of the agency's concurrent disciplinary finding and exercise of powers under Regulation 11, the DC disposed of the SCN without any further direction. [Paras 4, 5, 6]

SCN disposed of by IBBI DC without any direction, having noted Regulation 7A and the disciplinary committee of the IP's agency's prior finding of no professional misconduct.

Final Conclusion: The show cause notice alleging contravention for accepting the IRP assignment post 31st December, 2019 without a valid AFA was disposed of by the IBBI DC without direction, having taken note of Regulation 7A and the prior disciplinary finding of the insolvency professional agency which did not hold the IP guilty of professional misconduct.

Extension of corporate insolvency resolution process (CIRP) period - exclusion of lockdown period for computation of insolvency time-lines - extension of period of limitation in view of COVID-19 - special provision relating to time-line under IBBI regulations - Committee of Creditors' resolution to seek extension of CIRP

Extension of corporate insolvency resolution process (CIRP) period - exclusion of lockdown period for computation of insolvency time-lines - Committee of Creditors' resolution to seek extension of CIRP - Extension of the CIRP period by 90 days beyond 180 days after excluding the lockdown period was permissible and granted. - HELD THAT: - The Resolution Professional filed the IA under Section 12(2) of the Code read with Regulation 40 of the IBBI Regulations seeking a 90-day extension beyond the initial 180-day CIRP period, asserting inability to complete resolution due to the COVID-19 lockdown. The Committee of Creditors, at its 5th meeting, passed a resolution to seek extension with an 84.38% voting share (Annexure A-6). The Tribunal relied on the Supreme Court's suo motu order extending limitation from 15 March 2020, the National Company Law Appellate Tribunal's direction excluding the lockdown period for counting the CIRP timeline, and the Insolvency Board's insertion of a special time-line provision (Regulation 40C) and corresponding exclusion in liquidation rules (Regulation 47A). In view of these authoritative orders and regulations, and because the facts were undisputed, the Tribunal found it appropriate to exclude the lockdown period from computation (specified as 25.03.2020 to 31.07.2020) and to allow the requested extension of the CIRP period by 90 days beyond the 180 days so computed. [Paras 3, 8]

IA allowed; CIRP period extended by 90 days beyond 180 days after excluding the lockdown period from 25.03.2020 to 31.07.2020.

Final Conclusion: The application for extension of the CIRP was allowed: having applied the Supreme Court and NCLAT directions and the IBBI Regulations excluding the lockdown period, the Tribunal extended the CIRP by 90 days beyond the 180-day period after excluding the lockdown interval specified.

Maintainability of writ petition where alternative statutory remedy exists - prematurity of judicial interference in ongoing PMLA investigation - search, seizure and freezing under Section 17 of the PML Act and consequential adjudication under Section 8 - PML Act as a self-contained code with in-built remedies of appeal under Sections 26 and 42 - proceeds of crime and persons connected with scheduled offence

Maintainability of writ petition where alternative statutory remedy exists - PML Act as a self-contained code with in-built remedies of appeal under Sections 26 and 42 - prematurity of judicial interference in ongoing PMLA investigation - Whether the High Court should exercise writ jurisdiction to quash or stay actions taken under the PML Act at the investigative stage when statutory remedies under the Act are available. - HELD THAT: - The Court held that the PML Act is a special, self-contained code providing a comprehensive mechanism for investigation, provisional freezing, adjudication and appeals. Sections 17 and 8, read with the remedy of appeal under Section 26 to the Appellate Tribunal and further appeal under Section 42 to the High Court, constitute efficacious alternate remedies. Given that the investigation was at a nascent stage and the statutory procedure for forwarding reasons and seeking adjudication under Section 17/8 is available, the Court declined to interfere by exercising extraordinary writ jurisdiction. The petition was therefore held to be premature and not maintainable in view of the availability of the specific statutory process under the PML Act and the need to protect the integrity of the investigatory scheme. [Paras 16, 17, 18]

Writ petition dismissed as premature; no interference with ongoing PMLA proceedings and statutory remedies to be availed.

Search, seizure and freezing under Section 17 of the PML Act and consequential adjudication under Section 8 - proceeds of crime and persons connected with scheduled offence - Whether the impugned actions of recording reasons, issuing freezing/restriction communications and seizing/retaining documents and properties under Section 17 could be quashed at this stage. - HELD THAT: - The Court examined the statutory scheme: Section 17 permits search/seizure or freezing where an authorised officer has reason to believe and records reasons in writing; the authority must forward reasons and material to the Adjudicating Authority and seek retention/continuation within thirty days; Section 8 empowers the Adjudicating Authority to examine sources and confirm or lift freezing. The Court accepted that the Act contemplates investigation against persons connected with scheduled offences and that freezing orders (or restrictions) made at investigatory stage are subject to adjudication under the statutory machinery. In the facts before it, the Court declined to quash the impugned communications and panchnama dated 22.7.2020, leaving the issues of attachment, freezing and extent of persons to be dealt with under Sections 17 and 8 and by the appellate remedy in the statute. [Paras 13, 14, 15, 16]

Impugned search/seizure/freeze-related actions not quashed; matters to be adjudicated through the statutory procedure under Sections 17 and 8 and subsequent appellate remedies.

Final Conclusion: The writ petition challenging initiation of proceedings and the freezing/restriction measures under the PML Act was dismissed as premature; the petitioners must pursue the remedy provided under the PML Act (adjudication under Section 8, appeal under Section 26 and further appeal under Section 42) and the Court will not interfere at the investigatory stage.

Closure of appeal for statistics with liberty to reopen - maintenance of appeal pending outcome of parallel writ petitions - stay of personal hearing as interim relief - conformity of Tribunal order with Section 35C

Closure of appeal for statistics with liberty to reopen - maintenance of appeal pending outcome of parallel writ petitions - stay of personal hearing as interim relief - The correctness of the Tribunal's disposal of the appeal for statistical closure with liberty to reopen when parallel writ petitions and an interim order staying the personal hearing were pending. - HELD THAT: - The High Court held that where a writ petition has resulted in an interim order restraining the personal hearing, the appropriate course is not to finally dispose of the appeal for statistical purposes with a mere liberty to apply for reopening. The Tribunal should keep the appeal pending so that it awaits the orders (interim or final) in the writ proceedings; disposal for statistics with liberty to reopen is inappropriate in the factual matrix where the High Court had directed that the personal hearing shall not go on. The Court therefore set aside the impugned order of the Tribunal and restored the appeal to the Tribunal's file to await the writ petitions' outcome. [Paras 5, 7, 8]

Impugned order closing the appeal for statistics set aside; appeal restored to Tribunal and to remain pending until disposal or interim orders in the writ petitions.

Conformity of Tribunal order with Section 35C - Whether the Tribunal's order was in consonance with Section 35C of the Central Excise Act, 1944. - HELD THAT: - The High Court did not decide this question on merits. Having set aside the statistical disposal and restored the appeal to await the writ petitions, the Court expressly left the contention regarding conformity with Section 35C open for determination by the appropriate forum. [Paras 8]

Question as to conformity with Section 35C left open.

Final Conclusion: The appeal is allowed: the Tribunal's order disposing the appeal for statistical purposes with liberty to reopen is set aside and the appeal is restored to the Tribunal to remain pending until interim or final orders in the related writ petitions; the conformity of the Tribunal's order with Section 35C is left open for decision.

Service tax under reverse charge mechanism - license fee as price of privilege - no quid pro quo for state granted fees - Section 117(1) of the Finance Act, 2019 - retrospective bar on service tax for liquor licences "by whatever name called" - leviability of service tax on storage licence for CO2 - penalty not imposable where primary demand is unsustainable

Service tax under reverse charge mechanism - license fee as price of privilege - no quid pro quo for state granted fees - Section 117(1) of the Finance Act, 2019 - retrospective bar on service tax for liquor licences "by whatever name called" - Liability to pay service tax under reverse charge on Export Pass fee, Import Pass fee, Permit fee and Excise Staff Salary and overtime charges paid to the State Excise Department. - HELD THAT: - The Tribunal held that fees charged by the State in relation to alcoholic liquor that amount to the price for parting with the State's exclusive privilege are not consideration for a service and therefore not leviable to service tax. Reliance was placed on constitutional allocation of powers (Entries in the State List), Supreme Court authorities treating licence/permit fees as price of privilege, and the statutory amendment in Section 117(1) of the Finance Act, 2019 which, by using the words "by whatever name called", evidences legislative intent that licence/application fees for liquor in the period 01.04.2016 to 30.06.2017 are not subject to service tax. The Tribunal applied these principles to hold that Export Pass fee, Import Pass fee, Permit fee and amounts described as Excise Staff salary/overtime did not exhibit the requisite quid pro quo for a taxable service and the demand thereon was set aside. [Paras 6, 8]

Demand for service tax on Export Pass fee, Import Pass fee, Permit fee and Excise Staff Salary and overtime charges set aside.

Leviability of service tax on storage licence for CO2 - service tax under reverse charge mechanism - Leviability of service tax on Storage Licence Renewal fee for CO2 paid to the State Excise Department. - HELD THAT: - The Tribunal found that the Storage Licence for CO2, and the renewal fee paid specifically for storage of CO2, did not fall within the concept of licence/application fees for parting with the State's exclusive privilege to deal in alcoholic liquor. The license for storage of CO2 was held to be a distinct regulatory permission admitting an element of quid pro quo and therefore taxable. The appellant did not press against confirmation of this demand and the Tribunal accordingly upheld the Commissioner's confirmation of service tax on the Storage Licence Renewal fee, with interest. [Paras 6, 8]

Service tax on Storage Licence Renewal fee for CO2 confirmed; appellant liable to pay the same with interest.

Penalty not imposable where primary demand is unsustainable - Imposability of penalties under the Finance Act, 1994 in respect of the demands set aside. - HELD THAT: - The Tribunal held that where the principal demand is not sustainable on merits, penalties imposed in respect of those demands cannot be sustained. Applying this principle to the present facts, the Tribunal concluded that penalties relating to the demands which were set aside should not survive. [Paras 8]

Penalties in respect of the demands set aside are deleted.

Final Conclusion: Appeal partly allowed: service tax demand confirmed only in respect of the Storage Licence Renewal fee for CO2 (payable with interest); demands in respect of Export Pass fee, Import Pass fee, Permit fee and Excise Staff Salary/overtime set aside; consequential penalties deleted.

Manpower Recruitment or Supply Agency service - Employer-employee relationship exclusion from 'service' - Secondment/deputation of employees - Reimbursement at actuals without mark up - Definition of 'service' under Section 65B(44) - Supply of manpower vs. provision of employee services

Manpower Recruitment or Supply Agency service - Employer-employee relationship exclusion from 'service' - Secondment/deputation of employees - Reimbursement at actuals without mark up - Definition of 'service' under Section 65B(44) - Whether the amounts reimbursed to the parent/foreign company in respect of seconded expatriate employees fall within taxable Manpower Recruitment or Supply Agency service or are excluded as services provided by employees to their employer. - HELD THAT: - The Tribunal examined the contractual fabric (Secondment Agreement, Letter of Assignment and Letter of Employment) and found that the terms expressly vested selection, direction, supervision and termination rights with the appellant, declared the secondees to be in the exclusive employment of the appellant during the secondment, and provided that reimbursements by the appellant to the parent company were to be at actual cost without mark up. The Tribunal applied the definition of "service" under Section 65B(44) and the scope of "manpower recruitment or supply agency" to conclude that where a group company merely seconded employees and the recipient exercised employer rights and responsibilities (including tax withholding and social security contributions), the transaction does not give rise to a service provider-recipient relationship required for taxability under the manpower supply rubric. The Tribunal also relied on consistent precedents holding that administrative disbursement of salaries by a group company does not convert the arrangement into a manpower supply service and that the exclusion of employee services from "service" post July 2012 reinforces that deputation/secondment, when evidenced by the contractual and factual matrix, falls outside taxable manpower supply. Applying these principles to the material facts, including the absence of any mark up and the presence of an employer employee relationship during secondment, the Tribunal concluded that the demand under the manpower recruitment or supply agency category was unsustainable. [Paras 6, 8]

The demand raised on the appellant under the category of Manpower Recruitment or Supply Agency service was set aside and the appeal of the appellant was allowed.

Final Conclusion: Appeal allowed; impugned order dated 14.02.2019 of the Commissioner (Appeals) set aside insofar as it upheld the Departmental demand under the manpower recruitment or supply agency service for the period April 2014 to September 2015.

Refund of excess deposit paid during investigation - deposit paid under protest / adjustment of pre-deposit - time bar under Section 11B(5)(f) / limitation for refund - appropriation of amounts paid towards admitted liabilities - settlement under Chapter V and powers of Settlement Commission - interest on refund of pre-deposits

Refund of excess deposit paid during investigation - appropriation of amounts paid towards admitted liabilities - Whether the amount paid by the petitioner during investigation in excess of the demand specified in the Show Cause Notice was liable to be refunded or adjusted by the respondents. - HELD THAT: - The Court found that the cumulative sum paid by the petitioner during investigation was towards tax liability on captively consumed intermediate inputs for the period July 1996 to June 2001 and that the Show Cause Notice sought to appropriate only a part of that payment (the demand confined to the period November 1997 up to June 2001). The balance paid therefore constituted an excess which, in absence of any appropriation proposal in the Show Cause Notice, could only be adjusted towards other tax liabilities or refunded. The Settlement Commission erred in treating the payment as having extinguished other liabilities without a clear appropriation and in declining refund on that basis. The Court directed appropriation of the settled admitted amount from the excess and ordered refund of the remaining balance with interest. [Paras 18, 21, 22, 26, 29]

Direct refund of the balance excess amount after appropriation of the settled admitted liability, and quashal of the Settlement Commission's refusal to refund.

Deposit paid under protest / adjustment of pre-deposit - time bar under Section 11B(5)(f) / limitation for refund - Whether the petitioner's payment during investigation was a deposit attracting the limitation for refund or was payable 'under protest' so as not to be barred by the one-year refund limitation. - HELD THAT: - Relying on the principle that amounts paid pending challenge or investigation are effectively paid 'under protest' and may be adjusted or refunded (as reflected in precedent cited), the Court held that the requirement to file a refund claim within one year from the date of payment could not be invoked to withhold repayment where the payment was made during investigation and the matter remained pending. The Settlement Commission's reliance on the ordinary refund time-bar was therefore unsustainable in the circumstances where the petitioner had opted for settlement and the proceedings were pending before the Commission. [Paras 24, 25, 27, 28]

Payment during investigation treated as deposit/paid under protest; time-bar argument rejected and cannot justify retention of excess amounts.

Settlement under Chapter V and powers of Settlement Commission - interest on refund of pre-deposits - Whether, having granted waiver of penalty, interest and immunity, the Settlement Commission could deny refund of excess amounts and the proper consequence of quashing its order. - HELD THAT: - The Court observed that the Settlement Commission had granted full waiver of interest and penalty and immunity from prosecution under the Act; having done so, it could not retain excess amounts on the ground of time-bar. On quashal of the impugned direction, the Court directed that the admitted sum determined in settlement be appropriated from the excess and the remaining balance be refunded with interest at the rates prescribed for refund of pre-deposits under the Act from three months after the Commission's order until refund, with a timeline for repayment by the Revenue. [Paras 28, 29]

Quashal of the Settlement Commission's order refusing refund; direction for appropriation and refund with statutory interest and specified timeline for compliance.

Final Conclusion: Writ petition allowed: the Settlement Commission's refusal to refund the excess amount paid during investigation is quashed; the respondents are directed to appropriate the admitted settled liability from the excess and refund the remaining balance with interest within the period ordered.

Cancellation of registration - opportunity of hearing - show cause notice - bogus transactions / bogus sales - Input Tax Credit (I.T.C.) allegations

Cancellation of registration - opportunity of hearing - show cause notice - bogus transactions / bogus sales - Validity of cancellation of the assessee's registration where the show cause notice did not disclose the names of other dealers, particulars of alleged bogus transactions and the adverse material relied upon, and whether cancellation could be sustained on grounds not disclosed in the notice. - HELD THAT: - The Court held that before cancelling a dealer's registration a reasonable opportunity of hearing is mandatory and requires that the assessee be confronted with the exact charge and the adverse material relied upon. The show cause notice dated 24.10.2016 did not disclose the names of the other dealers alleged to have been parties to bogus transactions, nor did it specify the nature, volume or particulars of those transactions or identify the documentary material proposed to be relied upon. In those circumstances the assessee could not have effectively met the allegations. The assessing authority therefore proceeded to cancel registration by an ex parte order without furnishing the particulars essential for an effective hearing. The appellate authority and the Tribunal erred in sustaining the cancellation without correcting this defect. [Paras 10, 11, 12, 13]

Cancellation of registration set aside insofar as it was based on grounds and material not disclosed in the show cause notice; order upheld in favour of the assessee on this ground.

Retrospective cancellation - cancellation of registration - Whether the registration could be cancelled with retrospective effect. - HELD THAT: - The Court observed that, having found the show cause notice and proceeding defective for lack of disclosure and opportunity, it was unnecessary to decide the question of retrospective effect of cancellation in the present proceedings. However, recognising the seriousness of the allegations relating to alleged bogus transactions and I.T.C., the Court directed that the assessing authority issue a fresh notice in terms of the earlier order and proceed in accordance with law, thereby leaving the question of retrospective effect to be considered in the fresh proceeding. [Paras 14]

Second question left open; matter remitted for fresh notice and adjudication in accordance with law.

Final Conclusion: Revision partly allowed: cancellation of registration set aside for want of adequate notice and opportunity; matter remitted to the assessing authority to issue fresh notice and proceed in accordance with law.

Input Tax Credit under pre-amendment proviso to Section 19(1) of the Act - liability of selling dealer as trustee for tax collected - Revenue's right to proceed against selling dealer to recover tax collected - effect of post amendment substitution vis-a -vis pre-amendment position

Input Tax Credit under pre-amendment proviso to Section 19(1) of the Act - effect of post amendment substitution vis-a -vis pre-amendment position - The purchasing dealer was entitled to the Input Tax Credit for the period in question under the pre-amendment position of Section 19(1) of the Act. - HELD THAT: - The Division Bench held that the period in dispute is governed by the pre-amendment proviso to Section 19(1) as it stood prior to 29.1.2016. Under that pre-amendment proviso, the purchasing (registered) dealer needed only to establish that the tax due on such purchase had been paid by him in the manner prescribed. The purchasing dealer in the present case proved compliance and the assessing authority recorded that fact. Consequently, denial of input tax credit in the hands of the purchasing dealer was not permissible. The Single Judge's direction to allow ITC was therefore upheld and the appeal dismissed on this ground. [Paras 7, 9]

ITC must be allowed to the purchasing dealer for 2009-2010 under the pre-amendment proviso to Section 19(1); the Single Judge's order allowing ITC was upheld.

Liability of selling dealer as trustee for tax collected - Revenue's right to proceed against selling dealer to recover tax collected - Revenue retains the right to proceed against the selling dealer to recover tax collected, despite allowance of ITC to the purchasing dealer. - HELD THAT: - The Court observed that permitting ITC in the hands of the purchasing dealer does not extinguish the Revenue's remedy against the selling dealer. The amounts collected by the selling dealer were held to be in trust for the State, and the Revenue is free to hold enquiry and recover the tax from the selling dealer. The Division Bench noted that there was no contention that the selling dealer was non-existent or a ghost; identity and registration were proved and not disputed, supporting Revenue's continuation of proceedings against the seller. [Paras 8]

Allowance of ITC to the purchasing dealer does not preclude Revenue from proceeding against the selling dealer to recover tax collected, the selling dealer holding the tax in trust for the State.

Final Conclusion: The Division Bench's judgment upholding the Single Judge's order allowing Input Tax Credit to the purchasing dealer for 2009-2010 under the pre-amendment proviso to Section 19(1) is followed; the appeal is dismissed and it is affirmed that Revenue may still proceed against the selling dealer to recover tax collected.

Transfer of right to use - sale as extended by definition under the Tamil Nadu Value Added Tax Act, 2006 - exigibility to tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006 - tests for transfer of right to use (consensus ad idem; exclusion of transferor; legal right to use; goods available for delivery)

Transfer of right to use - exigibility to tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006 - tests for transfer of right to use (consensus ad idem; exclusion of transferor; legal right to use; goods available for delivery) - Whether the supply of cranes under the contract amounted to a transfer of right to use goods and thus was exigible to tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT: - The Court examined the contract terms relied on by the Revenue and the criteria laid down by the Supreme Court for a transfer of right to use, namely availability of goods for delivery, consensus ad idem as to identity of goods, the transferee having a legal right to use (including requisite permissions), the right being exclusive to the transferee for the period and the transferor being unable to transfer the same right again. Applying those tests to the factual matrix and the agreement, the Court found that the cranes remained in the possession of the petitioner and that the necessary attributes of a transfer of the right to use were not satisfied. Consequently, the transaction did not amount to a transfer of right to use within the extended definition of sale and was not exigible to tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006. [Paras 14, 15]

No transfer of right to use was established; the levy under Section 4 is not sustainable.

Final Conclusion: The impugned assessment/revision orders insofar as they levy tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006 for the stated assessment years are quashed and the writ petitions are allowed. No costs.

Proof of possession by establishing booking and identification of consignor - validity of search and seizure and reliability of independent witnesses - sampling and testing of narcotic substances - requirement to draw representative samples from each container - prejudice caused by mixing of samples and consequent loss of identity - inadmissibility of statements recorded under Section 67 where law prohibits reliance

Proof of possession by establishing booking and identification of consignor - validity of search and seizure and reliability of independent witnesses - Whether the prosecution established beyond reasonable doubt that the appellant had booked the parcel at Dart Air which contained 2.850 kilograms of Heroin - HELD THAT: - The Court examined the evidence relating to the courier-agency recovery and found material infirmities in the prosecution case. The Airway Bill entries did not match the appellant's identity documents, invoices and the proforma invoice which would indicate booking by the appellant were not placed on record despite testimony that they were seized, and independent witnesses did not consistently identify the appellant as the person who attended the office. The Court noted unexplained aspects of why the consignor would attend in person the day after booking and that independent witnesses were not shown to have shared relevant information with NCB. Given these loose ends and inconsistencies in the testimonies of prosecution witnesses about the packaging and the events at the courier office, the Court concluded that NCB had not proved beyond reasonable doubt that the appellant had booked the parcel containing 2.850 kgs of Heroin. [Paras 48]

NCB failed to establish that the appellant booked the parcel containing 2.850 kgs of Heroin; that part of the prosecution case is not proved beyond reasonable doubt.

Sampling and testing of narcotic substances - requirement to draw representative samples from each container - prejudice caused by mixing of samples and consequent loss of identity - Whether the procedure followed in testing and sampling the substance recovered from the parcel (mixing contents of 148 pouches and drawing two samples) was legally valid and sufficient to establish that each pouch contained Heroin - HELD THAT: - The Court applied established authorities holding that where contraband is recovered from multiple containers or packages, samples must ordinarily be drawn from each container or representative samples from clearly identified lots; indiscriminate mixing destroys the identity of contents of individual packages. Here, NCB opened numerous concealed pouches, mixed the powder from all one hundred and forty eight pouches and drew two small samples from the aggregate. The Court found this procedure contrary to the standards required for preserving identity and testing, and held that mixing and drawing samples from the mixture did not prove that each pouch contained Heroin. The Court further observed that the pouch from which a positive field-test was said to have been performed was not weighed separately and that the procedure was therefore prejudicial to the appellant. [Paras 37, 40, 44]

The sampling and testing procedure adopted by NCB was flawed and prejudicial; it did not establish that each pouch contained Heroin.

Validity of search and seizure and reliability of independent witnesses - inadmissibility of statements recorded under Section 67 where law prohibits reliance - Whether the prosecution proved recovery of 180 grams of Heroin from the appellant's residence and whether the appellant's Section 67 statement could be relied upon - HELD THAT: - The Court scrutinised the evidence for the house-search recovery and found multiple deficiencies: the authorised raiding team's composition was not fully examined (several members omitted), the purported 'secret information' authorising the search lacked any disclosed source, and independent witnesses' testimonies were inconsistent on place and manner of recovery. Discrepancies included differing accounts as to the exact room and location where the package was found, inconsistent descriptions of the recovered pullanda and powder, and divergent versions concerning the amount of currency recovered. The Court also noted that the Trial Court had relied heavily on the appellant's statement under Section 67, but in view of binding authority the Court held such evidence is not admissible for proving guilt. Taken together, these factors created reasonable doubt about the asserted recovery of 180 grams from the premises. [Paras 49, 52, 60, 63, 68]

NCB failed to prove beyond reasonable doubt the recovery of 180 grams of Heroin from the appellant's residence; the appellant's Section 67 statement could not be relied upon.

Final Conclusion: The appeal is allowed. In view of the failure of the prosecution to prove the recoveries at the courier office and at the appellant's residence beyond reasonable doubt and the defects in sampling and evidentiary proof relied upon, the appellant is acquitted of the offences charged and directed to be released forthwith if not wanted in any other case.