TaxTMI Updates e-Newsletter
Feb 28,2024

Discrepancy between GSTR-1 and GSTR-3B - show cause notice and scope of adjudication - requirement to afford opportunity and personal hearing before confirmation of tax - remand for fresh consideration - documentary proof to substantiate non-GST supplies / trade discounts - treatment of rent paid to unregistered persons under reverse charge mechanism - quashing of assessment insofar as specific discrepancies

Discrepancy between GSTR-1 and GSTR-3B - show cause notice and scope of adjudication - Assessment confirmation on alleged mismatch between GSTR-3B and GSTR-1 and consequent IGST short payment was not sustainable where IGST short payment was not raised in the show cause notice. - HELD THAT: - The assessing officer accepted the petitioner's explanation that there was no mismatch between the returns as regards CGST and SGST. Thereafter the officer recorded a finding of short payment of IGST which was not an issue raised in the show cause notice that led to the assessment order. The Court held that confirmation of tax on a head not raised in the show cause notice cannot be sustained and, accordingly, directed that the assessing officer may issue a fresh show cause notice if he intends to proceed on that head.

Assessment quashed insofar as the unnotified finding of IGST short payment; fresh show cause notice may be issued before proceeding further.

Documentary proof to substantiate non-GST supplies / trade discounts - requirement to afford opportunity and personal hearing before confirmation of tax - Tax, interest and penalty imposed in respect of trade discounts/incentives treated as non-GST supplies could not be sustained without affording the petitioner an opportunity to produce the relevant documents and be heard. - HELD THAT: - The petitioner explained that trade discounts/incentives received from suppliers were performance-based and constituted non-GST supplies, supported by financial credit notes. The assessing officer recorded absence of invoices, ledger copies, agreements and debit notes but proceeded to impose tax, interest and penalty. The Court found that, instead of immediately confirming liability, the assessing officer ought to have called for additional documents or given a hearing to enable the petitioner to substantiate the claim. Consequently the assessment in this regard was set aside and remanded for reconsideration after allowing the petitioner to file documents and for a hearing.

Assessment quashed insofar as trade discount/non-GST supply; remanded for reconsideration after allowing document production and personal hearing.

Requirement to afford opportunity and personal hearing before confirmation of tax - quashing of assessment insofar as specific discrepancies - Finding that no documentary evidence was submitted to substantiate disclosure of indirect income was untenable in view of the petitioner's production of service tax returns and GSTR-3B copies; assessment on this head required reconsideration with opportunity to produce documents. - HELD THAT: - The petitioner had enclosed copies of service tax returns and GSTR-3B returns to show that indirect income was disclosed. The assessing officer nonetheless recorded that no documentary evidence was submitted. The Court held that in presence of those documents the conclusion was unsustainable and that the matter must be reopened so the petitioner may be permitted to place additional evidence and be heard before any fresh assessment is made.

Assessment quashed insofar as indirect income; remanded for reconsideration after permitting document production and a hearing.

Treatment of rent paid to unregistered persons under reverse charge mechanism - requirement to afford opportunity and personal hearing before confirmation of tax - Confirmation of tax liability in respect of commercial rent was unsustainable without calling for relevant documents after the petitioner stated tax on rent to unregistered persons was discharged under reverse charge and that rent to registered persons is liability of provider. - HELD THAT: - The taxpayer replied that tax on rent paid to unregistered persons had been discharged under the reverse charge mechanism and that rental liability in respect of registered persons is on the service provider. The assessing officer nevertheless concluded liability had not been discharged without asking for supporting documentation. The Court held that the officer should have sought the documents and afforded a hearing prior to confirming liability, and therefore set aside the assessment on this head and remanded the matter for fresh consideration on receipt of documents and after hearing the petitioner.

Assessment quashed insofar as rent for commercial purposes; remanded for reconsideration on production of documents and after personal hearing.

Final Conclusion: Writ petition allowed insofar as Discrepancy Nos.1, 2, 10 and 11; the assessment order dated 29.12.2023 is quashed in respect of those heads and remanded for reconsideration. The petitioner may file additional documents within two weeks; the assessing officer shall provide a reasonable opportunity including personal hearing and, if required for the IGST issue, issue a fresh show cause notice and complete reassessment within the stipulated period.

Giving effect to appellate order - refund of taxes paid following appellate determination - impermissible review/change of opinion by assessing officer - direction to reassign compliance to a different assessing officer - inapplicability of section 69A/section 115BBC to offerings in hundis

Giving effect to appellate order - refund of taxes paid following appellate determination - Validity of the order dated 30th November 2023 purportedly giving effect to the ITAT order and the obligation to refund taxes paid - HELD THAT: - The ITAT held that the assessee's total income for AY 2017-2018 is nil and that Sections 69A and 115BBC/115BBE were not applicable to the offerings received in hundis/donation boxes. Having accepted the ITAT's conclusion that no income was chargeable to tax, the only task left for the Assessing Officer was to give effect to that appellate determination by refunding taxes paid or recovered for the assessment year. The impugned order dated 30th November 2023 did not faithfully implement the ITAT's order but reopened contested questions and recorded additional tax liability; that order therefore failed to give effect to the ITAT decision and was unlawful. [Paras 12, 13, 15, 16]

Order dated 30th November 2023 quashed; Assessing Officer directed to give effect to the ITAT order and refund taxes paid/recovered for AY 2017-2018.

Impermissible review/change of opinion by assessing officer - Whether the Assessing Officer was competent to re-open or review the earlier assessment findings while giving effect to the ITAT order - HELD THAT: - The Court observed that the new Assessing Officer went beyond the limited task of giving effect to the ITAT order and effectively reviewed the earlier assessment, altering prior findings (including the acceptance of entitlement to exemption under Section 11). Such a change of opinion by the AO in the course of giving effect to an appellate order is impermissible. The Court relied on the principle that assessing authorities do not possess an unrestricted power of review to revisit concluded findings merely by re-framing an assessment. [Paras 8, 15]

Assessing Officer's action amounting to a review/change of opinion was improper and cannot stand; the impugned giving-effect order is set aside.

Inapplicability of section 69A/section 115BBC to offerings in hundis - Acceptance of ITAT's conclusion that additions under Section 69A and tax under Section 115BBE/115BBC did not apply to the donation-box offerings - HELD THAT: - The ITAT, after examining the factual matrix and statutory scheme, concluded that Section 69A had no applicability and that the provisions of Section 115BBC(1) were not attracted to anonymous donations received in hundis by a religious-charitable trust. The High Court accepted the ITAT's reasoning and treated that determination as final for the purposes of giving effect, thereby removing any basis for taxing such offerings for AY 2017-2018. [Paras 12, 13]

ITAT's findings on non-applicability of Section 69A and Section 115BBC/115BBE to the hundi donations are accepted and must be given effect; no tax is chargeable on those receipts for AY 2017-2018.

Direction to reassign compliance to a different assessing officer - Appropriate supervisory directions to ensure compliance with the ITAT and High Court orders - HELD THAT: - In view of the failures identified in the impugned giving-effect order and the conduct of the officer who prepared it, the Court directed that the Principal Commissioner of Income Tax shall assign the task of issuing a fresh order giving effect to the ITAT and this Court's directions to an officer other than the one who prepared the impugned order. The Department offered, and the Court recorded, timelines for passing the corrected order and issuing the refund. [Paras 18]

Principal Commissioner to assign the giving-effect work to a different officer; corrected order to be passed within two weeks and refund to be issued within a further two weeks.

Final Conclusion: The writ petition is allowed: the order dated 30th November 2023 giving effect to the ITAT order is quashed; the Assessing Officer must give effect to the ITAT's determination that the assessee's total income for AY 2017-2018 is nil and refund taxes paid, with the Principal Commissioner to reassign compliance and timelines specified for issuing the corrected order and refund.

Principal officer - connection with the management or administration - service of notice of intention under section 2(35)(b) - initiation of prosecution under section 276B

Principal officer - connection with the management or administration - Whether the petitioner was properly held to be the "Principal Officer" of the company under clause (b) of Section 2(35) of the Income Tax Act. - HELD THAT: - Clause (b) of Section 2(35) requires that a person be "connected with the management or administration" of the company before being treated as a "principal officer"; mere holding of an office in the company or mere service of a notice expressing an intention to treat a person as principal officer is not by itself sufficient. The respondents' orders proceeded on the assumption that service of a notice of intention alone justified treating the petitioner as principal officer, without recording or relying upon material in the impugned orders that establishes his connection with management or administration. The Court found that material placed in the respondent's counter affidavit, which goes beyond the basis stated in the notices and orders, did not cure the deficiency in the impugned orders and that the statutory test of being connected with management or administration must be satisfied on the basis disclosed in the notice/order and by inquiry afforded to the person concerned. [Paras 10]

The legal principle that service of a notice alone does not make a person a "principal officer" was affirmed; the respondents' orders do not adequately establish that the petitioner was connected with the management or administration.

Service of notice of intention under section 2(35)(b) - initiation of prosecution under section 276B - Whether the impugned orders holding the petitioner to be the principal officer should be sustained or require fresh consideration. - HELD THAT: - The impugned order dated 20 June 2019 and corrigendum dated 24 July 2019, and subsequent communications, were set aside because they failed to demonstrate satisfaction that the petitioner was connected with management or administration; the matter must be reopened from the stage of issuance of a notice under Section 2(35) so that the respondents may examine the petitioner's connection with the company's management or administration after considering the replies already submitted and after affording due opportunity of hearing. The Court directed fresh consideration rather than deciding the factual question on the record before it. [Paras 14, 15]

Impugned orders set aside; matter revived from the stage of issuance of the notice under Section 2(35) for fresh finalization after appropriate inquiry and hearing.

Interim stay on prosecution - Whether interim protection granted earlier should continue. - HELD THAT: - Having set aside the impugned orders and directed fresh consideration, the Court ordered that the interim stay on prosecution and consequential proceedings shall continue, subject to the result of the fresh decision to be taken by the respondents in accordance with the directions given. [Paras 16]

Interim stay on prosecution and consequential proceedings continues until the respondents take a final decision pursuant to the directions in this order.

Final Conclusion: The writ petition is allowed: the orders dated 20 June 2019 and 24 July 2019 are set aside; the matter is restored to the stage of issuance of the notice under Section 2(35) for fresh consideration of whether the petitioner was connected with the management or administration of the company, after affording him an opportunity of hearing; the interim stay on prosecution continues subject to the fresh decision.

Full and true disclosure - clean hands doctrine - apportionment of undisclosed income - power to reject settlement application under Section 245C - procedure under Chapter XIX-A and finality of settlement orders

Full and true disclosure - clean hands doctrine - power to reject settlement application under Section 245C - apportionment of undisclosed income - Validity of the Settlement Commission's rejection of the applicant's Section 245-C application on the ground that the applicant failed to make full and true disclosure and did not approach the Commission with clean hands. - HELD THAT: - The Court examined the report submitted by the Principal Commissioner and the record of hearing before the Interim Board. The Commissioner's report recorded substantial differences between unaccounted sales and income as computed from seized material and the figures furnished by the petitioner, and noted absence of any basis or rationale provided by the petitioner for apportioning unaccounted sales, expenses and income between the petitioner and the company. The petitioner filed objections and was heard and given several opportunities, but did not furnish a satisfactory explanation or a methodical basis for the apportionment. Section 245-C requires disclosure of full and true particulars; Chapter XIX-A provides the Commission with a statutory scheme and power to reject an application where the applicant has not made such disclosure or has not come with clean hands. In the absence of any cogent basis for the petitioner's apportionment and having regard to the detailed report and proceedings before the Commission, the Court found no error in the Commission's conclusion that the conditions for settlement under Section 245-C(1) were not fulfilled and that rejection was warranted.

The Commission rightly rejected the application under Section 245-C for failure to make full and true disclosure and not approaching the Board with clean hands; no interference with the order.

Final Conclusion: The writ petition is dismissed; the reasoned order of the Interim Board for Settlement rejecting the Section 245-C application is upheld.

Royalty for the use or right to use any industrial, commercial or scientific equipment - deduction of tax at source under section 195 - business connection / permanent establishment in India - time bar / reasonable period for proceedings under section 201(1) and 201(1A) - bona fide belief as defence to non deduction of tax at source

Royalty for the use or right to use any industrial, commercial or scientific equipment - deduction of tax at source under section 195 - Characterisation of time charter hire charges as "royalty" under Section 9(1)(vi) and consequent obligation to deduct tax under Section 195. - HELD THAT: - The Tribunal affirmed the view of the CIT(A) that the contracts were, in substance, contracts for the hire/lease of dredgers giving the Indian charterer effective control and exclusive use of the equipment for the charter period. The bench accepted that the captain and crew, though appointed by the owner, worked under the charterer's directions, the payment was fixed irrespective of actual usage, and the equipment was provided exclusively to the charterer. Applying the amended Explanation 2(iva) to Section 9(1)(vi) (inclusion of payments for use/right to use equipment), the Tribunal held these attributes bring the payments within "royalty" so taxable in India and attracting the payer's obligation to deduct tax at source under Section 195. Precedents and statutory amendment were treated as determinative; contrary authorities were held distinguishable. Outcome: the assessee's contention that the payments were not royalty was rejected and the obligation to deduct TDS stood confirmed. [Paras 13, 15, 16, 19]

Time charter hire charges qualify as royalty under Section 9(1)(vi) and the assessee was obliged to deduct tax under Section 195; grounds challenging this characterisation dismissed.

Time bar / reasonable period for proceedings under section 201(1) and 201(1A) - Whether proceedings/orders under Section 201(1)/201(1A) were barred by limitation. - HELD THAT: - Tribunal agreed with the CIT(A) that no fixed statutory limitation applies to s.201 proceedings in respect of non resident payees because Parliament deliberately omitted a time limit for non resident cases (as explained in the Finance Act memorandum and retained exceptions). Judicial authorities were examined and the Tribunal held that what constitutes a "reasonable period" depends on facts; a four year benchmark cannot be universally applied. In the facts - prolonged non deduction, nondisclosure of payee's correct residential status and other conduct - the proceedings were not time barred. The Tribunal found no infirmity in the appellate conclusion that the s.201/s.201A action was maintainable. [Paras 21, 24, 27]

Proceedings under Section 201(1)/201(1A) in the present cases are not barred by limitation; the limitation plea rejected.

Bona fide belief as defence to non deduction of tax at source - deduction of tax at source under section 195 - Whether the assessee's plea of bona fide belief absolved it from liability for non deduction under Section 201(1)/201(1A). - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee had not demonstrated a bona fide belief entitling it to escape liability. Material on record (Form 15CB/15CA) showed affirmative assertions that the remittance was not taxable based on an incorrect treaty assumption and the assessee failed to disclose the payee's tax haven residency to RBI/auditors/Assessing Officer. The appellate authority's view that a payer must seek an AO's certificate under Section 195(2)/(3) if in doubt was applied; reliance on later or incomplete opinions was rejected. Consequently the defence of bona fide belief was held unavailable. [Paras 30, 31, 33]

Claim of bona fide belief rejected; assessee remains liable for consequences of non deduction.

Business connection / permanent establishment in India - Whether the foreign dredger owner (M/s. Miller Dredging Co. Inc. and similar payees) had a business connection / permanent establishment (PE) in India such that payments constituted business income taxable under Section 9(1)(i). - HELD THAT: - The Tribunal concurred with the CIT(A) that the foreign owners did not carry on dredging business in India: they supplied vessels on time charter for exclusive use by the Indian charterer, received fixed hire irrespective of actual work, and the operational decisions, licences, port and security formalities, and execution of dredging lay with the Indian charterer. Crew provided by the owner acted under the charterer's directions primarily to keep the vessel operational - a corollary to hiring the equipment. On these facts and by reference to analogous tribunal and court decisions, the Tribunal concluded there was no business connection or PE in India and business income taxation under s.9(1)(i) was not attracted. [Paras 36, 37, 38, 39, 101]

Foreign owners did not have a business connection/PE in India; the Department's appeals on this point dismissed.

Admission of additional evidence - Admissibility of additional evidence (audit reports and assessment files) before the CIT(A). - HELD THAT: - The CIT(A) declined to admit the proffered additional evidence on the ground that it was immaterial and did not show correct disclosure of the payee's residential status; the Tribunal observed that the ground was general and the assessee's representative had not identified any specific omission or prejudice. No specific infirmity in that discretionary rejection was found warranting interference. [Paras 29]

Claim that additional evidence should have been admitted rejected; ground treated as general and dismissed.

Final Conclusion: For the assessment years in issue (2003 04 to 2011 12), the Tribunal dismissed the assessee's appeals and the Department's cross appeals. It upheld the characterisation of time charter hire charges as royalty attracting TDS obligations; held s.201 proceedings were not time barred on these facts; rejected the assessee's bona fide belief defence; declined to admit the additional evidence; and affirmed that the foreign owners did not possess a business connection/PE in India on the stated facts.

Issuance of notice or assessment upon a deceased assessee vitiating jurisdiction - condition precedent of valid notice for assumption of jurisdiction by the Assessing Officer - assessment order non-est where finalised in the name of a deceased person despite notice of death - curable mistake under Section 292BB of the Act

Issuance of notice or assessment upon a deceased assessee vitiating jurisdiction - assessment order non-est where finalised in the name of a deceased person despite notice of death - curable mistake under Section 292BB of the Act - Validity of the assessment order passed in the name of the deceased assessee where the Assessing Officer had been informed of the death prior to finalisation of the assessment. - HELD THAT: - The Tribunal held that an assessment order issued in the name of a deceased person, when the Assessing Officer had been informed of the death (death certificate placed on record and brought to AO's notice), is non-est in law and liable to be quashed. The Tribunal relied on the reasoning in Krishnaawtar Kabra (supra) that issuance of notice or action upon a deceased assessee is equivalent to no valid notice and strikes at the jurisdiction of the AO because a valid notice is a condition precedent to assume jurisdiction. The appellant had informed the AO by letter dated 29.09.2017 enclosing the death certificate and had sought time to enable the legal heir to represent; nevertheless the assessment order dated 02.11.2017 was finalised in the name of the deceased. The Tribunal rejected the applicability of Section 292BB as a cure in the facts of the case, observing that Section 292BB deals with service of notice and does not validate finalisation of assessment in the name of a deceased person where the AO had actual notice of death and failed to adopt the course of obtaining representation through the legal heir. Applying the principle that want of a valid notice or action upon a deceased renders the proceeding void for want of jurisdiction, the Tribunal quashed the impugned assessment order. [Paras 5, 6]

Impugned assessment order passed in the name of the deceased for Assessment Year 2012-13 is quashed; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal and quashed the assessment order dated 02.11.2017 under Section 143(3) r.w.s. 263 of the Act for Assessment Year 2012-13, holding that finalisation of assessment in the name of a deceased person after the AO had been informed of the death vitiates the proceedings.

Beneficial ownership and dominion over asset - distinction between legal ownership and beneficial ownership for depreciation - interpretation of 'owned' for depreciation purpose under section 32 - allowance of depreciation where company funds are used and asset recorded in company's books - use of asset wholly and exclusively for business - concept of 'kept ready for use'

Beneficial ownership and dominion over asset - distinction between legal ownership and beneficial ownership for depreciation - allowance of depreciation where company funds are used and asset recorded in company's books - use of asset wholly and exclusively for business - concept of 'kept ready for use' - Depreciation on a car registered in the name of the director but purchased with company funds and shown as an asset in the company's books is allowable to the company. - HELD THAT: - The Tribunal held that where the company furnished material showing that the funds for acquisition were provided by the company and the vehicle is reflected in the company's accounts, the company for practical purposes vests with dominion over the vehicle and is the beneficial owner entitled to claim depreciation. The Tribunal relied upon and followed the ratio in Mysore Minerals Ltd. and the Jurisdictional High Court decision in PCIT v. Asian Mills (P.) Ltd., which recognise that the term 'owned' for depreciation purposes must be given a wider meaning to effectuate the legislative intent, and that legal title is not decisive where the assessee has financed the acquisition and the asset is used for business. The Tribunal also noted that ancillary expenditures (interest on car loan and insurance) were allowed by the department, reinforcing that the vehicle was commercially used for business. Applying these principles to the facts, the disallowance by the AO and the First Appellate Authority was set aside and the matter remitted to the AO to allow depreciation in accordance with law. [Paras 10, 11]

Appeal allowed and AO directed to allow depreciation in accordance with law.

Final Conclusion: The Tribunal allowed the appeal and directed the Assessing Officer to allow depreciation on the vehicle for AY 2017-18, holding that the company was the beneficial owner entitled to depreciation as the purchase was financed by the company and the vehicle was used for business.

Revised return requirement for claim of deduction and appellate power to entertain claim where relevant material is on record - appellate authority's power co-terminus with assessing officer - proviso to section 147-reopening beyond four years barred unless failure to disclose fully and truly all material facts - reopening based on change of opinion not permissible - Rule 46A-duty to afford opportunity to the Assessing Officer when admitting additional evidence

Revised return requirement for claim of deduction and appellate power to entertain claim where relevant material is on record - appellate authority's power co-terminus with assessing officer - Allowability of enhanced long-term capital loss claimed by the assessee by filing a revised computation during assessment proceedings instead of filing a revised return - HELD THAT: - The Tribunal held that although the Assessing Officer cannot ordinarily entertain a claim for deduction made after filing of the return unless a revised return is filed (as discussed in Goetze (India) Ltd.), the appellate authority (CIT(A) and the Tribunal) has jurisdiction to consider such a claim where the relevant material and facts supporting the claim were already on the record and examined by the AO. The AO had been aware of and had verified the sale transactions, the computation of indexed cost and supporting documents; the enhanced loss was furnished during scrutiny and verified. Relying on the principle that an appellate authority's powers are co-terminus with the AO and the authorities (including High Court precedents) permitting appellate consideration of additional claims when material is on record, the CIT(A)'s allowance of the enhanced capital loss was upheld. The Tribunal therefore found no illegality in entertaining the revised computation given that all material facts were available to and examined by the AO. [Paras 3, 4, 7, 8]

The allowance of the enhanced long-term capital loss by the CIT(A) is sustained and the Revenue's appeal is dismissed.

Proviso to section 147-reopening beyond four years barred unless failure to disclose fully and truly all material facts - reopening based on change of opinion not permissible - Validity of reassessment under section 147/148 where notice was issued beyond four years and whether the reopening was based on failure to disclose fully and truly all material facts - HELD THAT: - The Tribunal examined the reasons recorded for reopening and found they related to matters that were part of the original assessment record (balance sheet, profit & loss and particulars already available to the AO). The AO's reasons did not identify any specific failure by the assessee to disclose fully and truly material facts; rather, they amounted to a review or change of opinion regarding matters already considered in the original s.143(3) assessment. Applying the proviso to section 147 and relevant Supreme Court and High Court precedents, the Tribunal held that where the original assessment under s.143(3) was completed and no failure to disclose is demonstrable, action after four years is barred and reopening cannot be sustained. Consequently, the CIT(A)'s quashing of the reassessment was upheld. [Paras 10, 11, 12, 14]

Reassessment is quashed as barred by the proviso to section 147; the Revenue's appeal is dismissed.

Rule 46A-duty to afford opportunity to the Assessing Officer when admitting additional evidence - revised return requirement for claim of deduction and appellate power to entertain claim where relevant material is on record - Whether the CIT(A) erred in deleting the addition of Rs. 2 crores treated by the AO as business income and in admitting/considering material without affording opportunity to the AO under Rule 46A - HELD THAT: - The Tribunal found that the explanation and documentary material showing the sum as sale consideration of a capital asset were already placed before the AO during assessment proceedings (letters dated 05.12.2012 and 20.03.2013) and thus no fresh evidence was admitted before the CIT(A) in violation of Rule 46A. On merits, the amount represented sale consideration of capital assets (to be adjusted to capital work-in-progress) and was not business income; the CIT(A)'s reliance on precedents permitting appellate correction of classification where facts are on record was accepted. Because the AO had the relevant information and the classification was inadvertent, deletion of the addition was sustained. [Paras 16, 17, 18]

The deletion of the addition of Rs. 2 crores is confirmed and the Revenue's appeal is dismissed.

Final Conclusion: All three appeals filed by the Revenue for assessment years 2008-09, 2009-10 and 2010-11 are dismissed: (i) the CIT(A)'s allowance of the enhanced long-term capital loss is upheld where material was on record and examined by the AO; (ii) the reassessment is quashed as barred by the proviso to section 147 in the absence of failure to disclose fully and truly all material facts; and (iii) the CIT(A)'s deletion of the addition of Rs. 2 crores and finding of capital receipt is sustained, with no breach of Rule 46A established.

Voluntary Disclosure of Income Scheme, 1997 and year of credit under VDIS - unexplained credit and assessment as income under section 68 (requirement to explain source) - burden of proof - identity, capacity and genuineness of creditor - evidentiary effect of entries in books of account or any other record under VDIS - annual letting value of house property determined by municipal valuation - interest liability for defaults in return/tax payment under provisions relating to delay and shortfall in advance tax (sections 234A, 234B and 234C)

Voluntary Disclosure of Income Scheme, 1997 and year of credit under VDIS - unexplained credit and assessment as income under section 68 (requirement to explain source) - burden of proof - identity, capacity and genuineness of creditor - evidentiary effect of entries in books of account or any other record under VDIS - Deletion of addition of amount declared under VDIS, 1997 as unexplained credit in assessment year 1998-1999 - HELD THAT: - The Tribunal examined whether the amount of Rs. 1,50,10,000 declared under VDIS-97 could be treated as an unexplained credit assessable under section 68 in AY 1998-99. The lower authorities treated the credit as arising in the year relevant to AY 1998-99 on the basis that the declaration under VDIS constituted an admission that the amounts were not disclosed earlier. The assessee furnished details and contemporaneous particulars showing that the investments/expenditures related to earlier years (from AY 1990-91/1991-92 onwards) and relied on clarifications under the Scheme that the year of credit may be reflected in books or other records as per the declarant's option and that "any other record" may evidence availability of the amount. The Tribunal found that none of the authorities had established that the investments/purchases/expenditures were made in the financial year 1997-98 and rejected the lower authorities' conclusion that the entries necessarily related to AY 1998-99 merely because the VDIS declaration was filed on 26.12.1997. On the material before it, and having regard to the disclosures and records produced by the assessee, the Tribunal held that the addition in AY 1998-99 could not be sustained and deleted the addition. [Paras 8]

Addition of Rs. 1,50,10,000 declared under VDIS-97 treated as unexplained credit in AY 1998-1999 deleted.

Annual letting value of house property determined by municipal valuation - valuation of property let out free to related entity and application of section 23 principles - Computation of income from house property by adopting municipal valuation for annual letting value - HELD THAT: - The Tribunal considered the assessment officer's determination of annual letting value (ALV) for property let to SRM Nightingale School and the CIT(A)'s direction to adopt municipal valuation. The CIT(A) had remitted the valuation issue to the AO to value the ALV on the basis of Chennai Corporation municipal valuation after verification and allowed the assessee time to produce evidence. The Tribunal found no infirmity in the CIT(A)'s approach and directed the Assessing Officer to adopt the municipal value as per Chennai Corporation, after due verification and giving the assessee the opportunity contemplated by the CIT(A). [Paras 9]

Assessing Officer directed to determine annual letting value in accordance with municipal valuation adopted by Chennai Corporation and recompute income from house property.

Interest liability for defaults in return/tax payment under provisions relating to delay and shortfall in advance tax (sections 234A, 234B and 234C) - Chargeability of interest under provisions relating to delay and defaults (sections 234A, 234B and 234C) - HELD THAT: - The Tribunal examined the assessee's challenge to the levy of interest under the provisions dealing with interest for delay in furnishing return and defaults/shortfall in payment of advance tax. Having considered the matter, the Tribunal found no infirmity in the order of the CIT(A) which upheld the charge of interest and directed the Assessing Officer to charge interest in accordance with the statutory provisions. [Paras 10]

Levy of interest under sections 234A, 234B and 234C upheld; Assessing Officer to compute interest as per law.

Final Conclusion: The appeal is partly allowed: the addition of Rs. 1,50,10,000 declared under VDIS-97 and treated as unexplained credit in AY 1998-1999 is deleted; the Assessing Officer is directed to adopt municipal valuation for computing annual letting value of the house property and recompute income accordingly; interest under the relevant provisions is to be charged as directed.

Supply of standardized/off-the-shelf software versus royalty - Article 12(3) of India-China DTAA - royalties for imparting information concerning industrial, commercial or scientific experience - Concept of know-how and imparting of information - End User License Agreement (EULA) and reseller characterization - Business income not taxable in India in absence of Permanent Establishment - Levy of interest under section 234A - timeliness of return filing - Levy of interest under section 234B where tax deducted at source - Penalty proceedings under section 270A - premature initiation

Supply of standardized/off-the-shelf software versus royalty - Article 12(3) of India-China DTAA - royalties for imparting information concerning industrial, commercial or scientific experience - Concept of know-how and imparting of information - End User License Agreement (EULA) and reseller characterization - Business income not taxable in India in absence of Permanent Establishment - Receipts from supply/licensing of software assessed as royalty under Article 12(3) of the India-China DTAA are not taxable as royalty but constitute business income not taxable in India in absence of PE. - HELD THAT: - The Tribunal examined the License Agreement and the EULA and the factual matrix which showed grant of non-exclusive, non-transferable, non-assignable licences for incorporation of a standardized/off the shelf software into head units supplied with vehicles. The assessee retained ownership of intellectual property, source code and technical documentation; licencees were expressly prohibited from copying, modifying or deriving source code; end users executed EULA restricting use and MG India acted as reseller. The expression "imparting of information concerning industrial, commercial or scientific experience" connotes know how having perpetual or extended use. Here no know how enabling reproduction for perpetual use was transferred; licences were for use of the software (binary) while rights in the copyright remained with the assessee. The decision in Engineering Analysis Centre of Excellence Ltd. was held squarely applicable: payment for non exclusive, restricted licence to a copy of software is payment for supply of a copyrighted article (business income) and not for use of the copyright (royalty). No contrary material was placed on record by Revenue. Accordingly, the receipts do not fall within Article 12(3) and are business income not chargeable in India in absence of a PE. [Paras 11, 12]

Payments received for supply/licensing of the software are business income and not royalty under Article 12(3) of the India-China DTAA; ground Nos. 4 and 4.1 allowed in favour of the assessee.

Levy of interest under section 234A - timeliness of return filing - Levy of interest under section 234A requires verification of whether return was filed within the extended due date; matter restored to AO for verification and fresh decision. - HELD THAT: - The assessee filed its return on 09.02.2021 and relied on the CBDT extension of due date to 15.02.2021. Interest under section 234A is attracted only if return is furnished after the due date. The Tribunal found that the question of applicability of interest depends on verification of filing date vis a vis the extended due date and therefore directed restoration of the issue to the Assessing Officer for verification and afresh decision in accordance with law. [Paras 14]

Issue of interest under section 234A restored to the file of the AO for verification and fresh decision.

Levy of interest under section 234B where tax deducted at source - Interest under section 234B deleted where tax was deducted at source and relevant proviso and judicial decisions apply. - HELD THAT: - The Tribunal considered the proviso to section 209(1)(d) (as amended) and the factual position that tax on the impugned receipts was deducted at source. Following the Tribunal's precedent in Amadeus IT Group SA which has been affirmed by the Delhi High Court, and in view of the Revenue's concession on the propositions, the Tribunal held that levy of interest under section 234B was not called for and deleted the interest charged under that section. [Paras 15]

Interest charged under section 234B deleted.

Penalty proceedings under section 270A - premature initiation - Initiation/endorsement of penalty proceedings under section 270A is premature and does not require adjudication at this stage. - HELD THAT: - The Tribunal observed that the mechanical endorsement initiating penalty proceedings under section 270A is premature in the present appellate stage and therefore refrained from adjudicating the matter. [Paras 16]

Penalty proceedings under section 270A left untouched as premature.

Validity of DRP directions and Document Identification Number (DIN) - Validity of DRP directions as to DIN not adjudicated; matter kept open for later adjudication. - HELD THAT: - The assessee raised grounds challenging the validity of the DRP directions for want of a DIN and the handwritten DIN; the counsel requested these grounds to be kept open and the Tribunal expressly did not adjudicate them at present. [Paras 7]

Grounds relating to DIN and validity of DRP directions kept open/not adjudicated.

Final Conclusion: The Tribunal held that the receipts from supply/licensing of standardized/off the shelf software are business income and not royalty under Article 12(3) of the India-China DTAA, and therefore not taxable in India in the absence of a PE; interest under section 234B was deleted; interest under section 234A was remanded to the AO for verification of filing date; penalty proceedings under section 270A were held premature; DIN-related grounds were left open.

Twin conditions for exercise of jurisdiction under section 263 (order erroneous and prejudicial to the revenue) - jurisdiction under section 263 of the Income-tax Act, 1961 - adoption of one of the plausible views by the Assessing Officer - capital gains treatment of unit-linked insurance/units under section 45

Twin conditions for exercise of jurisdiction under section 263 (order erroneous and prejudicial to the revenue) - jurisdiction under section 263 of the Income-tax Act, 1961 - adoption of one of the plausible views by the Assessing Officer - capital gains treatment of unit-linked insurance/units under section 45 - Validity of invoking revisional jurisdiction under section 263 to set aside the assessment for AY 2016-17. - HELD THAT: - The Tribunal examined whether the Principal CIT rightly invoked section 263 by holding the assessment order to be erroneous and prejudicial to the revenue. The law requires satisfaction of both twin conditions before exercise of revisional jurisdiction. The Assessing Officer had re-opened the assessment, made enquiries about the surrender/redemption of units of Bajaj Allianz and accepted the explanation and assessed income accordingly. The Tribunal found that the AO had adopted a plausible view in treating the redemption as capital gain, noting that unit-linked insurance/units are specifically brought within capital gains regime under section 45. Because the AO adopted a tenable view, the requisites of prejudice to revenue were not made out and the revisional jurisdiction could not be validly exercised. On these grounds the Tribunal set aside the order under section 263 and restored the findings of the AO. [Paras 8, 9]

Impugned revision under section 263 quashed; assessment framed by the AO restored.

Final Conclusion: The appeal is allowed: the Principal CIT's order under section 263 for AY 2016-17 is set aside because the AO had adopted a plausible view in treating the redemption as capital gain and the twin conditions for exercise of section 263 were not satisfied.

Taxation of unexplained cash credits under section 68 read with section 115BBE - burden of proof and verification of cash sales during the demonetisation period - reliance on books of account, VAT returns and physical stock verification as evidentiary basis - allowability of business promotion and car running expenses supported by bills and vouchers - treatment of typographical errors in tax audit reports and consequential additions

Taxation of unexplained cash credits under section 68 read with section 115BBE - burden of proof and verification of cash sales during the demonetisation period - reliance on books of account, VAT returns and physical stock verification as evidentiary basis - Deletion of addition treating cash sales during 01.10.2016 to 08.11.2016 as unexplained cash credit - HELD THAT: - The Tribunal found that the Assessing Officer's conclusion that cash sales in the period 01.10.2016 to 08.11.2016 were inflated to cover demonetised currency was unsupported. The assessee produced books of account, month wise cash flow details, VAT returns and stock records; a survey under section 133A revealed no discrepancy between physical and book stock. The Tribunal observed that demonetisation was announced on 08.11.2016 and could not have been anticipated; a minor variation in cash sales percentages compared to earlier years did not suffice to treat declared cash sales as unexplained credits. Since cash sales were already offered as income and the evidentiary materials were unrebutted, the addition was deleted. [Paras 27]

Addition of Rs. 4,73,58,629 treated as unexplained cash credit is deleted; assessee's related grounds allowed.

Allowability of conveyance, car running and similar business expenses - reliance on bills and vouchers recorded in books of account - Disposition of assorted disallowances (conveyance, car running & maintenance, director salaries and mobile expense) - HELD THAT: - The Tribunal considered the impugned petty additions and the material on record. For conveyance, car running and maintenance, and similar expenditures, the Tribunal upheld the findings of the Commissioner (Appeals) that these were business expenses supported by bills and vouchers and incurred wholly and exclusively for business; no infirmity was found in deletion of disallowances where warranted. Conversely, where the Assessing Officer's additions were sustained by the Tribunal (as to certain petty additions), those grounds were dismissed. The Tribunal applied ordinary principles that the Assessing Officer should not substitute his commercial judgment where expenses are supported by records. [Paras 29]

Grounds 3 to 6 (petty additions) dismissed; relevant disallowances found untenable where supported by vouchers and books.

Burden of proof and verification of cash sales during the demonetisation period - reliance on books of account, VAT returns and physical stock verification as evidentiary basis - Revenue's challenge to CIT(A)'s treatment of certain cash deposits as genuine cash sales dismissed - HELD THAT: - The Tribunal held that the facts and reasoning in the Revenue's ground mirrored those considered and decided in the assessee's appeal. Having found the assessee's records and survey verification persuasive and the AO's inference of inflation unsupportable, the Tribunal dismissed the Revenue's challenge to the CIT(A)'s finding that a portion of cash deposits represented genuine cash sales. [Paras 33]

Revenue's ground contesting genuineness of specified cash deposits is dismissed.

Allowability of business promotion and car running expenses supported by bills and vouchers - Deletion of disallowance of business promotion expenses upheld - HELD THAT: - The Tribunal accepted that business promotion expenses comprised customary trade practice (such as free gifts on large purchases) and were supported by bills and vouchers recorded in the assessee's books. It reiterated the settled proposition that an Assessing Officer should not dictate commercial expediency where expenses are substantiated, and therefore found no reason to interfere with CIT(A)'s deletion of the addition. [Paras 41]

Deletion of addition in respect of business promotion expenses sustained.

Allowability of depreciation as statutory allowance - allowability of car running expenses supported by bills and vouchers - Deletion of disallowance of depreciation and car running expenses upheld - HELD THAT: - The Tribunal observed that depreciation is a statutory allowance and not a first year claim here; car running expenses were supported by bills and vouchers for petrol, repairs and insurance. On these bases the Tribunal found no merit in the Assessing Officer's disallowance and upheld CIT(A)'s deletions. [Paras 44]

Disallowance of depreciation and car running expenses set aside; deletions upheld.

Treatment of typographical errors in tax audit reports and consequential additions - reliance on reconciliation to correct audit report anomalies - Deletion of addition on account of alleged unaccounted stock arising from typographical error in tax audit report - HELD THAT: - The Tribunal found the Assessing Officer's huge addition arose from a typographical omission of decimal points in the tax audit report's quantitative figures for gold bars, producing an absurd overstated value. CIT(A) appreciated the typographical error and accepted reconciliations that aligned tax audit figures with stock register. The Tribunal found no error in CIT(A)'s factual conclusion and dismissed the Revenue's challenge. [Paras 46, 48]

Addition on account of unaccounted stock due to typographical error in tax audit report deleted.

Final Conclusion: The assessee's appeal is partly allowed (deletion of the addition treating cash sales during 01.10.2016-08.11.2016 as unexplained credits; other petty additions addressed as indicated). The Revenue's appeal is dismissed in entirety.

Unexplained cash credit under section 68 - taxation under section 115BBE - treatment of cash deposits during demonetisation - acceptance of books of account and evidentiary consequence

Unexplained cash credit under section 68 - acceptance of books of account and evidentiary consequence - treatment of cash deposits during demonetisation - Sustenance of addition of Rs. 39,27,414 made as unexplained cash credit under section 68 read with section 115BBE in respect of cash deposits during the demonetisation period. - HELD THAT: - The Assessing Officer treated deposits made in October-November 2016 as unexplained, despite having accepted the assessee's books and recorded sales in the books of account, and without making any adverse finding qua purchases or stock. The Commissioner (Appeals) sustained the AO's view on the ground that the demonetisation-period deposits were unusually high and the assessee did not produce confirmations from sundry debtors; the CIT(A) further relied on RBI restrictions regarding acceptance of demonetised notes. The Tribunal found that where the books of account are accepted and there is no adverse finding regarding purchases or stock, the consequent cash sales recorded in those books cannot be treated as unexplained money under section 68 merely because of the timing or volume of deposits during demonetisation. In such circumstances the AO's rejection of the source lacked logical basis and no independent adverse material was brought on record to justify invoking section 68. Accordingly the addition was unsustainable and had to be deleted. [Paras 9]

Impugned addition under section 68 deleted and grounds raised by the assessee allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the addition of Rs. 39,27,414 treated as unexplained cash credit under section 68 (and taxed under section 115BBE), and directed deletion of the impugned addition for assessment year 2017-18.

Revisionary jurisdiction under section 263 of the Income-tax Act - erroneous order prejudicial to the interests of the Revenue - plausible view taken by the Assessing Officer - valuation of shares - choice between DCF method and NAV - inclusion under section 56(2)(x)(c)(B) as income from other sources

Revisionary jurisdiction under section 263 of the Income-tax Act - erroneous order prejudicial to the interests of the Revenue - plausible view taken by the Assessing Officer - valuation of shares - choice between DCF method and NAV - inclusion under section 56(2)(x)(c)(B) as income from other sources - Validity of the PCIT's order under section 263 setting aside the assessment on the ground that the AO erred in not treating the excess of FMV over purchase consideration as income under section 56(2)(x)(c)(B) - HELD THAT: - The Tribunal found on the record that the Assessing Officer issued detailed questionnaires, called for bank statements, ledger accounts, valuation report and other documents, received substantive replies and examined a valuation under the DCF method as well as the NAV. The AO adopted a plausible view in accepting the assessee's valuation and made no addition. The PCIT invoked section 263 on the basis that FMV exceeded purchase price and that the difference should have been taxed under section 56(2)(x)(c)(B). The Tribunal applied settled law that section 263 cannot be used where the AO has made enquiries and adopted one of two permissible views; an order is revisable only if the view taken by the AO is unsustainable in law. Reliance was placed on Malabar Industrial Co. Ltd. and related authority to hold that mere disagreement by the Commissioner does not make an order erroneous and prejudicial to revenue. Having found the AO's approach to be a tenable, investigated conclusion (including the assessee's choice between valuation methods), the Tribunal concluded that the PCIT's exercise of revisionary jurisdiction was not justified and the revision order was therefore quashed. [Paras 12, 13, 14, 15]

Impugned order passed by the Principal Commissioner of Income Tax under section 263 is quashed; the appeal is allowed.

Final Conclusion: The Tribunal held that the Assessing Officer had made adequate enquiries and adopted a plausible view on valuation of shares and taxability under section 56(2)(x)(c)(B); therefore the PCIT's revisionary order under section 263 was without justification and is quashed, and the assessee's appeal is allowed.

Disallowance under section 14A in the absence of exempt income - rent/lease equalization reserve not taxable as reserve or unascertained liability for computation of book profits under section 115JB - application of accounting standard AS-19 to lease equalization charges

Disallowance under section 14A in the absence of exempt income - suo-moto disallowance made by the assessee - Deletion of disallowance of Rs. 51,48,128 made under section 14A of the Act - HELD THAT: - The Tribunal found that no exempt income was earned during the year (as recorded in the assessment order) and that the assessee had, in any event, made a suo-moto disallowance in the return. Applying the settled legal position that in the absence of exempt income no disallowance under section 14A is called for, the Tribunal held that the disallowance sustained by the Assessing Officer and the CIT(A) was not justified and deleted the addition. The Tribunal noted consistency with its order in the assessee's own case for a later year where the section 14A disallowance was deleted. [Paras 7]

Disallowance of Rs. 51,48,128 under section 14A deleted.

Rent/lease equalization reserve not taxable as reserve or unascertained liability for computation of book profits under section 115JB - application of accounting standard AS-19 to lease equalization charges - Deletion of adjustment of rent/lease equalization reserve of Rs. 36,06,899 for computation of book profits under section 115JB - HELD THAT: - The Tribunal examined the nature of the rent/lease equalization reserve created pursuant to AS-19 in respect of cancellable leases for office premises and the authorities cited. Relying on decisions of High Courts (including the jurisdictional High Court) which held that lease equalization charges are not reserves nor provisions for unascertained liabilities and are not covered by the clauses to the Explanation to section 115JB/115JA, the Tribunal held that such charges represent a method of accounting to equalize lease rental effects over the lease term and cannot be treated as an amount required to be added back to book profits under Explanation 1(b)/(c) to section 115JB. The Assessing Officer's addition, upheld by the CIT(A) on the basis of a coordinate Bench decision, was therefore not tenable and was deleted. [Paras 11, 12, 13, 14, 15]

Adjustment of rent/lease equalization reserve of Rs. 36,06,899 under section 115JB deleted.

Final Conclusion: Appeal allowed: the Tribunal deleted the section 14A disallowance and the adjustment of rent/lease equalization reserve under section 115JB for Assessment Year 2014-15.

Validity of penalty notice under section 271(1)(c) - Requirement to specify limb - concealment of particulars of income or furnishing inaccurate particulars - Distinction between penalty for concealment/inaccurate particulars under section 271(1)(c) and penalty for under reporting under section 270A - Recording of satisfaction in assessment order for initiation of penalty proceedings

Validity of penalty notice under section 271(1)(c) - Requirement to specify limb - concealment of particulars of income or furnishing inaccurate particulars - Validity of penalty proceedings where the penalty notice did not specify whether it was issued for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal held that the Assessing Officer failed to frame a specific charge when initiating penalty proceedings: the assessment order recorded initiation as 'penalty proceedings u/s. 271(1)(c) is initiated separately for under reporting', which did not identify the limb under section 271(1)(c) (concealment or furnishing inaccurate particulars). Reliance on the Madras High Court decision in Babuji Jacob v. ITO was accepted as applicable: where the notice does not properly indicate the basis (and the facts do not attract either limb), the penalty proceedings are vitiated. The Tribunal rejected the Revenue's contention that the term 'under reporting' could be equated with concealment and that a recording in the assessment order satisfied the requirement, observing that the legislature has introduced section 270A for under reporting and the AO therefore must apply his mind and frame the correct charge under the applicable provision. Because the AO had not applied his mind and was in a confused state regarding the charge, the penalty was deleted. [Paras 8]

Penalty deleted for all the assessment years on jurisdictional ground of defective initiation/notice.

Distinction between penalty for concealment/inaccurate particulars under section 271(1)(c) and penalty for under reporting under section 270A - Recording of satisfaction in assessment order for initiation of penalty proceedings - Whether the reference in the assessment order to initiation of penalty for 'under reporting' can substitute for a proper satisfaction and specification of the limb under section 271(1)(c). - HELD THAT: - The Tribunal held that the assessment order entry stating initiation for 'under reporting' did not constitute an adequate framing of the charge under section 271(1)(c). The Tribunal emphasised the legislative introduction of section 270A (penalty for under reporting/misreporting effective from 01.04.2017) and observed that conflating 'under reporting' with the limbs of section 271(1)(c) is impermissible. Consequently, the AO's notation in the assessment order could not cure the defect of the penalty notice which failed to specify whether it was for concealment or for furnishing inaccurate particulars; absence of such specification vitiated the penalty proceedings. [Paras 8]

Recording in the assessment order that penalty was initiated for 'under reporting' did not validate penalty under section 271(1)(c); penalty proceedings were unsustainable on that ground.

Final Conclusion: The Tribunal allowed the appeals and deleted the penalty orders for assessment years 2013-14 to 2016-17, holding that the Assessing Officer failed to frame the specific charge under section 271(1)(c) (concealment or furnishing inaccurate particulars) and that an assessment order reference to 'under reporting' did not cure the defective initiation of penalty proceedings.

Abetment - penalty under section 112 of the Customs Act, 1962 - scope of a show cause notice and prohibition on widening charges at appellate stage - provisional assessment and consequence of misdeclaration for confiscation - protection under section 155 of the Customs Act, 1962 - double jeopardy / concurrent disciplinary proceedings - limits of review under Committee of Chief Commissioners under section 129A(2) of the Customs Act, 1962

Abetment - penalty under section 112 of the Customs Act, 1962 - provisional assessment and consequence of misdeclaration for confiscation - scope of a show cause notice and prohibition on widening charges at appellate stage - Whether the adjudicating authority erred in rejecting imposition of penalty under section 112 by holding that there was no evidence of mens rea or abetment by the customs officers and whether the review committee could sustain an appeal seeking remand to reconsider penalty based on allegations of illicit gratification not pleaded against the officers in the show cause notice. - HELD THAT: - The Tribunal accepted the adjudicating authority's finding that abetment requires mens rea and intentional aiding and that the show cause notice did not contain evidence connecting the respondent-officials to any illicit gratification or collusion (see quoted paras 104-107 and analysis at paras 6-11). The court held that liability to confiscation arose from the importer's misdeclaration from the moment of import and was not caused or made by subsequent finalization of provisional assessments by the officers; therefore, the officers could not be said to have contributed to confiscation by the act of finalizing provisional assessments (para 7). The Committee's grounds in appeal attempted to expand the charges by importing allegations of illicit gratification not pleaded against the respondents; this was impermissible because adjudication must be confined to the framework of the show cause notice (para 10). The appeal failed to produce factual linkage between the general depositions alleging payments and the respondent-officials; accordingly the attempt to widen the scope at appellate stage was rejected (paras 9-11). The Tribunal concluded there was no legal or evidentiary basis to displace the adjudicating authority's conclusion of no abetment and dismissed the prayer for remand or modification on this ground (paras 11, 15). [Paras 7, 9, 10, 11, 15]

Adjudicating authority's finding of no abetment and refusal to impose penalty under section 112 is upheld; appeal seeking remand to reconsider penalty on basis of unpleaded allegations of illicit gratification is dismissed.

Protection under section 155 of the Customs Act, 1962 - double jeopardy / concurrent disciplinary proceedings - limits of review under Committee of Chief Commissioners under section 129A(2) of the Customs Act, 1962 - Whether the adjudicating authority's reference to protection under section 155 and to concurrent disciplinary proceedings (double jeopardy) rendered its order illegal or improper so as to warrant remand by the review committee. - HELD THAT: - The Tribunal observed that the adjudicating authority disposed of the pleas of protection under section 155 and of double jeopardy on merits and dropped proceedings on substantive grounds rather than by a mere procedural bar (paras 12-14). Section 155 is a statutory safeguard for acts done in discharge of official duties; the adjudicating authority had considered that plea and declined to impose penalty on merits, not by procedural exclusion, and there was therefore no legal defect of the kind contemplated by section 129A to justify remand (para 13). Likewise, the adjudicator's consideration of double jeopardy and concurrent disciplinary action did not amount to a legally improper failure requiring interference; multiple proceedings under different statutes are not, as a rule, a ground for upsetting a merits decision (para 14). Consequently the review committee's reliance on these matters did not furnish a valid basis for ordering remand. [Paras 12, 13, 14, 15]

Findings of the adjudicating authority on section 155 and on double jeopardy are not legally improper; they do not justify remand and the review committee's grounds on these points are rejected.

Final Conclusion: The impugned order of the adjudicating authority, which discharged the respondent-officials by finding absence of mens rea, abetment or evidence linking them to illicit gratification and which addressed pleas under section 155 and double jeopardy on merits, is upheld; the appeals by the Principal Commissioner are dismissed and no remand is ordered.

Provisional release of seized imported goods - bona fide purchaser protection - conditions for provisional release - excessiveness of bank guarantee as a condition - diplomatic immunity and recoverability of customs duty

Provisional release of seized imported goods - conditions for provisional release - excessiveness of bank guarantee as a condition - bona fide purchaser protection - Modification of the conditions imposed for provisional release by deleting the requirement of a bank guarantee for a sum of Rupees one crore. - HELD THAT: - The Court found on the materials that the petitioner was prima facie a bona fide purchaser who had not bought the vehicle directly from the diplomatic importer but after it passed to other individuals in India. While the breach of import conditions by the diplomat was not disputed, recovery of duty from the original importer was unlikely because the importer (a diplomatic official) is not in India and enjoys immunity under the Vienna Conventions. Having regard to those facts, the Court held that imposing a bank guarantee of the magnitude required under serial No.3 of the impugned order was onerous and unreasonable as a condition for provisional release. Accordingly, that requirement was deleted while the remaining conditions were left intact and the vehicle ordered to be released subject to those conditions within one week. [Paras 5, 6]

Requirement of a bank guarantee for a sum of Rupees one crore deleted; provisional release to be effected subject to the remaining conditions.

Diplomatic immunity and recoverability of customs duty - provisional release of seized imported goods - conditions for provisional release - Refusal to permit provisional release on the modified basis of payment of 50% of the differential duty instead of the conditions imposed in the impugned order. - HELD THAT: - Counsel for the petitioner sought modification to allow provisional release upon payment of 50% of the duty and a bond. The Court noted that the import condition had been breached by the diplomat and observed that, given the diplomatic status of the importer and the practical difficulty of recovering duty from the original importer who is not in India, it was not inclined to permit provisional release on the basis of a reduced payment of 50% of the duty. The Court therefore declined the prayer to substitute the impugned conditions by permitting provisional release against 50% duty payment. [Paras 3, 5]

Request to permit provisional release on payment of 50% of duty declined; original conditions preserved except as modified by deletion of the bank guarantee requirement.

Final Conclusion: Writ petition disposed by modifying the impugned provisional-release order: the bank guarantee requirement deleted; the vehicle to be released within one week subject to the remaining conditions; prayer to allow release on payment of 50% duty refused; no order as to costs.

Limited judicial review of resolution plan under Section 30(2) and Section 31 - primacy of commercial wisdom of Committee of Creditors - treatment of operational creditor claims in a resolution plan - right of subrogation of guarantors and effect of approved resolution plan on guarantors - treatment of statutory authority claims and required consent for modification of concession agreements - inclusion of assets released by avoidance/Section 43 proceedings in valuation and plan

Locus to challenge approved resolution plan - members of erstwhile board and guarantors as persons vitally interested in a resolution plan - Appellants have locus to challenge the Adjudicating Authority's order approving the Resolution Plan. - HELD THAT: - The Tribunal examined earlier decisions including Vijay Kumar Jain and the prior consideration of the Appellants' objections during earlier rounds of litigation. Having regard to the Appellants' status as erstwhile promoters/director and guarantors who were permitted to raise objections before the Adjudicating Authority and whose objections were previously noticed, the plea of want of locus was rejected and the appeals were admitted for consideration on merits constrained by the statutory scope of review under Section 30(2). [Paras 38]

Locus objection rejected; appeals proceed to be heard on merits within the limited scope of judicial review.

Treatment of Income Tax claims as operational creditor claims - compliance of Section 30(2)(b) with respect to operational creditors - Treatment of Income Tax dues in the Resolution Plan does not violate Section 30(2) and cannot be re-opened in these appeals. - HELD THAT: - This Tribunal relied on the separately decided appeal filed by the Income Tax Department (C.A.(AT) Ins. No.549 of 2023) where it was held that the treatment of the Income Tax Department's claim in the Resolution Plan was consistent with Section 30(2)(b). In view of that earlier decision and the pendency of any challenge by the Successful Resolution Applicant in the Supreme Court, the Appellants may not re-agitate the issue in these appeals. [Paras 43]

No violation of Section 30(2) in respect of Income Tax dues; issue not reopened in these appeals.

Treatment of statutory authority claims in a resolution plan - requirement of consent for modification of concession agreement - whether YEIDA is a secured creditor - Issues concerning YEIDA's claims and status are not decided here and are to be examined in YEIDA's separate appeal (Company Appeal (AT) (Ins.) No.493 of 2023). - HELD THAT: - The Tribunal noted that YEIDA has filed its own appeal raising all grounds against the impugned order and that a settlement proposal between the Successful Resolution Applicant and YEIDA is under active consideration. Given YEIDA's distinct challenge and the public-law elements concerning concession agreements and required approvals, the Tribunal held that those matters are better and appropriately addressed in YEIDA's appeal rather than in the present appeals by the erstwhile promoter/director. [Paras 47, 49]

Claims and status of YEIDA remitted for determination in YEIDA's appeal; not decided in these appeals.

Extinguishment of subrogation rights of guarantors by approved resolution plan - effect of Section 31(1) on guarantors' rights - The Resolution Plan's clause extinguishing rights of subrogation is valid; guarantors do not retain subrogation rights post-approval. - HELD THAT: - The Tribunal examined Clause 34.50 of the Resolution Plan and precedents (including Lalit Kumar Jain, Essar Steel and V. Ramakrishnan) which establish that an approved resolution plan binds guarantors and may extinguish subrogation rights insofar as the plan expressly provides. The Court observed that the Appellants had not paid creditors so as to acquire subrogation under Section 140, and that the statutory scheme and authoritative decisions support the view that approval of a plan may lawfully curtail subrogation rights where the plan so provides. [Paras 58]

Right of subrogation extinguished as per the approved resolution plan; challenge on this ground fails.

Grant of reliefs and concessions by Adjudicating Authority for implementation of a resolution plan - limits of Adjudicating Authority's jurisdiction in issuing directions to implement a plan - Directions granting certain reliefs and concessions to facilitate implementation of the plan were within jurisdiction and do not vitiate plan approval. - HELD THAT: - The Tribunal reviewed the specific directions granted (including to SEBI/stock exchanges, RERA authorities, local administrations, ROC/MCA) and noted Clause 12 of the Resolution Plan where the Successful Resolution Applicant undertakes to implement the plan whether or not reliefs are granted. The directions were framed 'as applicable under prevailing laws' and aimed at expediting implementation; consequently they did not amount to impermissible usurpation of statutory authority nor render the plan invalid. [Paras 73]

Reliefs and concessions granted do not violate law and do not render the Resolution Plan invalid.

Inclusion of assets released by avoidance proceedings in resolution plan valuation - effect of Section 43/avoidance order on asset pool - The Resolution Plan did take into account the 758 acres of land released from encumbrances and the Appellant's challenge on this ground is rejected. - HELD THAT: - Respondents pleaded and explained, including tabular details, that the land released by avoidance orders had been factored into the Suraksha plan. The Tribunal observed the parties were aware of the Supreme Court's avoidance judgment and that the Appellant's rejoinder did not controvert the specific pleading that the land was included. On this basis the Tribunal found no merit in the contention that the 758 acres were ignored. [Paras 77]

758 acres released by avoidance proceedings were considered in the Resolution Plan; challenge on this ground dismissed.

Entitlement and remedies of intervening homebuyers in appeals - limits on reliefs available to intervenors - Intervening homebuyers were permitted to intervene but are not entitled to independent reliefs in these appeals; specific IAs were disposed as recorded. - HELD THAT: - The Tribunal allowed intervention by certain homebuyers to press concerns but reiterated that intervenors cannot claim standalone reliefs beyond supporting or opposing the main parties. Individual IAs were disposed: one IA granted liberty to approach respondent for refund, others rejected for lack of claim in CIRP or otherwise; overall interventions do not warrant setting aside the impugned order. [Paras 82]

Interventions permitted; IAs disposed as recorded and no substantive relief granted to intervenors in these appeals.

Final Conclusion: Both appeals are dismissed; the Adjudicating Authority's approval of the Suraksha Realty Resolution Plan is upheld subject to pending issues concerning YEIDA being adjudicated in YEIDA's separate appeal; parties to bear their own costs.

Quantified as written communication - tax dues under enquiry, investigation or audit - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for cases under investigation/enquiry/audit - department acceptance / non-dispute of taxpayer's written quantification - requirement of opportunity of hearing before summary rejection - Scheme's object to offload legacy disputes

Quantified as written communication - tax dues under enquiry, investigation or audit - department acceptance / non-dispute of taxpayer's written quantification - Whether the petitioner's tax dues for April 2014 to June 2017 were 'quantified' as on 30.06.2019 for purposes of eligibility under the Scheme. - HELD THAT: - The Court applied the statutory definition of 'quantified' as a written communication of the amount of duty payable and the CBIC explanations that such written communication may include a letter intimating duty demand, an admission by the taxpayer, or audit report. The petitioner had furnished a revised computation sheet on 15.03.2019 which the department used as the basis for subsequent action including a recovery notice under Section 87 and later a show cause notice. The Court held that where the department does not dispute the amount contained in a written communication and proceeds on that basis, the dues stand 'quantified' within the meaning of the Scheme even though the enquiry/investigation was pending. A unilateral taxpayer communication that is contested by the department would not suffice, but that is not the present case because the department relied on and did not repudiate the computations submitted by the petitioner. [Paras 19, 20, 21, 29]

The tax dues for April 2014 to June 2017 were quantified on or before 30.06.2019 and the petitioner was eligible to file under the Scheme in the category of enquiry/investigation/audit.

Requirement of opportunity of hearing before summary rejection - Scheme's object to offload legacy disputes - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for cases under investigation/enquiry/audit - Whether the summary rejection of the petitioner's SVLDRS-1 declaration without affording an opportunity of hearing was valid. - HELD THAT: - Having found eligibility, the Court addressed procedural fairness. It relied on the Scheme's limited scope for discretion, CBIC guidance and established precedents that summary rejection without hearing would violate principles of natural justice and frustrate the Scheme's object of resolving legacy disputes. The Court held that minor or non-material discrepancies in quantum cannot justify outright rejection; such differences are to be resolved under the Scheme's corrigible procedures (e.g., Sections 127(2)/(3)). Consequently the respondents must reconsider the declaration, afford the petitioner an opportunity of hearing and pass a speaking order communicating the decision. [Paras 31, 32, 33, 36]

The summary rejection without hearing was impermissible; the respondents are directed to consider the declaration as valid in the investigation/enquiry/audit category, afford a hearing and pass a speaking order.

Final Conclusion: The petition is allowed: the Court held that the petitioner's tax dues for April, 2014 to June, 2017 were 'quantified' as on 30.06.2019 and the declaration under the Sabka Vishwas Scheme must be reconsidered; the respondents shall grant an opportunity of hearing and thereafter pass a speaking order giving consequential relief under the Scheme.

Remand for fresh consideration - distinctness of reliefs between writ petition and civil suits - quashing of recovery certificate - continuation of interim protection

Distinctness of reliefs between writ petition and civil suits - remand for fresh consideration - Whether the High Court erred in dismissing the writ petition without considering the distinct prayers made therein and whether the writ petition must be remanded for adjudication on merits. - HELD THAT: - The Supreme Court examined the prayers made in the writ petition and found them to be distinct from the reliefs sought in the civil suits filed by the appellant, noting that two of the suits had been withdrawn. Because the High Court had dismissed the writ petition without adjudicating those distinct prayers on their merits, the impugned order could not stand. The Court set aside the impugned order and remanded the matter to the High Court with a direction to consider the writ petition on its own merits and dispose of it expeditiously. The Court also directed that the parties represented by counsel appear before the High Court on the specified date and bring the remand to the notice of the concerned roster bench to facilitate prompt disposal. [Paras 8, 11]

Impugned order set aside and matter remanded to the High Court for consideration of the writ petition on merits; parties directed to appear before the High Court on 11.03.2024.

Continuation of interim protection - quashing of recovery certificate - Whether the interim protection previously granted by this Court should be continued pending disposal of the writ petition. - HELD THAT: - The Court noted that on 05.08.2019 an interim order had been granted restraining coercive steps for further recovery of advertisement tax, and that a substantial sum had already been realized from the appellant. Balancing the interests and in view of the remand for fresh consideration, the Court found it would be in the interest of justice to continue the interim protection until the writ petition is finally disposed of by the High Court. The Court rejected the respondents' contention that continuation would cause procrastination by directing prompt appearance and expeditious disposal before the High Court. [Paras 9, 10, 11]

Interim order dated 05.08.2019 is continued until disposal of the writ petition.

Final Conclusion: The Supreme Court allowed leave, set aside the High Court's order dated 22.07.2019, remanded the writ petition to the High Court for adjudication on its merits, continued the interim protection granted on 05.08.2019 until disposal of the writ petition, directed the parties to appear before the High Court on 11.03.2024, and disposed of the appeal with no costs.

Review jurisdiction - error apparent on the face of the record - finality of litigation - extension of time for filing returns and payment of tax - turnover tax reduced to 5% for parcel sales during Covid lockdown

Review jurisdiction - error apparent on the face of the record - finality of litigation - Whether the review petitions disclose any error apparent on the face of the record warranting review of the Judgment dated 30.11.2023. - HELD THAT: - The Court reiterated that review jurisdiction is narrow and confined to cases where an error apparent on the face of the record is shown. The Court recorded that it had considered the submissions and documents before rendering the earlier judgment and that review does not permit a rehearing or an attempt to re-agitate matters not part of the pleadings. The contention by the petitioners about the cabinet decision and Annexures does not establish an error apparent on the face of the record sufficient to reopen the concluded judgment. [Paras 6]

No error apparent on the face of the record; review petitions dismissed.

Turnover tax reduced to 5% for parcel sales during Covid lockdown - extension of time for filing returns and payment of tax - Whether FL3 licensees who filed returns on or before 31.03.2022 and remitted turnover tax on or before 30.04.2022 for the specified Covid-lockdown periods are liable to pay interest for delayed filing/payment or any tax beyond the reduced rate. - HELD THAT: - The Court had earlier held that for returns filed on or before 31.03.2022 and turnover tax cleared on or before 30.04.2022, FL3 licensees for the periods specified would not be liable to pay interest for delayed filing/payment and that the turnover tax applicable on parcel sales authorised during the Covid lockdown period was 5% as implemented pursuant to the cabinet decision and subsequent notification. The Court noted that respondents had remitted tax within the extended time and that the earlier judgment had considered the documents and submissions relevant to this relief. [Paras 3, 5]

Those FL3 licensees who complied with the extended timelines are not liable to interest; the reduced turnover tax rate of 5% applies for the stated Covid-lockdown periods.

Final Conclusion: The review petitions are dismissed; the earlier judgment dated 30.11.2023 is affirmed insofar as it applied the reduced 5% turnover tax and denied interest for FL3 licensees who filed returns and remitted tax within the extended timelines for the specified Covid-lockdown periods.