TaxTMI Updates e-Newsletter
Mar 07,2022

Fresh hearing and opportunity to produce evidence - administrative adjudication on service tax demand - quashing/superseding of demand-cum-show-cause notice by reasoned order - judicial restraint under Article 226 - interim protection from coercive action

Fresh hearing and opportunity to produce evidence - administrative adjudication on service tax demand - quashing/superseding of demand-cum-show-cause notice by reasoned order - Petitioner to be afforded a fresh hearing before the Joint Commissioner and permitted to produce relevant materials; the authority to pass a reasoned order which shall supersede the impugned demand-cum-show-cause notice. - HELD THAT: - The High Court declined to adjudicate the factual controversy regarding payment of service tax under Article 226 and observed that it would be inappropriate to entertain detailed factual inquiry when the department itself had not given the petitioner an opportunity to produce materials or cooperate in the earlier proceedings. In the exercise of supervisory jurisdiction the court directed that the petitioner be given a fresh hearing before the Joint Commissioner, Central Goods and Service Tax, Dibrugarh, and be allowed to produce all relevant materials and raise any issues the petitioner may wish to raise. Thereafter the Joint Commissioner is to pass a reasoned order which will supersede the demand-cum-show-cause notice dated 29.09.2020. [Paras 5, 6]

Direction issued to the Joint Commissioner to grant a fresh hearing on the specified date, consider submissions and documents, and pass a reasoned order superseding the impugned demand-cum-show-cause notice.

Interim protection from coercive action - judicial restraint under Article 226 - No coercive action to be taken against the petitioner until the fresh hearing is conducted and a reasoned order is passed. - HELD THAT: - While remitting the matter for fresh consideration, the court granted interim protection to prevent enforcement of the demand-cum-show-cause notice until the departmental authority completes the directed hearing and issues a reasoned order. This preserves the petitioner's position pending the administrative adjudication ordered by the court. [Paras 7]

Prohibition of coercive measures against the petitioner until completion of the directed hearing and issuance of a reasoned order.

Final Conclusion: Writ petition allowed; the Joint Commissioner, Central Goods and Service Tax, Dibrugarh, to hear the petitioner afresh on 28.03.2022 at 10:30 AM, permit production of relevant materials and submissions, and pass a reasoned order which shall supersede the demand-cum-show-cause notice dated 29.09.2020; meanwhile no coercive action to be taken against the petitioner.

Violation of principles of natural justice - cancellation of registration under GST - rejection of application for revocation as non-speaking order - requirement to disclose computation of shortfall and issue show cause notice - restoration of registration with liberty to issue show cause and pass speaking order

Violation of principles of natural justice - cancellation of registration under GST - Validity of the cancellation of the appellant's registration certificate dated 08.02.2021 by the central authorities. - HELD THAT: - The cancellation order dated 08.02.2021 refers to a show cause notice dated 06.06.2018 issued by the state authorities but contains no reference to the show cause notice dated 02.12.2019 relied upon by the central authorities, and the latter notice was not shown to have been uploaded or communicated to the appellant. In these circumstances the central authorities proceeded without affording effective notice and opportunity to the appellant. The cancellation is therefore in breach of the principles of natural justice and unsustainable.

The cancellation dated 08.02.2021 by the central authorities is set aside as violative of natural justice.

Rejection of application for revocation as non-speaking order - requirement to disclose computation of shortfall and issue show cause notice - restoration of registration with liberty to issue show cause and pass speaking order - Validity of the order dated 06.10.2021 rejecting the appellant's application for revocation of cancellation passed by the state/central authorities. - HELD THAT: - The appellant filed the returns and paid tax, and submitted computation of late fee and interest; the order rejecting revocation dated 06.10.2021 does not state why the appellant's reply could not be considered nor identify any specific deficiency in the appellant's computation. Where the authorities contend a shortfall in late fee or interest, they must disclose the department's computation and issue a show cause calling upon the assessee to respond. The impugned rejection is devoid of reasons, arbitrary and unreasonable; the Court directed that the authorities may, if they contend any shortfall, issue show cause, allow the appellant to reply and thereafter pass a speaking order in accordance with law.

The order dated 06.10.2021 rejecting the revocation is set aside; the authorities are to reconsider with opportunity to the appellant, and to pass a speaking order.

Final Conclusion: The impugned orders of cancellation and the rejection of the revocation application are set aside; the appellant's certificate of registration under the State and Central GST Acts is to be restored within one week, subject to the authorities' liberty to issue show cause notices if any shortfall is alleged and to consider the appellant's replies before passing a speaking order.

Provisional attachment under section 83 of the CGST Act - formation of opinion by the Commissioner - exercise of power with circumspection - post-attachment objection and right to be heard under Rule 159(5) - duty to pass a reasoned order on objections - administrative circular as guidance to field formations

Provisional attachment under section 83 of the CGST Act - administrative circular as guidance to field formations - exercise of power with circumspection - Validity and effect of the circular dated 23rd February, 2021 vis-a -vis exercise of provisional attachment powers - HELD THAT: - The court held that the circular, which prescribes safeguards and requires the Commissioner to record on file the reasons forming the opinion for provisional attachment, does not impinge on the rights of the petitioner and is not ultra vires. The circular emphasises that the power of provisional attachment is extraordinary and must not be exercised routinely; the Commissioner must exercise due diligence by considering the nature of the offence, amount of revenue involved, business nature and other relevant facts and record the basis of the opinion on file. These safeguards supplement and reflect the statutory requirements and the principles laid down by the Supreme Court in Radha Krishan Industries; they do not negate the statutory scheme under section 83 read with Rule 159. [Paras 20, 21, 22]

The circular dated 23rd February, 2021 is not ultra vires and its safeguards do not adversely affect the petitioner's rights; the Commissioner may record reasons on file but must exercise the power with care and in accordance with law.

Formation of opinion by the Commissioner - post-attachment objection and right to be heard under Rule 159(5) - duty to pass a reasoned order on objections - Whether the person whose property is provisionally attached is entitled to be furnished the prima facie opinion/reasons formed by the Commissioner so as to effectively exercise the objection remedy under Rule 159 - HELD THAT: - The court determined that the objection remedy under Rule 159(5) can be effectively exercised only if the taxable person knows the prima facie opinion formed by the Commissioner at the stage of attachment. Absent communication of that opinion, the taxpayer cannot meaningfully challenge the basis for attachment. The court relied on the scheme of section 83 and Rule 159 and on the safeguards articulated in Radha Krishan Industries to hold that the petitioner is entitled to receive a certified copy of the reasons/opinion recorded by the Commissioner before filing objections. The court therefore directed the respondent to furnish the certified copy of the opinion, to permit the petitioner to file objections within the stipulated short period, to afford a hearing, and to decide the objection by a reasoned order (either releasing the attachment by FORM GST DRC-23 if satisfied or rejecting the objection), within the timelines fixed by the court. [Paras 27, 31]

The petitioner is entitled to a certified copy of the prima facie opinion/reasons formed by the Commissioner before lodging objections under Rule 159(5); the Commissioner must afford a hearing and pass a reasoned order on the objection within the timelines directed.

Remand for fresh consideration of objections - post-attachment procedural safeguards - Procedure to be followed after furnishing reasons to the petitioner - HELD THAT: - The court directed a specific course: respondent to furnish certified copy of the opinion within one week; petitioner to file objections within one week of receipt; respondent to grant an opportunity of hearing and decide the objection within two weeks of filing the objection; and to communicate the decision within one week of passing it. If satisfied that the bank accounts are no longer liable for attachment, the respondent shall release them by issuing FORM GST DRC-23; if not, the objection may be rejected. The court thereby remitted the factual/operative decision-making on the objections to the Commissioner for fresh consideration in accordance with law and the timelines set out. [Paras 31]

Matter remitted to the Commissioner to consider the objections afresh and pass a reasoned order in accordance with Rule 159 and the directions of the court within the specified timeframe.

Final Conclusion: Writ petition dismissed subject to directions: respondent to furnish certified copy of the Commissioner's prima facie opinion; petitioner may file objections and be afforded a hearing; Commissioner to decide objections by a reasoned order within the court-prescribed timelines and communicate the same; if attachment is found unwarranted, respondent to release the property by FORM GST DRC-23.

Writ of Mandamus - Article 226 of the Constitution of India - Time bound direction to executive to complete departmental inquiry - Concurrent departmental inquiry and criminal investigation - No expression of opinion on merits

Writ of Mandamus - Time bound direction to executive to complete departmental inquiry - Concurrent departmental inquiry and criminal investigation - No expression of opinion on merits - Direction to the Commissioner, CGST, Vadodara to consider the complaint dated 31.08.2020 and complete the inquiry within a period of three months from the date of the order. - HELD THAT: - The petitioner filed a writ under Article 226 seeking an order directing the respondent authorities to conclude the inquiry into the complaint dated 31.08.2020 and to furnish the inquiry report. The respondent informed the Court that a criminal investigation under the NDPS Act is pending and a departmental inquiry has been initiated. On receiving an assurance from the learned A.G.P. that the inquiry would be completed within three months, the Court directed the Commissioner, CGST, Vadodara to look into the petitioner's complaint and complete the inquiry within that time frame. The Court expressly limited its order to a direction for expeditious inquiry and permitted direct service, clarifying that it had not expressed any opinion on the merits of the underlying allegations or the concurrent criminal proceedings.

The Commissioner, CGST, Vadodara is directed to consider the complaint dated 31.08.2020 and complete the inquiry within three months; no comment is made on the merits and direct service is permitted.

Final Conclusion: Writ petition disposed by issuing a time bound direction to the Commissioner, CGST, Vadodara to consider the complaint dated 31.08.2020 and complete the departmental inquiry within three months; the Court declined to express any view on the merits of the matter.

Liability to pay GST on temporary lease/auction of stall - exemption for charitable activities under Notification No.12/2017 - binding effect of tender conditions upon bidder - remedy under Section 54 for refund of GST - adjudication under the respective GST enactments - maintainability of writ petition challenging tender condition

Maintainability of writ petition challenging tender condition - binding effect of tender conditions upon bidder - The writ petition challenging the tender condition that demanded GST from the successful bidder is not maintainable on merits and must be dismissed, with an alternate statutory remedy. - HELD THAT: - The court observed that the tender conditions expressly required the highest bidder to pay the applicable tax. Having participated in and accepted the tender terms and having paid the bid amount (and GST), the petitioner cannot, in a writ proceeding, challenge the imposition of the tender condition which he accepted. The court relied on the principle that a bidder who participates in a tender is bound by its conditions and cannot later contend that such conditions are invalid. The court further held that determination of whether the respondents were exempt from tax required adjudication under the GST enactments and therefore could not be finally decided in the writ petition. Consequently, the writ petition is dismissed while leaving open the statutory remedy for challenge or refund. [Paras 10, 11, 12]

Writ petition dismissed; petitioner left to pursue statutory remedy for refund or adjudication under the GST enactments.

Exemption for charitable activities under Notification No.12/2017 - adjudication under the respective GST enactments - remedy under Section 54 for refund of GST - Whether the respondents were exempt from GST under Notification No.12/2017 is not to be decided in the writ; the question requires adjudication by the proper authorities and, if appropriate, a refund application under Section 54. - HELD THAT: - The court noted that Notification No.12/2017 exempts services by entities registered under Section 12AA of the Income Tax Act by way of charitable activities, but whether the temple's activity of leasing space for temporary commercial use falls within that exemption involves a factual and legal determination that must be made by the GST authorities. The court therefore declined to adjudicate the exemption question in the writ petition and directed that the petitioner may invoke the statutory remedy under Section 54 of the GST enactments for any refund of tax paid, leaving the issue to be decided through the adjudicatory process provided by the GST law. [Paras 10]

Exemption question left for adjudication by GST authorities; petitioner permitted to seek refund under Section 54.

Final Conclusion: Writ petition dismissed; petitioner bound by tender conditions and must pursue adjudication or refund under the GST enactments (including remedy under Section 54) to challenge the levy or obtain refund of GST paid. No costs.

Inherent jurisdiction under Section 482 Cr.P.C. - bail under Section 167 Cr.P.C. - modification of bail conditions - surety requirements - cash security and deposit of property documents as alternative security - personal attendance and identification of sureties

Modification of bail conditions - custodial period and inability to raise funds - cash security and deposit of property documents as alternative security - surety requirements - Whether the conditional bail order requiring a government employee surety should be modified and, if so, on what alternative conditions the petitioner should be released on bail. - HELD THAT: - The Court, exercising its inherent jurisdiction under Section 482 Cr.P.C., considered that the petitioner had been in custody since 07.12.2021 and, because of his incarceration, was unable to secure the government surety and raise the previously directed cash security. Although the allegations against the petitioner were serious and investigation was continuing, the Court found that the strict condition requiring a government employee as surety indirectly defeated the petitioner's defeasible right to be enlarged on bail. Balancing the custodial period, the ongoing investigation, and the need to secure attendance and identity, the Court modified the earlier condition so as to preserve the protective purpose of bail while making it practicable for the petitioner to obtain release. The modification permits the petitioner to deposit an increased cash security and to provide alternative tangible securities and specified categories of sureties in lieu of a government employee surety, subject to safeguards for identification and attendance.

Petition allowed; the bail condition is modified so that the petitioner shall deposit a cash security of Rs. 10,00,000 and execute a bond for Rs. 50,00,000 by depositing documents of property worth Rs. 50,00,000 belonging to himself or his family members or friends, furnish two sureties (one blood surety and one relative surety) for Rs. 5,00,000 each, appear daily at 10.00 a.m. until further orders, and ensure sureties and the petitioner affix photograph and left thumb impression on the bond and produce Aadhar card or bank passbook for identity.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed by modifying the earlier conditional bail order: government employee surety requirement is dispensed with and replaced by enhanced cash deposit, property-document bond, specified blood and relative sureties, daily attendance and identity verification conditions.

Jurisdiction under Section 263 of the Income Tax Act - unaccounted income - assessment erroneous and prejudicial to the interests of revenue - re-appreciation of evidence - appeal under Section 260A of the Income Tax Act

Jurisdiction under Section 263 of the Income Tax Act - assessment erroneous and prejudicial to the interests of revenue - Whether the Commissioner (Exemptions) was justified in invoking jurisdiction under Section 263 by holding the original assessment to be erroneous and prejudicial to the interests of revenue. - HELD THAT: - The Court accepted the ITAT's reasoning that the Commissioner (Exemptions) had not demonstrated that the Assessing Officer failed to make required enquiries or that the assessment was erroneous and prejudicial to revenue. The ITAT found that the Assessing Officer had issued queries, examined the assessee's replies, and considered the books and supporting details at the original assessment. The CIT(E)'s show cause notice was held to contain incorrect factual assertions and, in the absence of a detailed enquiry at the revision stage explaining how the assessment was erroneous and prejudicial, jurisdiction under Section 263 was not attracted. The High Court agreed with the ITAT's conclusion that mere disagreement with the AO's conclusion, without demonstrable failure of inquiry or perversity, did not justify exercise of revisionary jurisdiction under Section 263.

The exercise of jurisdiction under Section 263 was not warranted and the ITAT's quashing of the revision was upheld.

Unaccounted income - re-appreciation of evidence - appeal under Section 260A of the Income Tax Act - Whether the amounts in question (fee receipts, sale proceeds, and interest) constituted unaccounted income and whether the ITAT's factual findings warranted interference on appeal under Section 260A. - HELD THAT: - The Court concurred with the ITAT that the impugned cash deposit formed part of the assessee's disclosed total receipts and had been assessed by the AO; therefore it could not be treated as unaccounted income. The sale consideration and interest were found to have been explained and either disclosed (appearing in Form 26AS) or taken into account in the assessment. The High Court noted the settled principle that interference under Section 260A is permissible only where the order directly and substantially affects rights, is not free from difficulty, calls for discussion of alternative views, or where the factual finding is perverse; re-appreciation of evidence is not a ground for interference. As the ITAT's factual findings were clear and cogent, no interference was warranted.

The ITAT's factual conclusions that the amounts were disclosed/assessed and not unaccounted were upheld and the appeal under Section 260A was dismissed for lack of merit.

Final Conclusion: The High Court upheld the ITAT's order declining to sustain revision under Section 263, affirmed that the impugned receipts and interest were disclosed/assessed and not unaccounted income, and dismissed the appeal under Section 260A as devoid of merit.

Interest under Section 220(2) of the Income Tax Act, 1961 - admission of application under Section 245D(1) - surcharge under Section 113 of the Income Tax Act, 1961 - retrospective operation of statutory amendment - block assessment - remand for recomputation/quantification

Interest under Section 220(2) of the Income Tax Act, 1961 - admission of application under Section 245D(1) - block assessment - Extent of period for which interest under Section 220(2) is chargeable in a block assessment pending admission by the Settlement Commission - HELD THAT: - The Court applied the ratio in Commissioner of Income Tax v. Damani Brothers and the subsequent Bombay High Court decision in Leonie M. Almeida to hold that interest pursuant to normal proceedings (including under Section 220(2)) is leviable only up to the date on which the Settlement Commission admits the petition under Section 245D(1). Thereafter, the special settlement procedure governs and further interest under the normal charging provisions ceases. Applying that principle to the facts, the Court directed that interest be limited to the period from 5th January 1997 (the 36th day after the block assessment order dated 27th November 1996) up to 9th April 1997 when the petition was admitted under Section 245D(1), and ordered recalculation of tax and interest accordingly. [Paras 9, 16]

Interest under Section 220(2) shall be calculated only up to the date the application was admitted under Section 245D(1) (limited here from 5th January 1997 to 9th April 1997) and the assessment is to be reopened for recomputation on that basis.

Surcharge under Section 113 of the Income Tax Act, 1961 - retrospective operation of statutory amendment - block assessment - Whether the proviso to Section 113 (levying surcharge) introduced with effect from 1st June 2002 applies retrospectively to searches conducted prior to that date - HELD THAT: - Relying on the decision in Commissioner of Income Tax (Central)-I v. Vatika Township (P.) Ltd., the Court concluded that Chapter XIVB is a self-contained code for block assessments and that the proviso to Section 113 brought in by the Finance Act, 2002 is not clarificatory or curative in nature and therefore does not operate retrospectively to impose surcharge on searches conducted before 1st June 2002. Since the search in the present case occurred on 23rd November 1995, the levy of surcharge at 15% could not be applied retrospectively and must be excluded from the recomputation. [Paras 11, 13, 16]

Surcharge under Section 113 (as introduced w.e.f. 1st June 2002) cannot be levied retrospectively on a search conducted on 23rd November 1995; surcharge is to be excluded in the fresh computation.

Final Conclusion: Petition allowed; respondent no.3 directed to issue a fresh assessment recalculating tax and interest for the Block Assessment Years 1985-1986 to 1996-1997 excluding the 15% surcharge and limiting interest to the period up to admission under Section 245D(1) (5th January 1997 to 9th April 1997), with payment/refund and interest consequences as ordered.

Power of revision under Section 264 - restrictive effect of Section 80A(5) on claims for chapter VI-A deductions - claim for deduction not made in the return cannot be allowed in revision - doctrine of reading down and severability in constitutional challenges

Power of revision under Section 264 - restrictive effect of Section 80A(5) on claims for chapter VI-A deductions - claim for deduction not made in the return cannot be allowed in revision - Whether the Principal Commissioner in revision under Section 264 could allow a deduction under Section 80IA(4) read with Section 80A(5) when the deduction was not claimed in the original return of income. - HELD THAT: - The Court held that sub section (5) of Section 80A imposes an independent statutory condition that a claim for deduction under the specified Chapter VI A provisions must be made in the return of income, and that this condition is applicable to the assessment authorities including the Commissioner in exercise of revisional powers. The Court accepted the reasoning of the Bombay High Court in EBR Enterprises that, in view of Section 80A(5) (inserted with retrospective effect), the Commissioner cannot grant a deduction in revision where the assessee had failed to claim that deduction in the return. The existence of wide revisional powers under Section 264 does not permit the Commissioner to disregard an express statutory bar contained in Section 80A(5); accordingly the Commissioner was justified in rejecting the revision application which sought to raise the deduction for the first time in revision proceedings.

Revision dismissed: the Commissioner correctly declined to allow the unclaimed Section 80IA(4) deduction in revision by reason of the restriction in Section 80A(5).

Final Conclusion: Writ petition dismissed; the High Court upheld the Principal Commissioner's order dated 19.06.2020 denying the claim of deduction for A.Y. 2015-16 on the ground that Section 80A(5) precludes allowance of a Chapter VI-A deduction not claimed in the return, and the court declined to adjudicate the constitutional challenge to Section 80A(5).

Deduction of lease equalisation charges - Application of accounting standards/ICAI Guidance Note for bifurcation of lease rentals - Computation of real income for taxation - Allowability of professional/non compete fees as revenue expenditure versus capital expenditure

Deduction of lease equalisation charges - Application of accounting standards/ICAI Guidance Note for bifurcation of lease rentals - Computation of real income for taxation - Assessee entitled to claim deduction of lease equalisation charge by bifurcating lease rental as per ICAI Guidance Note. - HELD THAT: - The High Court accepted the position already settled by the Supreme Court in Commissioner of Income Tax v. Virtual Software Systems Ltd., holding that where the Income tax Act is silent on a specific method of accounting, the assessee may apply the method prescribed by the ICAI Guidance Note to bifurcate lease rentals and arrive at the fair and real income chargeable to tax. The Court noted that such bifurcation is consistent with accounting principles and that there is no express bar in the Income tax Act to the application of those accounting standards; consequently, deduction of lease equalisation charges, representing diminution in value of depreciable lease assets, is allowable in addition to depreciation under the Act. [Paras 3]

Substantial question of law No.1 answered in favour of the assessee and against the Revenue.

Allowability of professional/non compete fees as revenue expenditure versus capital expenditure - Characterisation of payments to service provider where services not actually rendered - Payment characterised as 'professional charges' to M/s. PCR Investments held allowable to the assessee for purposes of this appeal. - HELD THAT: - The Revenue conceded that the same contention had been earlier raised in related proceedings and was not entertained by the Co ordinate Bench; the appellants' counsel fairly conceded the point before this Court. In view of that concession and the absence of fresh contention or allowance to revisit the characterisation, the Court answered the second substantial question against the Revenue. [Paras 4, 5]

Substantial question of law No.2 answered against the Revenue; the claim sustained in favour of the assessee for the purposes of this appeal.

Final Conclusion: The Tax Case Appeal is dismissed; both substantial questions of law are answered against the Revenue and in favour of the assessee. No costs.

Reopening of assessment - Section 148A procedure - validity of reassessment notices issued after 01.04.2021 - time limits for issuance of notice under Section 148/149 - delegated legislation exceeding delegated power - CBDT notifications dated 31.03.2021 and 27.04.2021 - presumption of constitutionality of subordinate legislation

Section 148A procedure - validity of reassessment notices issued after 01.04.2021 - reopening of assessment - Notice of reassessment dated 08.09.2021 for assessment year 2017-18 issued without following the procedure under Section 148A is invalid. - HELD THAT: - The Court applied the principle that the scheme of reassessment substituted by the Finance Act, 2021 - including the enquiry and notice procedure embodied in Section 148A - governs any notice issued after 01.04.2021. The substituted provisions alter the scheme and time-limits for reopening and require the mandatory procedural steps in Section 148A before a notice under Section 148 can be issued. Notices issued after 01.04.2021 without adherence to the Section 148A procedure are therefore contrary to the statutory scheme and are invalid. Having regard to the earlier Division Bench ruling in D.B. Civil Writ Petition No. 969/2022 (Sudesh Taneja v. Income Tax Officer and connected matters) and applying its reasoning, the impugned notice dated 08.09.2021 was quashed.

Impugned reassessment notice dated 08.09.2021 quashed as invalid for non-compliance with Section 148A.

CBDT notifications dated 31.03.2021 and 27.04.2021 - delegated legislation exceeding delegated power - presumption of constitutionality of subordinate legislation - The explanatory notifications issued by CBDT purporting to preserve the pre-amendment application of Section 148 for notices issued after 01.04.2021 exceed delegated power and are invalid. - HELD THAT: - The Court accepted the view that notifications issued under the Relaxation Act, 2020 could extend time limits but could not, by way of explanation, alter or preserve the statutory scheme enacted by the Finance Act, 2021. While subordinate legislation enjoys a presumption of constitutionality, it cannot travel beyond the limits of the delegation or purport to change the parent Act's provisions. The CBDT explanations that sought to make the pre-amendment provisions applicable for issuance of notices after 01.04.2021 were held to exceed the delegated authority and declared invalid, and therefore could not sustain reassessment notices issued without following the substituted statutory scheme.

CBDT notifications of 31.03.2021 and 27.04.2021 insofar as they purported to preserve pre-amendment procedure are invalid and cannot validate notices issued after 01.04.2021 without Section 148A compliance.

Final Conclusion: The reassessment notice dated 08.09.2021 for AY 2017-18 is quashed for non-compliance with the post-01.04.2021 reassessment regime; CBDT notifications of 31.03.2021 and 27.04.2021 cannot save such notices as they exceed the delegated power and are invalid.

Requirement to furnish reasons and dispose objections by a speaking order before reassessment under Section 148 - GKN principle - Speaking order - Draft assessment order not substituting for speaking order - Reassessment to proceed from objections stage

GKN principle - Requirement to furnish reasons and dispose objections by a speaking order before reassessment under Section 148 - Assessing Officer failed to follow the GKN procedure in respect of the objections filed on 23.11.2021 and was required to consider and dispose those objections by a speaking order before proceeding with reassessment. - HELD THAT: - The Court applied the GKN Driveshafts principle as articulated in paragraph 5 of that decision, observing that when a notice under Section 148 is issued the proper course is for the noticee to seek reasons and file objections, and the assessing officer must furnish reasons within a reasonable time and dispose of objections by passing a speaking order before proceeding with assessment. After the Single Judge and Division Bench orders, the Department issued a notice under Section 142(1) and the assessee submitted objections dated 23.11.2021. The Court held that those objections had to be considered and disposed of by the Assessing Officer (AO) through a speaking order prior to any further assessment action, and that failure to do so amounted to non-adherence to the GKN procedure. [Paras 5, 7]

Proceedings after the objections dated 23.11.2021 were vitiated for non-compliance with the GKN principle and the AO must consider and dispose the objections by a speaking order before further assessment.

Draft assessment order not substituting for speaking order - Speaking order - The draft assessment order and the show-cause notice dated 16.12.2021 do not qualify as the required speaking order disposing of the assessee's objections. - HELD THAT: - The Revenue's contention that the draft assessment order served as a speaking order was rejected. The Court reasoned that the GKN mechanism operates outside the regular assessment machinery and requires a distinct disposal of objections by a speaking order before issuing a draft assessment. A draft assessment served with a show-cause notice cannot substitute for the deliberative speaking order mandated by GKN. [Paras 6]

The draft assessment order issued with the show-cause notice does not satisfy the requirement of a speaking order disposing of the objections.

Reassessment to proceed from objections stage - Requirement to furnish reasons and dispose objections by a speaking order before reassessment under Section 148 - Proceedings subsequent to the objections dated 23.11.2021 were set aside and the matter was remanded to the Assessing Officer to proceed from the objections stage and complete reassessment after passing a speaking order. - HELD THAT: - In view of the failure to adhere to the GKN procedure, the Court quashed all proceedings taken after the assessee's objections dated 23.11.2021 and directed the AO to proceed from that stage. The AO was instructed to pass a speaking order disposing the objections and thereafter complete the reassessment expeditiously, subject to the AO's business, and in any event within a specified timeframe directed by the Court. [Paras 10]

Proceedings after 23.11.2021 are set aside; the AO shall proceed from the objections stage, pass a speaking order and complete reassessment within the time directed.

Final Conclusion: All proceedings taken after the assessee's objections dated 23.11.2021 are quashed for non-compliance with the GKN principle; the Assessing Officer is directed to consider and dispose of those objections by a speaking order and thereafter complete the reassessment from that stage expeditiously (within the period ordered by the Court).

Comparability - Transactional Net Margin Method (TNMM) - Profit Level Indicator - Operating Profit to Operating Cost (OP/OC) - exclusion of comparables on ground of persistent loss making - exclusion of comparables on ground of disproportionate turnover/size - adjustments for material effects under Rule 10B and Rule 10C

Comparability - exclusion of comparables on ground of persistent loss making - Profit Level Indicator - Operating Profit to Operating Cost (OP/OC) - Inclusion of M/s CG VAK Software & Exports Ltd. (segmental) as a comparable despite earlier exclusion by the TPO on the ground of being a persistent loss making company. - HELD THAT: - The Tribunal examined the segmental results of M/s CG VAK Software & Exports Ltd. for the relevant consecutive years and found that the BPO segment showed profits of 3.81% in FY 2008-09 and 0.29% in FY 2009-10. The TPO had accepted functional comparability of the BPO segment with the assessee but excluded the comparable solely because the company was said to be a persistent loss maker. Given that the segmental results demonstrated profit in two out of three years, the company did not satisfy the criterion of persistent loss making. As the comparability analysis under TNMM relies on the net margin (OP/OC) and functional similarity, an entity that is functionally comparable cannot be excluded merely on an asserted status of persistent losses when segmental profitability contradicts that status. Applying these facts, the Tribunal held that the DRP rightly directed inclusion of CG VAK (segmental) and dismissed the Revenue's challenge to that inclusion. [Paras 10]

The Tribunal dismissed the Revenue's ground challenging inclusion of CG VAK on the basis of persistent loss making and upheld the DRP's direction to include the comparable.

Comparability - exclusion of comparables on ground of disproportionate turnover/size - adjustments for material effects under Rule 10B and Rule 10C - Whether M/s CG VAK Software & Exports Ltd. can be excluded as a comparable solely because its turnover is much lower than the assessee's turnover. - HELD THAT: - The Tribunal admitted the additional ground as a legal issue for adjudication. It noted that under TNMM the principal metric is the net margin realised and that the transfer pricing rules (Rule 10B/10C) contemplate adjustments to eliminate material effects. Mere disparity in turnover or size, without demonstration that such disparity causes differences in functions, assets and risks leading to materially different results, does not justify excluding a functionally comparable entity. Relying on precedent (as cited in the order), the Tribunal held that a functionally comparable company cannot be rejected solely on the basis of lower turnover unless it is shown that functions, assets and risks are not comparable. On this basis the additional ground seeking exclusion for low turnover was rejected. [Paras 13, 14]

The Tribunal rejected the Revenue's contention that CG VAK should be excluded on account of low turnover and held that turnover disparity alone is not a ground for exclusion absent demonstration of different functions, assets or risks.

Final Conclusion: The appeal by the Revenue is dismissed: the DRP's directions to include M/s CG VAK Software & Exports Ltd. (segmental) as a comparable for benchmarking the assessee's international transactions under TNMM are upheld; additional objections based on turnover/size and on persistent loss making are rejected. The cross-objection by the assessee is rendered infructuous and dismissed.

Addition on account of suppressed receipts/'on-money' - comparison of sale price per square foot of different properties - requirement of evidentiary basis before making additions - relevance of time gap and locational differences in property transactions - inapplicability of precedents based on related party transactions to arm's length sales

Addition on account of suppressed receipts/'on-money' - comparison of sale price per square foot of different properties - requirement of evidentiary basis before making additions - relevance of time gap and locational differences in property transactions - inapplicability of precedents based on related party transactions to arm's length sales - Validity of the addition of Rs. 3,59,855/- as alleged 'on money' by comparing sale rates of two different shops sold at different times. - HELD THAT: - The Tribunal examined the facts that two shops of different sizes and different locations within the same shopping complex were sold nearly nine months apart and at different per square foot rates. The Assessing Officer computed an alleged concealed amount by applying the higher rate of one sale to the area of the other sale without making any independent enquiries from the buyers, verifying stamp duty valuation, or producing other incriminating evidence. The Tribunal noted that positional advantage of a shop within a market complex and timing of sale are relevant and can explain differences in sale price. Reliance on a co ordinate Bench decision concerning sales to related parties was held misplaced because the present transactions were with unrelated parties. In the absence of any evidentiary foundation or material irregularity in the books of account despite substantial declared sales and profit, the comparison of rates alone and the resultant addition were held to be conjectural and unsustainable. [Paras 10, 11]

The addition of Rs. 3,59,855/- as suppressed receipts/on money is deleted and the assessee's appeal is allowed.

Final Conclusion: The Tribunal deleted the addition made by the Assessing Officer which was founded solely on a superficial comparison of per square foot rates of two dissimilar shop transactions carried out at different times, holding that such a comparison without independent evidentiary support or enquiry was conjectural; reliance on a decision involving related party sales was inapplicable, and the appeal is allowed.

Charitable trust - objects of general public utility - Proviso to section 2(15) of the Income-tax Act, 1961 - mutual concern / principle of mutuality - incidental activities to main object - income from playing cards excluded from exemption

Charitable trust - objects of general public utility - Assessee is a charitable trust within the meaning of section 2(15) of the Income-tax Act, 1961. - HELD THAT: - On examination of the trust deed, its aims and objects - providing facilities for indoor and outdoor games, swimming pool, recreation activities, training camps and utilization of income solely for those objects - and the fact of registration with the Charity Commissioner and under section 12A, the Tribunal applied the jurisdictional High Court precedent in Chembur Gymkhana. The High Court's finding that provision of sports facilities to a diverse membership amounts to advancement of a general public utility was followed. On these facts the Tribunal held that the assessee advances an object of public benefit as distinct from a benefit to an individual or narrow group, and therefore qualifies as a charitable trust under section 2(15). [Paras 11]

Assessee held to be a charitable trust within the meaning of section 2(15).

Proviso to section 2(15) of the Income-tax Act, 1961 - incidental activities to main object - mutual concern / principle of mutuality - Whether income from bar/restaurant/permit room and other recreational activities defeats exemption under the Proviso to section 2(15). - HELD THAT: - The assessing officer applied the Proviso to section 2(15) and treated the trust as a mutual concern on the basis that it carried on banquet hiring, restaurants and permit room activities. The Tribunal examined authoritative precedent, notably the Special Bench decision in Breach Candy Swimming Bath Trust v. ITO, which treated income from swimming pool, sports activities, bar and restaurants as activities carrying out the object of general public utility (except income from playing cards at stake). Following that ratio and the material facts showing that such services are incidental to the assessee's main charitable objects, the Tribunal held that provision of bar and restaurant facilities (and similar recreational activities) are incidental to and in furtherance of the charitable objects and therefore are not caught by the proviso to section 2(15). [Paras 12]

Income from bar/restaurant and other recreational activities (except specified excluded activity) treated as incidental to main charitable object and not hit by the Proviso to section 2(15); trust not to be treated as a mutual concern on that basis.

Income from playing cards excluded from exemption - Proviso to section 2(15) of the Income-tax Act, 1961 - Whether income from providing facilities for playing cards at stake is eligible for exemption under section 11. - HELD THAT: - The Tribunal relied on the Special Bench's explicit conclusion that income derived from providing facilities for playing cards at stake is distinguishable and not to be treated as income from activities carrying out the object of general public utility. While other activities (swimming pool, sports, bar, restaurants) were held incidental and eligible, the specific income from playing cards at stake was identified as not qualifying for exemption under section 11 by reason of the proviso to section 2(15). The Tribunal therefore preserved the distinction drawn by the Special Bench and excluded playing-cards-at-stake income from exemption. [Paras 10, 12]

Income from providing facilities for playing cards at stake is not eligible for exemption under section 11; other identified activities are incidental and eligible.

Final Conclusion: Appeals allowed: the Tribunal held the assessee to be a charitable trust and, following the Special Bench and jurisdictional precedent, directed that income from swimming-pool, sports, bar and restaurant facilities (being incidental to main objects) be treated as eligible for exemption under section 11, while income from playing cards at stake remains excluded.

Chargeability of capital gains in the hands of the transferor - ownership of flats in a cooperative housing society - applicability of Section 50C in the hands of actual owners

Chargeability of capital gains in the hands of the transferor - ownership of flats in a cooperative housing society - Capital gain assessed in the hands of the cooperative housing society - HELD THAT: - The Tribunal examined the development agreement executed by the society and the factual matrix showing that the society was formed by flat owners and the flats belonged to individual members. The redevelopment arrangement contemplated grant of redevelopment rights by the individual flat owners and allotment of new flats to those members; the society itself did not hold proprietary title to the flats. Since capital gain is taxable only in the hands of the person who transfers the capital asset, the CIT(A) was correct in deleting the addition made against the society where no transfer by the society was established. The Tribunal further observed that the CIT(A) directed the Assessing Officer to examine chargeability in the hands of the individual members, thereby safeguarding revenue interests.

Addition of capital gain in the hands of the assessee-society deleted and the CIT(A)'s order on this point upheld.

Applicability of Section 50C in the hands of actual owners - Examination of applicability of Section 50C to the individual members - HELD THAT: - The Tribunal noted that determination of the applicability of Section 50C is dependent on whether the individual flat owners are treated as the transferors and on the evidence to be examined in their respective hands. The CIT(A) directed the Assessing Officer either to call details of the flat owners for scrutiny or to refer the matter to the respective Assessing Officers to examine taxability and the applicability of Section 50C in the individual members' hands. The Tribunal found this procedural direction appropriate to enable examination of taxability where the correct persons (members) may be chargeable.

Issue of applicability of Section 50C remitted to the Assessing Officer for examination in the hands of the individual flat owners.

Final Conclusion: The appeal filed by the Assessing Officer is dismissed; the addition of capital gain in the hands of the cooperative housing society is deleted, and the Assessing Officer is directed to examine, in the hands of the individual members, the question of chargeability to capital gains and the applicability of Section 50C.

Exemption under section 54EC - Six months investment period - Financial year limitation on investment for 54EC - Prospective effect of amendment by Finance (No.2) Act, 2014 w.e.f. 1-4-2015 - Interpretation of proviso to section 54EC(1)

Exemption under section 54EC - Six months investment period - Financial year limitation on investment for 54EC - Prospective effect of amendment by Finance (No.2) Act, 2014 w.e.f. 1-4-2015 - Whether the assessee was entitled to claim exemption under section 54EC for investments made in two specified long-term assets (each upto Rs.50 lakhs) arising from sale of two immovable properties, when such investments fell within the six month period but spanned two financial years. - HELD THAT: - The Tribunal examined the plain language of section 54EC(1), the first proviso limiting investment to Rs.50 lakhs in a financial year and the amendment effected by the Finance (No.2) Act, 2014 effective from 1-4-2015 which inserted a second proviso dealing with transfers of one or more original assets. Relying on coordinate decisions of the Delhi Tribunal (ACIT v. Seema Sobti and ACIT v. Akshay Sobti) and the decision of the Madras High Court in CIT v. Coromandel Industries Ltd., the Tribunal held that the original proviso prior to the 2015 amendment does not properly permit denial of exemption where the statutory six month investment period straddles two financial years. The legislative amendment of 1-4-2015 was held to be prospective in effect and not intended to alter the law applicable to earlier assessment years. Consequently, investments made within six months of transfer must be considered for the purpose of s.54EC even if part of such investment falls in the subsequent financial year; the benefit claimed by the assessee could not be denied on the ground that investments were in two financial years. The Assessing Officer's application of the post 2015 proviso to the facts of assessment year 2009-10 was unsustainable. Applying these principles to the facts, the Tribunal allowed the assessee's claim and set aside the disallowance sustained by the Commissioner (Appeals). [Paras 5]

Assessee's appeal allowed; exemption under section 54EC to be allowed as claimed since investments made within six months of transfer cannot be denied merely because they fall in two financial years and the 2015 amendment is prospective.

Final Conclusion: The Tribunal set aside the impugned order and allowed the assessee's appeal, holding that where investments in specified long term assets are made within six months of transfer, the exemption under section 54EC cannot be denied merely because the investments span two financial years; the 2015 amendment to s.54EC is prospective and inapplicable to assessment year 2009-10.

Unexplained expenditure deemed to be income under section 69C - burden of proof on assessee to establish source of expenditure from books and records - non-traceability of alleged suppliers and adverse inference - reopening/consideration on remand and admission of additional evidence under Rule 46A - addition on account of unexplained loans under section 69 - treatment of repayment of earlier loans in subsequent assessment year - unexplained cash credit and creditworthiness of lenders under section 68 - onus on assessing officer to make further inquiry where lender confirmations exist

Unexplained expenditure deemed to be income under section 69C - non-traceability of alleged suppliers and adverse inference - burden of proof on assessee to establish source of expenditure from books and records - reopening/consideration on remand and admission of additional evidence under Rule 46A - Deletion of addition of Rs. 1,03,94,934/- made under section 69C on account of alleged non-existent suppliers. - HELD THAT: - The Commissioner (Appeals) found that the assessee, a registered charitable trust, had recorded the expenditure for construction in its books and had produced supporting material including valuation report, map and copies of cash memos. The assessing officer's reliance on a local inquiry report that suppliers could not be traced did not, by itself, warrant treating the expenditures as unexplained where the source was reflected in books of account. The assessee explained non-traceability and furnished the valuation report during appellate remand proceedings under Rule 46A; the AO's remand report invited consideration on merits. The Tribunal agreed that mere non-traceability absent other adverse materials or doubt about application to charitable purpose did not justify invoking section 69C, and that the AO should have made further inquiry rather than draw an adverse inference solely from non-availability of suppliers. [Paras 5]

Addition under section 69C of Rs. 1,03,94,934/- deleted.

Addition on account of unexplained loans under section 69 - treatment of repayment of earlier loans in subsequent assessment year - reliance on prior appellate and tribunal findings on genuineness of loans - Sustentation or deletion of addition of Rs. 5,04,00,000/- treated as unexplained loan repayment under section 69 for AY 2011-12. - HELD THAT: - The Commissioner (Appeals) examined that the loans were originally received in earlier assessment years (AY 2009-10 and AY 2010-11) and were recorded in the books; repayments were effected in the year under appeal through banking channels. Prior appellate orders and ITAT findings had accepted the genuineness of the loans in the relevant earlier years. In these circumstances the AO erred in invoking section 69 to tax repayments in the year of repayment where the loans had already been admitted as genuine in earlier proceedings. The Tribunal found no reason to disturb the Commissioner (Appeals)'s conclusion. [Paras 5]

Addition of Rs. 5,04,00,000/- on account of loan repayment under section 69 deleted.

Unexplained cash credit and creditworthiness of lenders under section 68 - onus on assessing officer to make further inquiry where lender confirmations exist - evidence of receipt through banking channels and lender confirmations - Deletion of addition of Rs. 21,50,000/- treated as unexplained loan under section 68 for lack of proof of creditworthiness. - HELD THAT: - The assessee produced bank statements showing receipt through banking channels, copies of PANs of lenders and confirmations regarding the loans. The Commissioner (Appeals) held that where lenders have confirmed the transactions and supporting material is on record, it is for the AO to make further inquiries or to take action against the lenders if not satisfied, and the assessee cannot be penalised when it has discharged its onus. The Tribunal found the Commissioner (Appeals)'s factual appreciation and legal reasoning to be free from perversity and upheld the deletion. [Paras 5]

Addition of Rs. 21,50,000/- under section 68 deleted.

Final Conclusion: All deletions made by the Commissioner (Appeals) in respect of additions under sections 69C, 69 and 68 for AY 2011-12 are sustained; the Revenue's appeal is dismissed.

Assessment of income as business income versus income from house property - verification of Memorandum of Association and objects to determine nature of income - admission of documents by appellate authority under Rule 46A of the Income tax Rules - determination of annual letting value for assets shown as stock in trade - remand to assessing officer for limited verification and consequential adjudication - prospective effect of statutory amendment narrowing applicability of annual letting value

Assessment of income as business income versus income from house property - verification of Memorandum of Association and objects to determine nature of income - determination of annual letting value for assets shown as stock in trade - Whether income attributable to unsold residential apartments of Victoria Towers should be treated as business income or as income from house property and whether the matter should be remitted for verification of the Memorandum of Association and objects. - HELD THAT: - The Tribunal accepted the CIT(A)'s approach of applying the Supreme Court decision in Chennai Properties & Investments Ltd. and directing the AO to verify the Memorandum of Association and the main objects to determine whether the activities of the company are in consonance with those objects. The CIT(A) admitted and considered those documents as vital evidence; the Tribunal found no infirmity in directing the AO to verify them. In addition, the Tribunal observed that section 23 provisions for annual letting value would not apply to assets held as stock in trade for the assessment year under consideration and noted that a proviso later inserted (by Finance Act, 2017 w.e.f. 01.04.2018) extending ALV to stock in trade is prospective and does not affect the assessment year 2012 13. Accordingly, the Revenue's challenge to the CIT(A)'s direction and to admission of the Memorandum and objects under Rule 46A was dismissed, and the matter was remitted to the AO for the limited purpose of verification and consequent assessment if established. [Paras 7, 10, 11]

Revenue's appeal is dismissed insofar as it challenges the CIT(A)'s direction to verify the Memorandum of Association and to assess the income of Victoria Towers as business income if verification establishes conformity with main objects; ALV provisions held inapplicable to stock in trade for AY 2012 13 (prospective amendment noted).

Remand to assessing officer for limited verification and consequential adjudication - assessment of income as business income versus income from house property - Whether, having treated rental receipts of Coromandal Plaza as business income, consequential claims for allowance of expenses including depreciation should be adjudicated and by whom. - HELD THAT: - The Tribunal held that once the income of Coromandal Plaza is to be assessed as business income, consequential expenses and depreciation pertaining to operation of the shopping mall become admissible in principle. However, the genuineness and quantum of such expenses are matters for the assessing officer to verify. Therefore the Tribunal set aside the related grounds to the file of the AO for verification and adjudication of the claims, directing that the AO examine the proofs and allow the expenses if substantiated. [Paras 12, 15]

Assessee's appeal on consequential allowance of expenses and depreciation is remitted to the AO for verification and decision; consequential allowances to be considered if substantiated.

Admission of documents by appellate authority under Rule 46A of the Income tax Rules - Miscellaneous/ procedural: whether the cross objection CO No. 36/Chny/2017 filed by the assessee should be permitted to be withdrawn as duplicative. - HELD THAT: - The Tribunal allowed the assessee's prayer to withdraw the cross objection on the ground that the same issue was raised in the assessee's own appeal (ITA No. 697/Chny/2017), treating the proceeding as duplicative and permitting withdrawal. The withdrawal was recorded and the cross objection dismissed as withdrawn. [Paras 3]

Cross objection CO No. 36/Chny/2017 is permitted to be withdrawn and is dismissed as withdrawn.

Final Conclusion: The Revenue's appeal (ITA No. 462/Chny/2017) and the assessee's withdrawn cross objection are dismissed; the assessee's appeal (ITA No. 697/Chny/2017) is admitted (delay condoned) and allowed for statistical purposes in part by upholding the remand/directions: (i) Victoria Towers income to be treated as business income subject to AO's verification of Memorandum of Association and objects (ALV inapplicable for AY 2012 13), and (ii) consequential claims for expenses and depreciation for Coromandal Plaza remitted to the AO for verification and decision.

Application of section 68 regarding unexplained cash credit - burden of proof for genuineness of receipt and role of confirmations - fresh claims in assessment under section 153A treated as return under section 139 - de novo assessment under section 153A and allowability of fresh deductions - allowability of carry forward business loss in proceedings under section 153A

Application of section 68 regarding unexplained cash credit - burden of proof for genuineness of receipt and role of confirmations - Whether the sum treated as unsecured loan from Jayesh K. Sheth could be sustained as unexplained cash credit under section 68. - HELD THAT: - Assessing Officer treated an amount as unsecured loan and added it as unexplained cash credit when no satisfactory explanation or confirmations were on record and notices issued under section 133(6) remained unanswered. The assessee produced its audited balance sheet showing an advance of Rs.30 lakhs from Jayesh K. Sheth described as a flat advance and not as an unsecured loan; the figure added by the AO did not exactly match the balance-sheet entry. The Tribunal recorded absence of independent material establishing that the receipt was a loan, observed that the assessee had not earlier produced confirmation before the AO but had now pointed to the balance-sheet entry characterising the receipt as an advance, and therefore directed the assessee to obtain and file confirmations from Jayesh K. Sheth. The Tribunal directed that on receipt of such confirmation proving the amount was an advance for a flat (and thereby establishing genuineness of the receipt), the Assessing Officer shall delete the addition made under section 68. The ground was allowed for statistical purposes.

Addition under section 68 set aside conditionally; assessee to file confirmation from the lender and on satisfaction AO to delete the addition.

Fresh claims in assessment under section 153A treated as return under section 139 - de novo assessment under section 153A and allowability of fresh deductions - allowability of carry forward business loss in proceedings under section 153A - Whether the assessee could set off brought forward business loss and unabsorbed depreciation claimed in the return filed in response to notice under section 153A. - HELD THAT: - The Assessing Officer disallowed set off on the ground that the loss/deduction was not claimed in the original return filed under section 139. The Tribunal examined the legal position and followed the Bombay High Court decision holding that a return furnished in response to notice under section 153A is to be treated as a return under section 139 and that assessment under section 153A is a de novo exercise of computing 'total income' for the relevant years. Accordingly, fresh claims made in the return filed under section 153A are to be examined on merits and cannot be rejected solely because they were not made in the original return. The Tribunal accepted the assessee's submissions and the precedents cited, held that the assessee is entitled to set off the brought forward business loss/unabsorbed depreciation as claimed in the section 153A return, and restored the matter to the Assessing Officer for allowing the set off in accordance with law after affording the assessee an opportunity of being heard.

Claim for set off of brought forward business loss/unabsorbed depreciation in the return filed under section 153A allowed; matter remitted to AO to permit set off as per law after due opportunity.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: the addition treated as unexplained cash credit under section 68 is directed to be deleted upon filing and verification of lender's confirmation that the receipt was a flat advance; the claim for set off of brought forward business loss and unabsorbed depreciation filed in the return under section 153A is accepted and the matter is restored to the Assessing Officer to allow the set off in accordance with law after giving opportunity to the assessee.

Deduction under Section 80JJAA - Requirement of revised return versus revised computation during assessment - Filing of Form 10DA / accountant's report as a directory requirement - Formation by splitting up or reconstruction of an existing business - Exclusion of first 100 employees for computing deduction under Section 80JJAA - 300 days continuous employment requirement for Section 80JJAA - Computation of book profits under Section 115JB - add-back of provisions for unascertained liabilities - Actuarial valuation rendering gratuity and leave encashment as ascertained liabilities - Provision for bonus as an ascertained liability under the Payment of Bonus Act

Deduction under Section 80JJAA - Requirement of revised return versus revised computation during assessment - Assessee's revised claim for deduction under Section 80JJAA made during assessment although original return showed a lesser amount is admissible for consideration by the Assessing Officer. - HELD THAT: - The Tribunal held that where the assessee has made a claim for deduction in the original return (albeit for a wrong amount) and seeks re-computation of that claim during assessment, the claim cannot be denied solely because a formal revised return under section 139(5) was not filed. Reliance was placed on precedent distinguishing a fresh/new claim from a re-computation of an existing claim, and on authoritative decisions (including the jurisdictional position exemplified by WIPRO Ltd. and PCIT v. E-Funds International India Pvt. Ltd.) which take a pragmatic view that the assessing authority must determine taxable income in accordance with law and entertain particulars supplied during assessment. Applying that principle, the Tribunal held the AO must consider the assessee's revised claim of Rs. 7,99,50,456 subject to allowability on merits. [Paras 14]

Assessee's revised computation of deduction under Section 80JJAA filed during assessment to be considered by the AO.

Filing of Form 10DA / accountant's report as a directory requirement - Deduction under Section 80JJAA - Failure to file Form 10DA with the original return does not preclude allowance of deduction under Section 80JJAA if the accountant's report is furnished during the course of assessment. - HELD THAT: - The Tribunal noted that the proviso requiring electronic filing of the accountant's report was inserted only from 01.04.2013 and prior thereto there was no requirement to file the form electronically with the return. Judicial authority establishes that the requirement to furnish the accountant's report is directory; satisfaction of that requirement during assessment proceedings suffices. The assessee filed Form 10DA during assessment (date corrected by assessee) and, applying precedent, the Tribunal held that the Form 10DA filed in the course of assessment meets the statutory requirement and the deduction under Section 80JJAA should not be denied on this ground. [Paras 17]

Form 10DA furnished during assessment satisfies the requirement and the deduction under Section 80JJAA cannot be denied for non-filing with the original return.

Formation by splitting up or reconstruction of an existing business - Deduction under Section 80JJAA - The assessee was not formed by splitting up or reconstruction and that finding, having attained finality in earlier proceedings, applies for the purpose of Section 80JJAA. - HELD THAT: - The Tribunal recorded that an identical contention on splitting up/reconstruction had been considered earlier by a coordinate bench of the Tribunal, affirmed by the Karnataka High Court, and SLP by the revenue dismissed by the Supreme Court. Sections 10B and 80JJAA contain similar prohibitions regarding formation by splitting up or reconstruction. Given the finality of the earlier findings on those facts, the Tribunal held the assessee cannot be treated as formed by splitting up/reconstruction for disallowing Section 80JJAA deduction. [Paras 23]

Finding that the assessee was not formed by splitting up or reconstruction is binding and supports allowance of deduction under Section 80JJAA.

Exclusion of first 100 employees for computing deduction under Section 80JJAA - Where the number of workmen employed during the year exceeds 100, the statutory scheme does not require exclusion of the first 100 employees when computing the deduction under Section 80JJAA. - HELD THAT: - Following the coordinate bench decision in Honeywell Technology Solutions Lab Pvt. Ltd. (Bangalore Tribunal), the Tribunal held that if the assessee satisfies both conditions - that the workmen employed during the year were at least 100 and there is a requisite percentage increase - the benefit attaches to the total eligible new workmen and it is not necessary to discount the first 100 employees. The lower authorities erred in excluding 100 regular workmen from computation where total workmen exceeded 100. [Paras 26]

First 100 employees need not be excluded when computing Section 80JJAA deduction if total workmen exceed 100 and other conditions are met.

300 days continuous employment requirement for Section 80JJAA - An employee who completes 300 continuous days of employment across relevant successive periods qualifies for the Section 80JJAA benefit; it is not restricted to completion of 300 days within a single financial year. - HELD THAT: - The Tribunal applied the binding decision of the jurisdictional High Court in CIT v. Texas Instruments India Pvt. Ltd., which interpreted Section 80JJAA purposively to promote employment. The High Court rejected a restrictive view that 300 days must fall within a particular financial year, holding that continuity of employment for 300 days qualifies the employee and the employer may claim deduction for the prescribed three-year period. The Tribunal therefore accepted the assessee's method of reckoning eligibility where certain employees completed 300 days across consecutive periods. [Paras 29]

Employees who complete 300 continuous days (even if spanning periods) qualify for Section 80JJAA deduction; assessee's computation is acceptable.

Computation of book profits under Section 115JB - add-back of provisions for unascertained liabilities - Actuarial valuation rendering gratuity and leave encashment as ascertained liabilities - Provision for bonus as an ascertained liability under the Payment of Bonus Act - Provisions for gratuity and leave encashment based on actuarial valuation, and provision for bonus under the Payment of Bonus Act, are ascertained liabilities and cannot be added back to book profit under Section 115JB as unascertained/contingent liabilities. - HELD THAT: - Explanation 1 to Section 115JB mandates add-backs for provisions made for meeting liabilities other than ascertained liabilities. The Tribunal observed that actuarial valuation establishes the gratuity and leave encashment amounts as accrued/ascertained liabilities under accepted accounting principles and precedent (including Kirloskar Systems Ltd. and Apex Court authority) and thus they are not contingent. Likewise, where the employer is statutorily liable to pay bonus under the Payment of Bonus Act, the provision is an ascertained liability as held in Echjay Forgings. Consequently, the AO erred in treating these provisions as unascertained and adding them back for computation of book profits under Section 115JB. [Paras 35]

Additions to book profit under Section 115JB on account of actuarial provisions for gratuity/leave encashment and statutory bonus are not warranted; the provisions are allowable and must be excluded from add-back.

Final Conclusion: The Tribunal allowed the appeal: it directed the Assessing Officer to consider the assessee's revised claim for deduction under Section 80JJAA (Form 10DA filed during assessment satisfies the requirement), accepted that the assessee was not formed by splitting up/reconstruction, upheld the method of computing eligible employees (no exclusion of first 100 where total exceeds 100) and the 300 day continuous employment reckoning, and disallowed the AO's add-backs under Section 115JB in respect of actuarial provisions for gratuity/leave encashment and provision for bonus.

Seizure under Section 110 of the Customs Act, 1962 - confiscation for fraudulent availing of diplomatic exemption - forgery of Bill of Entry - conditional duty-free import and liability to repay duty - ignorantia juris non-excusat - frivolous and misconceived writ petition - costs awarded to Delhi State Legal Services Authority

Seizure under Section 110 of the Customs Act, 1962 - forgery of Bill of Entry - confiscation for fraudulent availing of diplomatic exemption - conditional duty-free import and liability to repay duty - ignorantia juris non-excusat - Challenge to the Seizure Memo dated 27.10.2021 and the petitioner's claim for release of the seized vehicle. - HELD THAT: - The petitioner sought release of a Toyota Vellfire seized by Respondent No.1. The petitioner failed to demonstrate any legal capacity to seek release - he was not shown to be the owner, importer or purchaser, and advanced no legal basis for entitlement. The Court rejected the plea of ignorance of liability given the petitioner's commercial experience in dealing with luxury cars, applying the principle ignorantia juris non-excusat. The Seizure Memo records that the vehicle was imported by fraudulently availing diplomatic exemption and that the Bill of Entry and other documents were forged; on that basis the vehicle was detained and seized under Section 110 of the Customs Act, 1962 on a reasonable belief that it was liable to confiscation. Given those allegations and the absence of any justification for release, the Court found no ground to interfere with the Seizure Memo at this stage and treated the writ petition as frivolous. [Paras 6, 7, 9, 10, 11]

Writ petition dismissed; Seizure Memo upheld and petition held frivolous, with costs of Rs. 1,00,000 to be deposited with the Delhi State Legal Services Authority within five weeks.

Final Conclusion: The challenge to the seizure of the vehicle is rejected for want of any entitlement or justification by the petitioner and because the Seizure Memo records forgery and fraudulent mis use of the diplomatic exemption; the writ petition is dismissed as frivolous with costs directed to the Delhi State Legal Services Authority.

Date of import for air consignments determined by date of issuance of airway bill - applicability of DGFT end use notification to Nominated Agencies versus Normal importers - temporal non retroactivity of regulatory notifications vis a vis imports effected prior to notification - pre 18/12/2019 importability of gold by Normal importers under RBI guidelines

Date of import for air consignments determined by date of issuance of airway bill - The date of import of the impugned gold is 17/10/2017. - HELD THAT: - The Tribunal accepted the undisputed chronology that the airway bill was issued on 17/10/2017 and held that for import by air the relevant date is the date the airway bill is issued, being the date the goods left the last airport in the exporting country. Once the airway bill was issued the parties no longer had control over the goods; consequently the importation is treated as having occurred on 17/10/2017. [Paras 6]

Date of import held to be 17/10/2017.

Applicability of DGFT end use notification to Nominated Agencies versus Normal importers - temporal non retroactivity of regulatory notifications vis a vis imports effected prior to notification - Notification No. 34/2017 dated 18/10/2017 is not applicable to the appellant's import which was filed as a Normal importer and which occurred on 17/10/2017. - HELD THAT: - The Tribunal found that the DGFT Notification No. 34/2017 imposes end use conditions when a Nominated Agency imports gold, requiring manufacture and export. The appellant, however, filed the Bill of Entry as a Normal importer in accordance with RBI guidelines and the import date preceded the notification. Therefore the Notification's restrictions do not attach to this import. The Tribunal applied the temporal fact (import date 17/10/2017) together with the distinction between Nominated Agencies and Normal importers to conclude non applicability of the 18/10/2017 Notification to the case at hand. [Paras 6, 7]

Notification No. 34/2017 is not applicable to the appellant's import.

Pre 18/12/2019 importability of gold by Normal importers under RBI guidelines - Prior to Notification dated 18/12/2019, gold was freely importable by Normal importers under RBI guidelines. - HELD THAT: - The Tribunal noted that the 18/12/2019 Notification subsequently restricted imports to Nominated Agencies with end use conditions, which implies that before that date Normal importers could import gold. The Tribunal relied on its earlier decision in M/s. Sri Exports (summarised in the order) to support the view that, before 18/12/2019, articles of gold were freely importable by Normal importers consistent with RBI and DGFT postures at that time. [Paras 6]

Gold was freely importable by Normal importers prior to 18/12/2019.

Final Conclusion: The appeal is allowed: the Tribunal set aside the adjudicating authority's order of confiscation and penalty, holding that the import occurred on 17/10/2017 and that the DGFT Notification dated 18/10/2017 does not apply to the appellant's clearance as a Normal importer; the impugned order is therefore set aside and consequential relief directed.

Penalty under Section 114(i) for attempt to export prohibited goods - Confiscation under Section 113 for attempted export of prohibited goods - Custodian accountability for goods in transit (Board Circular No.57/98-Cus) - Know Your Customer (KYC) obligations of exporters - Prohibition on export of species listed under CITES (Red Sanders) - Doctrine of preponderance of probabilities in quasi judicial adjudication

Penalty under Section 114(i) for attempt to export prohibited goods - Custodian accountability for goods in transit (Board Circular No.57/98-Cus) - Know Your Customer (KYC) obligations of exporters - Whether appellants were liable to penalty under Section 114(i) for aiding or abetting attempted export of prohibited Red Sanders - HELD THAT: - The Tribunal examined the adjudicating authority's findings and the statutory and administrative framework governing responsibility for goods after stuffing and sealing at an ICD. Relying on Board Circular No.57/98 Cus, once goods were examined, stuffed and sealed at the ICD, responsibility and accountability for carriage to the gateway port vests with the custodian. The Tribunal found no material in the adjudication to show that the appellants performed any act or omission which rendered the prohibited Red Sanders liable to confiscation at the time they had custody; the substitution occurred during transit after custody had passed to the ICD/custodian. Even if the appellants were negligent in KYC or in dealings with the absconding conspirator, such omissions related only to the declared onions (which were not prohibited) and therefore could not attract a penalty under Section 114(i), which applies to goods in respect of which a prohibition is in force. The Tribunal therefore concluded that the imposition of penalty under Section 114(i) was not sustainable on the material before it. [Paras 4]

Penalty imposed under Section 114(i) set aside; appellants not liable to penalty under that provision on the material before the Tribunal.

Confiscation under Section 113 for attempted export of prohibited goods - Prohibition on export of species listed under CITES (Red Sanders) - Doctrine of preponderance of probabilities in quasi judicial adjudication - Whether the adjudicating authority's confiscation and related orders in the impugned order were sustainable - HELD THAT: - The Tribunal reviewed the findings of the lower authority that Red Sanders (a CITES listed and prohibited export item) was substituted into the sealed container en route to the port. Noting the absence of positive material establishing that the appellants actively rendered the prohibited goods liable to confiscation at the time they had custody, and having regard to the custodian's accountability for movement from ICD to gateway port under the Board Circular, the Tribunal found the adjudicating authority's conclusion linking the appellants' omissions to confiscation of the prohibited goods unsustainable. The Tribunal also observed that the appellate authority had largely reproduced the adjudicating authority's reasoning without adding independent findings. Applying the standard of preponderance of probabilities appropriate to quasi judicial proceedings, the Tribunal found in favour of the appellants on the facts and law before it. [Paras 4]

Impugned confiscation and ancillary findings set aside; the appeals allowed.

Final Conclusion: The Tribunal set aside the impugned order of the Commissioner (Appeals) and the original adjudication insofar as penalties under Section 114(i) and related confiscation were imposed, allowing the appeals on the ground that responsibility for substitution during transit lay with the custodian and the material did not sustain penalty or confiscation against the appellants.

Scheme of Amalgamation - dispensation of convening and holding meetings of shareholders - dispensation of convening and holding meetings of secured and unsecured creditors - consent affidavits constituting unanimous consent of shareholders and creditors - Tribunal's power to dispense meetings under Section 230(9) of the Companies Act, 2013 - maintainability under Rule 3(2) of the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 - accounting treatment in scheme to conform with statutory audit certification under Section 133

Scheme of Amalgamation - dispensation of convening and holding meetings of shareholders - dispensation of convening and holding meetings of secured and unsecured creditors - consent affidavits constituting unanimous consent of shareholders and creditors - Tribunal's power to dispense meetings under Section 230(9) of the Companies Act, 2013 - Whether meetings of shareholders and of secured and unsecured creditors of the applicant companies for sanctioning the Scheme of Amalgamation could be dispensed with. - HELD THAT: - The Tribunal found that each applicant company had placed on record consent affidavits from all its shareholders constituting 100% in number and value, and that where creditors existed the unsecured creditors had similarly filed consent affidavits. For those companies with no secured creditors, convening a meeting of secured creditors did not arise. The application was held maintainable under Rule 3(2) of the Rules and within the territorial jurisdiction of the Tribunal. The Tribunal applied the settled principle and the express power in Section 230(9) of the Companies Act, 2013 that permits dispensation of calling a meeting of creditors or a class of creditors where creditors constituting at least ninety per cent by value agree and confirm the scheme by affidavit. The Tribunal also noted supporting filings - board resolutions approving the Scheme, audited financial statements for the relevant year, statutory auditors' certificates confirming accounting treatment under Section 133, and a registered valuer's report - as relevant background satisfying requirements for consideration of the application. On these bases, the necessity of convening and holding the meetings of shareholders and, where applicable, of unsecured creditors was dispensed with for each Transferor and the Transferee Company; meetings of secured creditors were unnecessary where no secured creditors existed. [Paras 21, 22]

Meetings of shareholders and of unsecured creditors of all applicant companies are dispensed with; meetings of secured creditors do not arise where no secured creditors exist; CA (CAA) 12 (ND) of 2022 is allowed.

Final Conclusion: The Tribunal allowed the application under Sections 230-232 read with the Rules, dispensed with convening the meetings of shareholders and, where applicable, unsecured creditors of the applicant companies on the basis of unanimous consent affidavits and recorded that meetings of secured creditors did not arise where none existed; CA (CAA) 12 (ND) of 2022 is allowed.

Admission under Section 7 of the Insolvency and Bankruptcy Code - applicability of the Limitation Act to proceedings under the IBC - effect of acknowledgment in writing - continuing default - requirement of record of default - remand for fresh consideration

Admission under Section 7 of the Insolvency and Bankruptcy Code - applicability of the Limitation Act to proceedings under the IBC - continuing default - effect of acknowledgment in writing - The impugned order dismissing the Section 7 petition as time barred could not be sustained. - HELD THAT: - The Tribunal found on the admitted facts that several documents on record - the Corporate Debtor's financial statements showing the loan as "Long Term Borrowing", the Form 26AS indicating TDS in 2016-17, the account ledger confirmation signed by the Corporate Debtor (covering 01.04.2015 to 31.03.2016) and the certificate from the Chartered Accountant evidencing outstanding dues till 31.12.2019 - were not considered by the Adjudicating Authority. These documents, taken together, demonstrated an outstanding liability and constituted material on which the question of limitation and any acknowledgment in writing or continuing default ought to be examined. In view of these omissions, the Tribunal concluded that the finding of the Adjudicating Authority that the claim was time barred was unsustainable. [Paras 8, 9]

Impugned order dated 22.03.2021 dismissing the Section 7 petition as time barred set aside.

Remand for fresh consideration - requirement of record of default - effect of acknowledgment in writing - The matter was remitted to the Adjudicating Authority for fresh consideration after perusal of admitted documents and hearing of parties. - HELD THAT: - Having set aside the impugned order, the Tribunal directed the Adjudicating Authority to reconsider the Section 7 application by perusing the specific documents that record the Corporate Debtor's liability and any acknowledged indebtedness, and to hear the parties on the question of limitation and admissibility of the claim. The remand is for fresh adjudication of the petition, including examination of whether the statutory requirements for admission under Section 7 (such as furnishing the record of default) are met in light of the documents evidencing outstanding debt and any acknowledgments. [Paras 9]

Matter remitted to the NCLT, Ahmedabad Bench, for fresh hearing and decision after perusal of the identified documents; fresh orders to be passed within twelve weeks from receipt of the judgment.

Final Conclusion: The Tribunal set aside the NCLT's order rejecting the Section 7 petition as time barred, observed that material documents evidencing the debt and acknowledgments were not examined, and remitted the matter to the Adjudicating Authority for fresh consideration and hearing, to be completed within twelve weeks.

Filing of Form-D within 30 days from liquidation commencement date - locus standi of a stakeholder in liquidation proceedings - applicability of Regulation 21-A of IBBI (Liquidation Process) Regulations, 2016 - effect of corporate guarantee on status of secured/financial creditor - permissibility of secured creditor realising security under Section 52 of IBC - relevance of pre-existing consortium agreement to specific immovable property

Filing of Form-D within 30 days from liquidation commencement date - Form-D was filed within the prescribed period and therefore the secured creditor's claim was not barred for want of timeous intimation. - HELD THAT: - The liquidation commencement date (LCD) was 18.09.2019. Reckoning the timeline by the model table in Regulation 47 renders the 30th day as 18.10.2019. The e-mail trail shows Form-D was sent to the liquidator on 18.10.2019. Although the Form bears the date 17.10.2019, there is no evidence of fabrication or collusion and no requirement for liquidator's physical endorsement on the form. On these facts the Form-D was accepted as submitted within time and objections based on limitation and antecedent dating were rejected. The Tribunal held that Section 12 of the Limitation Act was not engaged and the challenge to the date was untenable.

Form-D accepted as filed within the 30-day period; objection on time bar and ante-dating rejected.

Locus standi of a stakeholder in liquidation proceedings - The applicant, being an erstwhile managing director and stakeholder who may be affected if the asset becomes part of the liquidation estate, has locus standi to challenge the realisation of the property. - HELD THAT: - Although respondents contended lack of locus, the Tribunal observed that as an ex-director and potential stakeholder who may benefit if the asset is held to be part of the liquidation estate, the applicant had sufficient interest to maintain the application. The point was not pressed heavily by respondents and was answered in favour of the applicant.

Applicant has locus standi to file the application.

Applicability of Regulation 21-A of IBBI (Liquidation Process) Regulations, 2016 - obligation to deposit amounts under Section 53(1)(a) & (b)(i) - Regulation 21-A, as amended on 06.01.2020, was not applicable to Respondent No.1 for the purpose of this application; there was no requirement at the relevant time to pre-deposit the amounts under Section 53(1)(a) & (b)(i) before proceeding to realise security. - HELD THAT: - Prior to the substitution of Regulation 21-A on 06.01.2020 the provision did not prescribe a time limit for complying with Section 53(1)(a) & (b)(i). The Tribunal held that Section 53(1)(b)(i)'s reference to workmen's dues for the 24 months preceding LCD describes the period to which the dues relate, not the time by which amounts must be deposited. In absence of a temporal obligation in the pre-amendment regulation to deposit such amounts before realisation, the amended Regulation 21-A could not be retroactively applied to defeat Respondent No.1's rights as of the date of the application.

Regulation 21-A (as amended) not applicable to Respondent No.1 in the circumstances; no pre-deposit requirement was enforced.

Relevance of pre-existing consortium agreement to specific immovable property - The consortium agreement dated 14.03.2014 was not relevant to the schedule immovable property now in dispute. - HELD THAT: - The consortium related to working capital facilities and, by its terms and evidentiary record, covered current assets by hypothecation rather than immovable property. The schedule property was acquired by the corporate debtor later (2016) and was unencumbered prior to creation of the security interest in favour of Respondent No.1. Hence the consortium did not operate to prevent Respondent No.1 from enforcing the security over that immovable property.

Consortium agreement of 14.03.2014 has no relevance to the schedule property dispute.

Effect of corporate guarantee on status of secured/financial creditor - permissibility of secured creditor realising security under Section 52 of IBC - Respondent No.1, having a security interest and a guarantee-related liability, qualified as a secured/financial creditor entitled to proceed under Section 52; the liquidator's permission to realise the secured asset did not warrant interference on the grounds advanced. - HELD THAT: - The Tribunal distinguished earlier precedents relied upon by the applicant by noting that in the present case the corporate debtor had given guarantee in addition to the creation of an equitable mortgage. The Tribunal relied on subsequent three-judge authority that recognizes a guarantee-based liability as bringing the guarantor within the scope of a financial creditor where the obligation falls within the definition of financial debt. On the facts, Respondent No.1 had submitted evidence of security by deposit of title deeds and of claim in Form-D, and the liquidator had verified charge records. Given these findings and the acceptance of Form-D, the Tribunal found no ground to interfere with the liquidator's grant of permission to realise the schedule property.

Respondent No.1 is entitled to enforce its security and the liquidator's permission to realise the property does not require interference.

Final Conclusion: The application challenging Respondent No.1's possession notice and permission to realise the schedule property is dismissed. I.A. No. 54/2020 is accordingly dismissed.

Financial debt - default - admissibility of Section 7 application - definition of financial creditor - moratorium - appointment of Interim Resolution Professional - abuse or mala fide invocation of insolvency process

Financial debt - default - definition of financial creditor - admissibility of Section 7 application - Whether the financial creditor proved existence of financial debt and default such that the Section 7 application was maintainable and liable to be admitted. - HELD THAT: - The Tribunal found that the financial creditor had placed on record Balance Sheets of the corporate debtor for FY 2012-13 to 2016-17 which reflected the loan advanced and were signed by a director of the corporate debtor. The Form I filed under Section 7 read with the Rules was held complete and the material showed that the applicant came within the definition of "financial creditor", had provided financial facility to the corporate debtor, and that there was default in repayment. The Tribunal noted that the corporate debtor had not availed the opportunity to contest the claim within the stipulated time and had not established absence of debt or default. The Tribunal applied the statutory threshold that a default of Rs. 1 lakh or more makes a Section 7 application maintainable and concluded that the requisite debt and default were proved. [Paras 12, 13, 14, 15, 16]

The Section 7 application was admitted as the financial creditor proved existence of financial debt and default; the application is maintainable.

Abuse or mala fide invocation of insolvency process - inter-se dispute - Whether the application filed by shareholders and a director (IA 3626/ND/2021) establishing inter-se dispute or mala fide invocation warranted rejection of the main petition. - HELD THAT: - The applicants repeatedly raised similar objections which had been considered and rejected earlier; their right to file a reply had been closed and prior attempts at impleadment/intervention were dismissed by this Tribunal and upheld on appeal. The Tribunal observed that allegations of collusion, merged entries in balance sheets, or claimed fabrication were not substantiated on the record and did not demonstrate fraud or malafides sufficient to negate the financial creditor's claim. The Tribunal emphasised that the applicants could not, by successive applications, circumvent the bar on defending the main petition when the opportunity to do so had been closed. [Paras 4, 8, 9, 10]

IA 3626/ND/2021 was dismissed for lack of merit; the contention of mala fide invocation/inter-se dispute did not warrant rejection of the main petition.

Appointment of Interim Resolution Professional - moratorium - Appointment of an Interim Resolution Professional and imposition of moratorium consequent to admission of the Section 7 petition; ancillary directions regarding public announcement and funds for the IRP. - HELD THAT: - Following admission, the Tribunal accepted the nominated Insolvency Professional's consent and absence of disciplinary proceedings and appointed him as Interim Resolution Professional. The Tribunal directed immediate public announcement in accordance with the Regulations and required the financial creditor to deposit the prescribed interim amount to meet IRP expenses within three days. A moratorium was declared under Section 14 and the Tribunal specified the statutory prohibitions flowing from that moratorium, while noting statutory exceptions and obligations of management and others to cooperate with the IRP. [Paras 19, 20, 21, 22, 23]

Mr. Ashish Singh was appointed as Interim Resolution Professional; public announcement, deposit for IRP expenses and imposition of moratorium were directed in accordance with the Code and Regulations.

Final Conclusion: The application by shareholders/director (IA 3626/ND/2021) was dismissed; the Section 7 petition filed by the financial creditor was admitted upon finding of financial debt and default; an Interim Resolution Professional was appointed, directions for public announcement and funding were given, and moratorium under the Code was declared.

Mandatory twin requirements - extraneous considerations in granting relief - mitigating circumstances: advanced age and cooperation during investigation - exercise of discretionary jurisdiction - refusal to interfere despite procedural lapse - pronouncement not to be treated as precedent - question of law left open

Mandatory twin requirements - extraneous considerations in granting relief - Whether the High Court had failed to consider and apply the mandatory twin requirements and had granted relief on extraneous considerations. - HELD THAT: - The Court agreed with the petitioner's grievance that the High Court did not deal with the mandatory twin requirements and had granted indulgence to the respondents on extraneous considerations. This finding records that the High Court's discretion was exercised without attention to the compulsory legal criteria that should govern such relief. The Court, however, did not proceed to set aside the High Court order on the basis that procedural omission alone was identified; instead, it treated that omission as a determinative defect in the High Court's reasoning while addressing the appropriate remedial outcome in light of the case facts.

High Court failed to apply the mandatory twin requirements and granted relief on extraneous considerations; this defect is recognised by the Court.

Mitigating circumstances: advanced age and cooperation during investigation - exercise of discretionary jurisdiction - refusal to interfere despite procedural lapse - question of law left open - pronouncement not to be treated as precedent - Whether the Supreme Court should interfere with the High Court order notwithstanding that procedural requirements were not observed. - HELD THAT: - Notwithstanding the identified failure by the High Court, the Supreme Court declined to interfere with the High Court order in the special facts of the case. The Court noted the respondents are reportedly senior citizens and had cooperated during the investigation, factors which it treated as mitigating and sufficient to justify non-interference in these petitions. The Court expressly left the substantive question of law open for future consideration and cautioned that the impugned order shall not operate as a precedent in other cases. Thus, the Court exercised its discretionary jurisdiction to refuse interference on facts while preserving the legal issue for determination elsewhere.

Special leave petitions disposed of without interference on facts; question of law left open and impugned order not to be treated as precedent.

Final Conclusion: The Supreme Court found that the High Court failed to apply the mandatory twin requirements and granted relief on extraneous considerations, but, in view of the respondents' advanced age and cooperative conduct, declined to disturb the High Court order in these special facts; the legal question is left open and the order is not to be treated as precedent; the special leave petitions are disposed of.

Section 45(1) PMLA twin conditions - triple test for grant of bail - economic offences constitute a class apart - prima facie satisfaction on charge - non-bailable offences under PMLA

Section 45(1) PMLA twin conditions - non-bailable offences under PMLA - Whether the bail application must be tested in the light of the twin conditions contained in Section 45(1) PMLA as amended and the jurisprudence of the Supreme Court. - HELD THAT: - The Court reviewed the history and scope of Section 45(1) PMLA, the declaration in Nikesh Tarachand Shah, the subsequent amendment by the Finance Act, 2018, and recent Supreme Court orders including Parkash Gurbaxani and Dr. V.C. Mohan. Having regard to those authorities and noting that the question of the amendment's implications is sub judice before the Supreme Court, the Court held that the present regular bail application must nonetheless be tested on the touchstone of the twin conditions in Section 45(1) PMLA. The Court therefore proceeded to consider whether the conditions - opportunity to the Public Prosecutor and satisfaction that there are reasonable grounds for believing that the accused is not guilty and is not likely to commit an offence while on bail - were met on the material before it. [Paras 24, 29, 32, 34, 38]

The bail application was required to be examined under the twin conditions of Section 45(1) PMLA.

Triple test for grant of bail - prima facie satisfaction on charge - economic offences constitute a class apart - Whether the applicant satisfies the conventional triple test for grant of bail and, notwithstanding that, whether reasonable grounds exist under Section 45(1)(ii) PMLA to hold that the applicant is not guilty and is not likely to commit an offence while on bail. - HELD THAT: - The Court found on the material that the applicant is a qualified Chartered Accountant with deep societal roots, had joined investigation repeatedly, was not a flight risk (passport seized), and that documentary evidence had largely been seized and witnesses recorded; on these aspects the applicant satisfied the conventional triple test and risks of absconding or tampering were capable of being allayed by conditions. However, having applied the additional PMLA threshold, a prima facie appraisal of the prosecution material (including routing of substantial disbursements through the Escrow Account, transfers to non contracting parties, diversion to entities controlled by the applicant, detection of sums diverted and vendor statements indicating diversion of materials, and the applicant's role as authorised signatory) led the Court to conclude there were no reasonable grounds for believing that the applicant was not guilty or that he was not likely to commit an offence while on bail. The Court balanced the triple test findings against the rigours of Section 45(1) and, on broad probabilities, held that the PMLA threshold was not satisfied. [Paras 43, 44, 45, 46, 47]

Although the applicant satisfied the conventional triple test, the additional Section 45(1) PMLA threshold was not met on the material; accordingly bail was refused.

Final Conclusion: The application for regular bail under Section 439 Cr.P.C. was dismissed: the Court applied the twin conditions of Section 45(1) PMLA and, on a prima facie appraisal of the prosecution material, found no reasonable ground to conclude that the applicant was not guilty or would not be likely to commit an offence while on bail.

Quashing of prosecution under Section 3 and 4 of the Prevention of Money Laundering Act - Liability of a purchaser and requirement of projecting proceeds of crime as untainted property - Prosecution of a bona fide purchaser - Reverse burden under Section 24 of the PMLA - Use of registered documents of unimpeachable character in proceedings under Section 482 Cr.P.C. - Abuse of process of law

Quashing of prosecution under Section 3 and 4 of the Prevention of Money Laundering Act - Liability of a purchaser and requirement of projecting proceeds of crime as untainted property - Prosecution of a bona fide purchaser - Whether the prosecution of the petitioner under Section 3 read with Section 4 of the PMLA in S.C.No.74 of 2017 could be quashed on the ground that he was a bona fide purchaser who did not project the impugned property as untainted. - HELD THAT: - The Court applied the legal test laid down by the Supreme Court in Nikesh Tarachand Shah that conviction under Section 3 requires (i) involvement in activity connected with proceeds of crime (such as acquiring or possessing) and (ii) projecting or claiming the property as untainted. The complaint against the petitioner alleged purchase of the impugned property from the daughter of the alleged offender and asserted knowledge and use of company payments to disguise the transaction. The material relied upon by the prosecution-the registered sale deed-expressly records payments by RTGS to the vendor's mother on specific dates and deduction of TDS, demonstrating payment of consideration to the family members. The Court held that these unimpeachable entries in the registered sale deed negate the allegation that the petitioner knowingly projected the property as untainted or participated in concealing proceeds of crime. On that basis, and because the prosecution has not placed materials showing the petitioner projected the property as untainted, continuation of criminal proceedings against him under Section 3/4 would be an abuse of process. [Paras 12, 13, 14, 16, 17]

Prosecution of the petitioner under Section 3 and 4 of the PMLA in S.C.No.74 of 2017 is an abuse of process and is quashed.

Reverse burden under Section 24 of the PMLA - Use of registered documents of unimpeachable character in proceedings under Section 482 Cr.P.C. - Abuse of process of law - Whether earlier dismissal of co-accused's quash petition and the appellate Tribunal's observations or undertakings by the purchasers precluded the petitioner from seeking quashing of prosecution. - HELD THAT: - The Court refused to treat the dismissal of a co-accused's quash petition as a bar to the petitioner's challenge, noting that the co-accused's factual position differed and that reverse burden under Section 24 is to be considered at trial and cannot ipso facto prevent a quash where no material shows the petitioner had the requisite knowledge. The Court also rejected the submission that the purchasers' undertaking before the Tribunal estopped them from statutory remedies, observing that one cannot contract out of statutory rights and that the purchasers had challenged portions of the Tribunal's order. Further, relying on the principle that courts may examine registered documents of unimpeachable character under Section 482 Cr.P.C., the Court relied upon the sale deed entries to decide the petition at the threshold to prevent abuse of process. [Paras 7, 8, 9, 16, 17]

Earlier orders against co-accused or undertakings given before the Tribunal did not preclude the petitioner from seeking quashment; registered sale deed entries could be relied upon under Section 482 Cr.P.C., and on that basis prosecution was held to be an abuse and quashed.

Final Conclusion: The Criminal Original Petition is allowed; prosecution of the petitioner in S.C.No.74 of 2017 under Section 3 and 4 of the PMLA is quashed as an abuse of process, subject to the petitioner's undertaking to abide by the trial Court's decision on confiscation of the impugned property under the PMLA.

Service tax liability of partners - absence of service recipient / no service to oneself - remuneration or share of profit of a partner is not a taxable service

Service tax liability of partners - absence of service recipient / no service to oneself - remuneration or share of profit of a partner is not a taxable service - Whether amounts received by the appellants from the partnership firm constitute taxable services attracting service tax or are merely a partner's share of profit/remuneration not liable to service tax. - HELD THAT: - The Tribunal found that the service recipient, if any, would only be the partnership firm, and a partner cannot be regarded as having provided a service to the firm of which he is a constituent; therefore there is no separate recipient of service and no service has been rendered. The figures shown in the appellants' income-tax returns as 'sale of services' were held to be a portion of profit earned from the partnership and not consideration for a taxable service. The Tribunal expressly relied on the reasoning in the decision of the Hon'ble High Court in Amrish Rameshchandra Shah as supportive of the view that the activities of the partner in the facts before the Court were not liable to service tax, and also referred to the principle in Commissioner of Income Tax, Madras vs. R. M. Chidambaram Pillai that remuneration received by a partner is not a service but a share in profit. Applying these principles to the material on record, the Tribunal concluded on merits that the appellants were not liable for service tax and that the impugned demands and show-cause proceedings lacked merit. [Paras 6, 7]

Impugned orders demanding service tax set aside; appellants held not liable to pay service tax on the amounts in question.

Final Conclusion: Appeals allowed; the orders demanding service tax from the partners are quashed and set aside, with consequential relief, the Tribunal holding that the amounts received were a partner's share of profit/remuneration and not taxable services.

Management, maintenance and repair services - supply of tangible goods service - reimbursements as disbursements not part of taxable value - composite works contract - works contract service - effective control - penalty and interest not tenable where demand unsustainable on merits

Management, maintenance and repair services - supply of tangible goods service - effective control - Characterisation of contracts for providing Diesel Gensets and associated operations - taxable as management/maintenance service or as supply of tangible goods service. - HELD THAT: - The work orders required the appellant not merely to supply Diesel Gensets but to make complete arrangements for pumping during power failure, which included supplying, loading/unloading, checking batteries, connecting the Gensets to booster pumps on power failure and switching back on restoration. The essence of the contract was to ensure operation of the pumping system during power failure and to manage that arrangement; it was not a contract simply to supply Gensets without transferring possession or effective control. Therefore the transaction cannot be treated as a supply of tangible goods where only transfer without management is involved. The Tribunal held that the appellant had correctly discharged service tax under the head management, maintenance and repair services and set aside the demand framed as supply of tangible goods service. [Paras 15]

Demand insofar as framed as supply of tangible goods service is set aside; the services are management/maintenance and repair services.

Reimbursements as disbursements not part of taxable value - management, maintenance and repair services - Whether reimbursements received for diesel, lubricating oil and similar consumables formed part of the taxable value of the service. - HELD THAT: - The consumables (diesel, mobile oil, battery water, grease etc.) were incurred by the appellant in the course of providing the management/maintenance arrangement and were reimbursed by the Delhi Jal Board. These amounts were held to be reimbursements of expenses incurred and not consideration for an independent supply of goods forming part of the taxable service value. Consequently such reimbursements cannot be included in the gross value of services for the purpose of the demand impugned in the show cause notice. [Paras 15]

Reimbursements for consumables are not consideration and cannot be included in the taxable value; demand on this ground set aside.

Composite works contract - works contract service - Taxability of electric motor winding contracts where the work order allocates 20% to services and 80% to goods - whether service tax can be levied on the full contract value. - HELD THAT: - The electric motor winding jobs were composite contracts involving both supply of materials and rendering of services. The work orders themselves attributed 20% of the contract value to services and 80% to materials; the appellant discharged service tax on the 20% and VAT on the 80%. The Tribunal accepted that the demand to tax the 80% element as service tax cannot be sustained, noting precedent decisions favourable to the appellant and observing that a composite works contract is a separate species and taxable under the head of works contract service as per higher authority; furthermore the definition relied upon for works contract service does not include motor winding so as to justify the Revenue's demand. On these bases the demand on the goods component was set aside. [Paras 16]

Demand of service tax on the 80% goods component of the winding contracts is unsustainable and is set aside.

Penalty and interest not tenable where demand unsustainable on merits - Sustenance of interest and penalties imposed consequent to the confirmed demand. - HELD THAT: - Having decided the substantive demands in favour of the appellant on merits in respect of both categories of services, the Tribunal held that the interest and penalties imposed consequential to the disallowed demand also cannot be sustained and must be set aside. [Paras 17]

Interest and penalties imposed in the impugned order are set aside.

Final Conclusion: The appeal is allowed; the demands confirmed as supply of tangible goods service and on the goods component of motor winding contracts, together with the consequential interest and penalties, are set aside for the period covered by the show cause notice (01.04.2009 to 31.03.2013).

Non-extendability of statutory time-limits under a special law - Condonation of delay and Limitation Act, Section 5 - Finality of prescribed limitation period for filing appeals/references - Binding precedent of Commissioner of Customs and Central Excise v. Hongo India Private Limited

Non-extendability of statutory time-limits under a special law - Condonation of delay and Limitation Act, Section 5 - Binding precedent of Commissioner of Customs and Central Excise v. Hongo India Private Limited - Whether the short delay in filing the appeal before the Commissioner of Central Excise Appeals/CESTAT could be condoned. - HELD THAT: - The High Court held that the question of condoning delay is governed by the scheme of the special statute and is controlled by the decision in Commissioner of Customs and Central Excise v. Hongo India Private Limited, which establishes that where the special law indicates an absolute limitation for initiating appellate or reference proceedings, the courts have no power under Section 5 of the Limitation Act to extend that period. Applying that principle to the facts, the court found the statutory time-limit for filing the appeal could not be enlarged by invoking the Limitation Act and therefore the appellate authorities were correct in treating the appeal as barred by limitation. The court concluded that the precedent is squarely applicable and dispositive of the present controversy. [Paras 4, 5]

Appeal dismissed on the ground that the short delay could not be condoned in view of the binding Supreme Court precedent; the orders treating the appeal as time-barred are upheld.

Final Conclusion: The civil miscellaneous appeal is dismissed; the decision of the appellate authorities treating the appeal as time-barred is upheld in view of the binding Supreme Court precedent, with no order as to costs.

Labelling or relabelling and re-packing from bulk to retail - deemed manufacture under Chapter Note 9 to Chapter 38 - repacking from retail to bulk does not amount to manufacture - requirement of positive evidence to infer processing (sieving) as manufacture - rectification of mistake - consequences for interest and penalty where demand cannot be sustained

Rectification of mistake - restoration and rehearing of appeals - Whether the record showed that the miscellaneous applications for rectification covered both appeals and whether the Tribunal's recall of its final order to restore both appeals for rehearing was factually justified. - HELD THAT: - The Tribunal examined the filings and found that the assessee had in fact filed two miscellaneous applications: E/ROM/30090/2019 (application for rectification covering both Appeal Nos. E/684/2009 and E/827/2009) and E/Misc./30086/2019 (application seeking early hearing of the rectification application, also covering both appeals). The Miscellaneous Order contained inaccuracies in heading and numbering and mislabelled E/Misc./30086/2019 as E/ROM/30086/2019 and showed the applications against separate appeals, but the underlying filings by the assessee covered both appeals. The Tribunal observed that the appellant had not presented correct facts before the High Court. On this basis the Tribunal concluded that recalling the Final Order to restore and rehear both appeals was based on the rectification applications as filed and was thus factually supported. [Paras 5, 6, 7]

The record established that the rectification-related applications were filed by the assessee covering both appeals and the Miscellaneous Order recalling the Final Order to restore both appeals for rehearing was factually justified; the Tribunal corrected the record of earlier misstatement before the High Court.

Labelling or relabelling and re-packing from bulk to retail - deemed manufacture under Chapter Note 9 to Chapter 38 - requirement of positive evidence to infer processing (sieving) as manufacture - repacking from retail to bulk does not amount to manufacture - Whether the assessee's activities (labelling and repacking) amounted to manufacture under Chapter Note 9 to Chapter 38 and whether the demand, interest and penalties based on that finding could be sustained. - HELD THAT: - Chapter Note 9 deems labelling or relabelling and re-packing from bulk to retail (or any other treatment to render the product marketable) as manufacture. The Tribunal analysed the material and found: (a) it was undisputed the assessee sold activated carbon in bags with its own name pre-printed, which constituted labelling; (b) the stock/sales data and invoices showed instances where the assessee aggregated smaller (25 kg) bags into larger (50 kg) bags - i.e., repacking from retail to bulk - which is the converse of packing from bulk to retail and therefore does not satisfy the note; (c) the Revenue's allegation that the assessee sieved the material (to produce grades shown on sale invoices) rested on discrepancies between purchase and sale invoices and isolated instances where suppliers later inserted grade particulars, but there was no direct evidence of sieving or other processing by the assessee (no inspection evidence, equipment or positive proof); (d) in the absence of positive evidence the indirect inference drawn by the Commissioner that the assessee carried out sieving and repacking from bulk to retail was not sustainable. Applying the legal test under Chapter Note 9, the Tribunal held that mere labelling together with repacking from retail to bulk, and invoice discrepancies without positive corroborative evidence of processing, did not bring the activity within the scope of deemed manufacture under the Chapter Note. [Paras 21, 22, 23, 24, 25]

The assessee's activities did not amount to manufacture under Chapter Note 9 to Chapter 38; consequently the demand, and the consequential interest and penalties, could not be sustained and were set aside.

Final Conclusion: The Miscellaneous Order's factual record was corrected to show that the assessee's rectification applications covered both appeals and restoration for rehearing was justified. On merits, the Tribunal held that the activities did not constitute deemed manufacture under Chapter Note 9 to Chapter 38; Excise Appeal No. E/684/2009 (assessee) was allowed, Excise Appeal No. E/827/2009 (Revenue) was rejected, and the demand, interest and penalties were set aside.

Locus standi of a juristic person - denial of input tax credit - interpretation of Clause (ix) of sub section (8) of Section 18 of the Jharkhand Value Added Tax Act, 2005 - retrospective effect of amendment by ordinance and notification - remand for fresh adjudication

Locus standi of a juristic person - denial of input tax credit - High Court's conclusion that the writ petition by Tata Steel Ltd. was not maintainable for lack of locus standi was incorrect. - HELD THAT: - The Supreme Court accepted the concession of learned senior counsel that the High Court's reasoning on locus standi was not justified. Tata Steel Ltd., being a registered juristic person, could maintain the writ petition challenging denial of input tax credit to its unit at Naomundi, notwithstanding that for taxation purposes the Naomundi and Jamshedpur units were treated as separate assessees under the Jharkhand Value Added Tax Act, 2005. The impugned dismissal on the ground of want of locus standi therefore lacked foundation and could not be sustained.

The High Court's conclusion on want of locus standi is set aside and the appellant's maintainability objection is accepted.

Interpretation of Clause (ix) of sub section (8) of Section 18 of the Jharkhand Value Added Tax Act, 2005 - retrospective effect of amendment by ordinance and notification - remand for fresh adjudication - The impugned interpretation of Clause (ix) to sub section (8) of Section 18 given by the High Court is set aside and the matter is remanded for fresh decision in view of a subsequent amendment and retrospective notification. - HELD THAT: - The Supreme Court found the High Court's reasoning in paragraph 7 of the impugned order cryptic and insufficiently addressed the contentions necessary for interpreting Clause (ix) of sub section (8) of Section 18. The Court noted that the Jharkhand Value Added Tax (Amendment) Ordinance, 2011 amended that clause and a notification (No. S.O. 1 dated 7 May 2011) purported to give the amendment retrospective effect from 1 April 2006, which is material because the appeal concerns financial years 2006 07 and 2007 08. Rather than itself undertaking the interpretation, the Supreme Court set aside the High Court's interpretation and remanded the matter to the High Court for fresh consideration, permitting the respondent to file an amended or additional counter affidavit relying on the amended clause and leaving it open to the appellant to challenge the ordinance and the notification. The Court expressly declined to express any view on the interpretation of the clause either before or after amendment or on the validity of the retrospective notification.

Impugned interpretation set aside; matter remanded to the High Court for fresh decision with liberty for parties to rely on or challenge the amendment and notification.

Final Conclusion: The appeal is allowed: the High Court's conclusion on want of locus standi is set aside and the impugned interpretation of Clause (ix) to sub section (8) of Section 18 is set aside and remanded for fresh decision; respondents may file amended/additional pleadings relying on the amended clause and the appellant may challenge the ordinance and notification; no opinion is expressed on the interpretation pre or post amendment or on validity of the retrospective notification; pending applications disposed of.

Quashing and restoration of appeal - Amnesty scheme conditions for withdrawal of appeal - Discretion to restore appeal in view of COVID-19 pandemic - Waiver of pre-deposit for hearing - Direction to decide appeal on merits within fixed time

Quashing and restoration of appeal - Amnesty scheme conditions for withdrawal of appeal - Discretion to restore appeal in view of COVID-19 pandemic - Waiver of pre-deposit for hearing - Direction to decide appeal on merits within fixed time - Validity of the Tribunal order permitting withdrawal of Second Appeal to join the Vera Samadhan Yojna - 2019 and consequent direction to restore the appeal and hear it on merits without insisting on further pre-deposit. - HELD THAT: - The Tribunal had permitted the writ applicant to withdraw Second Appeal No.441 of 2019 so as to join the Vera Samadhan Yojna - 2019; the scheme required withdrawal of any pending appeal and a specified deposit to avail its benefits. The writ applicant, having deposited a part amount but not the full prescribed amount, could not obtain relief under the scheme. Taking note of the peculiar facts and the impact of the Covid-19 pandemic on the petitioner's ability to make full payment, the High Court held that leaving the litigant without remedy would be unconscionable. The Court therefore quashed the Tribunal's order dated 13.02.2020 permitting withdrawal and directed restoration of the Second Appeal to the Tribunal's file. As part of equitable relief, the Court directed that the Tribunal should not insist on any further pre-deposit for hearing the appeal on merits, having regard to the amount of Rs. 10 Lakh already deposited by the writ applicant and information that an additional amount had been debited from the writ applicant's bank account to the Government Treasury. The restored appeal was directed to be heard and disposed of on merits within three months from receipt of the writ of this order. [Paras 10, 11, 12, 13, 14]

Order dated 13.02.2020 of the Tribunal permitting withdrawal is quashed and set aside; Second Appeal No.441 of 2019 is restored to the Tribunal file, to be heard on merits within three months and without insistence on further pre-deposit.

Final Conclusion: The writ is allowed: the Tribunal's withdrawal order is quashed, the Second Appeal is restored for merit hearing within three months, and no additional pre-deposit shall be insisted upon in view of amounts already paid and the pandemic-related circumstances.

Violation of principles of natural justice - assessment under section 25(1) of the KVAT Act - jurisdiction of High Court under Article 226 - adjournments and opportunity to be heard - fresh notice superseding earlier reply

Jurisdiction of High Court under Article 226 - violation of principles of natural justice - Whether the assessment order could be quashed on the ground of violation of principles of natural justice and whether the High Court should exercise jurisdiction under Article 226. - HELD THAT: - The Court applied the settled principle that interference with assessment orders by the High Court is warranted when there is an infringement of fundamental rights, assumption of jurisdiction not vested in the authority, violation of natural justice, or challenge to vires. Having examined the facts and sequence of communications, the Court found no deprivation of a hearing that would amount to a breach of natural justice. The discretionary jurisdiction under Article 226 was not attracted because the assessing authority had afforded and recorded multiple opportunities and warnings before passing the assessment order. [Paras 7, 11]

The writ petition does not disclose a violation of natural justice or other jurisdictional error warranting interference under Article 226; jurisdictional attack dismissed.

Fresh notice superseding earlier reply - assessment under section 25(1) of the KVAT Act - Whether failure of the assessing officer to consider the petitioner's earlier reply to a prior notice vitiated the subsequent assessment based on a later notice. - HELD THAT: - The Court noted that the later notice dated 05.01.2021 raised a different set of allegations and proposed a different escaped turnover; therefore the earlier reply dated 08.05.2018 was not material to the fresh proceedings initiated by the later notice. Since a fresh notice within limitation raised new allegations, omission to consider the earlier reply did not vitiate the assessment premised on the later notice. [Paras 8]

Failure to consider the earlier reply did not invalidate the assessment founded on the subsequent notice raising different allegations.

Adjournments and opportunity to be heard - violation of principles of natural justice - Whether the petitioner was denied sufficient opportunity to be heard before issuance of the assessment order. - HELD THAT: - The record of communications (Ext.P7-P10) showed that the petitioner repeatedly sought short adjournments which were granted, often with a rider that no further adjournment would be given. Despite multiple extensions and explicit adjournments to specified dates, the petitioner failed to file objections or appear on the final date. In those circumstances, the assessing officer was entitled to proceed to pass the assessment order. The Court held that repeated failure by the petitioner to avail the granted opportunities precluded a finding of denial of hearing. [Paras 3, 9, 10]

Sufficient opportunities were granted and the petitioner's non-appearance and failure to file objections justify the assessment being finalized without further adjournment.

Final Conclusion: Writ petition dismissed: the assessment under section 25(1) for assessment year 2016-17 is not vitiated by denial of natural justice or by non-consideration of an earlier reply; petitioner remains at liberty to pursue statutory remedies.

Principles of natural justice - right to personal hearing - reassessment under the Karnataka Value Added Tax Act, 2013 - remand for fresh consideration

Principles of natural justice - right to personal hearing - reassessment under the Karnataka Value Added Tax Act, 2013 - remand for fresh consideration - Validity of the reassessment order passed without affording the petitioner a personal hearing and resulting demand notice. - HELD THAT: - The Court found that earlier opportunities to produce books or documents prior to issuance of the show cause/proposition notice do not extinguish the petitioner's statutory and constitutional entitlement to a personal hearing after the show cause/proposition notice has been issued. The petitioner had responded to the proposition notice and specifically requested a personal hearing; nevertheless the assessing authority proceeded to pass the reassessment order and demand notice without affording that requested opportunity. Passing the assessment order without granting the requested personal hearing amounted to a breach of the principles of natural justice. For that reason the reassessment order and the demand notice could not be sustained. The matter is therefore remitted to the assessing authority for reconsideration beginning from the stage of receipt of the reply to the proposition notice, with a direction that the opportunity of personal hearing as requested by the petitioner be afforded. The Court directed an expeditious disposal by requiring the petitioner to appear on the specified date and the proceedings to be completed within ten weeks from that appearance. [Paras 4, 5]

Impugned reassessment order and demand notice set aside; matter remanded to respondent No.3 for reconsideration from receipt of the reply to the proposition notice with direction to afford the petitioner a personal hearing and conclude proceedings within ten weeks from the petitioner's appearance on the directed date.

Final Conclusion: Writ petition allowed: reassessment order and demand notice quashed; matter remanded for fresh consideration from the stage of receipt of the reply to the proposition notice with a directed personal hearing and time-bound disposal.