TaxTMI Updates e-Newsletter
Mar 08,2022

Refund of zero-rated supplies - interest on delayed refund - statutory time limit for processing refund applications and issuance of FORM GST RFD-02/RFD-03

Refund of zero-rated supplies - interest on delayed refund - statutory time limit for processing refund applications and issuance of FORM GST RFD-02/RFD-03 - Direction to respondents to process the petitioner's refund application for the month of November, 2019 and to pay interest on the delayed refund within a specified time frame. - HELD THAT: - The petitioner filed a refund application dated 4th November, 2020 for export of goods treated as zero-rated supplies which had not been processed and for which no acknowledgment in FORM GST RFD-02 or deficiency memo in RFD-03 had been issued within the stipulated time. On notice, the respondents accepted that the application would be processed and an order passed within six weeks, and did not oppose payment of interest on the delayed refund. In view of the respondents' concession and the petitioner's entitlement to interest for delayed payment, the court, with the consent of the parties, disposed of the petition by directing the respondents to process the refund claim and pay the interest accrued thereon in accordance with law within six weeks.

The respondents are directed to process the petitioner's refund application for November, 2019 and to pay interest on the delayed refund in accordance with law within six weeks; writ petition disposed of.

Final Conclusion: The petition is disposed of by directing the respondents to process the petitioner's refund application for November, 2019 and to pay the interest accrued on the delayed refund in accordance with law within six weeks.

Provisional attachment under Section 83 - cessation of provisional attachment after one year - protection of government revenue - administrative clarification by CBIC circular - stay of provisional attachment order

Provisional attachment under Section 83 - cessation of provisional attachment after one year - administrative clarification by CBIC circular - Effect of the one year limit under Section 83(2) on the provisional attachment in the present case and consequential interim relief. - HELD THAT: - Section 83 empowers provisional attachment of property including bank accounts where proceedings are pending and provides that every such provisional attachment shall cease to have effect after expiry of one year from the date of the order. The Court noted the recent Supreme Court pronouncement referred to by the parties and the CBIC circular dated 23.02.2021 which clarifies that provisional attachments cease after one year. Applying this principle to the facts, the order of provisional attachment dated 03.12.2020 had been in force for more than one year and therefore its effect had ceased upon completion of the one year period. The Court accordingly exercised its supervisory jurisdiction to grant interim relief in light of the statutory limitation and the administrative clarification; no detailed adjudication on the merits of the tax liability was undertaken at this stage.

Provisional attachment order dated 03.12.2020 is stayed as having ceased to be effective after one year; interim relief granted.

Remand for further consideration of reliefs - Procedural and interlocutory steps directed for further adjudication of the petitioner's remaining prayers. - HELD THAT: - The Court granted leave to add the concerned adjudicating officer at Udaipur as an additional respondent and permitted amendment of the cause title within one week. Notice was directed to be issued to the newly added respondent and the matter was listed for further consideration. No substantive determination was made on the remaining substantive prayers; those are to be considered afresh on the returnable date.

Amendment and joinder permitted; notice to added respondent; matter listed for further hearing on 22.03.2022 for consideration of the petitioner's remaining prayers.

Final Conclusion: The Court held that a provisional attachment under Section 83 ceases to operate after one year and, on the facts, granted interim relief by staying the attachment dated 03.12.2020; procedural directions were given for joinder of the adjudicating officer and the petition listed for further hearing on 22.03.2022 to decide the remaining prayers.

Unexplained cash credit under the provisions of section 68 of the Income tax Act - onus to prove identity, capacity and genuineness of the creditor - donor's capacity to make the gift - probative scrutiny of recitals and surrounding circumstances - disbelief of self serving recitals in absence of supporting evidence

Unexplained cash credit under the provisions of section 68 of the Income tax Act - onus to prove identity, capacity and genuineness of the creditor - donor's capacity to make the gift - probative scrutiny of recitals and surrounding circumstances - The Tribunal was justified in confirming the addition of Rs. 41,00,000 as unexplained cash credit under Section 68. - HELD THAT: - The Court agreed with the findings of the Assessing Officer, the Commissioner (Appeals) and the ITAT that the explanation that the amount belonged to the assessee's daughter resident abroad was not satisfactorily proved. Material contradictions and improbabilities were noted: the daughter's alleged cash withdrawals aggregating about Rs. 10.77 lakh over 22 months, prior gifts from the father, the claim that substantial marriage gifts were kept as cash rather than deposited, and the fact that the Rs. 41 lakhs deposited on 12 June 2010 was shortly thereafter transferred into a liquid fund (indicating use by the assessee rather than application towards purchase for the daughter). The authorities held that the assessee failed to establish the creditor's capacity and the genuineness of the transaction. The Court applied the established principle that recitals or self serving statements must be tested against surrounding circumstances and that mere identification or movement through banking channels is insufficient; the onus lies on the assessee to prove identity, capacity and genuineness of the donor. Reliance on Durga Prasad More and R.S. Sibal was affirmed to justify disbelieving the claimed source where evidence is inconsistent or improbable. [Paras 9, 10, 11, 12, 13]

Addition of Rs. 41,00,000 as unexplained cash credit under Section 68 sustained; Tribunal's order confirmed.

Final Conclusion: The appeal is dismissed; the question of law framed is answered in favour of the Department and against the assessee, and the interim order is vacated.

Reopening of assessment under Section 148 of the Income-tax Act - Reason to believe - No fresh material for reassessment / re-opening - Review and re-appreciation of material already verified in original assessment - Contingent liability disclosure under Accounting Standard AS-29 - Non-application of mind in disposal of objections - Quashing of reassessment notice and order disposing objections

Reopening of assessment under Section 148 of the Income-tax Act - Contingent liability disclosure under Accounting Standard AS-29 - No fresh material for reassessment / re-opening - Validity of reopening on the ground that a contingent liability noted in the audited accounts was claimed as a revenue deduction and whether there was fresh material to form a valid reason to believe for escapement of income. - HELD THAT: - The Court found on the record that the petitioner had not claimed the contingent liability as a revenue expense but had disclosed it as a note in the audited accounts in accordance with AS-29. The reopening was premised on the incorrect belief that the contingent liability had been claimed as a deduction. Further, the material relied upon for reopening was the same audited accounts that were earlier available and subject to examination in the original assessment proceedings; there was no fresh material placed on record to justify formation of a fresh reason to believe that income had escaped assessment. On these bases the reason to believe recorded for issuance of the Section 148 notice lacked rational nexus to escapement of income. [Paras 2, 3, 6, 8]

Reopening was invalid because the contingent liability was only a disclosure under AS-29 and there was no fresh material to sustain a valid reason to believe.

Non-application of mind in disposal of objections - Quashing of reassessment notice and order disposing objections - Whether the order disposing of the objections against the reassessment notice is vitiated by non-application of mind and consequent validity of that order. - HELD THAT: - The Court observed that the order dated 27th December, 2021 disposing of the objections failed to deal with the contentions advanced by the petitioner, proceeded on an incorrect premise, and contained repetitions indicative of non-application of mind. Because the disposing order did not address the determinative factual and legal points and was founded on the erroneous premise that the contingent liability had been claimed as an expense, the disposing order itself was unsustainable. [Paras 5, 7, 9]

The order disposing objections is set aside for non-application of mind and being founded on an incorrect premise; consequentially the reassessment notice and the disposing order are quashed.

Final Conclusion: The Section 148 notice dated 28th March, 2021 and the order disposing objections dated 27th December, 2021 are quashed: the reassessment was founded on an incorrect premise regarding a contingent liability disclosed under AS-29 and there was no fresh material to form a valid reason to believe; the disposing order also suffers from non-application of mind. The Assessing Officer remains at liberty to act afresh if genuine fresh material is discovered, and the petitioner may challenge any such fresh action in accordance with law.

Assumption of jurisdiction under section 153C - Requirement of incriminating material for initiation of proceedings under section 153C - Scope of satisfaction for proceedings under section 153C limited to material seized at search - Presumption under section 132(4A) and section 292C that items found at searched premises belong to the person whose premises were searched - Non-applicability of amended provision of section 153C w.e.f. 01.06.2015 to searches conducted earlier - Quashing of assessment where addition is made without reference to incriminating material (Singhad Technical Education Society ratio)

Assumption of jurisdiction under section 153C - Requirement of incriminating material for initiation of proceedings under section 153C - Scope of satisfaction for proceedings under section 153C limited to material seized at search - Assumption of jurisdiction under section 153C in the present cases was impermissible as there was no material seized from the searched premises shown to belong to the assessee and the satisfaction did not refer to any incriminating material of the assessee. - HELD THAT: - The search on 27.11.2014 at the premises of the searched person (Abhay Maheshwari) yielded a laptop which, on scanning, led the AO to issue notices under section 153C. However, the record shows nothing seized at the search that belonged to the assessee. In terms of the statutory scheme applicable for the relevant assessment years, the satisfaction to invoke section 153C must be tied to seized material belonging to a person other than the searched person. The satisfaction note does not refer to any laptop or other seized item as belonging to the assessee, and the assessment order contains no reference to incriminating material connecting the seized data to the assessee. Relying on the principle that initiation under section 153C must be grounded on seized material pointing to the taxpayer, and on the authoritative ratio that additions made without such incriminating material are unsustainable, the Tribunal held that the AO's assumption of jurisdiction was unlawful and the assessments were vitiated. [Paras 12, 14, 15]

Assessment orders quashed for want of lawful assumption of jurisdiction under section 153C and absence of incriminating material connecting seized material to the assessee.

Presumption under section 132(4A) and section 292C that items found at searched premises belong to the person whose premises were searched - Non-applicability of amended provision of section 153C w.e.f. 01.06.2015 to searches conducted earlier - The presumption that items found at the searched premises belong to the occupier applied and the post search amendment to section 153C (w.e.f. 01.06.2015) was not applicable to the search conducted on 27.11.2014. - HELD THAT: - The Tribunal noted the statutory presumption under the provisions applicable to searches that documents and assets found at the premises are presumed to belong to the person whose premises were searched. The satisfaction note contained no assertion that any seized item belonged to the assessee; instead, the material was attributable to the searched person. Further, the amendment to section 153C introduced with effect from 01.06.2015 does not govern searches conducted prior to that date. As the search in this case occurred on 27.11.2014, the unamended provision applies and the expanded post amendment jurisdictional test could not be invoked retrospectively. [Paras 12, 13]

Invocation of jurisdiction could not be sustained on a post amendment footing; statutory presumptions pointed to the searched person, not the assessee.

Final Conclusion: Both appeals allowed; the Tribunal quashed the assessment orders for A.Y. 2011-12 and A.Y. 2012-13 because the proceedings under section 153C were initiated without any seized material shown to belong to the assessee and the post June 2015 amendment to section 153C was not applicable to the search carried out on 27.11.2014.

Entitlement to credit for tax deducted at source - Tax deducted at source (TDS) and assessee's liability - Proceedings treating deductor as assessee in default under Section 201(1) and 201(1A) - Rectification of assessment under Section 154 - Department's remedy against deductor for failure to remit deducted tax, including interest and penalty

Entitlement to credit for tax deducted at source - Tax deducted at source (TDS) and assessee's liability - Whether the petitioner can be held liable to pay tax where tenants deducted TDS but the revenue's records do not show remittance, and whether demand notices against the petitioner are sustainable. - HELD THAT: - The court accepted the petitioner's contention that where tax is deducted at source, the assessee is not required to pay tax to the extent such tax has been deducted. The settled position is that once deduction has been effected by the tenant, the Department's recourse is against the deductor for realizing the tax not remitted to the Government; the assessee-owner cannot be proceeded against for the same amount. Applying this principle to the material placed before the court (statements and tenant letters evidencing deduction), the demand notices issued against the petitioner were impermissible in law and could not be sustained. [Paras 6, 7]

Demand notices against the petitioner (Annexures 'M' and 'N') set aside insofar as they seek to recover amounts for which TDS was deducted by tenants.

Proceedings treating deductor as assessee in default under Section 201(1) and 201(1A) - Department's remedy against deductor for failure to remit deducted tax, including interest and penalty - The proper forum and remedy for the Department to recover tax not remitted by tenants who deducted TDS. - HELD THAT: - The court reiterated that the Department's remedy is to proceed against the deductor by treating the deductor as an assessee in default under the statutory provisions noted by the court, and to levy interest or penalty as permissible by law. The Department remains at liberty to initiate such proceedings or take other penal action against the tenants who deducted tax but failed to remit it to the Government. [Paras 6, 8]

Revenue must proceed against the deductors for recovery and may impose interest and penalty; departmental action against respondent nos. 3 and 4 is left open.

Rectification of assessment under Section 154 - Entitlement to credit for tax deducted at source - Disposition of the petitioner's pending rectification applications and the scope of consideration to be undertaken by the assessing authority. - HELD THAT: - The earlier writ petitions were disposed with liberty to file rectification applications. The petitioner filed rectification applications dated 08.08.2012 which remain pending. The court directed the assessing authority to decide those rectification applications afresh, taking into account the settled legal position that credit must be afforded for tax duly deducted, and to consider the material evidencing deduction (including tenant acknowledgements and the annexed statements and letters). The court mandated disposal within a fixed timeframe to secure an expeditious decision. [Paras 4, 5, 7, 9]

Respondent No. 2 is directed to decide the rectification applications referred to at Annexures 'R' and 'R1' in light of the discussion and materials, and to do so within eight weeks from release of the order.

Final Conclusion: The writ petition succeeds in setting aside the demand notices issued against the petitioner for amounts in respect of which tenants deducted TDS; the revenue must proceed, if at all, against the deductors under the statutory provisions and may levy interest or penalty; the assessing authority is directed to dispose of the pending rectification applications after considering the evidence of TDS deduction, within eight weeks.

Condonation of delay - revision under Section 264 of the Income Tax Act - late fee under Section 234E - rectification under Section 154 - impact of deletion of levy under Section 234E on liability under Section 220(2) - precedential effect of a Division Bench judgment

Condonation of delay - revision under Section 264 of the Income Tax Act - late fee under Section 234E - Whether the order dismissing the Section 264 proceedings on the ground of delay should be set aside and the delay condoned. - HELD THAT: - The Court accepted the petitioner's contention that, in view of the law declared by the Division Bench in FATHERAJ SINGHVI (as relied upon by the petitioner), the Department had no authority to seek computation of fee under Section 234E for the period prior to 01.06.2016 and that this legal position warranted a liberal approach to condonation of delay. Noting that the Revisional Authority had adopted a conservative and hyper-technical view on limitation and had dismissed the proceedings solely on the ground of delay, the Court found it to be in the interests of justice to set aside the impugned order dated 07.03.2020 and to condone the delay. The Court therefore directed that the Section 264 proceedings proceed on merits rather than being foreclosed by the procedural lapse. [Paras 9]

Impugned order dated 07.03.2020 set aside and delay condoned; Section 264 proceedings to be taken up on merits.

Revision under Section 264 of the Income Tax Act - rectification under Section 154 - impact of deletion of levy under Section 234E on liability under Section 220(2) - Whether the matters should be remitted to the revisional authority for fresh consideration on merits and, if so, the manner and time-frame for disposal. - HELD THAT: - The Court noted the appellate and tribunal proceedings history, including the Tribunal's observation that appeals on remand should await disposal of the Section 264 proceedings because deletion of the levy under Section 234E by the CIT under Section 264 would negate any liability under Section 220(2). In consequence of setting aside the dismissal for delay, the Court remitted both matters to the first respondent to take up the Section 264 proceedings on merits and dispose of them in accordance with law. The Court directed that the revisional authority dispose of the proceedings within eight weeks from receipt of the certified copy of this order to ensure expeditious resolution. [Paras 4, 10, 11]

Matters remitted to respondent no.1 for fresh adjudication of the Section 264 proceedings on merits; disposal directed within eight weeks.

Final Conclusion: Writ petitions allowed; impugned revisional order dismissing proceedings for delay set aside and delay condoned in view of the cited precedent; matters remitted to the revisional authority to decide the Section 264 proceedings on merits within eight weeks.

Limitation for completion of block assessment governed by the law operative at the time of search - Block assessment under Section 153-A of the Income-tax Act - Judicial restraint in issuing mandamus directing Assessing Officer on matters pending adjudication - Assessing Officer's discretion to allow inspection of records of search and satisfaction note - Availability of appellate remedy where Assessing Officer fails to address a plea

Limitation for completion of block assessment governed by the law operative at the time of search - Block assessment under Section 153-A of the Income-tax Act - Period of limitation for completion of the block assessment proceedings is the period provided under Section 153-B as it stood at the time of the search on 24.9.2014 and not the period substituted with effect from 1.6.2016. - HELD THAT: - The Revenue conceded that the period of limitation applicable to conclude assessment proceedings under Section 153-A is that provided by Section 153-B which was in operation on the date of search, namely 24.9.2014. The court accepted this concession and noted that the earlier provision (operative with effect from 1.6.2003 until its amendment effective 1.6.2016) prescribed completion "within two years", which governs the present block assessment years. This position addresses the petitioners' prayer for extension of the limitation period and forecloses reliance on the post-2016 amendment for these proceedings. [Paras 8]

The limitation period applicable to the block assessments for 2009-2010 to 2014-2015 is the period under Section 153-B as operative at the time of the search; no extension is warranted by invoking the post-2016 amendment.

Judicial restraint in issuing mandamus directing Assessing Officer on matters pending adjudication - Court will not direct the Assessing Officer how to decide the jurisdictional objection raised by the petitioners prior to completion of assessment proceedings; the jurisdictional issue must be addressed by the Assessing Officer at the appropriate stage. - HELD THAT: - The petitioners sought a mandamus directing the Assessing Officer to decide their jurisdictional plea raised in the application dated 04.01.2021. The court held that issuing such a peremptory direction would exceed its jurisdiction under Article 226 because it would amount to instructing the Assessing Officer how to decide a pending matter. The court, therefore, declined to interfere and observed that the Assessing Officer should address the jurisdictional contention during the course of the assessment; if the plea is not addressed, the petitioners retain their appellate remedies. [Paras 9]

No direction issued to the Assessing Officer to decide the jurisdictional application at this stage; the Assessing Officer shall consider the plea in the course of proceedings and the petitioners may avail appellate remedies if aggrieved.

Assessing Officer's discretion to allow inspection of records of search and satisfaction note - Availability of appellate remedy where Assessing Officer fails to address a plea - No mandamus to compel inspection of records of search or the satisfaction note; the Assessing Officer had already offered inspection opportunities and may in his discretion grant further opportunity, and petitioners may pursue appellate remedy if their plea is not addressed. - HELD THAT: - The petitioners sought a direction for inspection of the records of search and the satisfaction note. The court recorded that the Assessing Officer had already notified dates (16.11.2021 or 17.11.2021) for inspection, which the petitioners did not avail themselves of. The court declined to issue a mandamus compelling inspection or a speaking order during the ongoing proceedings, observing that doing so would cause undue delay and interfere with the Assessing Officer's discharge of duties. However, the court left open the Assessing Officer's discretion to allow another opportunity and affirmed the petitioners' right to approach the appellate authority if the Assessing Officer fails to address their requests. [Paras 9]

No direction for compelled inspection is issued; Assessing Officer may grant further opportunity in his discretion, and appellate remedy remains available if pleas are not addressed.

Final Conclusion: The writ petitions seeking mandamus and extension of limitation are dismissed; the Assessing Officer is to proceed with the block assessments for 2009-2010 to 2014-2015 applying the limitation law operative at the time of search, may in his discretion permit inspection of records, and the petitioners retain appellate remedies if aggrieved by the Assessing Officer's decisions.

Right of cross-examination - statement recorded behind the back of the assessee - admissibility of statements recorded during survey / under section 133A - onus of proof under section 68 - reopening of assessment under section 147/148 - addition under section 68 - deletion of additions for denial of opportunity to cross examine

Right of cross-examination - statement recorded behind the back of the assessee - admissibility of statements recorded during survey / under section 133A - deletion of additions for denial of opportunity to cross examine - addition under section 68 - Addition under section 68 based on third party statements recorded during survey and not confronted to the assessee was sustained or liable to be deleted. - HELD THAT: - The Tribunal found that the AO made the impugned addition to income by invoking section 68 relying on the statement of Shri S.K. Gupta recorded during survey operations and other investigation reports that were obtained 'at the back' of the assessee. Despite repeated requests the assessee was not permitted to cross examine Shri S.K. Gupta. Applying coordinate Bench precedent, the Tribunal held that statements recorded behind the assessee which are adverse cannot be used against the assessee unless the assessee is confronted with them and given an opportunity of cross examination. In the absence of confronting or allowing cross examination, those statements lose evidentiary value and cannot sustain the addition. Having followed earlier decisions (including TRN Impex Pvt. Ltd. and Vijayshree Food Products Pvt. Ltd.), the Tribunal concluded that there was no admissible material on record to justify the addition under section 68 and therefore deleted the addition. The Tribunal also observed that the consequential addition by way of assumed commission was dependent on the primary addition and was therefore also unsustainable. [Paras 12, 13, 15, 17]

Addition of Rs. 55,85,000 made under section 68 deleted for lack of admissible evidence because the assessee was not allowed cross examination; consequential commission addition deleted.

Reopening of assessment under section 147/148 - onus of proof under section 68 - Validity of reassessment proceedings (assessee's challenge to reopening under section 147/148). - HELD THAT: - The assessee raised grounds challenging the validity of the reassessment. The Tribunal noted that these grounds were not pressed with vigor before it. After considering the rival submissions and the record, the Tribunal recorded that it would dismiss the grounds challenging validity of the reassessment proceedings as not seriously argued by the assessee. The Tribunal's decision on the substantive additions rendered the question of reopening largely academic, but procedurally the challenge to reopening was not upheld by the assessee before the Tribunal. [Paras 16]

Grounds challenging the validity of reassessment under section 147/148 dismissed (not pressed); challenge to reopening not sustained before the Tribunal.

Final Conclusion: The Tribunal deleted the addition of share application money/share capital made under section 68 and the related assumed commission because the adverse statements relied upon were recorded behind the assessee and the assessee was not permitted cross examination; the assessee's objections to the validity of reassessment were dismissed as not seriously argued and the appeal was partly allowed.

Taxability of life insurance maturity proceeds - Application of section 10(10D) - premium exceeding ten percent of sum assured - TDS under section 194DA - Deduction of TDS on gross amount versus net taxable income - Double taxation arising from taxing return of premium

Taxability of life insurance maturity proceeds - Application of section 10(10D) - premium exceeding ten percent of sum assured - Deduction of TDS on gross amount versus net taxable income - Double taxation arising from taxing return of premium - Whether the entire maturity proceeds of the single premium life insurance policy should be taxed or only the income component (maturity proceeds minus premium) which the assessee disclosed in the return - HELD THAT: - The assessee paid a single premium and did not claim deduction under section 80C; on maturity he received the gross sum but offered only the net income (maturity less premium) to tax. The CPC/AO treated the entire maturity proceeds as income and added the premium refund to income; the CIT(A) upheld that treatment on the ground that the policy did not satisfy the exemption condition in section 10(10D) (premium exceeding 10% of sum assured). The Tribunal examined the statutory scheme and the practical consequence of taxpayer position and observed that where the assessee had not claimed any 80C deduction and had offered only the net income in the return, taxing the refunded premium would amount to taxing the principal invested (double taxation). The Tribunal also noted the difficulty created by the payer deducting TDS on the gross amount under section 194DA and the Parliament's acknowledgement of that concern in the Finance Bill (proposing TDS on the income component). Applying these considerations to the facts, the Tribunal concluded that no addition was warranted and only the net income already offered in the return (maturity minus premium) should be taxed. [Paras 13, 14]

Addition of the premium amount was deleted and the appeal was allowed; only the net income component as offered in the return was to be taxed.

Final Conclusion: The Tribunal allowed the appeal, holding that where the assessee had neither claimed 80C deduction nor invoked 10(10D) and had offered only the net income in the return, the refund of the premium should not be treated as taxable income; the addition of the premium was deleted and only the net income disclosed by the assessee is to be taxed.

Set-off and carry forward of long-term capital loss - Effect of corporate restructuring and scheme of arrangement on tax carry-forward - Section 74 carry forward of loss from capital gains - Colourable device allegation and requirement of material evidence - Section 41(1) cessation or remission of trading liability - Admission of additional evidence before appellate forum

Set-off and carry forward of long-term capital loss - Effect of corporate restructuring and scheme of arrangement on tax carry-forward - Section 74 carry forward of loss from capital gains - The corporate scheme of arrangement that set off accumulated losses against share premium in the books does not extinguish the assessee's statutory right to carry forward and set off long-term capital loss under section 74 for Assessment Year 2016-17. - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that losses determined under the Income-tax Act in earlier assessment years remain available for set off under section 74 despite their having been adjusted against share premium in the company's financial statements pursuant to a court approved scheme. The AO's view that the book adjustment extinguished the carry forward losses was rejected as unsupported by material; there is no provision in section 74 or elsewhere in the Act that treats a Companies Act scheme adjustment as operating to deprive the assessee of tax-carried forward capital losses. The Tribunal also sustained the finding that the AO's allegation of a colourable device was made without examination of the prior assessment records and, if doubts existed, the proper remedy would have been reassessment of the relevant years rather than disallowance in the year under appeal. For these reasons the CIT(A)'s direction to permit set off was upheld. [Paras 8, 10, 12]

Set off of brought forward long-term capital loss was held to be available to the assessee for AY 2016-17; grounds 2 and 3 dismissed and CIT(A)'s order upheld.

Section 41(1) cessation or remission of trading liability - Colourable device allegation and requirement of material evidence - Admission of additional evidence before appellate forum - Sums shown as long-outstanding creditors were not exigible to be added as income under section 41(1) for AY 2016-17 where there was no material or finding of any supervening act or write off demonstrating legal cessation or remission of the liabilities; further, no additional evidence was placed before the Tribunal. - HELD THAT: - The Tribunal agreed with the CIT(A)'s reasoning that mere longevity of a liability in the books or inability to trace a creditor at the time of verification does not establish legal cessation or remission under section 41(1). Explanation to section 41 requires proof of remission or write off; on the agreed facts there was no write off or other supervening development nullifying the obligation. The AO had not established that the creditor and liability were treated as a nullity nor produced material to justify invoking section 41(1). Although the Revenue sought admission of a letter purportedly from a creditor, that document was not placed before the CIT(A) nor before the Tribunal; accordingly the CIT(A)'s deletion of the additions was sustained. [Paras 15, 17]

Additions under section 41(1) in respect of the two creditors were deleted; grounds 4 to 6 of the Revenue's appeal dismissed and CIT(A)'s order affirmed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal against the CIT(A)'s order for Assessment Year 2016-17, upholding the allowability of the carry forward and set off of long term capital loss and confirming deletion of additions under section 41(1).

Capital gains - determination of de facto ownership - agency/holding of property by directors for and on behalf of the company - remand for factual verification of funding and receipt of sale consideration - deduction under section 80IA(4)(iii) of the Income tax Act - verification and bifurcation of expenditure

Capital gains - determination of de facto ownership - agency/holding of property by directors for and on behalf of the company - remand for factual verification of funding and receipt of sale consideration - Whether the capital gains arising on sale of lands purchased in the names of directors are to be assessed in the hands of the company or in the hands of the individual directors. - HELD THAT: - The Tribunal recorded that the admitted facts show lands were registered in the names of two directors but the company contends the purchases were funded by the company and the directors acted only as facilitators pursuant to a Board resolution. The Board resolution alone was held insufficient to determine de facto ownership. The Tribunal directed that the Assessing Officer should examine whether (i) the company paid the purchase price in 2004; (ii) the company bore conversion costs; and (iii) the sale proceeds were received by the company (not retained by the directors). If the AO's factual verification is affirmative, the Tribunal observed that prima facie the capital gains ought to be assessed substantially in the hands of the company. For these reasons the Tribunal did not decide the question on merits but restored the matter to the file of the Assessing Officer for factual enquiry and determination. [Paras 13]

Issue remanded to the Assessing Officer for factual verification of payment, conversion costs and receipt of sale consideration; if verification is affirmative, capital gains to be assessed substantially in the hands of the company.

Deduction under section 80IA(4)(iii) of the Income tax Act - verification and bifurcation of expenditure - Whether the deduction claimed under section 80IA(4)(iii) should be allowed subject to verification and bifurcation of expenditures between owned and sold portions. - HELD THAT: - The Assessing Officer had disallowed the claim for want of bifurcation of expenditures between sold and owned portions. The CIT(A) directed the AO to procure the requisite bifurcation and verify the claim. On verification the AO granted the deduction. The Tribunal endorsed the course adopted by the CIT(A) and the AO, held that the AO was right to verify and allow the claim to the extent found correct, and confirmed the order giving effect to the deduction after due verification. [Paras 18, 19]

Direction of the CIT(A) to obtain bifurcation and verify is upheld; on verification the deduction under section 80IA(4)(iii) is allowed and the Revenue's appeal is dismissed.

Final Conclusion: The assessee's appeals are partly allowed for statistical purposes and the question whether capital gains are exigible in the hands of the company or the individual directors is remanded to the Assessing Officer for factual verification; the Revenue's appeal is dismissed and the deduction under section 80IA(4)(iii) is confirmed to the extent allowed after verification.

Arm's length price - Comparability and guaranteed minimum royalty - Resale Price Method (RPM) as Most Appropriate Method - Transactional Net Margin Method (TNMM) - Aggregation of design fees with royalty

Comparability and guaranteed minimum royalty - Arm's length price - Exclusion of comparables possessing guaranteed minimum royalty (GMR) clauses from benchmarking the assessee's royalty and deletion of the ALP adjustment. - HELD THAT: - The Tribunal found that the comparables relied upon by the TPO (notably Rampage and Bill Blass) contained guaranteed minimum royalty clauses which were absent in the assessee's franchise agreement; the presence of such guaranteed minimum return materially differentiates those comparables and renders them unsuitable for benchmarking. On exclusion of the GMR-bearing comparables, the arithmetic mean of the remaining accepted comparables came to 5.25%, which exceeded the 5% royalty paid by the assessee. Applying this comparability principle, the Tribunal held that the royalty paid by the assessee fell within the arm's length range and the ALP adjustment made by the TPO was unsustainable. [Paras 9, 10]

Comparables with guaranteed minimum royalty excluded; impugned ALP adjustment deleted and assessee's appeal on royalty allowed.

Aggregation of design fees with royalty - Arm's length price - Treatment of design fees paid to the AE and deletion of the resultant ALP adjustment. - HELD THAT: - The TPO characterised the design fees as part of the royalty stream and made an addition after treating the aggregated payment as exceeding ALP. The Tribunal held that even if the design fees were treated as part of royalty, the combined payment would remain below the arm's length benchmark of 5.25% arrived at after excluding unsuitable comparables. Consequently the adjustment lacked a legally sustainable basis and was deleted. [Paras 12, 14, 15]

Impugned ALP adjustment in respect of design fees deleted; grounds 6 to 10 allowed in favour of the assessee.

Resale Price Method (RPM) as Most Appropriate Method - Transactional Net Margin Method (TNMM) - Validity of CIT(A)'s direction to adopt RPM as the Most Appropriate Method for benchmarking purchases of merchandise and samples from the AE (and consequent deletion of the addition). - HELD THAT: - The Tribunal examined the functional profile and accepted that the assessee purchased finished goods from the AE and resold them without further processing, such that RPM is an appropriate method under Rule 10B(1)(b) and OECD guidance. The Tribunal rejected the TPO's objections-conjectural assertions of material differences, higher AMP expenditure and alleged value addition-finding no factual basis for displacing RPM. It relied on coordinate decisions (including L'Oreal and Burberry precedents) and observed that marketing and AMP expenses 'below the line' do not affect gross profit-based RPM computations; adjusted gross margins of the assessee exceeded the comparables' adjusted margins. On this basis the CIT(A)'s adoption of RPM was upheld and the addition deleted; other grounds became academic. [Paras 22, 23, 25]

CIT(A)'s direction to adopt RPM as MAM upheld; addition in respect of purchase of merchandise and samples deleted and revenue's appeal dismissed.

Resale Price Method (RPM) as Most Appropriate Method - Application of the 2012-13 decision mutatis mutandis to assessment year 2013-14. - HELD THAT: - The parties agreed that the legal and factual findings for assessment year 2012-13 apply similarly to assessment year 2013-14. The Tribunal, following the reasoning and conclusions reached for 2012-13, declined to interfere with the CIT(A)'s order for 2013-14 and dismissed the revenue's appeal for that year as well. [Paras 31, 32]

Findings for AY 2012-13 applied mutatis mutandis; the appeal of the Assessing Officer for AY 2013-14 dismissed.

Final Conclusion: The assessee's appeal is allowed insofar as the royalty ALP adjustment and the design fees adjustment are deleted; the Assessing Officer's appeals for assessment years 2012-13 and 2013-14 are dismissed and the CIT(A)'s adoption of RPM as the Most Appropriate Method for benchmarking imports for resale is upheld; cross-objections by the assessee are dismissed as infructuous.

Assessment under Section 153A read with Section 143(3) of the Income-tax Act - Requirement of incriminating material seized during search for disturbing completed assessments - Treatment of receipts as business income versus capital gains - Opinion of expert not constituting admissible incriminating material for making additions - Distribution of capital assets by an AOP and taxability in hands of AOP vis-a -vis its members

Assessment under Section 153A read with Section 143(3) of the Income-tax Act - Requirement of incriminating material seized during search for disturbing completed assessments - Whether additions made in proceedings under Section 153A read with Section 143(3) in relation to the assessment year 2005-2006 could be sustained in absence of incriminating material seized during the search. - HELD THAT: - The Tribunal held that the original assessment for AY 2005-2006 had been completed prior to the search and therefore did not abate; consequently, the Assessing Officer could disturb that completed assessment under Section 153A only if there was incriminating material unearthed during the search which could be linked to the additions. Applying the ratio of the jurisdictional High Court and the Delhi High Court (as summarised), in absence of any incriminating material connected to the additions the Assessing Officer had no jurisdiction to make the impugned additions in the reassessment under Section 153A. On the facts, the documents relied upon were either already available before the original assessment or were not, on the material, incriminating in nature; hence the additions could not be sustained. [Paras 5]

Additions made in the assessment completed under Section 153A read with Section 143(3) for AY 2005-2006 are not sustainable in absence of incriminating material; the assessee's appeal is allowed on this ground.

Opinion of expert not constituting admissible incriminating material for making additions - Treatment of receipts as business income versus capital gains - Whether the Assessing Officer could treat the receipt of Rs. 20 crore (split into components) as business income in the reassessment on the basis of a seized written opinion of a senior advocate. - HELD THAT: - The Tribunal observed that assessment cannot be founded merely on an expert opinion found during search, particularly when that opinion was not put to the assessee for rebuttal and other opinions favourable to the assessee were not considered. Tax liability must be determined on the basis of evidentiary material establishing undisclosed income; an expert opinion is not, by itself, incriminating material warranting recharacterisation of the transaction. Applying these principles to the facts, the Assessing Officer's reliance on the seized senior advocate's opinion to reclassify the amount as business income was unsustainable. [Paras 5]

The recharacterisation of the receipts as business income based solely on the seized legal opinion is not sustainable; such opinion cannot form the basis for the addition.

Distribution of capital assets by an AOP and taxability in hands of AOP vis-a -vis its members - Treatment of receipts as capital gains - Whether the Rs. 14 crore component of the settlement proceeds was taxable in the hands of the assessee or was to be taxed in the hands of the AOP. - HELD THAT: - The Tribunal's earlier decision (upheld by the High Court) was that the purported transfer of assets pursuant to the settlement amounted to distribution of capital assets on dissolution of the AOP and, under Section 45(4), any gains would be assessable in the hands of the AOP and not its members. The earlier Tribunal and High Court findings were binding on the question and, therefore, the Rs. 14 crore was not taxable in the hands of the assessee. Consequently, that component could not be reopened or taxed in the reassessment under Section 153A. [Paras 5]

The Rs. 14 crore component is not taxable in the hands of the assessee but was held to be assessable in the hands of the AOP; the earlier Tribunal and High Court rulings stand.

Final Conclusion: The Tribunal allowed the assessee's appeal and held that the additions made in the assessment completed under Section 153A read with Section 143(3) for AY 2005-2006 were unsustainable in the absence of incriminating material; the recharacterisation based on a seized legal opinion was impermissible, and the earlier judicial findings that the Rs. 14 crore component was assessable in the hands of the AOP (and not the assessee) were affirmed. The Revenue's appeal was dismissed.

Annual Mixed Use Charge - definition of "tax" under the Delhi Municipal Corporation (Property Tax) Bye Laws 2004 - regularisation charge under the Delhi Development Authority (Fixation of Charges For Mixed Use And Commercial Use of Premises) Regulations, 2006 - deductibility from rental income as tax levied by a local authority (proviso to section 23(1) of the Income tax Act, 1961) - alternative treatment as deduction under section 24(a) of the Income tax Act, 1961

Annual Mixed Use Charge - definition of "tax" under the Delhi Municipal Corporation (Property Tax) Bye Laws 2004 - regularisation charge under the Delhi Development Authority (Fixation of Charges For Mixed Use And Commercial Use of Premises) Regulations, 2006 - deductibility from rental income as tax levied by a local authority (proviso to section 23(1) of the Income tax Act, 1961) - Whether the annual mixed use charges paid to the Municipal Corporation of Delhi qualify as a 'tax' levied by a local authority and are deductible from rental income under the proviso to section 23(1) of the Income tax Act, 1961. - HELD THAT: - The Tribunal examined the definition of "tax" in the Delhi Municipal Corporation (Property Tax) Bye Laws 2004, which confines "tax" to property tax (building tax and vacant land tax) and does not include the Annual Mixed Use Charge. The impugned levy is imposed as a charge for regularising residential premises for certain commercial uses under the Delhi Development Authority (Fixation of Charges For Mixed Use And Commercial Use of Premises) Regulations, 2006, and is therefore a regulatory/regularisation charge rather than a tax in the sense contemplated by the municipal bye laws. The Tribunal noted that the Annual Mixed Use Charge does not alter the annual let out value of the property and consequently does not meet the criterion for deductibility under the proviso to section 23(1) which permits deduction of taxes levied by local authorities from rental income. On this basis the Tribunal held that the Assessing Officer's disallowance of the claimed amount was correctly upheld by the CIT(A). The Tribunal also recorded that the CIT(A) had, in any event, given the assessee alternative relief by treating the amount under section 24(a), but the primary question of entitlement under the proviso to section 23(1) was negatived. [Paras 11, 12, 13]

The Annual Mixed Use Charge is not a 'tax' within the municipal bye laws and is not deductible from rental income under the proviso to section 23(1); the disallowance is upheld.

Final Conclusion: The appeal is dismissed: the Tribunal affirms the disallowance of the Annual Mixed Use Charge as not being a tax levied by a local authority and not deductible under the proviso to section 23(1), while noting the CIT(A)'s alternative allowance under section 24(a).

Reopening of assessment under section 147/148 - reason to believe that income has escaped assessment - reopening based on incorrect/wrong facts - borrowed satisfaction and lack of independent application of mind - approval under section 151(1) for reopening given mechanically - bank cash deposits not ipso facto a valid ground for reopening

Reopening of assessment under section 147/148 - reopening based on incorrect/wrong facts - borrowed satisfaction and lack of independent application of mind - approval under section 151(1) for reopening given mechanically - Validity of reassessment proceedings initiated by AO by issuing notice under section 148 read with section 147 - HELD THAT: - The Tribunal found that the AO recorded as a foundational fact that the assessee had not filed the return of income for the relevant year, whereas the paper book and the AO's own assessment order acknowledged that the assessee had filed a manual return on 25.07.2011. The recorded reasons therefore proceeded on an incorrect factual premise. The Principal Commissioner of Income Tax's approval under section 151(1) was given after perusal of those same reasons and amounted to a mechanical endorsement without independent application of mind. The Tribunal applied the settled principle that reopening based on wrong facts or on a 'borrowed satisfaction' without independent verification or application of mind is a nullity. Reliance was placed on precedents where identical defects-reason recorded that return was not filed when it was-resulted in quashing of reassessment. Because the essential precondition for exercise of jurisdiction under section 147 (a genuine reason to believe on correct facts) was absent, the reassessment could not be sustained. [Paras 11, 12, 17]

Reopening of assessment was quashed as being based on incorrect facts and without independent application of mind; reassessment proceedings declared null and void.

Final Conclusion: The appeal is allowed: reassessment proceedings under section 147/148 (Assessment Year 2011-12) are quashed because the reopening was founded on incorrect factual premises and on a mechanical, borrowed satisfaction without independent application of mind.

Bogus purchases - reopening of assessment - denovo adjudication - opportunity of hearing - estimation of profit percentage

Bogus purchases - denovo adjudication - opportunity of hearing - estimation of profit percentage - Restoration of the assessment to the file of the Assessing Officer for de novo adjudication on the genuineness of purchases and the consequent disallowances in respect of specified suppliers. - HELD THAT: - The Tribunal noted that the Assessing Officer had made 100% disallowance of purchases from certain suppliers while the Commissioner (Appeals) had restricted disallowance to an estimated profit percentage of 3%. The Tribunal observed that the very same controversy had been the subject-matter of recent adjudication in the assessee's own case and that both parties agreed that the matter ought to be restored to the Assessing Officer. In view of those circumstances, the Tribunal declined to finally adjudicate the genuineness of the purchases on the present record and instead directed that the entire assessment be restored to the Assessing Officer for fresh consideration in accordance with law. The assessee was permitted to furnish additional evidence, if any, and was to be afforded a reasonable opportunity of hearing. The Assessing Officer was directed to dispose of the set-aside assessment uninfluenced by his earlier decision or by the Commissioner (Appeals)'s order. [Paras 3, 4]

Assessment restored to the Assessing Officer for de novo adjudication on the genuineness of disputed purchases; parties given liberty to place additional evidence and reasonable opportunity of hearing; appeals allowed for statistical purposes.

Final Conclusion: The appeals are disposed of by restoring the assessment to the Assessing Officer for fresh adjudication on the disputed purchases in accordance with law, with liberty to the assessee to produce further evidence and with a direction to afford a reasonable opportunity of hearing; the appeals are allowed for statistical purposes.

Penalty under Section 114 of the Customs Act, 1962 for attempt to export prohibited goods - Liability of a Customs Broker for abetment - Misuse / leasing of Customs Broker digital user ID and password - Customs Broker Licensing Regulations, 2013 - duties, non transferability and penal consequences - Distinction between regulatory action under Customs Broker Regulations and penal action under the Customs Act - Knowledge, negligence and recklessness of Customs House Agent

Penalty under Section 114 of the Customs Act, 1962 for attempt to export prohibited goods - Liability of a Customs Broker for abetment - Misuse / leasing of Customs Broker digital user ID and password - Customs Broker and its partner are liable to be proceeded under Section 114 for facilitating an attempt to export prohibited goods by permitting misuse of their digital ID and password. - HELD THAT: - The Tribunal accepted the legal characterisation that lending the Customs Broker's digital user ID and password to an unauthorised third party, which was admitted by the partner, constituted facilitation of a major step in the export process (filing of the Shipping Bill) and could amount to abetment of an attempt to export prohibited goods. The Court applied the principles defining an attempt and observed that filing the Shipping Bill is a step adapted to effectuate export and that misuse of the broker's credentials enabled the filing and clearance process. The adjudicatory reasoning distinguished earlier authorities relied upon by the appellants as factually different where the broker's role was passive or limited to document filing or valuation. Reliance on the jurisdictional High Court decision holding that a CHA who leases or recklessly permits misuse of licence/annexures can be penalised under Section 114 supported treating the misconduct as more than a regulatory breach and as punishable under the parent Act. [Paras 17, 18, 19, 21, 22]

The Customs Broker M/s. R.S. Arunachalam and its partner Smt. R.A. Vijayalakshmi may be proceeded against under Section 114 of the Customs Act, 1962 for facilitation of the attempted export of prohibited goods by permitting misuse of their digital credentials.

Customs Broker Licensing Regulations, 2013 - duties, non transferability and penal consequences - Distinction between regulatory action under Customs Broker Regulations and penal action under the Customs Act - Knowledge, negligence and recklessness of Customs House Agent - Violations of Customs Broker Licensing Regulations do not preclude imposition of penalty under Section 114 where the broker's conduct goes beyond mere regulatory breach and amounts to participation or facilitation of an attempt to export prohibited goods. - HELD THAT: - The Tribunal held that the Regulations impose duties (due diligence, non transferability of licence, verification of IEC and client), but those regulatory provisions operate alongside and do not oust penal provisions of the Customs Act. Where the broker's conduct-leasing of digital ID, handing over signed blank annexures and permitting unauthorised use-shows recklessness or facilitation of misdeclaration and attempted export, action under Section 114 is permissible in addition to regulatory proceedings. The Court analysed precedents relied upon by parties, distinguishing cases where the broker's role was limited and concluding that the present facts (admitted leasing and dishonour of duties) align with High Court authority upholding Section 114 liability on CHA who permitted misuse of licence. [Paras 16, 19, 21, 22]

Breach of Customs Broker Licensing Regulations may attract separate regulatory penalty, but does not bar penal proceedings under Section 114 where the broker's conduct amounts to facilitation of the attempted export of prohibited goods.

Remand for reconsideration of penalty under Section 114 - Role of appellate authority in setting aside non imposition and remanding for fresh adjudication - The Commissioner (Appeals) was justified in setting aside the original authority's decision of non imposition of penalty and remanding the matter for reconsideration of imposition of penalty under Section 114; the Tribunal upheld that course. - HELD THAT: - The adjudicating authority had refrained from imposing penalty under Section 114, treating the misconduct as falling only under the Customs Broker Regulations. The Commissioner (Appeals), relying on High Court authority and the admitted facts that the broker had leased its digital credentials and permitted misuse, set aside that part of the original order and remanded for reconsideration of penalty under Section 114. Having considered the evidence, statutory scheme and binding High Court precedent, the Tribunal found no error in the Commissioner (Appeals) directing fresh consideration and declined to interfere with that remand. [Paras 5, 16, 23]

The Commissioner's order setting aside the original authority's non imposition of penalty and remanding the matter for reconsideration under Section 114 is upheld.

Final Conclusion: The appeals are dismissed. The Tribunal upholds the Commissioner (Appeals) order setting aside the original authority's finding of no penalty and endorses the view that leasing or permitting misuse of a Customs Broker's digital credentials and related recklessness can attract penal consequences under Section 114 of the Customs Act, 1962 in addition to regulatory action under the Customs Broker Regulations.

Audi alteram partem - natural justice - service of notice - non-delivery of notice - remand for de novo adjudication

Audi alteram partem - natural justice - service of notice - non-delivery of notice - Whether the appellants were denied opportunity of personal hearing and whether the appellate order is vitiated for non-compliance with principles of natural justice. - HELD THAT: - The Tribunal found that none of the four noticees had marked their presence before the original adjudicating authority and that notices for three of the dates were recorded as received back undelivered in the Order-in-Original. The original authority had listed three hearing dates with only two days gap between them, which did not afford reasonable time. Although the main noticee (importer) was remanded for fresh adjudication by the Commissioner (Appeals), no similar opportunity was granted to the remaining noticees despite the admitted non-delivery of notices to them. Applying the principle of Audi alteram partem, the Tribunal held that the appellants were effectively unheard and that the Commissioner (Appeals) failed to appreciate the admitted non-delivery and the consequent denial of a fair hearing. For these reasons the appellate findings against the absent noticees were held unreasonable and illegal.

Findings against the present appellant (and co-noticees similarly situated) set aside; matter remanded for de novo adjudication with a direction to afford reasonable opportunity of personal hearing before deciding on merits.

Final Conclusion: The appeal is allowed by way of remand: the order of the Commissioner (Appeals) insofar as it concerns the present appellant (and similarly placed co-noticees) is set aside and the original adjudicating authority is directed to afford a proper, reasonable opportunity of hearing and to decide the matter afresh on merits.

Scheme of Arrangement - Amalgamation - Dispensation of meetings - Members' consent by affidavit - Absence of secured and unsecured creditors - Adjustment of unsecured creditor's claim - Compliance with Companies Act, 2013 regime for compromises and arrangements

Scheme of Arrangement - Dispensation of meetings - Members' consent by affidavit - Absence of secured and unsecured creditors - Dispensation of convening, calling and holding of meetings of the shareholders and of the secured and unsecured creditors of the Transferor Company - HELD THAT: - The Tribunal examined the Scheme and supporting documents and found that the Transferor Company had two shareholders who submitted affidavits consenting to the Scheme and to dispensation of the shareholders' meeting. The applicants produced a certificate from the statutory auditor certifying that, as on the relevant date, the Transferor Company had no secured or unsecured creditors, and no consent from creditors was therefore required. On that basis the Tribunal directed that the meetings of shareholders and of secured and unsecured creditors of the Transferor Company be dispensed with and allowed the application in respect thereof. [Paras 6, 9, 11, 13, 14]

Meetings of shareholders and of secured and unsecured creditors of the Transferor Company dispensed with and the application allowed in that regard.

Scheme of Arrangement - Dispensation of meetings - Members' consent by affidavit - Adjustment of unsecured creditor's claim - Dispensation of convening, calling and holding of the meetings of the shareholders, secured creditors and unsecured creditors of the Transferee Company - HELD THAT: - The Tribunal noted that the Transferee Company had two shareholders who filed affidavits consenting to the Scheme and to dispensation of the shareholders' meeting. It was recorded that there were no secured creditors and that the sole unsecured trade creditor's outstanding claim had been adjusted/settled in the ordinary course of business prior to the hearing, supported by affidavit and ledger entries. Having regard to these materials, the Tribunal directed that the meetings of shareholders, secured creditors and unsecured creditors of the Transferee Company be dispensed with and allowed the application insofar as it related to the Transferee Company. [Paras 5, 6, 12, 13, 14]

Meetings of shareholders, secured creditors and unsecured creditors of the Transferee Company dispensed with and the application allowed in that regard.

Final Conclusion: The joint petition for sanction of the Scheme of Amalgamation is allowed to the extent that the convening and holding of meetings of shareholders and of secured and unsecured creditors of both petitioner companies are dispensed with on the terms recorded; order to be served on the parties.

Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Convening of creditors' and members' meetings obviated by unanimous consent affidavits - Absence of secured creditors obviating creditor meeting - Service of joint application on regulatory and government authorities under Section 230(5) and Rule 8 of the CAA Rules

Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Convening of creditors' and members' meetings obviated by unanimous consent affidavits - Convening of meetings of equity shareholders and unsecured creditors of the Applicant Transferor Company dispensed with. - HELD THAT: - The Tribunal recorded that all three equity shareholders and the sole unsecured creditor of the transferor company furnished consent affidavits for the proposed scheme of amalgamation. On that basis, and having considered the material on record including board resolutions, valuation report and statutory auditor's certificate, the Tribunal exercised its power under the Companies Act and Rules to dispense with holding the meetings of equity shareholders and unsecured creditors of the transferor company.

Dispensation of convening meetings of equity shareholders and unsecured creditors of the transferor company granted in view of consent affidavits.

Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Convening of creditors' and members' meetings obviated by unanimous consent affidavits - Absence of secured creditors obviating creditor meeting - Convening of meetings of equity shareholders and unsecured creditors of the Applicant Transferee Company dispensed with; meeting of secured creditors obviated as none exist. - HELD THAT: - The Tribunal noted that both equity shareholders of the transferee company submitted consent affidavits and there was a single unsecured creditor who also furnished consent. The record further showed there were no secured creditors. Having regard to these consents and the absence of secured creditors, and after considering the accompanying documents and approvals in principle from stock exchanges, the Tribunal dispensed with the meetings of equity shareholders and unsecured creditors and held that meeting of secured creditors was obviated.

Dispensation of convening meetings of equity shareholders and unsecured creditors of the transferee company granted; no meeting of secured creditors required.

Service of joint application on regulatory and government authorities under Section 230(5) and Rule 8 of the CAA Rules - Direction issued to serve notice of the joint application on specified governmental and regulatory authorities and to file affidavit of service. - HELD THAT: - In compliance with the statutory scheme, the Tribunal directed each applicant to serve the joint application on the Central Government through the Regional Director, Registrar of Companies, Income Tax authorities with specified particulars, the Official Liquidator and other sectoral regulators as may be applicable, so that those authorities may file their replies in time. The Tribunal required filing of an affidavit of service as proof of compliance with these directions.

Applicants directed to serve the joint application on the named authorities and to file an affidavit of service.

Final Conclusion: The application under Sections 230-232 of the Companies Act, 2013 is allowed: meetings of equity shareholders and unsecured creditors of both applicant companies are dispensed with (meetings of secured creditors obviated where none exist), and the applicants are directed to serve the joint application on the specified authorities and file proof of service; application C.A.(CAA)/9/2022 disposed of accordingly.

Withdrawal of CIRP proceedings - exercise of powers under Article 142 of the Constitution - permissibility of withdrawal post-admission - Section 12A of the Insolvency and Bankruptcy Code - Rule 11 of the NCLT Rules - settlement between home buyers and corporate debtor - undertakings binding the corporate debtor to complete project and offer possession - consequences of moratorium under Section 14 of the IBC

Withdrawal of CIRP proceedings - settlement between home buyers and corporate debtor - Original applicants permitted to withdraw the CIRP proceedings and consequent quashing of orders admitting CIRP. - HELD THAT: - The Court found that a settlement had been reached between the appellant/corporate debtor and the original applicants together with a majority of the home buyers, under which the corporate debtor undertook to complete the project and offer possession within a year and to refund a specified amount to the original applicants. Having regard to the facts that the Committee of Creditors had been constituted but no substantive steps under CIRP were taken (the admission order having been stayed soon after constitution of the COC), and that a majority of the affected home buyers supported the settlement, the Court exercised its equitable jurisdiction to permit withdrawal of the CIRP initiated under Section 7. Consequentially, the Court quashed and set aside the orders of the NCLT and NCLAT admitting CIRP and directed dismissal of the Section 7 petition as withdrawn. [Paras 9, 14]

IA No. 18679/2022 is allowed; respondent Nos.1 to 3 permitted to withdraw CP No.1722/ND/2018 and the admission orders of the NCLT and the impugned NCLAT order stand quashed and set aside.

Exercise of powers under Article 142 of the Constitution - Rule 11 of the NCLT Rules - Section 12A of the Insolvency and Bankruptcy Code - Court authorised to permit withdrawal of CIRP by exercising powers under Article 142 instead of relegating parties to Section 12A/Regulation 30A procedure where settlement is in larger interest. - HELD THAT: - The Court examined Section 12A and the regulations (including Regulation 30A) governing withdrawal post-admission and noted precedents that the tribunal's procedure may be directory and that the Adjudicating Authority may permit withdrawal under Rule 11 in appropriate cases. Given the peculiar facts - majority of home buyers agreeing to the settlement, no progress of CIRP after constitution of the COC due to a stay, and the public interest in completion of the housing project - the Court held it was appropriate to exercise its extraordinary powers under Article 142 to effectuate the settlement and permit withdrawal without compelling the parties to follow Section 12A application procedure before the NCLT. [Paras 6, 7, 9, 13]

Powers under Article 142 are exercised to permit withdrawal and to give effect to the settlement in the larger interest of home buyers; parties need not be relegated to Section 12A procedure in the facts of this case.

Undertakings binding the corporate debtor to complete project and offer possession - settlement between home buyers and corporate debtor - Appellant and corporate debtor directed to give and abide by specific undertakings to complete the project, procure occupancy certificate, maintain services, and raise/pay demands as per ABA, with liberty for home buyers to approach the Court for breaches. - HELD THAT: - As a condition for permitting withdrawal, the Court recorded the joint settlement and required the appellant and the corporate debtor to file separate undertakings and the company resolution backing them. The specified undertakings include completion of the entire project within one year from 01.03.2022, completion of common areas and amenities as per the ABA, timely raising and payment of demands, continuation of maintenance services, and applying for occupancy certificate within six months. The Court emphasised that any breach would be viewed seriously and liberty was reserved to the home buyers and the Association to approach the Court for enforcement. [Paras 4, 15]

Undertakings are to be filed and are binding; breach will entitle home buyers/Krrish Provence Flat Buyers Association to approach this Court.

Payment from amounts deposited in Court - compensation for IRP expenditure and litigation costs - Payment direction: specified amount to be paid to the original applicants from the deposit in Registry; sum to be paid to the IRP towards expenditure and costs. - HELD THAT: - Pursuant to the earlier order which required deposit by the appellant, the Court directed that the agreed sum due to the original applicants be released from the deposited funds along with accrued interest. Additionally, recognising that IRP had been appointed and incurred some expenditure after admission, the Court directed payment to the IRP of a specified sum towards such expenditure and litigation costs, to be paid by the appellant by demand draft within the prescribed time. [Paras 2, 14, 16]

Respondent Nos.1 to 3 to be paid the agreed amount with accrued interest out of the deposit; appellant to pay directed sum to the IRP towards incurred expenditure and costs.

Final Conclusion: The Court allowed the interlocutory application permitting withdrawal of the Section 7 CIRP petition in view of the settlement supported by a majority of home buyers, quashed the admission orders of the NCLT and NCLAT, directed payment to the original applicants and to the IRP from the funds deposited in Court, recorded and mandated binding undertakings by the appellant and corporate debtor to complete the project and obtain occupancy certification, and reserved liberty to the home buyers to approach the Court in case of any breach.

Default under Section 7 of the IBC, 2016 - characterisation of transaction as loan or investment - documentary evidence to establish default - service of recall notice and postal tracking evidence - appropriateness of summary proceedings before NCLT/NCLAT - burden of proof in debt claims

Default under Section 7 of the IBC, 2016 - documentary evidence to establish default - burden of proof in debt claims - Whether the Appellant established a default by the Respondent such as would sustain a Section 7 petition. - HELD THAT: - The Tribunal found that the Appellant failed to substantiate the alleged default with documentary evidence. The Adjudicating Authority's finding that no default was proved rests on the absence of supporting records evidencing repayment obligation and on the admitted dispute as to the nature and terms of the transaction. The Tribunal noted that the Appellant did not controvert the interest rate pleaded nor produce books of account or contemporaneous documents to establish a demand-loan relationship. In these circumstances the Appellate Tribunal agreed that the requisite proof of default in summary insolvency proceedings was not made out and that the Adjudicating Authority correctly dismissed the Section 7 application for want of established default. [Paras 9]

No default was established; the Section 7 petition was rightly dismissed for lack of documentary proof of debt and default.

Service of recall notice and postal tracking evidence - appropriateness of summary proceedings before NCLT/NCLAT - Whether the recall notice was validly served and whether disputed facts about service and the underlying agreement could be resolved in summary insolvency proceedings. - HELD THAT: - The Tribunal recorded the Respondent's contention that the recall notice was sent to a wrong address and that the Postal Tracking Report filed by the Appellant itself indicated 'Not Delivered Unclaimed'. The Adjudicating Authority and this Tribunal held that the contested issue of service and the broader factual dispute about the agreement's terms could not be resolved on the record before NCLT/NCLAT in summary proceedings without leading appropriate evidence. Given the contested service and the existence of factual disputes, the claim could not succeed in the insolvency summary forum. [Paras 9]

The recall notice was not shown to be validly served and contested factual issues regarding service and the agreement could not be resolved in summary insolvency proceedings.

Characterisation of transaction as loan or investment - documentary evidence to establish default - Whether the amounts remitted by the Appellant were correctly characterised as a demand loan giving rise to a default, or as long term investment/borrowing. - HELD THAT: - The Tribunal observed that the Respondent's balance sheet entries reflected the amount as 'Long Term Borrowings' and subsequently as 'Investment', indicating acceptance of the funds for longer tenure rather than as a repayable demand loan. In the absence of documentary proof from the Appellant showing a binding demand loan arrangement and given the entries in the Respondent's financial statements, the Tribunal concluded that the amounts could not be treated as having been in default as of January 2019. This factual characterisation, supported by the material on record, defeated the Section 7 claim. [Paras 9]

The transaction was held to be reflected as long term borrowing/investment on the Respondent's balance sheet and therefore not a proved demand loan default as alleged by the Appellant.

Final Conclusion: The Appellate Tribunal affirmed the Adjudicating Authority's dismissal of the Section 7 application: the Appellant failed to prove a default by documentary evidence, valid service of the recall notice was not established, and the record indicated the amounts were reflected as long term borrowing/investment rather than a repayable demand loan; the appeal is dismissed.

Voluntary liquidation - dissolution of company - declaration of solvency - appointment of voluntary liquidator - compliance with Voluntary Liquidation Process Regulations - public announcement and notice to creditors - distribution of liquidated assets in accordance with Section 53 - submission of final report to IBBI and RoC - absence of objections from regulatory authorities

Voluntary liquidation - declaration of solvency - appointment of voluntary liquidator - compliance with Voluntary Liquidation Process Regulations - public announcement and notice to creditors - submission of final report to IBBI and RoC - absence of objections from regulatory authorities - distribution of liquidated assets in accordance with Section 53 - Whether the company could be dissolved under section 59 of the Code on the basis of the voluntary liquidator's compliance with the Code and the IBBI (Voluntary Liquidation Process) Regulations, 2017, and in the absence of objections. - HELD THAT: - The Tribunal proceeded on the materials and filings placed on record by the voluntary liquidator: board resolution and special resolution approving voluntary liquidation, declaration of solvency filed with ROC, appointment of a registered insolvency professional as voluntary liquidator, intimation to Income Tax authorities, publication of the statutory public announcement and service of the same to IBBI, a report that no claims were received from creditors, opening and subsequent closure of a bank account in the company's name after distribution of assets, submission of preliminary and final reports to IBBI and ROC, and a status report by ROC. Notices were issued to ROC and IBBI and no objections were raised by them; the voluntary liquidator also filed an affidavit confirming absence of any objections from any authority. The Tribunal found these steps to satisfy the requirements of section 59 of the Insolvency and Bankruptcy Code, 2016 read with the IBBI Regulations, and noted that distribution of assets was carried out in accordance with Section 53. On this basis the Tribunal was satisfied to order dissolution of the company. [Paras 7, 8]

The company is dissolved with effect from the date of the order.

Final Conclusion: The Tribunal, being satisfied with compliance of Section 59 of the Code and the IBBI (Voluntary Liquidation Process) Regulations, and in the absence of objections from ROC and IBBI, allowed the application and ordered dissolution of the company; a copy of the order is to be filed with the ROC within the statutory period.

Application under Section 95 for initiation of insolvency resolution process against personal guarantor - Interim moratorium under Section 96(1)(a) of the Insolvency and Bankruptcy Code, 2016 - Appointment of Resolution Professional under Section 97 of the Insolvency and Bankruptcy Code, 2016 - Powers and duties of the Resolution Professional under Section 99 of the Insolvency and Bankruptcy Code, 2016

Application under Section 95 for initiation of insolvency resolution process against personal guarantor - The Application filed by the Financial Creditor under Section 95 to initiate insolvency resolution process against the personal guarantor was prima facie in order to proceed under the Code. - HELD THAT: - The Tribunal recorded that the Financial Creditor filed the Application through a proposed Resolution Professional under Section 95 for initiation of insolvency resolution process in respect of the outstanding debt of the Corporate Debtor guaranteed by the personal guarantor. The demand notice in Form B was issued and the personal guarantor replied but did not make payment within the 14-day period. Part-III of Form C quantified the debt claimed by the Financial Creditor. On these records the Tribunal found the Application to be in order for proceeding as per the Code and treated the matter as properly before the Authority for further action. [Paras 1, 4, 5]

The Application is accepted as properly filed and in order for proceeding under the Code.

Interim moratorium under Section 96(1)(a) of the Insolvency and Bankruptcy Code, 2016 - The interim moratorium, as stipulated under Section 96(1)(a), commences from the date of filing the Application and operates in relation to all debts of the personal guarantor. - HELD THAT: - The Tribunal recorded that upon filing of the Application the interim moratorium under Section 96(1)(a) comes into effect and continues until admission of the Application. During the interim-moratorium period pending legal action or proceedings in respect of any debt of the personal guarantor are stayed and creditors of the personal guarantor are prohibited from initiating legal action in respect of any debt, subject to notified exceptions. [Paras 6]

Interim moratorium commences on filing and the specified prohibitions operate during the interim period.

Appointment of Resolution Professional under Section 97 of the Insolvency and Bankruptcy Code, 2016 - Powers and duties of the Resolution Professional under Section 99 of the Insolvency and Bankruptcy Code, 2016 - The proposed Resolution Professional was appointed under Section 97 and directed to exercise powers under Section 99 and related rules, including making the recommendations under Section 99(7). - HELD THAT: - The Tribunal considered the affidavit filed by the proposed Resolution Professional confirming absence of disciplinary proceedings and competency to act. Exercising powers under Section 97, the Tribunal appointed Mr. Chanchal Dua as Resolution Professional subject to the applicable IBBI regulations. The Resolution Professional was directed to exercise the statutory powers enumerated under Section 99, to examine the Application and make written recommendations with reasons for acceptance or rejection within the time stipulated by Section 99, and to furnish the report under Section 99(7) to the Applicant and the personal guarantor once filed. [Paras 7, 8, 9]

Mr. Chanchal Dua is appointed as Resolution Professional and directed to exercise powers under Section 99 and to submit the statutory report and recommendations.

Final Conclusion: The Tribunal held the Section 95 Application to be in order for further processing, declared the interim moratorium to be in effect from filing, appointed the proposed Resolution Professional under Section 97, and directed him to exercise powers under Section 99 and submit the required recommendations and report; the matter was listed for further proceedings.

Operational Creditor - sole proprietorship as a person under the Insolvency and Bankruptcy Code - harmonious construction of statutory definitions - liability of corporate debtor where invoices are issued to a different legal entity

Operational Creditor - sole proprietorship as a person under the Insolvency and Bankruptcy Code - harmonious construction of statutory definitions - Sole proprietorship entitled to maintain an application under Section 9 of the Code as an Operational Creditor. - HELD THAT: - The Tribunal examined the definitions in the Code and held that Section 2(f), which states that the Code applies to proprietorship firms, must be read in harmony with the definition of "person" in Section 3(23). Although Section 3(23) does not expressly name sole proprietorships, its residual clause "any other entity established under a statute" and the fact that proprietorships obtain statutory registrations (PAN, GST, MSME, shop licences, bank accounts) bring them within the statutory scheme. Applying the doctrine of harmonious construction and relying on NCLAT authority cited by the petitioner, the Tribunal concluded that a sole proprietorship can be an Operational Creditor and is entitled to file a petition under Section 9 through an authorised representative. [Paras 15, 19, 21]

Point No. I decided in favour of the petitioner: the sole proprietorship is entitled to maintain the petition under Section 9 as an Operational Creditor.

Liability of corporate debtor where invoices are issued to a different legal entity - Whether the petitioner proved that the corporate debtor owed debt on the invoices produced. - HELD THAT: - The Tribunal found that all invoices placed on record were issued to a different entity (M/s. Nikhil Footwear / partnership) and not to the respondent company (M/s. Nikhil Footwears Pvt. Ltd.), with differing GSTIN and PAN details for each entity. The petitioner conceded that the invoices pertained to the partnership firm. As the transactions shown by the invoices related to a distinct legal entity and not to the corporate debtor before the Tribunal, the petitioner failed to establish that the respondent owed the claimed dues. Consequently, the claim against the corporate debtor could not be sustained and the petition could not be maintained on that basis. [Paras 22, 23, 24]

Point No. II decided against the petitioner: the petitioner failed to prove that the corporate debtor owed the dues shown in the invoices.

Final Conclusion: The petition under Section 9 was dismissed. Although a sole proprietorship can act as an Operational Creditor and maintain a Section 9 petition, the present petitioner failed to establish that the invoices related to the respondent company; accordingly the petition is dismissed with no order as to costs.

Maintainability of insolvency application - minimum amount of default under Section 4 of the Insolvency and Bankruptcy Code, 2016 - applicability of Central Government notification dated 24.03.2020 raising the default threshold - effect of service of demand notice and timing of filing

Maintainability of insolvency application - minimum amount of default under Section 4 of the Insolvency and Bankruptcy Code, 2016 - applicability of Central Government notification dated 24.03.2020 raising the default threshold - effect of service of demand notice and timing of filing - Whether the Section 9 application is maintainable in view of the increased minimum default threshold under Section 4, having regard to the date of service of the demand notice and the date of filing of the application. - HELD THAT: - The Tribunal applied the statutory threshold in Section 4, as amended by the Central Government notification of 24.03.2020 which raised the minimum amount of default to Rs. 1 crore. The fresh demand notice in the present matter was served on the corporate debtor on 22.02.2021 and the Section 9 application was filed on 09.10.2021. The applicant's claimed default is below the threshold prescribed by the notification. Relying on the principle that Part II of the Code cannot be invoked where the minimum default is less than the notified threshold, and having regard to the Kerala High Court observation cited on the effect of the notification, the Tribunal concluded that an application under Section 9 filed after 24.03.2020 is not maintainable where the claimed default is below the notified minimum. Consequently the petition fails for want of maintainability under Section 4. [Paras 6, 7, 9]

The Section 9 application is not maintainable and is rejected.

Final Conclusion: The petition under Section 9 is rejected as not maintainable because the claimed default is below the minimum amount prescribed by the Central Government notification effective 24.03.2020; no order as to costs.

Voluntary liquidation - application under section 59 of the Insolvency and Bankruptcy Code, 2016 - compliance with the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - appointment of voluntary liquidator - distribution of assets in accordance with Section 53 - intimation to IBBI and RoC - no-objection by RoC and IBBI - dissolution of the company

Compliance with the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - appointment of voluntary liquidator - intimation to IBBI and RoC - distribution of assets in accordance with Section 53 - Sufficiency of compliance with the Code and the IBBI Voluntary Liquidation Regulations for seeking dissolution. - HELD THAT: - The Tribunal examined the records of the voluntary liquidation process, including the board resolution and special resolution for voluntary liquidation, appointment of an Insolvency Professional as voluntary liquidator, publication of the public announcement, submission of the preliminary and final reports, intimation to IBBI and RoC, filing of statutory forms and declarations with RoC, settlement of tax assessment and receipt of Income Tax NOC, opening and closure of the liquidation bank account and distribution of assets in accordance with Section 53. Having considered these materials, the Tribunal was satisfied that the statutory and regulatory steps required under section 59 of the Code and the IBBI (Voluntary Liquidation Process) Regulations, 2017 were complied with within the prescribed manner and time. [Paras 4, 7, 8]

The compliance requirements for voluntary liquidation were held to be fulfilled.

No-objection by RoC and IBBI - dissolution of the company - Whether any objection stood in the way of granting dissolution and the consequent order of dissolution. - HELD THAT: - Notices were issued to RoC and IBBI and the RoC filed a status report. No objections were received from RoC or IBBI following service. In view of the satisfaction recorded by the voluntary liquidator and the absence of any objection from the statutory authorities, the Tribunal concluded that there was no impediment to dissolution. The Tribunal therefore ordered the company to be dissolved with effect from the date of the order and directed that a copy of the order be filed with the RoC within the statutory period. [Paras 5, 6, 8, 9, 10]

The petition for dissolution was allowed; the company was dissolved and a copy of the order directed to be filed with the RoC.

Final Conclusion: The Tribunal, being satisfied with the statutory and regulatory compliance and in the absence of any objection from RoC or IBBI, allowed the application under section 59 and ordered dissolution of the company with effect from the date of the order, directing filing of the order with the RoC within the statutory period.

Extension of liquidation period under IBBI (Liquidation Process) Regulations, 2016 - distribution of unsold assets under Regulation 38(1) of the Liquidation Regulations - liquidator's fees under Regulation 4 of the Liquidation Regulations

Extension of liquidation period under IBBI (Liquidation Process) Regulations, 2016 - Grant of six months extension to the liquidation process of the Corporate Debtor - HELD THAT: - The Tribunal considered the liquidator's application which explained that the corporate debtor was placed in liquidation on 12.09.2018 and, despite multiple e-auctions (nine) and efforts including classified advertisements, a shop premises remained unsold. Reasons given included the lockdown, difficulty in finding a buyer, high maintenance charges deterring interest and absence of proper title (only an unregistered agreement to sell). The liquidator had earlier been permitted to effect a private sale by order dated 21.08.2020 but the asset still remained unsold. Having regard to these facts and the peculiar nature of the asset and the special circumstances preventing completion of liquidation within the original timeline, the Tribunal granted an extension of six months to the liquidation timeline from the date of the order to enable finalisation of the outstanding matters and completion of the liquidation process. [Paras 4, 5, 6, 9, 11]

Six months' extension of the liquidation process granted from the date of the order.

Distribution of unsold assets under Regulation 38(1) of the Liquidation Regulations - Permission to distribute the unsold asset amongst stakeholders under Regulation 38(1) - HELD THAT: - The Tribunal accepted the liquidator's submission that the unsold shop premises was of a peculiar nature and fell within the category contemplated by Regulation 38(1) for distribution of unsold assets among stakeholders. The applicant had placed the matter before the Stakeholders Consultation Committee (meeting held on 17.11.2020) and sought distribution in accordance with the order of priority under Section 53 of the Code. In view of the unsuccessful e-auctions, prior permission for private sale and continued inability to effect a sale despite publicity, the Tribunal allowed the liquidator to distribute the unsold asset to stakeholders under Regulation 38(1). [Paras 7, 8, 12]

Permission granted to distribute the unsold asset among stakeholders under Regulation 38(1) of the Liquidation Regulations.

Liquidator's fees under Regulation 4 of the Liquidation Regulations - Direction to stakeholders to pay the liquidator's fees as prescribed in Regulation 4 - HELD THAT: - The Tribunal noted the liquidator's statement that fees had been realized earlier on sale and distribution of other assets and that Regulation 4 prescribes liquidator's fees as a percentage of amounts realized and amounts distributed (as stated by the liquidator). Having regard to the continuation of the liquidation process and the order permitting distribution of the unsold asset, the Tribunal directed the stakeholders to pay the liquidator's fees in accordance with Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016. The Tribunal allowed the prayers seeking fee payment and disposed of the application accordingly. [Paras 10, 11, 12, 13]

Stakeholders directed to pay the liquidator's fees as prescribed in Regulation 4; prayers (b), (c) and (d) allowed and the application disposed of.

Final Conclusion: The Tribunal granted a six-month extension of the liquidation process, permitted distribution of the unsold shop premises to stakeholders under Regulation 38(1), and directed stakeholders to pay the liquidator's fees in accordance with Regulation 4; I.A. 5653/2020 disposed of in terms of the order.

Limitation under Section 7 IBC - Initiation of Corporate Insolvency Resolution Process - Admission of Section 7 application and setting aside by appellate forum - Permission to amend pleadings and place additional material on record - Remand for fresh adjudication by the Adjudicating Authority - Costs as condition for remand

Limitation under Section 7 IBC - Admission of Section 7 application and setting aside by appellate forum - The NCLAT's conclusion that the Section 7 application was barred by limitation and its order setting aside the NCLT admission. - HELD THAT: - The NCLAT set aside the NCLT order admitting the Section 7 application on the ground that the date of NPA was 17.06.2013 and the application filed on 01.04.2019 was time-barred. This Court noted that the appellant relied on additional material (correspondences and balance sheets for financial years 2015-2019) which were not before the Adjudicating Authority and which, it was contended, could demonstrate that the application was within limitation. The Court did not decide the limitation question on merits; instead it accepted that the absence of that material before the fora below warranted fresh consideration. Consequently, the NCLAT order was set aside and the matter remanded to the NCLT for fresh adjudication of the Section 7 application, leaving all substantive questions open.

NCLAT's order setting aside NCLT admission on limitation grounds set aside; matter remanded for fresh consideration by the NCLT without expressing any view on merits.

Permission to amend pleadings and place additional material on record - Remand for fresh adjudication by the Adjudicating Authority - Costs as condition for remand - Grant of permission to the Financial Creditor to amend the Section 7 petition and place additional annexures, and conditions of remand. - HELD THAT: - Relying on the Court's approach in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr., the Court granted the appellant leave to amend its Section 7 application and to place the additional material (correspondences and balance sheets) before the Adjudicating Authority. The Court imposed a condition of payment of costs as a precondition for remand, directing the appellant to pay Rs. 1,00,000 to the Corporate Debtor. The Court directed that the appropriate forum to consider the amended application is the NCLT and remanded the matter accordingly, while expressly leaving all questions open and not expressing any view on the merits.

Permission to amend granted; appeal disposed by setting aside NCLAT order and remanding to NCLT for fresh consideration of the amended Section 7 application, subject to payment of costs by the appellant.

Final Conclusion: Appeal disposed by setting aside the NCLAT order and remanding the matter to the NCLT for fresh adjudication of the amended Section 7 petition; appellant granted permission to place additional material on record, subject to payment of costs of Rs. 1,00,000 to the Corporate Debtor; all substantive questions left open.

Grant of bail - Section 45(1) PMLA - twin conditions for bail under PMLA - triple test for bail - economic offences constitute a class apart - mens rea and broad probabilities at bail stage - possibility of tampering with evidence and influencing witnesses - flight risk and securing presence at trial

Section 45(1) PMLA - twin conditions for bail under PMLA - Whether the applicant's bail application must be tested in light of the twin conditions contained in Section 45(1) of the PMLA as amended. - HELD THAT: - The Court held that the amended provision and the jurisprudence of the Supreme Court require that a bail application in connection with an offence under the PMLA be tested against the twin conditions of Section 45(1). Having reviewed the recent decisions of the Supreme Court and interlocutory orders (including Parkash Gurbaxani and Dr. V.C. Mohan), the Court concluded that the mandate of Section 45(1) cannot be ignored when considering bail under PMLA and that the application before it must be adjudicated on that touchstone. [Paras 28, 29, 31, 33, 36]

The bail application was required to be considered in accordance with the twin conditions of Section 45(1) PMLA.

Grant of bail - triple test for bail - economic offences constitute a class apart - mens rea and broad probabilities at bail stage - flight risk and securing presence at trial - possibility of tampering with evidence and influencing witnesses - Whether the applicant should be admitted to bail after applying the applicable legal tests and considering the facts and materials on record. - HELD THAT: - Applying settled principles governing bail (including the triple test and the special sensitivity applicable to economic offences), the Court examined the evidence and material on record. It concurred with the Special Court that there was no real prospect of tampering with evidence or influencing witnesses, and observed that the applicant's presence at trial could be secured by measures such as surrender of passport and issuance of LOCs; accordingly the applicant satisfied the ordinary triple test. However, having regard to the parameters under Section 45(1)(ii) of the PMLA and the prima facie material indicating the applicant's role as ultimate beneficial owner, the alleged sham transactions, routing and layering of funds, and the possibility that the accused possessed requisite mens rea, the Court found that it could not be satisfied that there were reasonable grounds for believing that the applicant was not guilty or that he was not likely to commit an offence while on bail. On that basis and after weighing the gravity of the allegations, the Court declined to grant bail. [Paras 34, 42, 43]

Bail was refused and the application dismissed.

Final Conclusion: The High Court held that a bail application in a PMLA case must be examined in light of the twin conditions in Section 45(1) and, after applying those conditions together with the established bail principles applicable to economic offences, declined to grant bail to the applicant; the dismissal does not express any view on the merits of the prosecution case.

Exemption under Notification No. 67/95-CE - substantive change in classification - tariff re-structuring from six digit to eight digit - withdrawal of exemption

Exemption under Notification No. 67/95-CE - substantive change in classification - tariff re-structuring from six digit to eight digit - withdrawal of exemption - Whether the addition of the item "other" in heading No. 22.04 by insertion of subheading 2204.90 with effect from 01.03.2005 effected a substantive change that terminated the benefit of the exemption under Notification No. 67/95-CE enjoyed by the assessee. - HELD THAT: - The Court accepted the Tribunal's finding that the amendment - the addition of "other" in heading 22.04 and the creation of subheading 2204.90 effective 01.03.2005 - arose from a general exercise of re-structuring the tariff from six digits to eight digits. The change was procedural and classificatory consequent to tariff harmonisation, and was not a substantive modification intended to withdraw or terminate an existing exemption. The assessee had enjoyed the exemption under Notification No. 67/95-CE up to and including the financial year 2005-2006, and there was no indication that the tariff revision was meant to remove that benefit. Consequently, the Revenue's contention that the amendment deprived the assessee of the exemption was rejected.

The appeal is dismissed; the tariff amendment did not constitute a substantive withdrawal of the exemption enjoyed by the assessee.

Final Conclusion: Appeal dismissed: the addition to heading 22.04 pursuant to tariff re-structuring did not amount to a substantive change to withdraw the exemption under Notification No. 67/95-CE, and the assessee's entitlement up to financial year 2005-2006 was upheld.

Valuation of job-worked goods - Applicability of Rule 10A read with Rule 8 of the Central Excise Valuation Rules - Assessable value on cost of materials plus processing charges (Ujagar Prints formula) - Rule 10A applicable only where job-worked goods are put into market or sold as such - Binding effect of Tribunal orders pending appeal to the Supreme Court - Distinction between factual matrix and applicability of precedent (Eicher Motors Tri.-LB)

Valuation of job-worked goods - Applicability of Rule 10A read with Rule 8 of the Central Excise Valuation Rules - Assessable value on cost of materials plus processing charges (Ujagar Prints formula) - Rule 10A applicable only where job-worked goods are put into market or sold as such - Valuation of laminations manufactured on job-work basis and whether Rule 10A(iii) read with Rule 8 applies or the Ujagar Prints formula governs assessable value. - HELD THAT: - The Tribunal found that Rule 10A contemplates different situations but is directed to circumstances where job-worked goods are sold or put into the market by or on behalf of the principal manufacturer. In the present factual matrix the laminations manufactured by the appellant were sent to another job-worker for further processing and ultimately used by the principal manufacturer in making a different final product which was sold. There is no case of the laminations being sold as such. Consequently, valuation under Rule 10A(iii) read with Rule 8 is not attracted. Instead, the Tribunal held that the assessable value should be determined by applying the formula in Ujagar Prints, i.e., cost of raw materials plus job-processing charges (including job-work profit), consistent with prior Tribunal decisions such as Advance Surfactants. The Tribunal therefore set aside the adjudged demand based on valuation under Rule 10A(iii). [Paras 5, 6, 10, 12]

Rule 10A(iii) read with Rule 8 is not applicable to the appellants' job-worked laminations; valuation to be as per the Ujagar Prints formula (cost of materials plus processing charges).

Binding effect of Tribunal orders pending appeal to the Supreme Court - Assessable value on cost of materials plus processing charges (Ujagar Prints formula) - Whether the Tribunal's earlier decision in Advance Surfactants (adopting Ujagar Prints method) could be declined effect by the Commissioner (Appeals) merely because the department had filed an appeal to the Supreme Court. - HELD THAT: - The Tribunal observed that mere filing of an appeal to the Supreme Court does not automatically stay or render ineffective the order appealed against; a specific order staying the earlier Tribunal decision is a condition precedent to deprive that decision of its operative effect. Citing Section 35M(1) read with Order 41 Rule 5 CPC principles and relevant High Court authority, the Bench held that since the Advance Surfactants order has not been stayed or set aside by the Supreme Court, lower authorities are bound to follow it. The Commissioner (Appeals) erred in refusing to follow the Tribunal decision on the ground that it was the subject of a pending appeal. [Paras 7, 8, 9, 10]

The Tribunal's earlier decision remains binding on lower authorities until stayed or set aside; mere pendency of a departmental appeal in the Supreme Court does not negate its effect.

Distinction between factual matrix and applicability of precedent (Eicher Motors Tri.-LB) - Valuation of job-worked goods - Whether the Larger Bench decision in Eicher Motors Ltd. governs the present case. - HELD THAT: - The Tribunal examined Eicher Motors (Tri.-LB) and found its facts distinguishable: that decision dealt with valuation under Rule 8 where a job-worked chassis was fitted into the motor vehicle by the principal manufacturer. In contrast, in the present case the laminations were further processed by another job-worker and ultimately used in manufacture of a different excisable product. The Tribunal noted that Eicher Motors did not consider or distinguish the Tribunal decisions relied upon by the appellant and therefore its ratio could not be applied to the present facts. [Paras 11]

Eicher Motors (Tri.-LB) is not applicable to the facts of this case; its ratio does not govern valuation here.

Final Conclusion: The appeal is allowed; the impugned Commissioner (Appeals) order confirming demands is set aside and valuation for the period in dispute is to be determined in accordance with the Ujagar Prints method as applied by the Tribunal, subject to the binding effect of existing Tribunal precedent not stayed by the Supreme Court.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Mens rea requirement for imposition of penalty under Rule 26 - Effect of settlement under SVLDRS-2019 on co-noticees and penalty proceedings - Liability of directors/employees for acts of the company - Requirement of specific role or knowledge to fasten personal penal liability

Effect of settlement under SVLDRS-2019 on co-noticees and penalty proceedings - Liability of directors/employees for acts of the company - Whether the appeal of the principal company stands disposed of on settlement under SVLDRS-2019 and whether that settlement affects penalty proceedings against the directors/employees - HELD THAT: - The Tribunal recorded that the appeal filed by the company was dismissed as deemed withdrawn because the matter in respect of the company had been settled under SVLDRS-2019 and a Form IV issued (see 4.2). The Tribunal observed the scheme FAQs indicating that once the main noticee discharges the duty/tax demand under the Scheme, co-noticees can avail benefits and that a declaration under the Scheme is not an admission of the allegations (see 4.3-4.4). Applying these principles and the cited decisions, the Tribunal held that settlement of the main company's liability under SVLDRS-2019 bears on continuation of penalty proceedings against persons associated with the company and that, where the main demand is settled under the Scheme, continuation of penalty against employees/directors is not justified unless the person independently seeks relief under the Scheme (see 4.7-4.8). [Paras 4]

The company's appeal is treated as settled under SVLDRS-2019 and the Tribunal refrained from making adverse observations about the company's case; the settlement materially affected the penalty proceedings against co-noticees.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Mens rea requirement for imposition of penalty under Rule 26 - Requirement of specific role or knowledge to fasten personal penal liability - Whether penalties imposed under Rule 26 on the individual appellants (directors/managers/employees) were sustainable - HELD THAT: - The Tribunal examined the Commissioner's findings (noting Para 30 as the operative finding against the present appellants) and found those findings to be general and lacking any specific attribution of acts or mens rea to the individual appellants (see 4.5-4.6). Relying on earlier decisions and the statutory test under Rule 26 (which penalises a person who deals with excisable goods which he "knows or has reason to believe" are liable to confiscation), the Tribunal concluded that the requisite mens rea was not established against the appellants who were performing their duties as employees/directors (see 4.7, citing jurisprudence emphasising mens rea). Consequently, the penalties imposed under Rule 26 could not be upheld. [Paras 4]

Penalties imposed on the appellants under Rule 26 are not sustainable and are set aside for want of mens rea and because the main company's matter has been settled under SVLDRS-2019.

Final Conclusion: The appeal is allowed: the company's appeal was treated as settled under SVLDRS-2019 and the penalties imposed under Rule 26 of the Central Excise Rules, 2002 on the individual appellants (directors/managers/employees) are set aside for lack of specific findings of mens rea and in view of the settlement of the main demand.

Refund of accumulated CENVAT credit under Rule 5 - Separation of refund remedy and recovery under Rule 14 - Statutory procedure must be followed in the prescribed manner - Mandatory one refund claim per quarter under the notification - Nexus between exported goods/services and claimed CENVAT credit - Proof of service-tax payment by the service provider for refund claim

Refund of accumulated CENVAT credit under Rule 5 - Separation of refund remedy and recovery under Rule 14 - Statutory procedure must be followed in the prescribed manner - Whether refund claims under Rule 5 could be denied on grounds that certain CENVAT credit was irregularly availed without invoking recovery proceedings under Rule 14 - HELD THAT: - The Tribunal held that Rule 5 provides for refund of accumulated CENVAT credit as per the formula and the legislative scheme to zero-rate exports. Allegations of irregular availment or erroneous taking of credit cannot be adjudicated in the refund proceedings under Rule 5; Rule 14 prescribes the exclusive machinery for denial and recovery of wrongly taken credit. Where the revenue has not initiated proceedings under Rule 14 to disallow or recover the disputed credit, the quantum of "Net CENVAT credit" as appearing in the assessee's records for the relevant quarter cannot be altered in the refund exercise. The principle that a statutory power must be exercised in the manner prescribed was applied to hold that denial of refund on the ground of irregular credit, without resort to Rule 14, is impermissible. [Paras 4, 5]

Refund cannot be denied on the ground of alleged irregular availment of credit unless recovery proceedings under Rule 14 are invoked; appeals allowed on this ground.

Mandatory one refund claim per quarter under the notification - Statutory procedure must be followed in the prescribed manner - Whether appellants were barred from filing the refund claims on the ground that more than one claim per quarter is permitted by the notification - HELD THAT: - The Tribunal examined clause 2(a) of Notification No. 27/2012-CE(NT) which provides that a claimant shall submit not more than one refund claim for every quarter. On the facts recorded in Table 2, the Tribunal found that the appellants had not filed more than one refund claim in any quarter. Further, the clause was read in the context of exports made in a quarter (the export turnover) and not as a restriction on claims relating to credits taken in different periods. Consequently, the revenue's contention that multiple claims were barred was rejected. [Paras 4]

Appellants were not barred by the notification from filing the refund claims; the contention of multiple claims per quarter was rejected.

Nexus between exported goods/services and claimed CENVAT credit - Refund of accumulated CENVAT credit under Rule 5 - Whether a direct nexus must be established between the goods/services exported in the quarter and the specific credit claimed for refund under Rule 5 - HELD THAT: - The Tribunal noted that Rule 5 prescribes a formula based on export turnover and net CENVAT credit for the relevant period. While revenue disputed nexus and questioned whether certain credits pertained to the quarter for which refund was filed, the Tribunal observed that Rule 5 governs refund computation and does not contain provisions to adjudicate the correctness of availment of credit itself. Where the department has not initiated Rule 14 proceedings to challenge the availment, denial of refund on nexus grounds is not sustainable. The Tribunal relied on authoritative tribunal decisions applying the same distinction between refund under Rule 5 and recovery under Rule 14. [Paras 4]

Refund cannot be refused merely on asserted absence of nexus between exported goods/services and the credits claimed where no Rule 14 proceedings have been initiated.

Proof of service-tax payment by the service provider for refund claim - Separation of refund remedy and recovery under Rule 14 - Whether claimants are required, in refund proceedings under Rule 5, to prove service-tax payment by the service provider (in cases of reverse charge) before refund of CENVAT credit can be allowed - HELD THAT: - The Tribunal dealt with the revenue's contention that credits taken on account of services paid on reverse charge were not admissible because the service tax payment by the provider was doubted. It held that Rule 5 is a mechanism to refund accumulated credit and is not the forum to determine the correctness of the availment of credit; issues concerning admissibility of credit (including proof of payment by provider) fall within the scope of Rule 14 recovery proceedings. In absence of such proceedings, refund cannot be withheld on this ground. [Paras 4]

No requirement to deny refund under Rule 5 for want of proof of service-tax payment by the provider where revenue has not contested the credit through Rule 14; refund cannot be withheld on that ground.

Final Conclusion: The impugned orders rejecting or partially rejecting the five refund claims under Rule 5 were set aside and all five appeals were allowed, on the ground that denial of refund on the basis of alleged irregular availment, lack of nexus, or disputed payment by service providers is not permissible in Rule 5 proceedings absent initiation of recovery proceedings under Rule 14; the notification restriction on multiple claims per quarter was also found inapplicable on the facts.

State cannot levy excise duty on alcoholic liquor not for human consumption - division of taxation power between Entry 51 List II and Entry 84 List I - definition of "excisable article" confined to alcoholic liquor for human consumption - excise duty permissible only on excisable articles as defined by statute

State cannot levy excise duty on alcoholic liquor not for human consumption - definition of "excisable article" confined to alcoholic liquor for human consumption - division of taxation power between Entry 51 List II and Entry 84 List I - Whether the State of Orissa could impose excise duty on the weak spirit/ wastage produced during re distillation which was found unfit for human consumption. - HELD THAT: - The Court found on the material before it that the wastage (weak spirit) produced in the respondent's ENA column was chemically tested and held to be unfit and unsafe for potable purpose. Applying the Constitution Bench decision in Synthetics and Chemicals Ltd., the Court observed that the Constitution distinguishes alcoholic liquors "for human consumption" (Entry 51 List II - within State competence to tax) from alcoholic liquors other than for human consumption (Entry 84 List I - within Centre's competence). The Court further followed the three Judge Bench in Modi Distillery which held that the State is not empowered to levy excise duty on raw material or inputs in the process of being rendered fit for human consumption, including wastage after distillation. A reading of the relevant provisions of the erstwhile Bihar and Orissa Excise Act, 1915, notably the definition of "excisable article" and the scope of power under Section 27(1), reinforces that the State's power to impose duty extends only to alcoholic liquor for human consumption. On these grounds the Court concluded that the demand of excise duty on the weak spirit, being non potable, could not be sustained. [Paras 16, 17, 18, 21, 22]

Demand notices seeking excise duty on the weak spirit/wastage found unfit for human consumption were unsustainable; the High Court's order allowing the writ petitions was correct and the appeals are dismissed.

Final Conclusion: The appeals are dismissed. The High Court correctly held that excise duty could not be imposed by the State on the weak spirit/wastage found unfit for human consumption, in view of the constitutional division of taxing powers and the statutory definition of "excisable article." No order as to costs.

Refund on assessment finding excess payment under Section 20(4) - restrictive refund provisions under Section 20(2)(a)-(b) - adjustment of refund with future tax liability - interest on delayed refund as contemplated by the Act - exercise of writ jurisdiction under Article 226 due to non-functioning appellate forum

Refund on assessment finding excess payment under Section 20(4) - restrictive refund provisions under Section 20(2)(a)-(b) - exercise of writ jurisdiction under Article 226 due to non-functioning appellate forum - Revisional Authority erred in rejecting the petitioner's claim of refund for assessment year 2017-18 by applying Section 20(2)(a)/(b) without considering Section 20(4) of the Act, and whether writ jurisdiction could be invoked. - HELD THAT: - The Revisional Authority decided the matter on the basis of Section 20(2)(a)/(b) without addressing or applying Section 20(4). The record and admissions show that the Assessing Authority on assessment found that the petitioner had paid an amount in excess of tax, interest or penalty. Section 20(4) requires that where such a finding is made on assessment the excess amount shall be refunded or allowed to be carried forward for adjustment. The Revisional Authority gave no reasons for excluding Section 20(4) and the respondents' counsel failed to demonstrate why Section 20(4) would not apply. Further, although Section 33 provides an appellate remedy, the Haryana Tax Tribunal is not functional, rendering the alternate remedy illusory and permitting the court to exercise jurisdiction under Article 226. In these circumstances the impugned revisional order was unsustainable and required setting aside, with directions to refund the amount found due together with interest as provided by law. [Paras 7, 9, 10]

Impugned revisional order set aside; respondents directed to issue refund for assessment year 2017-18 with interest within four weeks.

Final Conclusion: Writ petition allowed: revisional order dated 22.02.2021 set aside and respondent directed to refund the amount found due for assessment year 2017-18 with interest, the court exercising Article 226 jurisdiction because the statutory appellate forum is not functioning.

Principles of natural justice - right to fair hearing - real and effective opportunity to be heard - non-speaking order - application of mind - best judgment assessment - Rule 38 of the Kerala Value Added Tax Rules, 2005 - remand for fresh hearing and disposal

Principles of natural justice - right to fair hearing - real and effective opportunity to be heard - Rule 38 of the Kerala Value Added Tax Rules, 2005 - Whether the assessment orders were vitiated for denial of a real and effective opportunity of hearing to the petitioner - HELD THAT: - The Court found that the twin ingredients of natural justice - notice and an opportunity to be heard, and reasoned conclusions - were not satisfied. Documentary material and correspondence (including Ext.P8) showed that the petitioner was unable, for reasons beyond its control, to produce books and documents (computers and records were in bank custody and the Managing Director was incarcerated abroad) and had requested additional time to produce documents. The assessing officer refused the request without proper application of mind and proceeded on the basis of non-reply. The Court held that a ritualistic or illusory hearing does not satisfy the requirement; Rule 38 envisages a reasonable opportunity before completing a best judgment assessment, and on the facts a reasonable opportunity was not afforded to the petitioner. [Paras 11, 12, 13, 15, 16]

Assessment orders are vitiated by denial of a real and effective opportunity to be heard and therefore unsustainable.

Non-speaking order - application of mind - best judgment assessment - Whether the assessment orders are non-speaking and issued without proper application of mind - HELD THAT: - The Court observed that the assessing officer proceeded mainly on the basis of non-response by the assessee and adopted conclusions without independent reasoning. The orders lacked consideration of the specific issues raised and did not demonstrate the assessing authority's application of mind; they amounted to non-speaking orders. Reliance was placed on the principle that a quasi-judicial assessing officer must apply his mind independently even when taking into account intelligence or departmental findings. [Paras 9, 10, 17, 18]

Assessment orders are non-speaking for want of application of mind and are therefore liable to be set aside.

Remand for fresh hearing and disposal - Directions for disposal after setting aside the assessment orders - HELD THAT: - Having set aside the impugned orders for violations of natural justice and for being non-speaking, the Court directed that the petitioner shall appear before the first respondent on 15.12.2021 and file objections that day; no further adjournment for filing objections would be permitted. The Assessing Officer was directed to hear the petitioner and pass appropriate orders within three months from receipt of a copy of the judgment. The Court recorded that no further notice need be given by the Assessing Officer for the specified appearance date. [Paras 18, 19, 20]

Ext.P5, Ext.P6 and Ext.P7 are set aside and the matter is remanded for fresh hearing and disposal in accordance with the directions given.

Final Conclusion: Writ petition allowed; the assessment orders (Ext.P5, Ext.P6 and Ext.P7) are set aside for violation of natural justice and for being non-speaking; petitioner directed to appear and file objections on 15.12.2021 and the Assessing Officer to hear and pass fresh orders within three months of receipt of this judgment, no further adjournment for filing objections to be granted.

Ouster of consumer forum jurisdiction by special statutory remedy - Section 7B Arbitration of disputes under the Indian Telegraph Act, 1885 - Interpretation of "service" under the Consumer Protection Act - Provisions of the Consumer Protection Act are in addition to and not in derogation of other laws - Later law overriding earlier special law (Generalia specialibus non derogant) - Doctrine of election between alternate remedies

Ouster of consumer forum jurisdiction by special statutory remedy - Section 7B Arbitration of disputes under the Indian Telegraph Act, 1885 - Provisions of the Consumer Protection Act are in addition to and not in derogation of other laws - Existence of the statutory arbitral remedy under Section 7B of the Indian Telegraph Act, 1885 does not oust the jurisdiction of the consumer forum under the Consumer Protection Act, 1986. - HELD THAT: - Section 7B provides for arbitration of disputes between a telegraph authority and the person for whose benefit a telegraph facility is provided. However, the Court held that the statutory availability of arbitration under the Act of 1885 does not, by itself, oust the consumer fora's jurisdiction. The Consumer Protection Act was enacted as a special statute to safeguard consumer interests and, by Section 3 of the Act of 1986, its remedies are additional to, and not in derogation of, remedies under other laws. The mere fact that the remedy under the Act of 1885 is statutory and provides for arbitration is insufficient to infer an ouster of jurisdiction unless express words or necessary implication require it. Therefore a consumer may elect to pursue arbitration but is not compelled to forgo the remedies available under the consumer law. [Paras 16, 19, 20]

The statutory arbitral remedy in Section 7B does not oust the jurisdiction of the consumer forum; the consumer may choose to pursue consumer fora remedies.

Interpretation of "service" under the Consumer Protection Act - Inclusion of telecom services in later legislation does not imply prior exclusion - Telecom services fell within the wide definition of 'service' under the Consumer Protection Act, 1986; subsequent explicit inclusion in the 2019 Act does not imply exclusion prior to 2019. - HELD THAT: - The Court examined the definition of 'service' in Section 2(o) of the 1986 Act and noted its expansive 'means and includes' formulation - 'service of any description which is made available to potential users' with illustrative, non-exhaustive examples. Consequently, telecom services were comprehended within that wide definition even though the Act of 2019 expressly mentions 'telecom' in its definition. The later specific drafting in the 2019 Act cannot be read to mean that telecom services were outside the ambit of the 1986 Act. [Paras 7, 9, 14, 20]

Telecom services are within the ambit of 'service' under the Consumer Protection Act, 1986; explicit mention in the 2019 Act does not indicate prior exclusion.

Later law overriding earlier special law (Generalia specialibus non derogant) - Doctrine of election between alternate remedies - The earlier two-Judge Bench decision in General Manager, Telecom v. M Krishnan is incorrect to the extent it held that Section 7B impliedly bars consumer forum jurisdiction; a later consumer-protection enactment and the statutory scheme require that consumer remedies remain available. - HELD THAT: - The Court disagreed with M Krishnan for two principal reasons: it failed to recognize that the Consumer Protection Act is itself a special legislation enacted to protect consumers; and it did not apply the principle that a later statute may override an earlier one if inconsistent. Further, prior precedent and statutory text (Section 3 of the 1986 Act and its counterpart in the 2019 Act) establish that consumer remedies are additional to other remedies. The Court also invoked the doctrine of election: where alternate remedies coexist, a consumer may elect which remedy to pursue, provided their ambit is not essentially different. Accordingly, the reasoning in M Krishnan cannot stand as a bar to consumer fora exercising jurisdiction. [Paras 17, 18, 19, 20]

The view in M Krishnan that Section 7B by implication bars consumer forum jurisdiction is unsustainable; consumers may elect between available remedies and consumer fora retain jurisdiction.

Final Conclusion: The judgment of the NCDRC affirming that the District Consumer Forum has jurisdiction to entertain the complaint was upheld; the statutory arbitral remedy under Section 7B of the Indian Telegraph Act, 1885 does not oust consumer forum jurisdiction and telecom services are encompassed within the definition of 'service' under the Consumer Protection Act, 1986.

Demand and acceptance of illegal gratification - Criminal misconduct by a public servant - Presumption where public servant accepts gratification under Section 20 of the Prevention of Corruption Act - Trap evidence and entrustment/colour test - Burden to rebut statutory presumption - KVAT Act penalty proceedings and GC endorsement

Demand and acceptance of illegal gratification - Trap evidence and entrustment/colour test - KVAT Act penalty proceedings and GC endorsement - Prosecution proved beyond reasonable doubt the ingredients of offences under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act. - HELD THAT: - The court identified the essential ingredients for offences under Sections 7 and 13(1)(d) read with Section 13(2) as (i) demand and acceptance of bribe, (ii) handling of tainted money by the accused on the day of trap (colour test), and (iii) that work of the complainant was pending with the accused (para 37). The evidence of the complainant and the shadow witness, supported by entrustment and trap mahazars and a positive colour test, established receipt and custody of the tainted currency by the accused on the day of the trap (paras 41-42, 62). Although the initial interception and GC endorsement (Ex.P-31) were made by another officer and penalty proceedings under the KVAT Act would only arise after prescribed timelines, the fact that the accused negotiated over the telephone, agreed to and received the agreed sum of Rs. 5 lakhs, and kept it in his almirah, negated the defence explanation that the money was part payment of a statutory penalty not yet leviable (paras 39-51, 54). Having discharged its initial burden, the prosecution attracted the statutory presumption under Section 20 of the PC Act; the accused failed to produce plausible rebuttal evidence to dispel that presumption (paras 52-54). The trial court's reliance on the trap material, oral testimony of complainant and shadow witness, the positive colour test and the absence of a credible explanation by the accused furnished a sustainable basis for conviction (paras 62-63). [Paras 41, 42, 52, 54, 62]

Convictions under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act are upheld.

Presumption where public servant accepts gratification under Section 20 of the Prevention of Corruption Act - Burden to rebut statutory presumption - Whether the trial court's judgment suffers from legal infirmity or perversity. - HELD THAT: - The High Court re-appreciated the material evidence and legal principles governing trap cases and statutory presumptions. It observed that the prosecution established initial burden and that Section 20 presumption arose on proof of acceptance of gratification; the accused's written explanation and oral statements failed to provide plausible materials to rebut the presumption (paras 52-54). The Court also applied established precedents on appreciation of trap and shadow-witness testimony and rejected the contention that such witnesses ought to be disbelieved automatically (paras 55-61). On cumulative consideration, the High Court found no legal infirmity or perversity in the trial court's findings (para 63). [Paras 54, 55, 56, 62, 63]

The impugned judgment is not vitiated by legal infirmity or perversity and requires no interference.

Sentence adequacy and appellate limitation on enhancement - Whether the sentence imposed is excessive and liable to interference. - HELD THAT: - The Court noted that the trial court sentenced the accused to imprisonment terms and fines for the offences; in particular the sentence for Section 7 was for less than the statutory minimum of three years. As the State did not challenge sentence inadequacy, the appellate court held itself bound and declined to enhance the term in an appeal filed by the accused (para 64). The concurrent sentence for Section 13(1)(d) runs for four years and both sentences were ordered to run concurrently; no mitigating circumstances were presented to justify reduction (paras 64-66). [Paras 64, 65, 66]

Sentence is not disturbed; appellate court declines to enhance or otherwise alter the punishment in this appeal.

Final Conclusion: Criminal appeal dismissed; convictions under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act are affirmed and the appellant is directed to surrender to serve the remaining portion of sentence by the date fixed by the Court.

Specific performance - Illegality under Section 23 of the Indian Contract Act - Statutory allotment scheme and Rule 18(2) non alienation embargo - Doctrine of lis pendens under Section 52 of the Transfer of Property Act - Bonafide purchaser for value without notice - Prematurity of suit and Article 54 of the Limitation Act - In pari delicto - potior est conditio defendentis - Restitutionary relief as alternative to specific performance

Specific performance - Illegality under Section 23 of the Indian Contract Act - Statutory allotment scheme and Rule 18(2) non alienation embargo - In pari delicto - potior est conditio defendentis - Enforceability of the agreement dated 17.11.1982 and entitlement to specific performance - HELD THAT: - The agreement of sale between the plaintiff and the allottee (first defendant) was examined against the statutory scheme of allotment under the City of Bangalore Improvement (Allotment of Sites) Rules, 1972 and the lease cum sale (Form II). The Rules treat an allottee as a lessee obliged to construct a residential building and impose a statutory embargo on alienation for ten years from the date of allotment (and consequent conditions in Rule 18(2)). The Court held that the agreement, by its terms, would require the allottee to abstain from performing statutory obligations and would, if enforced, materially defeat the object and mandate of the Rules. Such a contract is therefore unenforceable as its object is unlawful within the principle of Section 23 (object/consideration defeating the provisions of law). The illegality was held to go to the root of the transaction and was not trivial or venial; the plaintiff was required to rely on the illegal transaction to obtain relief. Consequently, the suit for specific performance could not be countenanced and the maxim in pari delicto reinforced refusal of equitable assistance.

Agreement unenforceable; suit for specific performance dismissed.

Prematurity of suit and Article 54 of the Limitation Act - Whether the suit was premature under Article 54 of the Limitation Act - HELD THAT: - The Court noted the contention that a fixed time for vendor performance (three months from the date on which the vendor obtained the absolute sale deed from BDA) might render the suit premature if brought before that date. While recognising authorities on when a 'date fixed for performance' may be found, the Court did not disturb the High Court's factual conclusions on readiness/repudiation and ultimately did not rely on prematurity to uphold plaintiff's claim because the agreement itself was held unenforceable on statutory illegality grounds.

Prematurity issue need not and does not rescue the plaintiff once the contract is held unenforceable.

Doctrine of lis pendens under Section 52 of the Transfer of Property Act - Whether the sale to the second defendant (purchaser) was hit by lis pendens under Section 52 TP Act - HELD THAT: - The Court analysed the requirements of Section 52 and the doctrine that the embargo applies where a party to the litigation disposes of the property pendente lite. The transfer to the second defendant took place when the vendor (son) and the purchaser were not parties to the suit; the vendor was impleaded only later. The High Court's reliance on constructive notice and on the conduct of the husband (who was a party) was held misplaced: mere non disclosure or presence of a party who later facilitated title does not convert an otherwise valid transfer by a non party into one automatically void under Section 52. The Court found that the transfer in favour of the second defendant was not properly hit by lis pendens in the circumstances and that the High Court erred in so holding.

Sale to the second defendant was not rendered void by lis pendens; High Court erred in so finding.

Bonafide purchaser for value without notice - Whether the second defendant was a bonafide purchaser for value without notice - HELD THAT: - The Trial Court had found the second defendant to be a bonafide purchaser and the High Court reached the contrary conclusion after reappreciation of evidence. The Supreme Court observed that the High Court wrongly characterised the transaction as a sham (a contention not pleaded) and that many of the High Court's inferences (youth, means, enquiries about original possession certificate) were unsustainably drawn. However, having held the plaintiff's underlying contract unenforceable, the Court emphasised that even if there were doubts about the bona fides of the second defendant, such a finding would not advance the plaintiff's claim for specific performance. The Supreme Court therefore did not rest the final outcome on resolving the bona fides contest and declined to disturb the Trial Court's factual appreciation where unnecessary for the ultimate decision.

Court did not rely on a positive finding against the second defendant; resolution of bona fides was unnecessary to deny relief to the plaintiff.

Restitutionary relief as alternative to specific performance - Appropriate final relief between the parties after finding agreement unenforceable - HELD THAT: - Although the suit for specific performance was dismissed, the Court exercised equitable jurisdiction to mould relief between the parties. Taking into account the plaintiff's payment under the unenforceable agreement and the conduct and evidence on value, the Supreme Court substituted a money decree in place of specific performance. The Court directed payment by the appellants to the plaintiff's legal representatives of a specified lump sum within a fixed period, with interest thereafter if unpaid, as a fair and complete disposal of the controversy.

Specific performance dismissed; substituted relief awarded in favour of plaintiff's legal representatives (payment directed).

Final Conclusion: The agreement of 17.11.1982 was held unenforceable as its enforcement would defeat the statutory allotment scheme and the Rule 18(2) embargo; the suit for specific performance is dismissed. The sale to the second defendant was not properly hit by lis pendens, and resolution of the second defendant's bona fides was unnecessary to deny specific performance. In the exercise of equitable jurisdiction the Court substituted a money decree in favour of the plaintiff's legal representatives and directed payment by the appellants as full relief.