TaxTMI Updates e-Newsletter
Mar 11,2023

Principles of natural justice - opportunity of personal hearing - procedure for determination of tax under Section 75(4) - entitlement to concessional rate under Notification No. 11 of 2017 (clause (ix) and clause (vi)(a)) - appreciation of contractual documents for classification of supply

Principles of natural justice - opportunity of personal hearing - procedure for determination of tax under Section 75(4) - Assessment/order was finalised without affording the petitioner a personal hearing in contravention of the procedure mandated by Section 75(4) and principles of natural justice. - HELD THAT: - The record establishes that a revised notice in Form GST DRC-01 was issued which granted the petitioner an opportunity to file a representation with documentary evidence and an opportunity of hearing. The Assessing Officer did not fix any date or time for a personal hearing, and although the petitioner filed a written submission, it also sought a personal hearing which was not granted. Section 75(4) requires that where an adverse decision is contemplated, a personal hearing shall be granted unless the department intends to accept the assessee's stand. The officer proceeded to finalise the assessment without hearing the petitioner, thereby violating the statutory procedure and the principles of natural justice. This procedural infirmity is fatal to the impugned orders. [Paras 9, 10, 11, 12, 13]

Impugned orders set aside for failure to afford personal hearing in breach of Section 75(4) and principles of natural justice; writ petitions allowed.

Entitlement to concessional rate under Notification No. 11 of 2017 (clause (ix) and clause (vi)(a)) - appreciation of contractual documents for classification of supply - Whether the Assessing Officer could appreciate the petitioner's claim to concessional rate under the Notification without the contractual documents being placed on record. - HELD THAT: - The question of entitlement to the concessional composite works contract rate under Notification No. 11 of 2017 turns on the factual nature of the contract and whether the works fall within clause (vi)(a). The petitioner admitted that the relevant agreement and documentary evidence were not placed before the Assessing Officer; in such circumstances the Assessing Authority could not be expected to determine the nature of the contract or the applicability of the Notification without those documents. The State relied upon this lacuna. Given the procedural invalidity found, the Court did not decide the merits of the concessional rate claim on record but indicated that factual appreciation requires production and consideration of the contractual documents. [Paras 5, 6, 7, 8, 13]

Merits of the concessional rate claim not adjudicated on present record; determination requires production of the agreement and documentary evidence and fresh consideration after affording hearing.

Final Conclusion: Impugned assessment orders set aside for violation of Section 75(4) and principles of natural justice by finalising assessment without affording a personal hearing; the question of entitlement to concessional rate under Notification No. 11 of 2017 remains for fresh consideration by the Assessing Authority after the petitioner furnishes the contractual documents and is heard; no costs.

Violation of principles of natural justice - summary order without a reasoned adjudication - right to effective appeal / remedy illusory without reasons - remand for fresh consideration with opportunity of hearing - treatment of merits as prima facie upon remand

Summary order without a reasoned adjudication - violation of principles of natural justice - right to effective appeal / remedy illusory without reasons - Impugned summary order dated 9 June 2020 set aside for absence of a reasoned order and breach of principles of natural justice. - HELD THAT: - The Court examined whether the order impugned was a mere summary lacking reasons and whether such summary compliance violated the principles of natural justice and statutory scheme. The respondents' affidavit conceded that only a summary of the order was issued without mentioning reasons for disallowance, and that no detailed order had been passed. In those circumstances the Court concluded that the petitioner was denied the material requisite for filing an effective appeal, rendering the appellate remedy illusory. For this reason the impugned order could not stand and required being set aside to restore the efficacy of statutory remedies. [Paras 5, 6, 8]

Impugned order dated 9 June 2020 set aside for lack of a reasoned adjudication; proceedings restored.

Remand for fresh consideration with opportunity of hearing - treatment of merits as prima facie upon remand - Proceedings remanded to the jurisdictional officer to pass an appropriate reasoned order after giving opportunity; merits in respondents' reply treated as prima facie and all contentions kept open. - HELD THAT: - The Court directed that, in view of the defect identified, the matter be restored and remanded to the concerned jurisdictional officer for fresh adjudication in accordance with law after affording the petitioner an opportunity of hearing. The Court limited the scope of its inquiry to the procedural defect and expressly treated the merit-based contentions in the respondents' affidavit as prima facie only, leaving all substantive contentions, including the question of jurisdiction, open for determination by the authority on remand. [Paras 7, 9, 10]

Matter remitted to the jurisdictional officer for fresh consideration after giving opportunity; merits and jurisdictional contentions left open.

Final Conclusion: The High Court set aside the summary order of 9 June 2020 for want of a reasoned adjudication, restored the proceedings and remitted the matter to the jurisdictional officer to pass an appropriate reasoned order after affording the petitioner an opportunity; substantive contentions including jurisdiction remain open for determination on remand.

Classification by preferring a specific tariff heading over a general heading (Rule 3) - exclusion of machines and apparatus of headings 8401 to 8479 from being treated as 'parts' under Section XVII (Section Note 2(e)) - HSN explanatory notes and functional test for classification - 'suitable for use solely or principally' test for parts of railway rolling-stock - advance ruling is in personam and binding only on the applicant and the concerned officer (Section 103)

Classification by preferring a specific tariff heading over a general heading (Rule 3) - exclusion of machines and apparatus of headings 8401 to 8479 from being treated as 'parts' under Section XVII (Section Note 2(e)) - HSN explanatory notes and functional test for classification - 'suitable for use solely or principally' test for parts of railway rolling-stock - Roof mounted air conditioning units manufactured by the appellant are classifiable under HSN Heading 8415 and not under HSN Heading 8607. - HELD THAT: - The appellate authority applied the established rule that where competing headings exist the more specific heading is preferred to a more general one, invoking the principle in Rule 3. Heading 8415 is a specific entry for air conditioning machines and covers machines irrespective of the industry or vehicle in which they are used; the Explanatory Notes to Chapter 84 confirm classification by reference to function rather than field of industry. Section Note 2(e) to Section XVII excludes from that Section machines and apparatus falling within headings 8401-8479 from being treated as 'parts' or 'parts and accessories'. Although heading 8607 requires that parts be identifiable as suitable for use solely or principally with rolling stock, the roof mounted AC unit, being an air conditioning machine within heading 8415, is excluded from classification as a part under Section XVII by operation of Section Note 2(e) and therefore cannot be brought under heading 8607. The appellate authority rejected the appellant's reliance on decisions and section notes invoked to support classification under 8607 because those authorities and factual matrices did not attract the Section Note 2(e) exclusion applicable here. Applying these principles to the material before it, the authority concluded that the goods fall within heading 8415. [Paras 12, 14, 15, 18, 30]

The subject roof mounted air conditioning units are classifiable under HSN 8415 and not as parts of rolling stock under HSN 8607.

Advance ruling is in personam and binding only on the applicant and the concerned officer (Section 103) - Advance rulings pronounced by the Authority for Advance Ruling are in personam and not in rem; they bind only the applicant who sought the ruling and the concerned officer. - HELD THAT: - The authority noted the statutory character of advance rulings under Section 103 and observed that such rulings are binding only on the applicant and the jurisdictional officer in respect of that applicant. Consequently, prior AAR/AAAR decisions cited by the appellant are not automatically binding on the present parties where those prior rulings were rendered for different applicants. [Paras 28, 29]

The prior AAR/AAAR orders relied upon by the appellant do not bind the authority in the present proceedings because advance rulings are in personam.

Final Conclusion: The appeal is dismissed and the order AAR/GST/PB/016 dated 16th August 2022 is upheld: the roof mounted air conditioning units manufactured by the appellant are classifiable under HSN 8415, and the AAR's ruling remains binding in personam on the applicant and concerned officer.

Supply of goods v. supply of services - Job work - Composite supply and principal supply - Manufacture - Classification under HSN 8707 (Bodies) - Classification under SAC 9988 (fabrication/job-work services) - Applicability of CBIC Circular No. 52/26/18-GST (paras 12.2-12.3) - Applicable GST rates: 28% and 18%

Classification under HSN 8707 (Bodies) - Supply of goods v. supply of services - Applicability of CBIC Circular No. 52/26/18-GST (paras 12.2-12.3) - Applicable GST rates: 28% - Whether fabrication and mounting of tipper body on a chassis owned by the applicant amounts to supply of goods and the applicable GST rate. - HELD THAT: - The Authority examined the factual matrix and the relevant statutory concepts including manufacture, job work and the tests for composite supply and principal supply. Relying on the CBIC clarification in Circular No. 52/26/18-GST (paras 12.2-12.3), the Authority held that where the body building and mounting is carried out on a chassis owned by the body-builder (applicant) using the applicant's inputs and capital goods, the activity results in supply of goods. In that situation the predominant element is the built vehicle/body and the supply falls within HSN 8707 (Bodies), attracting the higher rate applicable to motor vehicle bodies. The Authority treated the circular as determinative on the facts presented and applied its distinction between situations where the body-builder supplies the built vehicle and where fabrication is performed on principal's chassis. [Paras 5]

Fabrication and mounting of tipper body performed on a chassis owned by the applicant is supply of goods classified under HSN 8707 and attracts GST @28%.

Job work - Supply of goods v. supply of services - Classification under SAC 9988 (fabrication/job-work services) - Applicability of CBIC Circular No. 52/26/18-GST (paras 12.2-12.3) - Applicable GST rates: 18% - Whether fabrication and mounting of tipper body on a chassis supplied and owned by the customer amounts to supply of services and the applicable GST rate. - HELD THAT: - Applying the same statutory concepts and the CBIC circular, the Authority found that where the chassis is owned and supplied by the customer and the body-builder merely performs fabrication/mounting (even if the body-builder uses certain inputs), the activity merits classification as a service (job work/fabrication on principal's goods). The circular distinguishes this factual scenario and indicates that such fabrication constitutes a supply of service rather than a transfer of goods. Consequently, the activity is to be treated as service under SAC 9988 and taxed at the rate applicable to such services. [Paras 5]

Fabrication and mounting of tipper body performed on a chassis owned and supplied by the customer is a supply of services (SAC 9988) and attracts GST @18%.

Final Conclusion: Advance rulings issued: where the applicant fabricates and mounts a tipper body on a chassis owned by the applicant, the transaction is supply of goods classified under HSN 8707 attracting GST @28%; where the chassis is owned and supplied by the customer, the activity is a supply of services (SAC 9988) and attracts GST @18%, in accordance with CBIC Circular No. 52/26/18-GST (paras 12.2-12.3).

Fees for included services - make available technical knowledge, experience, skill, know-how, or processes - source rule - utilization of services outside India - Section 195 - withholding obligation for payments to non-residents - Section 201(1) and 201(1A) - liability for TDS in case of default - Article 12 - Royalties and fees for included services (DTAA)

Fees for included services - make available technical knowledge, experience, skill, know-how, or processes - Article 12 - Royalties and fees for included services (DTAA) - Payments made to the non-resident US company do not constitute 'royalty' or 'fees for included services' because the services did not make available technical knowledge, know how, skill, processes or transfer of any technical plan or design. - HELD THAT: - The Court examined the definition of 'fees for included services' in Article 12 of the DTAA which requires that such services must make available technical knowledge, experience, skill, know how or processes or consist of development and transfer of a technical plan or technical design. It found, on the material before it, that the services rendered by the US company were limited to business facilitation activities (lead generation, market research, customer leads, assistance in negotiations and collections) and did not make available technical knowledge, know how, skill, processes or transfer any technical plan or design. The Tribunal's conclusion that the payments could not be categorised as royalty or fees for included services therefore stands and the AO's contrary view was held to be perverse. [Paras 14, 15, 20, 21]

The payments are not taxable as 'royalty' or 'fees for included services' and do not attract the characterisation urged by the Revenue.

Section 195 - withholding obligation for payments to non-residents - Section 201(1) and 201(1A) - liability for TDS in case of default - source rule - utilization of services outside India - Conditions for invoking Section 201(1) and 201(1A) against the assessee (i.e., treating the assessee as a defaulting withholding agent) are not satisfied because the payments do not constitute income deemed to accrue or arise in India. - HELD THAT: - The Court applied the statutory withholding test under Section 195 read with the source rules in Section 9(1)(vii) and the exception in clause (b) (services utilized outside India). Having found that the services were rendered and utilized in the USA, the Court accepted the reasoning in the authority relied upon by the assessee that the exclusion in Section 9(1)(vii)(b) applies where services are utilised for earning income outside India. Since the receipts of the non resident did not, on the facts, accrue or arise in India as 'fees for included services' or royalty, there was no obligation on the assessee to deduct tax at source and the AO's invocation of Section 201(1)/201(1A) was not sustainable. [Paras 8, 12, 20, 21]

The requirements for treating the assessee as a defaulting deductor under Sections 201(1) and 201(1A) are not met; therefore no TDS liability arises on the payments in question.

Final Conclusion: Appeals dismissed. The substantial questions of law are answered in favour of the assessee and against the Revenue: the payments to the US company are neither royalty nor fees for included services and, being services utilised outside India, did not attract a withholding obligation or render the assessee liable under Sections 201(1)/201(1A).

Reopening of assessment under section 147/148 - change of opinion - failure to make full and true disclosure - carry forward and set off of deficit under section 11 - requirement of fresh tangible material for reopening

Reopening of assessment under section 147/148 - change of opinion - requirement of fresh tangible material for reopening - Validity of the notice under section 148 proposing reassessment for A.Y. 2008-09 - HELD THAT: - The Court examined whether the Assessing Officer had a valid reason to believe that income chargeable to tax for A.Y. 2008-09 had escaped assessment. The reasons recorded relied on a perusal of records and the AO's view formed after subsequent year proceedings; no fresh tangible material not available at the time of the original assessment was identified. The Court applied the settled principle that reopening under section 147/148 requires reasons based on fresh or tangible material and cannot be predicated merely on a later change of opinion. Finding that the AO's recorded reasons amounted to a change of opinion and did not disclose new material or a failure to make full and true disclosure by the assessee, the Court held the reassessment notice and consequential proceedings to be invalid. [Paras 8, 11, 13]

Impugned notice dated 20th March 2015 and order dated 2nd November 2015 were quashed and set aside; consequential actions stayed.

Carry forward and set off of deficit under section 11 - failure to make full and true disclosure - Whether the petitioner was rightly entitled to claim carry forward and set off of the deficit under section 11 - HELD THAT: - The Court considered the settled jurisprudence permitting carry forward and set off of deficit where commercial principles and the benevolent scheme of section 11 justify treating an adjustment as application of income in the year of set-off. Reliance was placed on this Court's and Supreme Court's precedents recognizing that entitlement to carry forward is to be considered in the year of set-off and that earlier allowance of accumulation does not, without more, establish failure to disclose. Applying these principles to the material on record, the Court found that the petitioner had rightly claimed carry forward and set off of the deficit and that the AO's invocation of reassessment on the ground that such deficit should not be carried forward was a change of opinion rather than a consequence of any nondisclosure of material facts. [Paras 9, 10, 12]

Petitioner's claim to carry forward and set off of the deficit was upheld; reassessment could not be sustained on the ground now advanced by the AO.

Final Conclusion: The petition is allowed: the reassessment notice dated 20th March 2015 and the order rejecting objections dated 2nd November 2015 are quashed and set aside, consequential actions stayed; no order as to costs.

Reopening of assessment - assessment under section 143(3) r.w.s. 147 - notice under section 148 - change of opinion - tangible material - full and true disclosure of primary facts - presumption of application of mind in assessment under section 143(3) - quashing of reassessment notice and consequential actions

Reopening of assessment - change of opinion - tangible material - full and true disclosure of primary facts - presumption of application of mind in assessment under section 143(3) - quashing of reassessment notice and consequential actions - Validity of reopening assessment for AY 2015-16 by issuance of notice under Section 148 and passing of assessment order under Section 143(3) r.w.s. 147 where the AO relied on record already before him and did not identify new tangible material. - HELD THAT: - The Court held that the reopening was based on verification of existing case records and a change of opinion rather than any new tangible material. Citing the principle that the assessee's duty is limited to full and true disclosure of primary facts and that an AO must identify fresh material to justify reopening, the Court found the Assessing Officer had sought and received explanations during original proceedings (notice under Section 142(1) and replies) and had passed an order under Section 143(3), giving rise to the presumption that the AO had applied his mind. Reliance was placed on the legal propositions in ITO v/s. Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME COURT] that the assessee need not advise the AO on inferences, and on authorities holding that absent new material, reassessment amounts to impermissible review/change of opinion (including reference to Kelvinator of India Limited, [2002 (4) TMI 37 - DELHI HIGH COURT] Ananta Landmark (P.) Ltd. v. Deputy Commissioner of Income-tax, [2021 (10) TMI 71 - BOMBAY HIGH COURT] Tata Sons v. DCIT, [2022 (2) TMI 496 - BOMBAY HIGH COURT] and Joint Commissioner v. Cognizant Technology Solutions India Pvt. Ltd. [2023 (1) TMI 1233 - SC ORDER]). The reasons recorded in the notice for reopening referred only to material already on record and did not specify any undisclosed material fact; accordingly the reopening lacked jurisdiction. The Court therefore concluded that there was no failure by the assessee to disclose material facts and that the reassessment was invalid. [Paras 12, 13, 15, 18, 23]

Impugned notice under Section 148 and assessment order under Section 143(3) r.w.s. 147 for AY 2015-16 quashed and set aside; all consequential actions stayed.

Final Conclusion: Writ petition allowed; reassessment proceedings for AY 2015-16 were vitiated by change of opinion without fresh tangible material and the notice and consequent order are quashed and set aside, with no order as to costs.

Reopening of assessment under the Income Tax Act - show cause notice under section 148 (and section 148A) of the Income Tax Act - escaped assessment and six year limitation after Finance Act, 2021 - alternative efficacious remedy and writ jurisdiction under Article 226 - exception to rule of alternative remedy where authority acts beyond statutory mandate

Reopening of assessment under the Income Tax Act - show cause notice under section 148 (and section 148A) of the Income Tax Act - escaped assessment and six year limitation after Finance Act, 2021 - alternative efficacious remedy and writ jurisdiction under Article 226 - Maintainability of writ challenging the show cause notice issued under section 148 read with section 148A where the reopening is alleged to be time barred and the assessment involves disputed questions of fact. - HELD THAT: - The Court examined the petition challenging the notice dated 29.07.2022 issued for alleged escaped income in AY 2015 2016 and noted the petitioner's contention that, post Finance Act, 2021, reopening is barred where the escaped assessment valuation is below Rs.50 lakhs. The Court recognised the limited exceptions permitting immediate writ relief where a statutory authority acts beyond or contrary to the enactment, but observed that the Assessment Officer had received material (stamp duty valuation and sale deed information), formed an opinion, and recorded reasons for reopening. Given that the challenge turns on disputed factual questions (valuation, verifiability of indexed cost) and that the Revenue's action is amenable to adjudication on appeal under Section 246, the High Court declined to re open factual controversies in writ jurisdiction. The Court was thus unwilling to revisit the correctness of the reasons or valuation on the record at this stage and held that the petitioner must establish that the officer's conclusion is perverse or contrary to the material to displace the statutory procedure. [Paras 7, 8, 10, 11]

Writ petition challenging the show cause notice is not entertained; the petitioner should avail remedy of appeal under Section 246 or establish perversity of the recorded reasons before a forum with appropriate competence.

Final Conclusion: The writ petition seeking quashing of the notice under section 148 / 148A in respect of AY 2015 2016 is dismissed; contested factual issues regarding valuation and the applicability of the six year bar must be addressed through the statutory appeal process or by demonstrating that the officer's action was contrary to law.

Draft assessment order under Section 144C - directions of the Dispute Resolution Panel under Section 144C - notice of demand under Section 156 issued after completion of assessment - assessment as an integrated process involving determination of tax - curability of defects under Section 292B

Draft assessment order under Section 144C - notice of demand under Section 156 issued after completion of assessment - assessment as an integrated process involving determination of tax - Whether the order dated December 28, 2018 was a draft assessment order under Section 144C or, by issuance of demand and initiation of penalty, effectively a final assessment order - HELD THAT: - The Court noted that the draft assessment order concurrently directed issuance of a demand notice and initiation of penalty proceedings and that both the draft order and the demand notice were dated and served on the assessee on December 28, 2018 (paras 13, 18). Relying on the principle that assessment is an integrated process involving not only the computation of income but also determination of tax and issuance of demand, the Court treated the action of issuing demand and initiating penalty at the stage of the purported draft as indicative of a final order rather than a communication of a draft (para 20). The Court found the facts indistinguishable in legal effect from the position considered in Vijay Television where a similar simultaneous issuance of demand and penalty with the supposed draft was held to be a final order (para 17). Consequently, the procedure under Section 144C (which contemplates forwarding a draft to the assessee, consideration by the DRP and completion of assessment thereafter, and issuance of demand only after completion) was not followed, and the purported draft operated as a final assessment order. [Paras 13, 18, 20]

The Court held that the order dated December 28, 2018, by directing issuance of demand and initiating penalty, amounted to a final assessment order and was not a proper draft under Section 144C.

Curability of defects under Section 292B - directions of the Dispute Resolution Panel under Section 144C - Whether the error of issuing demand and initiating penalty at the draft stage was a curable defect under Section 292B - HELD THAT: - The Court examined Section 292B and the Revenue's contention that the defect was curable, and rejected that contention (para 22). It held that the mistake committed by the Assessing Officer in treating and acting on the purported draft as a final order by issuing demand and initiating penalty could not be cured under Section 292B, having regard to the mandatory sequence prescribed by Section 144C whereby demand under Section 156 may be issued only after completion of assessment in conformity with DRP directions (paras 15-16, 22). The Court also rejected the Revenue's submission that non-enforcement of the demand made the defect immaterial, observing that a demand notice, once issued pursuant to an assessment order, has enforceable civil consequences (para 21). [Paras 16, 21, 22]

The Court held that the error was not curable under Section 292B and that issuance of demand and initiation of penalty at the draft stage invalidated the procedure required under Section 144C.

Final Conclusion: The appeals are dismissed; the questions of law are answered in favour of the assessee and against the Revenue, holding that the order dated December 28, 2018 amounted to a final assessment (not a valid draft under Section 144C) and that the defect was not curable under Section 292B.

Stay on recovery of tax demand - assessee in default under Section 220(6) of the Income-tax Act, 1961 - time-bound disposal of application by the Commissioner of Income Tax - personal hearing and filing of written submissions - interim protection pending disposal of order

Time-bound disposal of application by the Commissioner of Income Tax - personal hearing and filing of written submissions - Disposal of the petitioner's application dated 01.02.2023 by the Commissioner of Income Tax. - HELD THAT: - The Court recorded that the petitioner's application before the Commissioner of Income Tax in relation to the order dated 01.02.2023 had not been disposed of. The Commissioner was directed to decide the application at the earliest and in any event within four weeks from receipt of the copy of this order. In doing so the Commissioner must accord a personal hearing to the petitioner's authorised representative and permit the filing of written submissions before passing a decision. The direction mandates fresh consideration and adjudication of the pending application rather than mere administrative acknowledgement. [Paras 9, 10, 12]

The matter is remitted to the Commissioner for fresh and time-bound disposal within four weeks with a personal hearing and opportunity to file written submissions.

Interim protection pending disposal of order - stay on recovery of tax demand - assessee in default under Section 220(6) of the Income-tax Act, 1961 - Interim effect of any adverse order passed by the Commissioner on the petitioner's position with respect to recovery and default status. - HELD THAT: - The Court provided interim protection by directing that if the Commissioner passes an order adverse to the petitioner, such order shall not be given effect to for a period of two weeks from the date when the petitioner receives the order. This limited deferment operates as a short period of interim relief affecting implementation of any adverse decision on recovery and the assessee-in-default status, thereby allowing the petitioner time to consider further remedies. [Paras 11]

Any adverse order by the Commissioner shall not be given effect to for two weeks from receipt by the petitioner.

Final Conclusion: Writ petition disposed directing the Commissioner of Income Tax to decide the petitioner's application dated 01.02.2023 within four weeks with personal hearing and written submissions; any adverse order shall not be given effect to for two weeks from receipt; pending application closed.

Failure to consider taxpayer's defence and evidence - Validity of notice issued under Section 148 - Order under Section 148A(d) - Application of Section 43B regarding statutory liabilities - De novo adjudication and personal hearing

Order under Section 148A(d) - Failure to consider taxpayer's defence and evidence - Application of Section 43B regarding statutory liabilities - Impugned order dated 30.07.2022 under Section 148A(d) and the consequent notice under Section 148 for AY 2017-18 set aside for failure to deal with the petitioner's defence and documentary evidence relating to payment/liquidation of statutory liabilities and non-claim of deduction. - HELD THAT: - The Court examined the reply filed by the petitioner to the statutory notice under Section 142(1) and noted that the petitioner had, during scrutiny, furnished that the statutory liabilities as on 31.03.2017 were paid/liquidated and that no deduction was claimed in respect thereof. The Section 148A(d) order records these contentions but proceeds to conclude that the liabilities were not fully paid and invokes Section 43B without addressing the specific defence and the challans placed on record. The Court found this to be an unsatisfactory disposition because the Assessing Officer did not deal with the petitioner's factual averments and documentary evidence before reaching the conclusion that income had escaped assessment. Given the lacuna in the reasoning and the existence of asserted evidence of payment, the Court held that the matter required fresh consideration on facts and law rather than adjudication on the limited record before it. [Paras 9, 10, 14, 15, 17]

Order dated 30.07.2022 under Section 148A(d) and the notice dated 30.07.2022 under Section 148 set aside; matter remanded for de novo consideration with an opportunity of personal hearing to the petitioner and fresh adjudication on the evidence and contentions, observations not affecting merits.

Final Conclusion: The writ petition is allowed to the extent that the Section 148A(d) order and consequent Section 148 notice for AY 2017-18 are quashed and the Assessing Officer is directed to undertake de novo adjudication after issuing notice for a personal hearing; the Court's observations are without prejudice to the merits.

Misalignment between show cause notice under Section 148A(b) and consequent order under Section 148A(d) - Validity of reassessment initiation and sufficiency of notice - Setting aside impugned notices and remand for de novo exercise

Misalignment between show cause notice under Section 148A(b) and consequent order under Section 148A(d) - Validity of reassessment initiation and sufficiency of notice - Impugned notice dated 30.05.2022 under Section 148A(b) and order dated 19.07.2022 under Section 148A(d) are inconsistent and cannot sustain reassessment initiation as held. - HELD THAT: - The Court found that the notice under Section 148A(b) raised two specific allegations against the petitioner (alleged fictitious loan from a named person and fictitious purchases of unlisted shares) and that the petitioner replied with documentary evidence and explanations. The Assessing Officer, however, in the impugned order proceeded on a different footing by referring to unrelated sale transactions in penny stocks, thereby creating a dissonance between the matters set out in the show cause notice and the basis recorded in the subsequent order. Because the order proceeds on a ground not reflected in the notice, the initiation of reassessment in its present form is unsustainable and the impugned notice and order were set aside. [Paras 6, 9, 10, 11]

Impugned notice and order set aside on account of material misalignment between the notice and the order.

Setting aside impugned notices and remand for de novo exercise - Direction given to the Assessing Officer to carry out a fresh exercise de novo in accordance with law and within a specified timeline. - HELD THAT: - While the impugned proceedings were set aside, the Court granted liberty to the Assessing Officer to undertake the exercise afresh but strictly as per law. The Court directed that the reassessment proceedings, if newly initiated, be completed expeditiously and fixed a timeline for the AO to conclude the exercise. The remand is for a proper, lawful re-examination and not to endorse the flawed approach adopted in the impugned order. [Paras 11, 12]

AO permitted to proceed de novo; exercise to be completed within twelve weeks from receipt of the judgment.

Final Conclusion: The notice dated 30.05.2022 and order dated 19.07.2022 in respect of AY 2016-17 are set aside for being materially inconsistent; the Assessing Officer is permitted to reinitiate and complete the exercise de novo in accordance with law within twelve weeks.

Validity of notice issued under Section 148 - Effect of the first proviso to Section 149 on limitation for reopening assessments - Jurisdictional challenge to notice as time-barred - Interim stay of assessment proceedings

Validity of notice issued under Section 148 - Effect of the first proviso to Section 149 on limitation for reopening assessments - Jurisdictional challenge to notice as time-barred - Interim stay of assessment proceedings - Whether further proceedings pursuant to the notice dated 22.7.2022 issued under Section 148 for assessment year 2014-2015 should be stayed pending adjudication of the petitioner's challenge that the notice is time-barred under the first proviso to Section 149. - HELD THAT: - The Court issued notice on the writ petition and the stay application and made the writ petition returnable in four weeks. Pending service and further orders, the Court granted interlocutory relief by staying further proceedings taken as a consequence of the impugned notice dated 22.7.2022. The Court recorded the petitioner's contention that, in light of the first proviso to Section 149, the notice was without jurisdiction because it was time-barred, and noted the existence of interim orders in identical controversies in other High Courts and in a Division Bench of this Court; however, the Court did not decide the merits of the limitation or jurisdictional challenge at this stage.

Notice issued; writ petition returnable in four weeks; further proceedings consequential to the notice dated 22.7.2022 stayed in the meantime.

Final Conclusion: Writ petition and stay application issued notice and, without adjudicating the merits of the limitation challenge under the first proviso to Section 149, the Court granted an interim stay of further proceedings arising from the notice dated 22.7.2022 for assessment year 2014-2015 pending the next hearing.

Re-opening of assessment under section 147 - Borrowed satisfaction - Validity of notice issued under section 148 - Sanction under section 151 - Unexplained cash credit under section 68 - Unexplained expenditure under section 69C - Principles of natural justice and right to cross-examination

Re-opening of assessment under section 147 - Borrowed satisfaction - Validity of notice issued under section 148 - Sanction under section 151 - Legality of reopening assessment and validity of notice/sanction - HELD THAT: - The Tribunal found that the Assessing Officer acted on information from the Investigation Wing linking the assessee to accommodation entries through entities related to Shri Pradeep Kumar Jindal and that the Assessing Officer recorded reasons and obtained the requisite approval before issuing notice under section 148. The Tribunal held that the materials on record distinguish the case from authorities relied upon by the assessee and that the re-opening was in accordance with law; accordingly the challenge based on borrowed satisfaction, absence of digital signature on the notice and alleged mechanical sanction were rejected. [Paras 9]

Grounds challenging reopening and validity of notice/sanction dismissed; reopening held lawful.

Unexplained cash credit under section 68 - Unexplained expenditure under section 69C - Principles of natural justice and right to cross-examination - Sustenance of additions treating received amounts as unexplained cash credit and unexplained expenditure, and complaint of denial of cross-examination - HELD THAT: - On the merits the Tribunal recorded that the Assessing Officer treated Rs.4,50,000 as accommodation entry and Rs.11,250 as commission/unexplained expenditure. Although the assessee contended that the amount had already been offered as voluntary donation and sought opportunity to cross-examine alleged entry operators, the Tribunal noted the undisputed fact that the assessee's Authorized Representative offered the impugned amount for taxation during assessment proceedings. In the circumstances the assessee failed to rebut the AO's findings and the Tribunal upheld the additions, rejecting the contention that denial of cross-examination rendered the assessment a nullity because the record contained an offer to tax the amount. [Paras 11, 13]

Additions under section 68 and section 69C sustained; plea of violation of natural justice not accepted.

Final Conclusion: The appeal is dismissed; the reopening of assessment for AY 2011-12 is upheld and the additions treating the receipts and commission as unexplained cash credit/expenditure are sustained.

Claim of exemption under section 10(23C) and application of income for charitable purpose - classification of vehicle use under section 13(3) - log book as evidentiary proof of exclusive charitable use of vehicle - disallowance of expenditure on luxury vehicle as application of income

Classification of vehicle use under section 13(3) - log book as evidentiary proof of exclusive charitable use of vehicle - disallowance of expenditure on luxury vehicle as application of income - Whether the addition made by the AO treating purchase and use of an Audi car as application of income for benefit of specified persons and disallowing related expenditure is sustainable. - HELD THAT: - The Tribunal examined the material on record and the submissions filed by the assessee. It is not disputed that the society replaced an earlier Audi with a higher model and that both vehicles are luxury cars; the sale of the old car was noted by the CIT(A). The AO made the addition under section 13 by concluding the vehicle was not used for educational/charitable purposes, observing absence of a log book. The Tribunal found the AO did not bring any material to rebut the assessee's claim that the vehicle was used by the principal and staff for school purposes and that earlier years' claims had been accepted. The Tribunal held that mere classification of the vehicle as a luxury car, or the absence of a log book alone, was not a sufficient basis for disallowance in the face of unchallenged evidence of use for running the school; accordingly the AO's conclusion was not sustained. The Tribunal therefore directed deletion of the disallowance. [Paras 9, 10]

The addition under section 13 treating the Audi car as not used for charitable purposes is deleted; the appeal is partly allowed.

Final Conclusion: The Tribunal found the AO failed to rebut the assessee's claim that the Audi car was used for educational purposes and that mere luxury character or absence of a log book, without supporting contrary material, did not justify disallowance; the addition was deleted and the appeal was partly allowed.

Addition under section 69A - addition under section 69 - explanation of cash deposits as gifts and past savings - satisfactory explanation for cash deposits - restriction/quantification of addition to a percentage

Addition under section 69A - explanation of cash deposits as gifts and past savings - satisfactory explanation for cash deposits - restriction/quantification of addition to a percentage - Whether the cash deposits of Rs. 14,29,000 made during the demonetization period, treated by the Assessing Officer as unexplained and added under section 69A, were rightly sustained and if the addition required any modification. - HELD THAT: - The Assessing Officer recorded cash deposits during the demonetization period and, being dissatisfied with the assessee's explanation, treated the deposits as unexplained and made an addition under section 69A. The assessee explained the deposits as gifts received on occasions of marriage(s) and past savings, and contended that the addition, if any, should have been made under section 69 rather than section 69A. While noting that the assessee did not furnish a cash flow statement, the Tribunal held that it could not be presumed that the assessee had no cash in hand or past savings. Applying a case-specific evaluative discretion, the Tribunal found the authorities below erred in wholly sustaining the addition and, on the facts and circumstances, considered it appropriate to mitigate the assessment by restricting the addition to 30% of the deposited amount. The Tribunal therefore modified the assessment quantification while leaving the foundational finding of unexplained deposits (as recorded by the lower authorities) effectively trimmed by the applied percentage reduction.

Addition sustained in principle but restricted to 30%; appeal partly allowed.

Final Conclusion: The appeal is partly allowed: the addition made to the returned income in respect of cash deposits during the demonetization period is restricted to 30%, and the remainder of the CIT(A)'s order is modified accordingly.

Reopening of assessment under section 147/148 - formation of belief / reason to believe - scope of judicial review at the notice stage - notice under section 148 - unexplained cash credit - opportunity to be heard / natural justice

Reopening of assessment under section 147/148 - formation of belief / reason to believe - scope of judicial review at the notice stage - notice under section 148 - Validity of reopening the assessment by issue of notice under section 148 for AY 2002-03 - HELD THAT: - The Tribunal upheld the conclusion of the CIT(A) that the Assessing Officer had reason to believe that income had escaped assessment and that the reopening was therefore justified. The CIT(A) applied the settled principle that at the stage of issuance of notice under section 147/148 the court (or reviewing forum) is not to go into the merits of taxability but must confine itself to whether a reason to believe exists; sufficiency or correctness of the material is not to be assessed at that stage. On the facts recorded (information from the Investigation Wing regarding an accommodation entry and related admissions), the formation of belief by the AO was held to be bona fide and the reopening under section 147/148 was sustained. The Tribunal found no error in law or fact in the concurrent view taken by the authorities below and declined to interfere. [Paras 4, 7]

Reopening of assessment for AY 2002-03 by notice under section 148 upheld.

Unexplained cash credit - opportunity to be heard / natural justice - Sustenance of addition on account of unexplained cash credit - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that the assessee failed to avail opportunities or furnish any explanation regarding the cash credit alleged to be an accommodation entry. The AO had afforded multiple opportunities during reassessment proceedings and recorded non-compliance; the assessee also did not file explanations during the appellate proceedings. In view of the absence of any explanation or participation by the assessee to rebut the cash credit, the CIT(A) correctly confirmed the addition. The Tribunal found the concurrent conclusion of the authorities below to be well-reasoned and not requiring interference. [Paras 5, 7]

Addition on account of unexplained cash credit confirmed.

Final Conclusion: The appeals are dismissed: the reopening of assessment for AY 2002-03 was validly made and the addition for unexplained cash credit was rightly sustained by the authorities below; the ITAT declines to interfere with the concurrent findings.

Fee under section 234E for delayed furnishing of TDS statements - Processing of TDS statements and computation of fee under section 200A - Prospective operation of statutory amendment - Binding effect of decision of the jurisdictional High Court on tax authorities

Fee under section 234E for delayed furnishing of TDS statements - Processing of TDS statements and computation of fee under section 200A - Prospective operation of statutory amendment - Levy of fee under section 234E on TDS returns filed prior to 1.6.2015 - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Karnataka High Court in Fatehraj Singhvi and held that the amendment to section 200A by the Finance Act, 2015 (with effect from 1.6.2015) which expressly provided for computation of fee under section 234E at the time of processing a statement could not be given retrospective effect to validate demands for periods prior to 1.6.2015. The appeals before the Tribunal related to TDS returns filed before 1.6.2015; therefore, following the jurisdictional High Court's decision, levy of fee under section 234E for those returns was not sustainable. The Tribunal noted that contrary views of other High Courts did not permit departure from the binding decision of the jurisdictional High Court in the area where the assessing office is located. [Paras 7, 10]

Levy of fee under section 234E on the TDS returns in question (filed prior to 1.6.2015) is deleted.

Binding effect of decision of the jurisdictional High Court on tax authorities - Obligation of a centralised appellate forum (NFAC) to follow the decision of the jurisdictional High Court where conflicting High Court decisions exist - HELD THAT: - The Tribunal reaffirmed that where High Courts have taken conflicting views, the decision of the jurisdictional High Court is binding on tax authorities and appellate bodies operating in that jurisdiction. The Tribunal relied on precedents and prior ITAT determinations to hold that a centralised forum such as NFAC must follow the binding law declared by the High Court having jurisdiction over the assessing officer, and should not deny relief merely because other non-jurisdictional High Courts have taken a contrary view. [Paras 8, 9]

NFAC is bound to follow the decision of the jurisdictional High Court and apply it in favour of the assessee.

Final Conclusion: The appeal is allowed: the fee levied under section 234E in respect of the TDS returns filed prior to 1.6.2015 is directed to be deleted, and the centralised appellate authority is required to follow the binding decision of the jurisdictional High Court.

Invocation of Section 263 of the Income-tax Act - erroneous and prejudicial to the interests of the Revenue - lack of enquiry - Assessing Officer's application of mind - plausible view - doctrine of merger - satisfaction under Section 68 regarding identity, creditworthiness and genuineness

Invocation of Section 263 of the Income-tax Act - erroneous and prejudicial to the interests of the Revenue - lack of enquiry - Assessing Officer's application of mind - satisfaction under Section 68 regarding identity, creditworthiness and genuineness - plausible view - Whether the Principal Commissioner of Income-tax validly exercised revisional jurisdiction under Section 263 to set aside the assessment order dated 30.12.2016. - HELD THAT: - The Tribunal examined the record of the set-aside proceedings and the reassessment order and concluded that the Assessing Officer conducted a detailed inquiry in compliance with earlier directions, including issuance of notices under sections 142(1), 133(6) and summons under section 131, examination of bank statements, audited financials, ITRs and recording of statements of directors of investor companies. The AO recorded satisfaction after verifying source of funds, identity, creditworthiness and genuineness of the share capital and share premium and took a view permissible under law. The revisional jurisdiction under Section 263 requires satisfaction that an order is both 'erroneous' and 'prejudicial to the interests of the Revenue' and cannot be exercised merely because the Commissioner prefers a different view or considers further inquiry desirable. Where the AO has applied his mind and reached a plausible view based on material on record, the Commissioner must either form an independent opinion on merits after his own examination or point to specific inadequacy or flaw in the AO's investigation. The Pr. CIT did not demonstrate any such flaw or bring contrary material to upset the AO's satisfaction; instead he re-opened the same subject-matter despite the AO having complied with earlier directions. Reliance was placed on co-ordinate Tribunal precedents and the jurisdictional High Court decision upholding the Tribunal where identical facts obtained. Applying these principles, the Tribunal found the second revisional order to be founded on suspicion and mere disagreement with a permissible view of the AO and therefore unsustainable. [Paras 16, 17, 21, 22]

The exercise of revisional jurisdiction by the Pr. CIT was invalid; the order passed under Section 263 dated 12.03.2019 is quashed and the assessment order dated 30.12.2016 is restored.

Final Conclusion: The appeal is allowed: the Tribunal quashed the impugned order passed under Section 263 dated 12.03.2019 and restored the assessment order dated 30.12.2016 for AY 2012-2013, holding that the Assessing Officer had conducted a complete inquiry and taken a plausible view which did not justify revisional interference.

Pre-trial custody - protection from arrest pending disposal - cooperation with investigation - application for exemption from filing documents - arrest under Section 19 of the Prevention of Money Laundering Act (PMLA) - pre-amendment applicability of Section 45 PMLA

Protection from arrest pending disposal - cooperation with investigation - pre-trial custody - Interim protection from arrest granted to the petitioners pending service of notice and subject to conditions specified by the Court. - HELD THAT: - The Court issued notice and, as an interim measure, directed that the petitioners shall not be arrested in the meantime. This protection is conditional: the petitioners are required to continue to cooperate with further investigation. The order records the factual background that the petitioners have undergone prolonged pre-trial custody and are senior citizens, but the Court confined itself to granting interim protection without adjudicating the merits of the allegations or the validity of any arrestable process under the relevant statutory provisions.

Petitioners shall not be arrested pending further orders, subject to their continued cooperation with investigation.

Application for exemption from filing documents - Applications for exemption from filing documents/facts/annexures and exemption from filing O.T. were allowed. - HELD THAT: - The Court allowed the procedural applications seeking exemption from filing certain documents and from filing the original transaction (O.T.), thereby permitting the petitioners to proceed without filing those materials at this stage. The order is procedural and does not address the substantive merits of the underlying criminal allegations or the applicability of provisions such as Section 45 PMLA.

Exemptions sought by the petitioners from filing documents/facts/annexures and from filing O.T. are allowed.

Final Conclusion: Notice issued; interim protection from arrest granted to the petitioners on condition of continued cooperation with investigation; applications for exemption from filing documents and O.T. allowed.

Statutory bail under Section 167(2) of Cr.P.C. - maintainability of default bail petition - charge sheet/complaint filed during investigation - completion of investigation - effect of subsequent filing on accrual of statutory bail

Statutory bail under Section 167(2) of Cr.P.C. - charge sheet/complaint filed during investigation - completion of investigation - Whether the filing and numbering of a complaint/charge sheet on 25.11.2022 defeated the petitioner's right to statutory/default bail which would have accrued on 26.11.2022. - HELD THAT: - The Court found on the record that the petitioner was arrested on 26.09.2022 and remanded on 27.09.2022, giving a statutory right to default bail on 26.11.2022. The complaint was filed and numbered on 25.11.2022. The petitioner did not invoke the statutory right on the 60th day; instead he pursued earlier bail remedies and this Court dismissed a bail petition on 07.12.2022 without raising the point that statutory bail had accrued. The Court noted the line of authority relied upon by the petitioner distinguishing a complaint filed without completion of investigation, but on the facts before it the complaint was filed and numbered prior to the accrual date. Where a complaint is filed and cognizance is sought or the complaint is otherwise in the process of filing before the expiry of the relevant period, the filing may affect the availability of default bail; accordingly, the factual position here defeated the petitioner's claim that the right had accrued and been preserved. [Paras 6, 8, 10]

The filing and numbering of the complaint on 25.11.2022 precluded the petitioner's claim to statutory/default bail accruing on 26.11.2022 on the facts of this case.

Maintainability of default bail petition - effect of subsequent filing on accrual of statutory bail - Whether the returned default-bail petition filed on 17.01.2023 (Crl.M.P.(SR) No.548 of 2023) was maintainable and whether the High Court should direct the Special Court to number and hear it notwithstanding the delay. - HELD THAT: - The Court observed that the petition under Section 167(2) Cr.P.C. must be filed when the right to statutory bail accrues (here the 60th day or other applicable period). The petitioner filed the default-bail petition on 17.01.2023, well after the date when the statutory right had arisen and after this Court had dismissed his earlier bail application on 07.12.2022. The Court held that a belated filing cannot be entertained as restoring the status quo ante; an application for default bail must be made on the date the right accrues. Consequently, asking the Special Court to entertain and number an application filed much later (and after earlier judicial proceedings) could not be permitted on these facts. [Paras 10, 11]

The petition filed on 17.01.2023 was not maintainable and no direction was given to the Special Court to number and hear the returned application.

Final Conclusion: The Criminal Petition is dismissed: on the facts the complaint was filed and numbered before the accrual date for statutory bail and the belated default-bail petition filed on 17.01.2023 could not be entertained; consequently no direction was issued to the Special Court to number or hear the returned petition.

Stay of predicate offence - proceedings under the Prevention of Money Laundering Act - territorial jurisdiction - alternative efficacious remedy - quashing of FIR - Adjudicating Authority

Territorial jurisdiction - quashing of FIR - Adjudicating Authority - alternative efficacious remedy - Whether the Karnataka High Court has jurisdiction to entertain a writ petition challenging search, seizure and related proceedings by the Directorate of Enforcement where the predicate FIR was registered in Mumbai and seized materials were forwarded to the Adjudicating Authority at Delhi, and whether the petitioner has an alternative efficacious remedy. - HELD THAT: - The Court held that territorial jurisdiction is governed by the situs of the authority which registered and is prosecuting the case. Reliance was placed on prior High Court decisions which explain that for quashing criminal proceedings or PMLA actions the relevant criterion is the location of the authority before whom the proceedings are pending and not merely where parts of the alleged acts occurred or where the accused or bank accounts are situated. As the FIR and ED case were registered at Mumbai and the seized material was forwarded to the Adjudicating Authority at Delhi, the Karnataka High Court cannot exercise jurisdiction to quash or stay those proceedings. Further, an alternative and efficacious remedy exists before the Mumbai High Court and the Adjudicating Authority at Delhi; accordingly, the petitioner is not entitled to relief in this Court despite submissions about the stay of the predicate offence and alleged illegality of the search and seizure. [Paras 9, 11, 12]

The writ petition is not maintainable before this Court for want of territorial jurisdiction and in view of alternative efficacious remedies; the petition is dismissed.

Final Conclusion: The Karnataka High Court dismissed the writ petition for lack of territorial jurisdiction and because alternative remedies exist before the Mumbai forum and the Adjudicating Authority at Delhi; no interference with the ED's actions was ordered.

Twin conditions under Section 45 of the PMLA and their applicability to bail - cooperation during investigation and non-arrest under Section 19 PMLA as relevant to grant of bail - failure to supply complaint and documents as required by Sections 204(3) and 208 Cr.P.C. - guidelines in Satender Kumar Antil / Aman Preet Singh concerning summons, arrest and interim bail - High Court's residuary power to grant bail under Section 439 Cr.P.C.

Twin conditions under Section 45 of the PMLA and their applicability to bail - cooperation during investigation and non-arrest under Section 19 PMLA as relevant to grant of bail - guidelines in Satender Kumar Antil / Aman Preet Singh concerning summons, arrest and interim bail - Whether the rigours of Section 45 of the PMLA preclude grant of bail where the accused was not arrested during investigation and cooperated with the investigating agency - HELD THAT: - The Court found on the admitted facts that the Enforcement Directorate did not arrest the applicant under Section 19 PMLA during the long investigation and that the applicant cooperated (statements recorded under Section 50). Applying the guidance in Satender Kumar Antil and Aman Preet Singh, the Court held that where an accused has not been arrested during investigation and has cooperated, the extreme rigour of Section 45 should not automatically be applied to deny bail on appearance pursuant to summons. The Court observed that the twin conditions in Section 45 are not an absolute bar to grant of bail and the High Court's judicial discretion (guided by law) remains available. On these grounds the trial court's refusal to grant interim bail and subsequent rejection of regular bail without applying the cited principles was held to be untenable, warranting grant of bail. [Paras 25, 26, 29]

The rigours of Section 45 PMLA do not automatically bar bail where the accused was not arrested during investigation and cooperated; bail was allowed.

Failure to supply complaint and documents as required by Sections 204(3) and 208 Cr.P.C. - rights of accused to copies of complaint, statements and documents before appearance on summons - Whether mandatory compliance with Sections 204(3) and 208 Cr.P.C. (supply of complaint and documents) was observed and its bearing on bail - HELD THAT: - The Court recorded that summons were issued without furnishing the copy of the prosecution complaint and the supporting statements/documents as required by Sections 204(3) and 208 Cr.P.C.; the Enforcement Directorate admitted non-provision and offered to supply copies only upon request. The Court treated this statutory non-compliance as a relevant factor in assessing the propriety of taking the applicant into custody on appearance and in considering the grant of bail, noting that the applicant had not been provided materials to meet the complaint when he appeared before the trial court. [Paras 11, 23, 27]

Statutory rights under Sections 204(3) and 208 Cr.P.C. were not complied with; this non-compliance weighed in favour of granting bail.

Guidelines in Satender Kumar Antil / Aman Preet Singh concerning summons, arrest and interim bail - High Court's residuary power to grant bail under Section 439 Cr.P.C. - Whether the trial court erred in taking the applicant into custody on appearance pursuant to summons without following the Supreme Court's dicta and whether this justified intervention by the High Court - HELD THAT: - The Court noted that the trial court sent the applicant to judicial custody despite no request by the Enforcement Directorate for arrest, and without applying the Supreme Court's guidance that summons should ordinarily be issued and arrest avoided where the accused was not arrested during investigation and had cooperated. The High Court observed that Section 44(2) preserves the High Court's special power under Section 439 Cr.P.C., and held that the trial court's action in taking custody without heeding the cited precedents was contrary to settled law and supported interference to grant bail subject to conditions. [Paras 26, 28, 29]

The trial court erred in taking custody without following the Supreme Court's guidance; High Court granted bail exercising its judicial power.

Final Conclusion: Bail granted to the applicant with conditions; the High Court held that where an accused was not arrested during investigation, cooperated with the agency and summons were issued without compliance with Sections 204(3) and 208 Cr.P.C., the rigour of Section 45 PMLA does not automatically preclude bail and the trial court's order taking custody was set aside. The trial court is directed to proceed with the trial uninfluenced by observations in this bail order.

Civil court jurisdiction ousted by Section 34 of SARFAESI Act - Scope of Section 34 as covering action "taken or to be taken" under SARFAESI/RDDBFI Acts - Interplay of Section 34 with limitation under Section 36 of the SARFAESI Act - Availability of remedies in Civil Court for claims beyond the purview of SARFAESI/RDDBFI Acts

Civil court jurisdiction ousted by Section 34 of SARFAESI Act - Availability of remedies in Civil Court for claims beyond the purview of SARFAESI/RDDBFI Acts - Whether the suit instituted by the respondents before the Civil Court was barred by Section 34 of the SARFAESI Act or was maintainable because the reliefs claimed fell outside the domain of the SARFAESI Act and the RDDBFI Act. - HELD THAT: - The Court held that Section 34 ousts Civil Court jurisdiction only in respect of matters which a DRT or Appellate Tribunal is empowered to determine under the SARFAESI Act or the RDDBFI Act. Where the reliefs claimed (declaration, compensation and waiver of wrongly imposed interest due to delay in registration) are beyond the scope of those statutes, the Civil Court retains jurisdiction. The Trial Court correctly found that the respondents' suit sought remedies which could not be adjudicated under SARFAESI/RDDBFI and therefore was maintainable. The Court also noted that the appellant-bank had not initiated SARFAESI measures against the respondents and, in any event, had accepted payments and executed documentation in favour of the respondents, which undercut its plea that the suit was barred. [Paras 8, 9, 23, 24, 30]

The suit was maintainable in the Civil Court as the reliefs sought by the respondents fell outside the purview of the SARFAESI Act and the RDDBFI Act; the Trial Court's decree in favour of the respondents was upheld.

Scope of Section 34 as covering action "taken or to be taken" under SARFAESI/RDDBFI Acts - Interplay of Section 34 with limitation under Section 36 of the SARFAESI Act - Whether the phrase 'action taken or to be taken' in Section 34Read with Section 36 permits a secured creditor to bar Civil Court jurisdiction by merely threatening future proceedings, even where no SARFAESI action has been initiated and the period for initiating such action may have elapsed. - HELD THAT: - The Court interpreted the words 'taken or to be taken' in Section 34 as not having an unfettered or 'ethereal' meaning that would permit a secured creditor to indefinitely preclude Civil Court remedies by alleging future action. Section 34 must be read with Section 36 which subjects initiation of SARFAESI measures to the law of limitation. The period of limitation runs from the accrual of cause of action and cannot be extended by intermittent inaction. On the facts the cause of action to initiate SARFAESI measures arose earlier (circa 2016) and the appellant-bank had not initiated proceedings within the limitation period; its statement of intended future action (reply dated 20.01.2020) was time barred. Therefore mere assertion of future proceedings could not oust Civil Court jurisdiction. [Paras 14, 15, 16, 17, 19]

The protection in Section 34 for actions 'to be taken' is limited by Section 36 (limitation); a secured creditor cannot claim an open-ended bar on Civil Court jurisdiction by relying on prospective action where limitation precludes such action.

Final Conclusion: The appeal is dismissed. The High Court upheld the Trial Court's finding that the respondents' suit was maintainable in the Civil Court because the reliefs claimed were beyond the scope of SARFAESI/RDDBFI Acts and because Section 34 cannot be invoked to oust civil jurisdiction by mere threat of future SARFAESI action when such action is limited by Section 36; parties to bear their own costs.

Compulsory retirement under Fundamental Rule 56(j) - Public interest test for premature retirement - Judicial review limited to existence of valid material - Stigma test - whether compulsory retirement is punitive attracting Article 311 - Short-circuiting of disciplinary proceedings - Assessment of service record and APARs in exercising FR 56(j)

Compulsory retirement under Fundamental Rule 56(j) - Public interest test for premature retirement - Judicial review limited to existence of valid material - Assessment of service record and APARs in exercising FR 56(j) - Validity of the order of compulsory retirement passed under FR 56(j) in the present case - HELD THAT: - The Court examined whether the competent authority had valid material and bona fide formed the opinion that premature retirement was in public interest. The appellant's APARs and character roll showed consistent grading as 'Outstanding' and integrity assessed as 'Beyond doubt' up to 31st July, 2019; no adverse entries were placed against him in the period immediately preceding the impugned order. Several complaints relied upon by the respondents were either closed, unsubstantiated or still shown as under examination; the matrimonial dispute which formed the basis of some adverse material had been amicably settled and was the subject of court orders. The respondents had repeatedly failed to comply with judicial directions in proceedings seeking forwarding of the appellant's dossier for appointment, and then, within a short span after recording an overall high grade, invoked FR 56(j) to retire the appellant about three months before superannuation. In these circumstances the Court applied settled principles that, while the formation of subjective satisfaction under FR 56(j) is for the authority, courts may ascertain whether valid material exists and whether the power was exercised bona fide. Applying that principle to the record, the Court found that there was no contemporaneous valid material to justify invoking public interest for premature retirement and that the action could not be reconciled with the appellant's prior unblemished record. [Paras 26, 31, 39]

The order of compulsory retirement dated 27th September, 2019 under FR 56(j) was quashed as not being based on valid material or public interest and therefore unsustainable.

Stigma test - whether compulsory retirement is punitive attracting Article 311 - Short-circuiting of disciplinary proceedings - Whether the impugned order was punitive in nature and intended to short circuit pending disciplinary proceedings - HELD THAT: - The Court analysed the circumstances in which the departmental disciplinary proceedings and charge sheet were initiated and the sequence of events leading to compulsory retirement. The disciplinary proceedings were pending and were not carried to conclusion; instead the respondents issued the order of compulsory retirement less than three months after initiating major penalty proceedings. Given the lack of fresh adverse material, the timing of the order immediately following initiation of charges, and the immediate abandonment of the disciplinary process thereafter, the Court concluded that the premature retirement operated as a device to effect immediate removal and thus had a punitive quality. Relying on established tests distinguishing bona fide exercise of FR 56(j) from actions that are punitive or a surrogate for dismissal, the Court held that the order was in substance punitive and could not be sustained as an exercise of the public interest power. [Paras 37, 39]

The compulsory retirement order was held to be punitive and a means to short circuit pending disciplinary proceedings; it was therefore set aside.

Allegations of institutional bias and non joinder of the concerned officer - Allegations of institutional bias against individual members of the decision making process - HELD THAT: - The appellant alleged institutional bias in respect of the Chairman, CBDT and participation of vigilance officers in committees. The Court observed that while mala fide exercise of power is justiciable, those specific allegations could not be examined because the officers allegedly biased were not made parties to the proceedings before the Tribunal or the High Court and therefore were not in a position to file counter affidavits or explain their conduct. For that reason the Court declined to adjudicate those specific allegations on the merits. [Paras 38]

The allegations of institutional bias were not gone into by the Court because the allegedly biased officers were not joined as parties; those contentions were not adjudicated on merits.

Final Conclusion: The appeal was allowed: the order of compulsory retirement dated 27th September, 2019 and its adverse consequences were quashed and set aside on the ground that the order was not based on valid material or public interest, and operated as a punitive measure to short circuit pending disciplinary proceedings; costs were left to the parties.

Debarment/blacklisting - principles of natural justice - show cause notice requirement before imposing blacklist - Integrity Pact/Undertaking - consequences for incorrect statement - Global Group Revenue (GGR) - inclusion/exclusion of intra group sales - self activating debarment under debarment guidelines

Global Group Revenue (GGR) - inclusion/exclusion of intra group sales - debarment/blacklisting - Integrity Pact/Undertaking - consequences for incorrect statement - principles of natural justice - show cause notice requirement before imposing blacklist - Validity of MHI's debarment/blacklisting of JBM Electric in light of inclusion of intra group sales in GGR and the procedure followed - HELD THAT: - The Court found that the factual premise - that JBM Electric's GGR figure included intra group sales - was not in dispute. However, there was no express mandate in the PLI Scheme, the PLI Guidelines or the application format that intra group sales must be excluded when reporting GGR, and the audited financial statements submitted adverted to related party transactions. The Project Management Agency (IFCI Ltd.) had received and evaluated the material and did not, until prompted by a late external complaint, treat the submissions as irregular. Even assuming intra group sales ought to have been excluded, the inclusion did not amount to a deliberate misrepresentation but, at worst, a misconception of the proper method of computation. Clause 4 of the Integrity Undertaking provides MHI with multiple remedial options upon a finding of an incorrect statement, including blacklisting, but blacklisting is one discretionary remedy among several. Given the gravity of blacklisting and the range of options available, MHI was required to afford a delinquent applicant a proper opportunity to be heard by issuing a show cause notice specifying the charge and the proposed penalty before imposing debarment. The impugned communications imposing debarment were therefore procedurally defective and unsustainable. [Paras 44, 45, 46, 48, 49]

MHI's debarment/blacklisting of JBM Electric was unjustified insofar as it was imposed without compliance with principles of natural justice; the impugned communications were quashed.

Self activating debarment under debarment guidelines - debarment/blacklisting - principles of natural justice - Consequent effect of quashing the debarment on JBM Ecolife's exclusion from the CESL tender and the first impugned judgment - HELD THAT: - The first impugned judgment had rested on the premise that the debarment of JBM Electric triggered a 'self activating' disqualification of its group companies under the debarment Guidelines, resulting in JBM Ecolife's exclusion from the tender. Because the Court has held the debarment communications to be vitiated for lack of a show cause hearing, that foundational premise falls away. The coordinate reasoning in the first impugned judgment is therefore unsustainable. Consequentially, the communications issued by the e tender administrator on 26.04.2022 (notifying JBM Ecolife of ineligibility and of a non responsive technical evaluation) must also be quashed, and JBM Ecolife restored to its earlier position in the tender process for further consideration. [Paras 51, 52, 62, 63]

The first impugned judgment is set aside; the communications dated 26.04.2022 served on JBM Ecolife are quashed and JBM Ecolife is permitted to rejoin the subject tender at the stage it occupied when it approached the writ court.

Final Conclusion: The Union of India's appeal is dismissed; JBM Ecolife's appeal is allowed. The debarment communications issued to JBM Electric were quashed for non compliance with principles of natural justice, the related communications excluding JBM Ecolife from the tender are quashed, and JBM Ecolife is restored to the position it occupied in the tender process.