TaxTMI Updates e-Newsletter
Mar 17,2022

Detention and seizure under GST transit provisions - Intention to evade tax - Quantitative mismatch between invoice/e-way bill and goods in transit - Liability for acts of persons not immediately linked in the supply chain - Principle that law does not compel performance of the impossible (lex non cogit ad impossibilia) - Refund of penalty and release of detained goods

Liability for acts of persons not immediately linked in the supply chain - Detention and seizure under GST transit provisions - Principle that law does not compel performance of the impossible (lex non cogit ad impossibilia) - Validity of proceeding under Section 129 of the Act insofar as it rested on alleged bogus purchases by the supplier of the petitioner - HELD THAT: - The Court applied the principle, as laid down by the Court in M/s. Shiv Enterprises, that an alleged 'intent to evade tax' must have a direct nexus with the trader's own activity and cannot be predicated on acts or omissions of a person not immediately linked to the trader. It observed that a trader cannot realistically be required to verify whether predecessors in the supply chain have discharged their input tax obligations and therefore cannot be penalised for matters beyond his capability to ascertain. On this basis the contention that proceedings under the Act could be sustained merely because the supplier allegedly engaged in bogus purchases was rejected. [Paras 6]

Proceedings under Section 129 based solely on alleged bogus purchases of the supplier, without a direct nexus to the petitioner's own activity, are not sustainable and were quashed on that ground.

Quantitative mismatch between invoice/e-way bill and goods in transit - Intention to evade tax - Detention and seizure under GST transit provisions - Whether the minor quantitative discrepancy found on physical verification justified detention under Section 129 as evidence of intent to evade tax - HELD THAT: - The Court examined the e-Invoice showing consignment weight as 10,430.7 kg and the State's asserted physical weight of 10,520 kg, noting the difference was less than 1% and that tax of Rs.1,276,717.68 had already been paid on the consignment. The State's own estimate of any alleged evasion was limited to about Rs.11,000. The Court held that such a marginal mismatch, in the context of tax having been paid on the consignment, did not demonstrate the requisite intent to evade tax to warrant detention and proceedings under Section 129. [Paras 7, 8, 9]

The minor discrepancy in quantity (less than 1% and with tax already paid) did not establish intent to evade tax and therefore did not justify detention or continuation of proceedings under Section 129.

Refund of penalty and release of detained goods - Detention and seizure under GST transit provisions - Relief to be granted where detention proceedings are quashed and goods have been released - HELD THAT: - Having quashed the proceedings on the stated grounds and noting the petitioner's willingness to pay any legitimate tax/penalty and that goods had already been released, the Court directed that any fine or penalty imposed and deposited by the petitioner be refunded within 15 days from receipt of the certified copy of the order. No further order on release of goods was required as they already stood released. [Paras 9, 10]

Proceedings under Section 129 quashed; deposited fine/penalty to be refunded within 15 days; no further order as goods have been released.

Final Conclusion: Writ petition allowed: proceedings under Section 129 of the Act quashed both insofar as based on alleged bogus purchases by the supplier and insofar as founded on a negligible quantitative mismatch; deposited fines/penalties ordered refunded within 15 days; no further order on release of goods as they have been released.

Provisional release of seized goods and conveyance - detention and provisional release under GST - deposit as condition for release pending departmental inquiry - continuation of inquiry at GST MOV-10 - writ remedy under Article 226 of the Constitution

Provisional release of seized goods and conveyance - deposit as condition for release pending departmental inquiry - detention and provisional release under GST - Release of the detained goods and conveyance on condition of deposit by the writ-applicant. - HELD THAT: - The Court considered the writ-application seeking quashing of an impugned confiscation notice and/or provisional release of goods and conveyance detained while in transit and pending inquiry at the GST MOV-10 stage. The petitioner offered to deposit a specified sum towards tax and penalty. The State respondents did not oppose provisional release on such deposit, subject to continuation of the departmental inquiry. The Court directed respondent no.2 to release the goods and conveyance forthwith upon deposit of the said amount, expressly refraining from adjudicating the merits of the confiscation proceedings and permitting the Department to continue the inquiry at GST MOV-10. [Paras 5, 7, 8]

The goods and conveyance shall be released by respondent no.2 upon deposit of the specified amount; merits of the confiscation are not decided and the Department may continue the GST MOV-10 inquiry.

Final Conclusion: Writ petition disposed by directing provisional release of detained goods and conveyance on deposit of the amount tendered by the petitioner; merits of confiscation not adjudicated and departmental inquiry at GST MOV-10 is left open.

Inherent powers under Section 482 Cr.P.C. - Direction for expeditious disposal of pending application - Judicial supervision to prevent prejudice caused by inordinate delay - Permission to travel abroad in aid of carrying on business

Inherent powers under Section 482 Cr.P.C. - Direction for expeditious disposal of pending application - Permission to travel abroad in aid of carrying on business - Whether a direction should be issued to the trial court to decide the pending application for permission to travel abroad (Crl. Misc. Case No. 324 of 2021) within a specified time-frame. - HELD THAT: - The applicant, who conducts an export business and requires travel abroad to meet clients and buyers, filed the underlying application for permission to travel which is registered as Crl. Misc. Case No. 324 of 2021 under Section 132(1) of the CGST Act and is pending before the District & Sessions Judge, Meerut. Exercising the Court's inherent jurisdiction under Section 482 Cr.P.C., and having regard to the prejudice likely to be caused to the applicant's business by further delay, the Court found it appropriate to intervene by issuing a time-bound direction to the trial court. The exercise of this power was limited to directing expeditious disposal of the pending application and did not decide the merits of that application.

The trial court (District & Sessions Judge, Meerut) is directed to decide Crl. Misc. Case No. 324 of 2021 within one month from the date of production of a certified copy of this order; the present petition under Section 482 Cr.P.C. is disposed of finally.

Final Conclusion: The petition under Section 482 Cr.P.C. is disposed of by directing the trial court to decide the pending application for permission to travel abroad (Crl. Misc. Case No. 324 of 2021) within one month from production of a certified copy of this order; no merits of the underlying application have been adjudicated.

Classification under Customs Tariff: specific heading versus residuary heading - Application of General Rules for the Interpretation of the First Schedule (Rules 1, 2(a) and 3(a)) - Essential character test for classification of processed fruits and vegetables - Residuary entry (heading 2106) cannot prevail over specific entry (heading 2008) - Supplementary Notes to Chapter 21 (inclusion of "namkeens" and "sweetmeats") - GST rate determination by reference to Customs Tariff classification

Classification under Customs Tariff: specific heading versus residuary heading - Essential character test for classification of processed fruits and vegetables - Application of General Rules for the Interpretation of the First Schedule (Rule 2(a)) - Whether Jackfruit Chips (sold without brand name) are classifiable as "namkeens" under HSN 2106.90.99 and taxable under Entry 101A of Schedule I at 5% - HELD THAT: - The authority examined whether the impugned products fall within the residuary heading 2106 or are classifiable under the specific provisions of Chapter 20, heading 2008. The court applied the rules for interpretation of the First Schedule to the Customs Tariff Act (as adopted for GST), in particular Rule 2(a) and Rule 3(a). The frying/salting process did not alter the essential character of the fruit; the products remain fruit/vegetable preparations whose essential character derives from the original edible part. Where a specific heading (2008) applies, the residuary entry 2106 cannot be invoked. On that basis Jackfruit Chips are classifiable under Tariff Heading 2008.19.40 and not under HSN 2106.90.99. [Paras 6]

Jackfruit Chips are classifiable under Tariff Heading 2008.19.40 and liable to GST at 12% (6% CGST + 6% SGST).

Application of General Rules for the Interpretation of the First Schedule (Rule 3(a)) - Residuary entry (heading 2106) cannot prevail over specific entry (heading 2008) - Whether salted and masala chips of Potato and Tapioca are classifiable as namkeens under HSN 2106.90.99 and taxable under Entry 101A of Schedule I at 5% - HELD THAT: - The authority found that slicing, frying and seasoning do not change the essential character of the potatoes or tapioca. Chapter 20 (heading 2008) provides specific coverage for preparations of fruits/vegetables/nuts where the essential character remains that of the original material. Applying Rule 3(a), the more specific description in heading 2008 prevails over the residuary heading 2106. Therefore salted and masala chips of Potato and Tapioca are classifiable under Tariff Heading 2008.19.40. [Paras 6]

Salted and masala chips of Potato and Tapioca are classifiable under Tariff Heading 2008.19.40 and liable to GST at 12% (6% CGST + 6% SGST).

Classification of roasted/salted nuts under Chapter 20 - Specific heading prevails over residuary heading - Whether roasted/salted/roasted-and-salted preparations of groundnuts, cashew nuts and other seeds are namkeens classifiable under HSN 2106.90.99 and taxable at 5% - HELD THAT: - The tariff and explanatory notes to Chapter 20 expressly cover roasted, salted or roasted-and-salted nuts (groundnuts, cashew nuts and other seeds). Those products therefore fall within specific sub-headings of heading 2008 and are not to be classified under the residuary heading 2106. The rulings relied upon by the appellant do not displace the specific tariff coverage applicable here. [Paras 6]

Roasted/salted/roasted-and-salted cashew nuts and groundnuts/other nuts are classifiable under Tariff Headings 2008.19.10 and 2008.19.20 respectively and liable to GST at 12% (6% CGST + 6% SGST).

GST rate determination by reference to Customs Tariff classification - Application of adopted interpretation rules to GST rate schedule - Whether the alternative submissions invoking "common parlance" or Supplementary Note 6 to Chapter 21 (inclusion of "namkeens" and "sweetmeats") require classification under heading 2106 and a 5% GST rate - HELD THAT: - The authority acknowledged Supplementary Notes to Chapter 21 but held that heading 2106 is residuary and excludes preparations whose essential character is given by fruits/vegetables as per Chapter 20. The GST rate schedule incorporates the First Schedule to the Customs Tariff Act and its interpretative rules; accordingly those tariff rules govern classification for GST purposes. As specific entries in Chapter 20 cover the impugned goods, the common parlance or circular references do not override the rule that a specific heading prevails over a residuary heading. [Paras 6]

The appeals based on common parlance and Supplementary Note 6 are rejected; classification follows Chapter 20 where applicable and the GST rate applicable to the Chapter 20 entries (12%) applies.

Final Conclusion: The Appellate Authority upholds the Advance Ruling with modification: Jackfruit, Banana, Tapioca, Potato (salted/masala) chips and Sharkaraivaratty are classifiable under appropriate Tariff Headings of Chapter 20 (principally 2008.19.40) and roasted/salted nuts under 2008.19.10 / 2008.19.20; these goods attract GST at 12% (6% CGST + 6% SGST). The appeal is rejected.

Advance ruling territorial nexus - Advance ruling confined to supplies undertaken by the applicant

Advance ruling territorial nexus - Whether the Authority for Advance Ruling, Telangana, can pronounce an advance ruling where the question pertains to a person not registered in the State of Telangana. - HELD THAT: - The Authority noted that the territorial competence of an Authority for Advance Ruling is fixed by the CGST and SGST Acts so that the Authority functions only for the State or Union Territory in which it is constituted. The applicant's query concerns the eligibility of a recipient who is not a registered taxable person in Telangana. Since the person affected is not registered in Telangana, the Authority lacks territorial jurisdiction to pronounce an advance ruling on that question. [Paras 7]

Application rejected for want of territorial nexus as the matter concerns a person not registered in Telangana.

Advance ruling confined to supplies undertaken by the applicant - Whether an advance ruling can be issued on a question that does not relate to the supply of goods or services undertaken by the applicant. - HELD THAT: - The Authority referred to the definition of 'Advance Ruling' which contemplates decisions on questions in relation to supplies or activities being undertaken by the applicant. The present clarification sought relates to the entitlement of another entity to take input tax credit and the passing on of such credit to the ultimate recipient, rather than to any supply undertaken by the applicant itself. Because the question is not connected to supplies made or to be made by the applicant, it falls outside the scope of matters on which an advance ruling may be given under the statutory scheme. [Paras 7]

Application rejected insofar as the question is not in relation to supplies undertaken by the applicant.

Final Conclusion: The application for advance ruling is rejected on two independent grounds: lack of territorial jurisdiction as the matter concerns a person not registered in Telangana, and non maintainability because the question does not relate to supplies undertaken by the applicant.

Classification of goods by HSN/tariff item - exemption under Notification No. 02/2017 (Central Tax (Rate)) - inclusion/exclusion of tariff headings for exemption - brewing or distillery dregs and waste (HSN 2303) - taxability at 5% under Notification No. 01/2017 - end user test

Classification of goods by HSN/tariff item - exemption under Notification No. 02/2017 (Central Tax (Rate)) - brewing or distillery dregs and waste (HSN 2303) - taxability at 5% under Notification No. 01/2017 - Sale of Distillery Wet Grain Soluble (DWGS) and Distillery Dry Grain Soluble (DDGS) qualifies for exemption under S.No.102 of Notification No.02/2017 or is taxable under Notification No.01/2017. - HELD THAT: - The Authority examined the tariff headings listed at S.No.102 of Notification No.02/2017 and noted that the chapters/heading numbers qualifying for the exemption do not include HSN 2303. Notification No.01/2017 classifies 'brewing or distilling dregs and waste' under tariff item 2303 at S.No.104 with a 5% rate. The applicant's products, DWGS and DDGS, fall within the description of 'brewing or distillery dregs and waste' and thus under HSN 2303. Because S.No.102 specifically excludes goods falling under HSN 2303, the products cannot be brought within the exemption at S.No.102. The asserted reliance on the end user test was considered but the ruling turned on statutory classification by tariff headings and the express scope of the exemption notification. [Paras 7, 8]

No; DWGS and DDGS fall under S.No.104 of Notification No.01/2017 (HSN 2303) and are taxable at 5%.

Final Conclusion: The Advance Ruling clarifies that Distillery Wet Grain Soluble and Distillery Dry Grain Soluble are excluded from the nil exemption at S.No.102 of Notification No.02/2017 because they fall under HSN 2303 as 'brewing or distillery dregs and waste' and are taxable at 5% under Notification No.01/2017.

Treatment of non-compete fee as revenue or capital expenditure - re-opening of assessment on the basis of change of opinion - reason to believe for reopening under Section 147/148 of the Income Tax Act - consideration of a query during original assessment proceedings

Treatment of non-compete fee as revenue or capital expenditure - consideration of a query during original assessment proceedings - re-opening of assessment on the basis of change of opinion - reason to believe for reopening under Section 147/148 of the Income Tax Act - Validity of the notice under Section 148/147 to reopen assessment for Assessment Year 2008-09 insofar as it sought to disallow the claim of non-compete fee as revenue expenditure - HELD THAT: - The Court held that the question whether the non-compete fee paid by the petitioner was revenue or capital in nature was raised and answered during the original assessment proceedings leading to the assessment order dated 30th November, 2010. The petitioner had furnished the business purchase agreement, a detailed explanation dated 30th November, 2010 and relied upon High Court decisions to support treating the payment as revenue expenditure; the Assessing Officer accepted that explanation in concluding the assessment. The reason recorded for reopening relied solely upon a later ITAT Special Bench decision and did not disclose any fresh tangible material; consequently the impugned notice amounted to a mere change of opinion by the revenue. Applying the principle that reopening on the basis of a change of opinion is impermissible, and following the reasoning in Aroni Commercials Ltd. that a query once raised and answered during assessment is a matter considered by the Assessing Officer even if not expressly dealt with in the assessment order, the Court concluded that the reason to believe for reopening was lacking. [Paras 8, 9, 10]

Notice dated 20th March, 2013 under Section 148 and the order dated 24th January, 2014 rejecting objections are set aside; reopening quashed as based on change of opinion without fresh material.

Final Conclusion: The petition is allowed; the reassessment notice and the order rejecting objections are quashed because the disputed issue of treatment of the non-compete fee had been considered in the original assessment and the reopening rested on impermissible change of opinion rather than on fresh tangible material.

Penalty under Section 271(1)(b) for failure to comply with notice under Section 142(1) - Validity of requiring consent-cum-waiver to obtain foreign bank information - Applicability of the right to silence (Selvi principle) in civil/tax proceedings - Equitable consistency in treatment of co related persons in the same transaction

Penalty under Section 271(1)(b) for failure to comply with notice under Section 142(1) - Validity of requiring consent-cum-waiver to obtain foreign bank information - Equitable consistency in treatment of co related persons in the same transaction - Penalty imposed under Section 271(1)(b) for non-compliance with notice issued under Section 142(1) was valid and sustainable. - HELD THAT: - The Court upheld the Income Tax Appellate Tribunal's conclusion that the assessee's failure to comply with a notice under Section 142(1) and to furnish the consent-cum-waiver form authorising retrieval of information from the foreign bank justified imposition of penalty under Section 271(1)(b). The Tribunal had followed this Court's earlier decision in the related case of Mr. Sanjay Dalmia where non-filing of the consent form in respect of the same HSBC account led to upholding penalties; the special leave petitions against those orders were dismissed by the Supreme Court. The Court observed that if the assessee truly had no connection with the foreign accounts, no prejudice would have been caused by compliance with the notice and filing of the consent form. The Court further noted that the protective assessment in the assessee's case was deleted only because substantive additions had been confirmed in the hands of her husband who was account holder No.1; that circumstance did not render the penalty unsustainable against the assessee (account holder No.2) for failure to cooperate. On these grounds the penalty could not be characterised as erroneous or unwarranted.

Penalty under Section 271(1)(b) upheld and appeals dismissed.

Applicability of the right to silence (Selvi principle) in civil/tax proceedings - The principle recognised in Selvi regarding the right to silence in criminal proceedings is not applicable as a ratio compelling exclusion of the consent requirement in tax proceedings. - HELD THAT: - The Court held that Selvi & Ors. v. State of Karnataka affirmed the right to silence in the criminal context and, although it contained some observations about non penal proceedings, those observations do not constitute a binding ratio applicable to tax proceedings. Accordingly, the assessee's reliance on Selvi to resist furnishing the consent cum waiver or to assert a constitutional bar under Article 21 was rejected.

Selvi principle in criminal law held not to furnish a ground to invalidate the notice/consent requirement in the present tax proceedings.

Final Conclusion: The appeals are dismissed; the Tribunal's affirmation of penalty for non compliance with the notice under Section 142(1) and refusal to set aside the penalty under Section 271(1)(b) is sustained, and the constitutional right to silence as articulated in Selvi is held inapplicable to negate the consent/notice requirement in these tax proceedings.

Withholding of refund under Section 241A - prima facie estimation of probable additions and their tax effect - estimation of quantum of additions/disallowances and likely tax impact - assessment of financial wherewithal to meet potential tax demand - advance pricing agreement and arm's length price - marked to market foreign exchange losses and Accounting Standard 11 - accounting policy and recognition of unearned revenue - respect for consistent method of accounting under Section 145(1)

Prima facie estimation of probable additions and their tax effect - estimation of quantum of additions/disallowances and likely tax impact - assessment of financial wherewithal to meet potential tax demand - withholding of refund under Section 241A - The impugned order under Section 241A withholding the refund for AY 2018-2019 was vitiated by failure to apply the parameters mandated by this Court and lacked rational and cogent grounds. - HELD THAT: - The Court examined whether the Assessing Officer had applied the factors directed in the earlier judgment, namely a prima facie estimation of probable additions, an estimation of the quantum and tax effect of such additions/disallowances, and consideration of the assessee's financial wherewithal and other relevant factors. The impugned order did not record cogent reasons applying those factors. The AO's broad conclusion of a likely tax liability of approximately Rs. 500 crores rested on unparticularised estimates and did not disclose considered quantification or reasons. The AO also failed to take into account the petitioner's financial ability to meet any demand and other amounts already held by the Revenue, which the Court found relevant to the exercise under Section 241A. For these deficiencies the order could not be sustained. [Paras 4, 6, 10, 13]

Impugned order under Section 241A set aside for failure to apply mandated parameters and for lacking rational and cogent reasons.

Advance pricing agreement and arm's length price - withholding of refund under Section 241A - The likelihood of tax liability on account of arm's length price adjustments could not justify withholding because an Advance Pricing Agreement (APA) had been executed and the Transfer Pricing Officer drew no adverse inference. - HELD THAT: - The Court noted that the petitioner had executed an APA relevant to the AY in question and relied on the Transfer Pricing Officer's order which recorded no adverse inference in respect of ALP for the financial year corresponding to AY 2018-2019. In view of the APA and the TPO's order, any estimate predicated on ALP adjustments was unlikely to sustain a tentative withholding under Section 241A. [Paras 7]

ALP-based adjustments could not be a valid foundation for withholding the refund in AY 2018-2019.

Marked to market foreign exchange losses and Accounting Standard 11 - withholding of refund under Section 241A - The AO's treatment of foreign exchange (including marked to market) losses did not furnish an estimated disallowance or its tax effect and therefore could not justify withholding. - HELD THAT: - The impugned order referred to an earlier addition in AY 2016-2017 relating to marked to market losses but did not quantify any likely disallowance for AY 2018-2019 or compute the resulting tax impact. The Court emphasised that without an articulated estimate of the amount likely to be disallowed, reliance on historical additions alone is speculative and insufficient to withhold a refund under Section 241A. [Paras 8]

Foreign exchange/marked-to-market loss head, without quantified estimate and tax effect, could not justify withholding the refund.

Accounting policy and recognition of unearned revenue - respect for consistent method of accounting under Section 145(1) - withholding of refund under Section 241A - The AO's large estimate of additions on account of unearned revenue was unjustified because the assessee consistently followed an accounting policy of recognizing unearned revenue and offering it for tax when services are rendered, a practice accepted in earlier adjudication. - HELD THAT: - The Court relied on the Dispute Resolution Panel's earlier order which accepted the assessee's consistent accounting practice of treating unearned revenue as a current liability and offering it for taxation in the year services are rendered. The Court also cited authorities emphasising that a method of accounting regularly followed is to be respected and that revenue recognition under accounting standards (including AS 11 for foreign exchange) and Section 145(1) inform tax computation. Given the assessee's long-standing and consistent accounting treatment (not disturbed), the AO's estimate of a substantial addition on unearned revenue lacked rational foundation and did not demonstrate any revenue loss requiring withholding. [Paras 9]

Estimate of additions for unearned revenue was unsustainable in view of the assessee's consistent accounting policy and prior acceptance; it could not support withholding.

Assessment of financial wherewithal to meet potential tax demand - withholding of refund under Section 241A - Considering the petitioner's financial position and other amounts held by the Revenue, the respondents were adequately secured and withholding the full refund was unnecessary; hence the refund should be released. - HELD THAT: - The Court observed that the petitioner demonstrated substantial net worth and that additional refunds totalling a specified amount remained with the Revenue, providing security for any future demand. The AO had not factored in these aspects. Given the absence of cogent quantification of likely additions and the assessee's financial wherewithal together with other amounts available to the Revenue, the balance did not justify continued withholding. The Court therefore directed release of the withheld refund while preserving the Revenue's rights in framing assessment. [Paras 10, 11, 12, 13, 14]

Respondents directed to release the withheld refund for AY 2018-2019; Revenue's right to proceed with assessment remains unaffected.

Final Conclusion: The writ petition is allowed. The order dated 28.04.2020 under Section 241A withholding the refund for AY 2018-2019 is set aside and the respondents are directed to release the withheld refund; the observations are confined to the tenability of the withholding order and do not affect the assessments to be framed.

Disallowance under section 40(a)(ia) for failure to deduct tax at source on interest - deductibility of interest on advances as business expenditure - assessment of bill-discounting charges and prudence in inter-connected transactions - treatment of loan processing/establishment charges as revenue or capital expenditure - precedential effect of coordinate bench decisions in the assessee's own case

Disallowance under section 40(a)(ia) for failure to deduct tax at source on interest - precedential effect of coordinate bench decisions in the assessee's own case - Whether the addition for non-deduction of TDS on interest paid to Barclays Investment & Loan (India) Ltd. should be sustained or requires further inquiry and evidence. - HELD THAT: - The Tribunal noted that the legal principles were considered in the assessee's earlier coordinate-bench decision in the assessee's own case, but the present appeal involves changed figures and factual nuance that the assessee sought to address by producing certificates from other lenders and explaining that Barclays had closed Indian operations. The Bench found that the assessee should be afforded an opportunity to produce other documents or sources to establish whether a certificate under the relevant provision had been issued by Barclays. Consequently the AO was directed to conduct appropriate inquiry and give the assessee opportunity to place evidence. The matter was therefore not finally decided on merits but remanded for verification and further inquiry, and the ground was treated in favour of the assessee for statistical purposes. [Paras 9]

Remanded for inquiry and verification; ground determined in favour of the assessee for statistical purposes.

Deductibility of interest on advances as business expenditure - precedential effect of coordinate bench decisions in the assessee's own case - Whether interest disallowance in respect of advances made by the assessee is sustainable. - HELD THAT: - Relying on the coordinate-bench decision in the assessee's own case for the earlier year, the Tribunal examined the nature of advances and the statutory and judicial principles applied previously. The advances financed replacement machinery (not extension), and there was no reason to depart from the earlier coordinate-bench conclusion. On this basis the Bench accepted the assessee's contentions and allowed the ground. [Paras 10]

Ground allowed in favour of the assessee.

Assessment of bill-discounting charges and prudence in inter-connected transactions - Whether bill-discounting charges paid at differing rates to related/connected parties are deductible in full or should be restricted as excessive. - HELD THAT: - The assessee paid bill-discounting charges at 15-16% to one entity and 19% to another related entity. The First Appellate Authority disallowed the excess portion as not based on principles of prudence and excessive. The Tribunal observed that the coordinate-bench decision for the assessee for the earlier year had decided the issue against the assessee on similar facts. Applying the same reasoning, the Bench found no reason to disturb the disallowance and accordingly confirmed the disallowance to the extent determined by the lower authority. [Paras 11]

Ground dismissed; disallowance upheld.

Deductibility of interest on advances as business expenditure - precedential effect of coordinate bench decisions in the assessee's own case - Whether disallowance of interest on advances (ground dealing with another set of advances) is sustainable. - HELD THAT: - The Tribunal referred to the coordinate-bench decision in the assessee's own case for the earlier assessment year which had examined the statutory provisions and authorities. The advances in question were given in an earlier year and out of interest-free funds; therefore the Bench found no reason to differ from the coordinate-bench conclusion and decided the ground in favour of the assessee. [Paras 12]

Ground allowed in favour of the assessee.

Treatment of loan processing/establishment charges as revenue or capital expenditure - Whether processing charges paid to SIDBI for sanction of a loan used to meet margin money for working capital should be disallowed as capital expenditure or allowed as revenue expenditure. - HELD THAT: - The assessee placed on record the SIDBI sanction letter showing the loan was sanctioned to meet margin money for working capital. The AO had allowed interest on the loan as revenue expenditure. Given that the loan financed working capital, the Tribunal found no justification to treat the processing charges for procuring that loan as capital expenditure. The Tribunal therefore set aside the impugned addition to the extent of the processing charges and allowed the ground partly. [Paras 13]

Processing charges treated as revenue expenditure; impugned addition reduced and ground allowed partly.

Final Conclusion: The appeal is partly allowed; certain grounds were allowed in favour of the assessee, one ground was remanded for inquiry and verification, one disallowance was upheld, and the loan processing charges disallowance was set aside in part.

Unexplained cash credit under section 68 - Burden of proof to establish identity, genuineness and creditworthiness of creditors - Repayment of loan within the same financial year and payment of interest with deduction of tax at source as relevant to discharging onus under section 68 - Relevance of statements and material seized in third party search to reassessment proceedings

Unexplained cash credit under section 68 - Burden of proof to establish identity, genuineness and creditworthiness of creditors - Repayment of loan within the same financial year and payment of interest with deduction of tax at source as relevant to discharging onus under section 68 - Addition of Rs. 1,50,00,000 treated as unexplained cash credit under section 68 and its deletion. - HELD THAT: - The Tribunal examined the material placed before the authorities and noted that the assessee received an unsecured loan of Rs. 1.50 Crores from Avi Exports and repaid the same within the same financial year. The assessee produced PAN, confirmation, bank statements, and evidence of payment of interest with deduction of tax at source. The Assessing Officer did not disallow the interest claimed nor dispute repayment in the year. Reliance was placed on the principle that once the assessee discharges the primary onus under section 68 by establishing identity, genuineness and creditworthiness of the creditor, and where the loan is repaid in the same year with interest and TDS, making an addition under section 68 is not justified. The Tribunal also noted that similar additions in sister concerns were deleted on appeal and that no adverse material in the remand report negated the assessee's evidence. Applying these legal principles and the facts that repayment, interest payment and TDS were not controverted by the Revenue, the Tribunal concluded that the addition could not be sustained. [Paras 16, 17, 18]

Addition of Rs. 1,50,00,000 under section 68 is deleted and the substantial ground of appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal by deleting the addition made under section 68 for AY 2007-08 on the ground that the unsecured loan was repaid within the same financial year, interest was paid with TDS and the assessee had discharged the primary onus; other grounds became academic.

Transfer of immovable property - capital gains chargeability - possession and registration - rectification of assessment to avoid double taxation - application of valuation under section 50C for computation of capital gains - uniformity and consistency in assessment - remand for computation and verification

Transfer of immovable property - capital gains chargeability - possession and registration - uniformity and consistency in assessment - Whether the capital gain on sale of the land arose in AY 2012-13 or in AY 2013-14 - HELD THAT: - The Tribunal found as an admitted fact that the sale deed was executed and the consideration acknowledged on 23.03.2012 and that peaceful possession was also stated to have been handed over in the sale deed. The registered instrument dated 23.03.2012 cannot be displaced by a later possession receipt ('Kabja Rashid') dated 04.04.2012, which was held to be a self-serving document not substituting the evidentiary value of the registered sale deed. Reliance on the date of entry of registration particulars for identification does not alter the legal effect of the earlier executed sale deed. The Tribunal rejected the CIT(A)'s acceptance of a later date and also rejected the assessee's contention that parity with co-owners whose assessments were taxed in a later year could justify treating the gain as taxable in AY 2013-14; a legally wrong approach in other co-owners' assessments cannot be availed of by the assessee. On these grounds the Tribunal set aside the CIT(A) order which had deleted the addition and held that the capital gain was exigible in AY 2012-13. [Paras 12, 13]

Capital gain held to arise in AY 2012-13; CIT(A)'s order deleting the addition set aside.

Rectification of assessment to avoid double taxation - application of valuation under section 50C for computation of capital gains - remand for computation and verification - Whether any remedial directions or recomputation were required in relation to AY 2013-14 and the method of computing the capital gain - HELD THAT: - The Tribunal accepted the assessee's submission that the capital gain had been offered and accepted in AY 2013-14 and recognised the potential for double taxation if the appeal is allowed in favour of the revenue. Accordingly, the Tribunal directed the Assessing Officer to exclude the capital gain in AY 2013-14 (rectification) to remove double taxation. Further, because the DVO report was not available at the time of the original assessment, the Tribunal directed the Assessing Officer to afford the assessee an opportunity to file objections and thereafter compute the long term capital gain in accordance with law, taking into account valuation under section 50C as applicable. These directions require the Assessing Officer to re-compute/verify the quantum and remove the duplication in the co-ordinate assessment year. [Paras 14]

Assessing Officer directed to exclude the capital gain in AY 2013-14 and to re-compute the long term capital gain after allowing objections and considering the DVO/valuation aspects.

Final Conclusion: Revenue's appeal allowed to the extent the CIT(A)'s order deleting the addition for AY 2012-13 is set aside; capital gain held taxable in AY 2012-13. The Assessing Officer is directed to exclude the gain in AY 2013-14 to obviate double taxation and to re-compute the gain after granting opportunity to the assessee and considering DVO/valuation issues.

Condonation of delay for filing appeal due to Covid-19 pandemic - validity and cancellation of registration under Section 12AA - requirement to follow procedure under Section 12AA(3)/(4) for cancellation of registration - definition of "charitable purpose" under Section 2(15) - operation of proviso in respect of General Public Utility - administrative guidance in CBDT Circular relating to non-mandatory cancellation when proviso to Section 2(15) is breached

Condonation of delay for filing appeal due to Covid-19 pandemic - Application for condonation of 53 days' delay in filing the appeal was allowed. - HELD THAT: - The Bench applied the principle of "sufficient cause" as explained in Collector, Land Acquisition v. Mst. Katiji and accepted that the national Covid 19 pandemic constituted a cause beyond the assessee's control. The assessee's reliance on the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 was noted. The Tribunal adopted a liberal, pragmatic approach to explain the delay and permitted condonation so that the appeal could be decided on merits. [Paras 3]

Delay condoned and appeal admitted for hearing on merits.

Validity and cancellation of registration under Section 12AA - requirement to follow procedure under Section 12AA(3)/(4) for cancellation of registration - administrative guidance in CBDT Circular relating to non-mandatory cancellation when proviso to Section 2(15) is breached - Cancellation of the assessee's registration under Section 12AA by the ld. CIT(E) on the sole ground that proviso to Section 2(15) was attracted was improper and the registration must continue unless cancellation is effected by due process under Section 12AA(3)/(4). - HELD THAT: - The Tribunal found that the assessee had been validly registered since 2001 and that the application filed under Section 12A(1)(ab) was made after a change of law and was later withdrawn. The Commissioner cannot cancel an existing registration merely because the proviso to Section 2(15) is triggered in a particular year; cancellation must be in accordance with the statutory procedure in Section 12AA(3)/(4). The Tribunal relied on the principle that registration remains valid unless cancelled by due process, the legislative history that the 2018 filing requirement was not in force when the objects were amended in 2013, and the CBDT Circular advising that exceeding the proviso's cutoff in a year does not mandate cancellation of registration. [Paras 15, 16, 19]

Order of ld. CIT(E) cancelling registration is set aside; registration under Section 12AA to be treated as continuing.

Definition of "charitable purpose" under Section 2(15) - operation of proviso in respect of General Public Utility - On merits, the ld. CIT(E)'s conclusion that the assessee's activities were predominantly commercial and thereby disqualified under the proviso to Section 2(15) was not sustained. - HELD THAT: - The Tribunal examined the nature of receipts and activities relied upon by the ld. CIT(E) and the assessee's detailed tabulation showing that many receipts related to distinct limbs of Section 2(15) (education, medical/relief of poor, preservation of environment, etc.) and that the proportion attributable purely to 'any other object of general public utility' was, on the assessee's case, below the threshold. The Bench noted that the assessee acted as an implementing agency/extended arm of government welfare schemes and that receipts from government agencies were applied to charitable objects. The Tribunal distinguished authorities relied upon by the Revenue where the facts showed pure commercial contracting or benefit primarily to private parties, and accepted that contractual modality or TDS deduction alone does not convert an activity into non charitable if it is inseparably linked to and performed in continuation of a governmental charitable scheme. [Paras 17, 18, 19]

Ld. CIT(E)'s finding that the society's activities were commercial and predominant is rejected; activities are charitable in nature and the proviso to Section 2(15) does not justify cancellation in the facts of this case.

Final Conclusion: The Tribunal allowed the assessee's appeal: condoned the delay in filing the appeal; set aside the Commissioner's order cancelling registration and held that cancellation could not be sustained merely on application of the proviso to Section 2(15) without following the statutory cancellation procedure, and on the merits found the assessee's activities to be charitable and its registration under Section 12AA to continue.

Deduction for bad debts written off under section 36(1)(vii) - interaction between provision for bad and doubtful debts and deduction for bad debts - deduction for transfer to special reserve under section 36(1)(viii) - timing of creation of reserves for claiming tax deduction - disallowance under section 40(a)(ia) for failure to deduct tax at source - scope of "technical services" for TDS purposes - applicability of minimum alternate tax provisions under section 115JB to a public sector/corresponding new bank - treatment of additions and adjustments while computing book profit under section 115JB - allowability of depreciation on Held-to-Maturity (HTM) securities - disallowance under section 14A for expenditure in relation to exempt income

Deduction for bad debts written off under section 36(1)(vii) - interaction between provision for bad and doubtful debts and deduction for bad debts - Deletion of disallowance of bad debts claimed under section 36(1)(vii) - HELD THAT: - The Tribunal followed the coordinate-bench and Supreme Court authority in the assessee's own case holding that where a bank debits a 'Bad Debts Written Off Account' forming part of profit and loss account and correspondingly reduces loans and advances in the balance sheet, such amounts qualify as bad debts written off under section 36(1)(vii). The Assessing Officer's insistence on closure of individual branch accounts was held to be based on apprehension and not a valid ground to deny deduction; subsequent recoveries are chargeable under section 41(4). Applying that precedent to the facts, the disallowance was reversed and deleted. [Paras 17]

Disallowance under section 36(1)(vii) deleted; assessee's claim allowed.

Deduction for transfer to special reserve under section 36(1)(viii) - timing of creation of reserves for claiming tax deduction - Whether amounts transferred to statutory/capital reserves (or reserves created in subsequent year) can be considered for deduction under section 36(1)(viii) - HELD THAT: - Following binding coordinate-bench authorities, the Tribunal held that section 36(1)(viii) does not prescribe a point in time by which the special reserve must be created and a reserve created in a subsequent year, but before finalisation of grant of deduction (i.e., before completion of assessment), may be taken into account. The Tribunal further noted that whether the assessee indeed created such reserves in the succeeding year and whether they were created before finalisation had not been verified by the authorities below. Consequently the matter required factual verification by the Assessing Officer. [Paras 25]

Issue remitted to the Assessing Officer to examine and allow the claim in accordance with law; ground allowed for statistical purposes.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - scope of "technical services" for TDS purposes - Deletion of disallowance under section 40(a)(ia) for payments made to National Payments Corporation of India (NPCI) - HELD THAT: - Relying on coordinate-bench and Supreme Court reasoning in Kotak Securities Ltd., the Tribunal held that payments for standardized, automated facilities (such as NPCI's switching services) are facilities available to all users and do not constitute specialised or exclusive 'technical services' attracting TDS under section 194J. Therefore there was no obligation to deduct tax at source and the disallowance under section 40(a)(ia) was not sustainable. [Paras 31]

Disallowance under section 40(a)(ia) set aside; payments to NPCI not subject to TDS as technical services.

Applicability of minimum alternate tax provisions under section 115JB to a public sector/corresponding new bank - treatment of corporate status of corresponding new bank for tax purposes - Whether provisions of section 115JB apply to the assessee (a public sector/corresponding new bank) - HELD THAT: - The Tribunal observed that the question involves detailed consideration of the interplay between the Banking Regulation Act definitions (including the concept of 'corresponding new bank'), deeming provisions under the Banking Companies (Acquisition and Transfer of Undertakings) Act, and the scope of section 115JB. The coordinate-bench decision in the assessee's own case found that the CIT(A) had not sufficiently considered section 51 of the BR Act and other relevant provisions and therefore restored the matter for fresh consideration by the CIT(A). Given identical facts, the Tribunal followed that course. [Paras 35]

Issue restored to the file of the CIT(A) for fresh examination.

Treatment of additions and adjustments while computing book profit under section 115JB - Additions made to book profit under section 115JB - HELD THAT: - Since the question of applicability of section 115JB to the assessee was remitted to the CIT(A), the related issues concerning additions made in computing book profit were also remitted for fresh adjudication by the CIT(A) in view of the outcome on applicability and for coherent reconsideration of the adjustments. [Paras 36, 37]

Additions to book profit restored to the CIT(A) for fresh consideration.

Allowability of depreciation on Held-to-Maturity (HTM) securities - Allowability of depreciation claimed on HTM securities - HELD THAT: - The Tribunal followed prior coordinate-bench and High Court decisions in the assessee's own case holding that banks' investments may be treated as stock-in-trade and that depreciation (diminution in value) on HTM securities is allowable. The Assessing Officer's reliance on a contrary High Court decision was addressed by noting subsequent favourable authorities and consistent Tribunal precedents in the assessee's case. On that basis the CIT(A)'s deletion of the disallowance was upheld. [Paras 44]

Disallowance denied; depreciation on HTM securities allowed and Revenue's appeal dismissed on this issue.

Disallowance under section 14A for expenditure in relation to exempt income - Approach to disallowance under section 14A in light of subsequent Supreme Court authority - HELD THAT: - Although earlier coordinate-bench decisions had decided similar issues in favour of the assessee, the Tribunal noted that subsequent Supreme Court pronouncements (Maxopp Investment Ltd.) changed the legal landscape. Given the change in law and various conflicting authorities, the Tribunal considered it appropriate that the Assessing Officer re-examine the matter in the light of the later decisions and apply the law to the facts of the year under consideration. [Paras 47]

Order of the CIT(A) set aside on this issue and matter remanded to the Assessing Officer for fresh examination.

Final Conclusion: The assessee's appeal is allowed in part: the disallowance of bad debts under section 36(1)(vii) and the disallowance under section 40(a)(ia) (payments to NPCI) were deleted; the CIT(A)'s deletion of disallowance for depreciation on HTM securities is upheld. Matters concerning deduction under section 36(1)(viii), applicability of section 115JB and related book profit additions, and disallowance under section 14A are remitted for fresh consideration by the appropriate authorities.

Disallowance under Section 14A and computation under Rule 8D - Requirement of recording satisfaction by assessing officer before applying Rule 8D - Computation of deduction under Section 80IA in the second year of the block and treatment of brought forward/notional losses - Remand for fresh consideration in light of binding High Court authority - Composite receipts under Income from House Property and deduction of ancillary service charges under Section 23 vis-a -vis standard deduction under Section 24

Disallowance under Section 14A and computation under Rule 8D - Requirement of recording satisfaction by assessing officer before applying Rule 8D - Validity of the disallowance under Section 14A computed under Rule 8D and whether the AO recorded requisite satisfaction before applying Rule 8D. - HELD THAT: - The Tribunal examined the AO's assessment record and found that the AO rejected the assessee's method of allocating expenses (ratio of exempt income to total income) after examining the accounts and the assessee's submissions. The AO specifically held that Rule 8D, being an objective method, was applicable and disallowed expenditure under Rule 8D(2)(iii). The Tribunal concluded that the AO's adverse conclusion as to the appropriateness of the assessee's own disallowance constituted the requisite satisfaction arising from examination of accounts, and therefore application of Rule 8D was justified. The Tribunal rejected the assessee's reliance on authorities holding that disallowance is impermissible without recording satisfaction, finding that on the facts the AO had in fact recorded non satisfaction and applied Rule 8D accordingly. The CIT(A)'s confirmation of the AO's disallowance was held to be justified. [Paras 4, 5, 6]

Disallowance under Section 14A computed under Rule 8D sustained; contention that AO failed to record satisfaction rejected.

Computation of deduction under Section 80IA in the second year of the block and treatment of brought forward/notional losses - Remand for fresh consideration in light of binding High Court authority - Allowability of deduction under Section 80IA for the year in question and the manner of setting off brought forward/notional losses of the undertaking. - HELD THAT: - The Tribunal noted conflicting treatment by the AO who treated each windmill unit on a standalone basis and disallowed the deduction by setting off brought forward losses, whereas the assessee contended for aggregated treatment so as to avail deduction. The Tribunal referred to its earlier order in the assessee's own case for A.Y. 2010-11 and to the binding jurisdictional High Court decision in CIT v. Hercules Hoists Ltd., observing that the legal position on set off of notional losses vis a vis eligibility for Section 80IA deduction required application of binding precedent and clarification of factual quantification of losses at the time of demerger. For these reasons the Tribunal did not decide the issue on merits but remanded the matter to the AO for fresh consideration in accordance with the directions and to apply the binding High Court ratio, with the assessee directed to supply supportive authorities and figures as necessary. [Paras 7, 8, 9]

Issue remanded to the AO for fresh consideration and decision in accordance with the Tribunal's directions and applicable High Court authority.

Composite receipts under Income from House Property and deduction of ancillary service charges under Section 23 vis-a -vis standard deduction under Section 24 - Whether security and gardening expenses could be deducted from gross rent to compute annual value of house property where the assessee claimed the license fee as composite consideration. - HELD THAT: - The assessee asserted that the gross composite license fee included security and garden maintenance charges and sought deduction of those charges from gross rent to compute annual value. The AO and CIT(A) examined the lease/leave and license agreement and relevant submissions and found no bifurcation of receipts evidencing that the stated license fee included ancillary service charges payable to the assessee; further, the agreement on record contradicted the assessee's claim as to parties and tenancies. In absence of documentary bifurcation or evidence of separate component of the composite consideration and actual expenditure relating to ancillary services, the Tribunal upheld the CIT(A)'s view that no separate deduction from income from house property could be allowed and that the standard deduction under Section 24 cannot be supplemented by unproved separate deductions. Reliance on a Delhi Tribunal decision was held inapplicable on the facts. [Paras 10, 11]

Disallowance of claimed security and gardening expenses from house property income upheld.

Final Conclusion: Appeals partly allowed for statistical purpose in respect of A.Y. 2011-12, 2012-13 and 2014-15; appeal for A.Y. 2013-14 dismissed. Disallowance under Section 14A/Rule 8D and disallowance of house property service charges were upheld; claim under Section 80IA remanded to the assessing officer for fresh consideration in accordance with the Tribunal's directions and applicable High Court precedent.

Penalty for concealment of particulars or furnishing inaccurate particulars of income - distinction between assessment proceedings and penalty proceedings - ex-parte assessment and its effect on levy of penalty - requirement of AO's satisfaction based on contradictory evidence before invoking penalty - appropriateness of invoking section for non-compliance versus concealment

Penalty for concealment of particulars or furnishing inaccurate particulars of income - ex-parte assessment and its effect on levy of penalty - distinction between assessment proceedings and penalty proceedings - requirement of AO's satisfaction based on contradictory evidence before invoking penalty - appropriateness of invoking section for non-compliance versus concealment - Whether penalty under section 271(1)(c) was rightly levied on the assessee in respect of cash deposits - HELD THAT: - The Tribunal examined the penalty imposed under section 271(1)(c) in the light of the materials placed before the Assessing Officer and the appellate authorities. It found that the Assessing Officer proceeded ex parte at the assessment stage without verifying service of notices and without considering the documentary explanation subsequently furnished showing that the cash deposits represented surplus withdrawals and receipts in the course of the assessee's role as nodal agency under NREGA. There was no finding by the AO based on any contradictory evidence that the explanation was false or not bona fide. The Tribunal reiterated that penalty under section 271(1)(c) can be imposed only when the AO is satisfied, on the basis of the proceedings, that particulars were concealed or inaccurate; absent such satisfaction grounded on contradictory material, imposition of that penalty is impermissible. The Tribunal further observed that where non-compliance with notices rather than deliberate concealment is the factual position, the proper provision to consider would have been the penal provision dealing with failure to comply with notices, and that assessment findings cannot be treated as conclusive for penalty purposes. On these grounds the Tribunal held that the CIT(A) erred in upholding the AO's penalty and that the penalty was not in accordance with law. [Paras 10, 11]

Penalty under section 271(1)(c) cancelled; order of the CIT(A) set aside and appeal of the assessee allowed

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(A) order and cancelled the penalty under section 271(1)(c) for Assessment Year 2010-11, holding that the AO had not established concealment or furnished contradictory evidence to justify that penalty and that the matter did not warrant imposition of section 271(1)(c) in the circumstances.

Deduction under Section 80P of the Income-tax Act - status as a co-operative society under Section 2(19) of the Income-tax Act - registration under State co-operative society law - rejection of books of account under Section 145(3) - statutory obligation of tax audit under Section 44AB - remand for fresh adjudication and verification of facts

Deduction under Section 80P of the Income-tax Act - status as a co-operative society under Section 2(19) of the Income-tax Act - registration under State co-operative society law - rejection of books of account under Section 145(3) - statutory obligation of tax audit under Section 44AB - remand for fresh adjudication and verification of facts - Whether the appellate order granting deduction under Section 80P should be upheld where the assessing officer had denied the deduction on grounds including challenged registration, unexplained sources of receipts, non-filing of tax-audit report and rejection of books of account. - HELD THAT: - The Tribunal observed that the CIT(A) had allowed deduction under Section 80P without adjudicating the foundational factual and legal issues going to eligibility - in particular, whether the assessee is a co-operative society as defined in Section 2(19) given the certificate was issued by the 'Registrar, Cane Co-operative Societies, U.P.' and not by the Registrar under the State co-operative law; whether the commission receipts were genuinely attributable to marketing of members' agricultural produce; the AO's findings as to non-submission of supporting evidence and non-compliance with tax-audit obligations under Section 44AB; and the AO's rejection of books under Section 145(3). Because these matters required enquiries, verification and fact-finding, and because Section 80P is dependent on the assessee's status and the attributability of income, the Tribunal set aside the CIT(A)'s order on this issue and directed a fresh, detailed, reasoned and speaking adjudication by the CIT(A) after giving the assessee adequate opportunity of hearing. The Tribunal expressly kept all contentions open and did not decide the merits on any of the disputed factual or legal points. [Paras 5, 6]

The appellate order of the CIT(A) insofar as it allowed deduction under Section 80P is set aside and the matter is remitted to the CIT(A) for fresh adjudication and verification; appeals are allowed for statistical purposes.

Final Conclusion: Both Revenue appeals for AYs 2014-15 and 2015-16 are allowed for statistical purposes; the allowance of deduction under Section 80P by the CIT(A) is set aside and the matter is remanded to the CIT(A) for fresh, reasoned adjudication after verification of registration, genuineness of receipts, accounting records and tax-audit compliance, with all contentions left open.

Validity of reopening under section 147 - Reassessment proceedings initiated on basis of Investigation Wing information - Accommodation entries / benami accommodation entries - Addition on account of bogus purchases - Determination of taxable income component vs. entire transaction (quantification of addition)

Validity of reopening under section 147 - Reassessment proceedings initiated on basis of Investigation Wing information - Reopening of assessment under section 147 was valid and reassessment proceedings were in accordance with law. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the material supplied by the Director General of Income Tax (Investigation), Mumbai, which indicated that recognised entry providers had furnished accommodation entries and that the assessee was one of the beneficiaries. Following the view of the jurisdictional High Court in similar cases, the Tribunal held that information from the Investigation Wing establishing that well-known entry operators provided bogus entries to various beneficiaries constituted sufficient basis for the AO's formation of belief that income had escaped assessment. The assessee's objections to reopening were considered by the AO and thereafter before the CIT(A); the Tribunal found no infirmity in the AO's assumption of jurisdiction for reopening. Consequently, the ground challenging reopening was dismissed. [Paras 14, 17, 18]

Ground challenging reopening dismissed; reassessment proceedings upheld as valid.

Accommodation entries / benami accommodation entries - Addition on account of bogus purchases - Determination of taxable income component vs. entire transaction (quantification of addition) - Addition on account of purchases shown from entry providers sustained but restricted to 6% of impugned purchases. - HELD THAT: - On merits the Tribunal applied the reasoning of a Coordinate Bench (Pankaj Choudhary) which examined the facts: the AO had relied largely on the Investigation Wing's report and statements without independent inquiry; the assessee's books and documentary evidence were not rejected and recorded sales were not disputed. Recognising the principle that tax authorities should ordinarily tax the income component rather than the entire transaction, and after comparing precedents where partial percentages were applied, the Tribunal concluded that a 6% disallowance of the impugned purchases was adequate to address potential revenue leakage in the facts of this case (noting the assessee's very low declared gross profit). Hence the AO's 100% addition was reduced and the CIT(A)'s enhancement to 100% was not sustained; the addition was confirmed at 6% of the disputed purchases following the Coordinate Bench's approach. [Paras 15, 16]

Addition sustained to the extent of 6% of the impugned purchases; appeal allowed in part to that extent.

Final Conclusion: Reassessment under section 147 was valid on the basis of Investigation Wing material; on merits the addition for bogus purchases is sustained but limited to 6% of the impugned purchases for AY 2008-09, and the appeal is allowed in part accordingly.

Beneficial ownership - onus to prove beneficial interest - addition equal to peak balance of foreign bank account - source of deposits and nexus with India - non-resident taxation under Section 5(2) - admissibility of third party documentary evidence under Rule 46A

Beneficial ownership - onus to prove beneficial interest - addition equal to peak balance of foreign bank account - Whether the deposits/balances standing in the name of Blueridge Investment Corporation and reflected in the HSBC, Geneva base note could be added to the assessee's income as his income. - HELD THAT: - The Tribunal examined the material placed before the authorities below and the additional third party documents admitted by the CIT(A). The CIT(A) had applied the legal requirement that the Department must establish that an assessee has a direct beneficial interest in an asset or bank account held in the name of a third party before making an assessment in the assessee's hands. The assessee filed an affidavit, correspondence from Blueridge Investment Corporation and communications from HSBC Geneva indicating that Blueridge was a Liberian company with a stated sole beneficial owner and that the assessee was a director/treasurer and only a joint signatory without beneficial interest. The AO had not produced independent evidence to controvert these documents or to demonstrate the assessee's beneficial ownership; instead the AO relied on circumstantial presumptions from the base note and the assessee's Indian connections. On the record and following the Tribunal's earlier decision in the assessee's own case for AY 2006-07 (where identical facts and evidence were considered and the additions were deleted), the Tribunal found that the Department failed to discharge the onus of proving beneficial interest and therefore the addition equal to the peak balance could not be sustained against the assessee. [Paras 13, 14, 15]

Addition made by AO in respect of balances in the Blueridge Investment Corporation account deleted; AO failed to prove that the assessee had beneficial ownership.

Source of deposits and nexus with India - non-resident taxation under Section 5(2) - admissibility of third party documentary evidence under Rule 46A - Whether the peak balance in the joint account of the assessee and his brother with HSBC Geneva could be treated as income of the assessee on the basis of presumed Indian source or receipt in India. - HELD THAT: - The Tribunal recorded that the assessee, a long term resident of Abu Dhabi, produced credit advices showing transfers from his HSBC Abu Dhabi account to HSBC Geneva and maintained that the funds derived from income/savings earned in Abu Dhabi. The CIT(A) admitted additional evidence under Rule 46A and accepted the documentary trail showing transfers from the Abu Dhabi account and the lack of proof of Indian source. The AO's reliance on the assessee's Indian assets and on general presumption from the base note was held insufficient to establish that the amounts accrued or were received in India within the meaning of the provisions applied. In light of identical findings in the Tribunal's earlier order for AY 2006-07 and the absence of fresh contrary material, the Tribunal upheld deletion of the addition relating to the joint account. [Paras 13, 14, 15]

Addition in respect of the joint HSBC Geneva account deleted; funds held to have been transferred from HSBC Abu Dhabi and not shown to have source or receipt in India.

Final Conclusion: Following the Tribunal's earlier decision in the assessee's own case on identical facts and on consideration of the evidentiary material admitted by the CIT(A), the revenue's appeal is dismissed and the additions made by the AO in respect of the HSBC, Geneva accounts are upheld as not sustainable.

Validity of assessment founded on third party statements without disclosure and cross examination - violation of principles of natural justice in income tax assessment - quashing of assessment under section 143(3) for non production of relied material - proof onus and requirement to confront adverse statements

Validity of assessment founded on third party statements without disclosure and cross examination - violation of principles of natural justice in income tax assessment - Assessment framed u/s 143(3) by relying on statements of third parties that were neither furnished to the assessee nor subjected to cross examination is vitiated and liable to be quashed. - HELD THAT: - The Tribunal examined the assessment record and found that the Assessing Officer relied upon statements and investigative material obtained from third parties and investigation wings, but did not provide copies of those statements to the assessee nor grant an opportunity to cross examine the declarants despite specific requests by the assessee. The show cause/summons dated 26.12.2017 merely required the assessee's presence on 27.12.2017 and did not specifically furnish or offer the opportunity of cross examination; the assessment was completed shortly thereafter. Relying on the settled principle that adverse orders based substantially on statements of third parties, which the affected party is not permitted to confront and test by cross examination, offend the rules of natural justice, the Tribunal held that the Assessing Officer's recourse to such undisclosed material rendered the assessment invalid. Applying the reasoning in Andaman Timber Industries (as followed by the Supreme Court) and related authorities, the Tribunal concluded that where the findings materially rest on such un disclosed statements, the assessment cannot stand and must be quashed. The Tribunal therefore quashed the assessment order passed u/s 143(3). [Paras 22]

Assessment order framed u/s 143(3) is quashed for failure to furnish material/statements relied upon and for denying opportunity of cross examination.

Final Conclusion: The appeal is allowed: the assessment order for A.Y.2015 16 passed under section 143(3) is quashed on grounds of breach of principles of natural justice for non production of relied material and denial of cross examination.

Deduction under section 24 of the Act - readiness to let out - capitalisation of pre-construction interest - rectification under section 154 - mistake apparent on the record - review not permissible in rectification proceedings - burden of proof to establish completion and readiness to let out

Deduction under section 24 of the Act - readiness to let out - capitalisation of pre-construction interest - burden of proof to establish completion and readiness to let out - Claim for deduction of interest on loan used for construction of a commercial building was not allowable under the head 'income from house property' and was to be capitalised. - HELD THAT: - The assessee claimed deduction for interest incurred on loan taken for construction of a commercial building, asserting the building was completed and intended to be let out, but produced no evidence of completion or of steps taken to let out the property. The Tribunal accepted the finding of the revenue authorities that the building was not shown to be ready to let out in all respects (e.g., supply connections, occupation certificate, clearances) and that the claim was based on presumption rather than on documentary proof. In the absence of evidence that the property was ready and that letting had been attempted, the interest incurred during the pre-commencement/construction stage must be capitalised to the cost of the building rather than allowed as a deduction under section 24. The factual conclusion that the property was not ready to let out and that no steps were taken to let it out was determinative of disallowance. [Paras 6, 8]

The claim for interest deduction was disallowed and the interest was to be capitalised to the cost of the building.

Rectification under section 154 - mistake apparent on the record - review not permissible in rectification proceedings - Rectification under section 154 could not be used to revisit or correct a debatable factual determination that the construction was incomplete; the rectification petition was rightly rejected. - HELD THAT: - The assessee sought rectification of the intimation under section 154 to alter the quantum of loss carried forward by treating the interest as allowable. The Tribunal reiterated the settled principle that a 'mistake apparent on the record' must be an obvious and patent error and not a matter requiring extended reasoning where two opinions are possible. The findings by the revenue authorities that the building was not completed and ready to let out were factual and debatable; such conclusions are not amenable to rectification proceedings which cannot be used as a forum for review. Since the assessee had not furnished evidence with the return to demonstrate completion/readiness to let out, rectification was not permissible. [Paras 3, 7, 8]

Rectification petition under section 154 was not maintainable for revisiting the disputed factual conclusion; the rejection of rectification was upheld.

Final Conclusion: The Tribunal upheld the orders of the revenue authorities: the interest claimed on loan for construction was to be capitalised (not allowed as deduction under section 24) and the rectification petition under section 154 could not be entertained to revisit the debatable factual findings; the assessee's appeal is dismissed.

Retention of bank guarantee after quashing of adjudication - Authority to hold security in absence of adjudication - Writ of Mandamus - Effect of decision in Canon India on validity of adjudication - Resuscitation/revival of show cause notices subject to higher court review

Retention of bank guarantee after quashing of adjudication - Authority to hold security in absence of adjudication - Writ of Mandamus - Whether the respondents can continue to retain the Bank Guarantee after the adjudication order against the petitioner has been set aside. - HELD THAT: - The adjudication order dated 25.09.2019 was quashed by this Court by the common order dated 25.10.2021 following the law declared in Canon India. Once the adjudication proceedings have been set aside and there is no adjudication pending in law against the petitioner, there is no authority for the respondents to hold the Bank Guarantee. Although the possibility of resuscitation or revival of the show cause notices has been preserved pending the outcome of review proceedings in the Supreme Court, that contingency does not supply present legal authority to retain the security. Consequently, a writ of mandamus directing return of the Bank Guarantee is appropriate where the underlying adjudication has been quashed and no current adjudicatory order subsists. [Paras 10, 11, 12, 13]

The respondents are directed to return the Bank Guarantee to the petitioner within two weeks from receipt of a copy of the order.

Final Conclusion: The writ petition is allowed; because the adjudication has been set aside in law, the respondents were directed to return the Bank Guarantee to the petitioner within two weeks, with no order as to costs.

Classification of used rails as heavy melting scrap - onus on Revenue to prove tariff classification - rejection of transaction value and sequential application of valuation rules under Section 14 - contemporaneous imports and comparable price evidence for upsetting invoice value - Board circular as guidance only; authorities must exercise independent mind - interest under Section 61/Section 47 payable from date of assessment

Classification of used rails as heavy melting scrap - onus on Revenue to prove tariff classification - Board circular as guidance only; authorities must exercise independent mind - Imported goods are classifiable under Chapter Heading 7204 as used rail heavy melting scrap and not under Chapter Heading 7302. - HELD THAT: - The Tribunal accepted the appellant's SGS survey report, contract and other documents showing the goods to be rusted, re-rollable rails of varying lengths suited for remelting. The revenue led no cogent evidence to establish a different classification and could not discharge the burden of proof. Reliance by lower authorities solely on the Board Circular dated 17.01.2006 was held impermissible because the Supreme Court has required assessing and appellate authorities to exercise independent judgment and consider case-specific evidence; a circular remains only guidance. Prior Tribunal authority on identical facts was noted. Applying these principles, the Tribunal held the goods to be "Used Rail Heavy Melting Scrap" under heading 7204. [Paras 4]

Classification under Chapter Heading 7204 accepted; classification under Chapter Heading 7302 rejected.

Rejection of transaction value and sequential application of valuation rules under Section 14 - contemporaneous imports and comparable price evidence for upsetting invoice value - onus on Revenue to prove tariff classification - Declared transaction value of USD 110 PMT is to be accepted and the enhancement to USD 176.58 PMT is not sustainable. - HELD THAT: - The Tribunal held that the department improperly applied Rule 10A and then Rule 3/4 of the Customs Valuation Rules without first rejecting the transaction value under Section 14 with cogent reasons. The sole basis for enhancement was a single invoice relied upon by DRI which the department failed to link to the consignments or to produce contemporaneous import data of like goods at higher prices. The investigation by DRI was held inconclusive and no show-cause proceeding flowed from it. Established authorities require detailed inquiry and evidence of comparable higher-priced imports before rejecting an invoice; mere suspicion or willingness shown by the importer to deposit security does not validate an enhanced value. Applying these principles, the Tribunal accepted the declared value. [Paras 4]

Transaction value of USD 110 PMT accepted; enhancement to USD 176.58 PMT set aside.

Interest under Section 61/Section 47 payable from date of assessment - goods not warehoused; interest claim prior to assessment unsustainable - Interest levied for the period prior to assessment on 28.03.2014 is not sustainable and is set aside. - HELD THAT: - The Tribunal found on record DRI and port documents showing the cargo was detained and remained in custody of the Kandla Port Trust and was never deposited in a warehouse. The assessment of the Bills of Entry occurred on the direction of the High Court and was completed on 28.03.2014. In these facts the Tribunal held that any liability to pay interest under the Act arises from the date of assessment/return of the Bills of Entry; accordingly interest charged for periods prior to 28.03.2014 cannot be sustained. [Paras 4]

Demand of interest for the period prior to 28.03.2014 set aside; interest, if any, to run from date of assessment.

Final Conclusion: The impugned order is set aside: goods are held to be classifiable under Chapter Heading 7204, the declared value of USD 110 PMT is accepted, and interest levied for the period prior to assessment on 28.03.2014 is quashed; appeal allowed with consequential relief in accordance with law.

Enforcement of approved resolution plan - Extinguishment of pre-Effective Date claims - Power supply obligations under approved resolution plan - Compliance with State Electricity Regulatory Commission regulations for fresh connections - Adjudicating Authority's power to grant implementation directions while appellate proceedings are pending

Enforcement of approved resolution plan - Adjudicating Authority's power to grant implementation directions while appellate proceedings are pending - Validity of the Adjudicating Authority's direction to DVC to provide a new (temporary) electricity connection to the Successful Resolution Applicant while an appeal against approval of the resolution plan was pending. - HELD THAT: - The Tribunal noted that the challenge to the legality of the resolution plan in CA(AT)(Ins) No.1111 of 2019 has been considered and the approval upheld (paragraph 12). The direction in the Impugned Order to grant a temporary connection complies with obligations contained in the approved resolution plan, which extinguishes pre-Effective Date claims and requires restoration/continuation of power supply (paragraphs 13-14). Having held the resolution plan lawful in the related appeal, there is no legal impediment to its implementation; accordingly, the Adjudicating Authority's order directing grant of a temporary connection was proper and not unlawful (paragraphs 16, 19). The Tribunal therefore affirmed the impugned direction subject to specified modifications to ensure implementation in accordance with regulatory requirements (paragraphs 16-19). [Paras 12, 13, 14, 16, 19]

The direction to DVC to provide a temporary electricity connection to the Successful Resolution Applicant is lawful and must be implemented, subject to specified modifications.

Extinguishment of pre-Effective Date claims - Power supply obligations under approved resolution plan - Compliance with State Electricity Regulatory Commission regulations for fresh connections - Scope and manner of implementation of the resolution-plan obligation requiring DVC to restore/supply power, including the interplay with WBERC Regulations and payment of security deposit for a fresh connection. - HELD THAT: - The approved resolution plan expressly extinguishes DVC's liabilities up to the Effective Date and obliges DVC to restore power and commit supply immediately after the Effective Date (clauses reproduced at paragraph 13). However, clause (g) stating supply "at the same rate as adjoining units" requires modification because terms for a new connection must reflect the tariff and conditions prevailing at the time of execution of a fresh agreement. The Tribunal held that supply must be implemented in accordance with the West Bengal Electricity Regulatory Commission Regulations made under the Electricity Act; accordingly the Successful Resolution Applicant must apply for a fresh connection and pay any security deposit and other charges admissible under the WBERC Regulations, and supply shall be in accordance with those Regulations (paragraphs 16-18, 19). [Paras 13, 16, 17, 19]

DVC's obligation to restore/supply power under the resolution plan stands, but implementation must conform to WBERC Regulations: the SRA shall apply for a fresh connection and pay security deposit/charges as admissible, and supply shall follow the WBERC-prescribed tariff and conditions.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's direction to DVC to provide a temporary electricity connection to the Successful Resolution Applicant is upheld as consistent with the approved resolution plan; implementation is subject to the SRA applying for a fresh connection, payment of security deposit/charges as admissible under WBERC Regulations, and supply being governed by those Regulations.

Privity of contract - Letter of Assurance as a limited undertaking subject to conditions - condition precedent of certification of invoices by the main contractor and EIL - substitution of the corporate debtor in the shoes of the principal contractor - application under Section 9 of the Insolvency and Bankruptcy Code, 2016

Privity of contract - substitution of the corporate debtor in the shoes of the principal contractor - Letter of Assurance as a limited undertaking subject to conditions - Whether the Letters of Assurance issued by the Corporate Debtor substituted it in the place of the Principal Contractor (FERNAS) and created privity of contract making the Corporate Debtor liable for all contractual liabilities of FERNAS. - HELD THAT: - The Tribunal examined the text and effect of the Letters of Assurance and held that those letters constituted a limited undertaking to make direct payments w.e.f. 1.9.2014 but were expressly subject to receipt of invoices duly certified by M/s FCIPL and EIL. The assurance therefore did not amount to an adoption or novation of the contract nor did it substitute the Corporate Debtor in the shoes of the Principal Contractor. The reasoning follows the principle that payments made directly for facilitation do not by themselves create privity of contract or convert the paying entity into the contractual obligor when the correspondence and methodology show only a limited assurance. The Tribunal applied this reasoning to the facts and declined to treat OPaL as having assumed full contractual liabilities of FERNAS. [Paras 11, 12, 13, 15]

Letters of Assurance did not substitute the Corporate Debtor in place of the Principal Contractor and did not create privity of contract making the Corporate Debtor liable for all obligations of FERNAS.

Condition precedent of certification of invoices by the main contractor and EIL - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether non-certification and non-compliance with conditions specified in the Letters of Assurance precluded liability of the Corporate Debtor and justified dismissal of the Section 9 application. - HELD THAT: - The Tribunal accepted the Corporate Debtor's pleaded defense that payment was expressly conditional upon submission of invoices duly certified by FCIPL and EIL and other contractual formalities. The record and the Corporate Debtor's reply identified specific deficiencies (non-amended work order, non-submission of undertakings, non-certification of invoices, absence of indemnity) which prevented processing of the claimed invoices. On that basis the Tribunal concluded there was no debt owing by OPaL in respect of the uncertified bills and the Adjudicating Authority correctly declined to admit the Section 9 petition. The conclusion aligns with precedents cited that direct facilitative payments do not create liability where conditions precedent remain unfulfilled. [Paras 6, 7, 13, 14, 15]

Non-certification and non-compliance with the explicit conditions in the Letters of Assurance meant no liability was established against the Corporate Debtor; the Section 9 application was rightly dismissed.

Final Conclusion: The appeal is dismissed. The Letters of Assurance were limited undertakings subject to certification and other conditions; they did not create privity or substitute the Corporate Debtor in the place of the Principal Contractor, and non-compliance with the conditions precluded any debt enforceable under Section 9.

Exclusion of time for computation of CIRP period - computation of timeline under Section 12 of the Insolvency and Bankruptcy Code, 2016 - extension of limitation on account of COVID-19 pandemic - non-counting of lockdown period under Regulation 40C of the Insolvency and Bankruptcy Board of India (Resolution Process for Corporate Persons) Regulations, 2016 - effect of Supreme Court orders in Suo Motu Writ Petition (Civil) No. 3/2020 on limitation - NCLAT directions regarding exclusion of lockdown period for CIRP timelines

Exclusion of time for computation of CIRP period - computation of timeline under Section 12 of the Insolvency and Bankruptcy Code, 2016 - extension of limitation on account of COVID-19 pandemic - non-counting of lockdown period under Regulation 40C of the Insolvency and Bankruptcy Board of India (Resolution Process for Corporate Persons) Regulations, 2016 - Exclusion of the period from 06.07.2021 to 28.02.2022 from the CIRP timeline for the corporate debtor Jaipur Metals and Electricals Limited. - HELD THAT: - The Resolution Professional's application for exclusion of the specified period was considered in the light of the Supreme Court's orders in the Suo Motu proceedings relating to extension of limitation during the COVID-19 pandemic, the NCLAT's directions excluding the lockdown period for counting CIRP timelines, and Regulation 40C of the IBBI Regulations which provides for non-counting of lockdown periods for CIRP tasks. Applying those authorities, the Tribunal accepted that the period from 06.07.2021 to 28.02.2022 falls within the exclusion established by the higher courts and regulatory guidance and therefore must not be counted for computation of the resolution period under Section 12 of the Code. Consequentially, on exclusion of the said period, the 270-day CIRP timeline is extended to end on 08.09.2022. The Tribunal disposed of I.A. No. 19/JPR/2022 by granting the exclusion as prayed.

The period 06.07.2021 to 28.02.2022 is excluded for computation of the CIRP period and I.A. No. 19/JPR/2022 is disposed of; the 270-day CIRP period is thereby extended to conclude on 08.09.2022.

Final Conclusion: The Tribunal allowed the Resolution Professional's application and excluded the period 06.07.2021 to 28.02.2022 from the CIRP timeline under Section 12 of the IBC, applying the Supreme Court's COVID-19 limitation orders, NCLAT directions and IBBI Regulation 40C; I.A. No. 19/JPR/2022 is disposed of and the CIRP 270-day period is correspondingly extended to end on 08.09.2022.

Placement of resolution plan before Committee of Creditors - disqualification under Section 29A - role of Resolution Professional in eligibility determination - power of Committee of Creditors to decide eligibility - mandate under Section 30(3) to present plans - MSME exception to applicability of Section 29A

Placement of resolution plan before Committee of Creditors - mandate under Section 30(3) to present plans - role of Resolution Professional in eligibility determination - Resolution Professional must place the Applicant's resolution plan before the Committee of Creditors for their consideration. - HELD THAT: - Section 30(3) imposes a statutory duty on the Resolution Professional to present to the Committee of Creditors those resolution plans which confirm the conditions specified in Sub Section (2). The Tribunal examined the minutes of the 10th CoC meeting and found that, although the Applicant was present on the record, the plan itself was not placed before the CoC for independent consideration; instead the RP recorded his view that the Applicant was disqualified under Section 29A. The Tribunal relied on the principle, as articulated by the NCLAT in Everest Oranics Ltd. Vs. Leesa Lifesciences Pvt. Ltd. , that the CoC is the appropriate forum to evaluate and decide on approval of resolution plans and to consider eligibility/ineligibility under Section 29A. Accordingly, the Tribunal held that the RP should not unilaterally preclude the CoC from examining the plan and the question of eligibility, and directed that the plan be placed before the CoC. [Paras 5, 6, 7, 8, 10]

Application allowed partly; RP directed to place the Applicant's resolution plan before the CoC for consideration.

Disqualification under Section 29A - power of Committee of Creditors to decide eligibility - MSME exception to applicability of Section 29A - Validity of the RP's rejection/disqualification was not finally decided and is to be considered by the Committee of Creditors. - HELD THAT: - The Tribunal expressly refrained from adjudicating the merits of the disqualification alleged by the RP so as not to influence the CoC's independent assessment. While the RP may record remarks and rely on materials (including third party verification), the ultimate question of whether the Applicant is ineligible under Section 29A - including any contention based on the Applicant's directorship in an undischarged insolvent or the asserted MSME exception - shall be examined and determined by the CoC using the materials placed before it. The Tribunal left open the RP's ability to record his observations but required the CoC to consider eligibility and decide the plan in accordance with law and the material available to it. [Paras 6, 8, 9, 10]

Tribunal declined to rule on the validity of the RP's rejection; directed the CoC to determine eligibility/ineligibility and decide on the plan expeditiously.

Final Conclusion: The application is partly allowed: the Resolution Professional is directed to place the Applicant's resolution plan before the Committee of Creditors (with any remarks the RP chooses to record); the Committee of Creditors shall consider the plan and determine the Applicant's eligibility under Section 29A (including any MSME-related contentions) and decide on approval or rejection expeditiously in accordance with law.

Enforceability of excluded securities - effect of conversion of debt into preference shares on creditor remedies - novation by approval of resolution plan - majority decision of the Committee of Creditors binding on dissenting members - rights of dissenting financial creditor under Section 53 of the Code

Enforceability of excluded securities - effect of conversion of debt into preference shares on creditor remedies - novation by approval of resolution plan - Whether excluded securities and guarantees remain enforceable where the underlying admitted/unpaid debt is extinguished or converted into non-convertible redeemable preference shares under the approved resolution plan. - HELD THAT: - The Tribunal examined the resolution plan which provides that a residual portion of the admitted debt would be written off and that any balance financial debt (unpaid debt) would stand converted into zero-dividend, non-cumulative non-convertible redeemable preference shares to be issued to financial creditors. The plan also explicitly defines certain instruments as "Excluded Securities" but, read together with clauses effecting write-off and conversion of unpaid debt, the Bench held that where the unpaid debt is extinguished or converted into preference shares there remains no outstanding liability against which the excluded securities can be enforced. Approval of the resolution plan by the Committee of Creditors therefore effects a novation in respect of the corporate debtor's debt insofar as the plan extinguishes or converts that debt, and the majority commercial decision of the CoC approving the plan operates to discharge enforcement rights insofar as there is no realisable underlying debt. The minutes of the CoC discussion and the fact of dissent by a minority creditor do not alter this outcome; the dissenting financial creditor remains entitled only to the rights available to dissenters under Section 53 of the Code. The Tribunal concluded on the prima facie view that the excluded securities were subsumed by the plan's provisions for write-off/conversion and that nothing remains realisable for enforcement once the debt is extinguished or converted. [Paras 25, 26, 27, 29, 30]

Excluded securities and guarantees cannot be enforced where the underlying admitted/unpaid debt is extinguished or converted into preference shares under the approved resolution plan; the approval effects novation and binds the dissenting creditor whose statutory rights under Section 53 remain preserved.

Final Conclusion: The application is dismissed. The Tribunal held that the resolution plan's provisions for write-off and conversion of unpaid debt into non-convertible redeemable preference shares operate to extinguish the underlying liability and thereby preclude enforcement of the excluded securities; the dissenting financial creditor retains only the statutory entitlements available to dissenters under the Code.

Approval of resolution plan under Section 31 of the IBC - Compliance with the mandatory requirements of Section 30(2) of the IBC - Priority payment of CIRP costs, employee and workmen dues, and operational creditors under the resolution plan - Treatment of dissenting financial creditors and liquidation value under section 53 - Conversion of unpaid admitted financial debt into non-convertible redeemable preference shares - Commercial wisdom of the Committee of Creditors not subject to judicial interference - Binding nature of an approved resolution plan and cessation of moratorium - Forfeiture of performance security on non-compliance/withdrawal of approved resolution plan

Approval of resolution plan under Section 31 of the IBC - Compliance with the mandatory requirements of Section 30(2) of the IBC - Tribunal granted approval to the revised resolution plan after finding that it was approved by the Committee of Creditors and complied with Section 30(2) requirements. - HELD THAT: - The Tribunal examined the record and noted that the resolution plan was approved by the CoC with 91.06% voting share. It applied the statutory checklist under Section 30(2) and found that the plan provided for payment of CIRP costs, payment priorities for employees/workmen and operational creditors, mechanisms for payment to financial creditors and implementation terms, and included provision for effective implementation. Reliance was placed on settled principles that the Adjudicating Authority's review is limited to the parameters of Section 30(2) and does not permit modification of the commercial decision of the CoC. On that basis and subject to observations in the order, the Tribunal accorded approval to the resolution plan under Section 31.

Approval of the resolution plan under Section 31 was accorded as the plan met the mandatory requirements of Section 30(2) and had CoC approval.

Priority payment of CIRP costs, employee and workmen dues, and operational creditors under the resolution plan - Treatment of dissenting financial creditors and liquidation value under section 53 - Conversion of unpaid admitted financial debt into non-convertible redeemable preference shares - The Tribunal accepted the plan's treatment of claims, payment priority and post-implementation treatment of unpaid/admitted debts including conversion and treatment of dissenting financial creditors. - HELD THAT: - The Tribunal recorded that the plan provides for payment of CIRP costs in priority and identifies funding sources; payment of employee and workmen dues and operational creditors in priority as required by Section 30(2)(b); and a detailed schedule for upfront cash tranches and subsequent payments to financial creditors. It accepted the plan's mechanism that dissenting financial creditors would be paid their liquidation value in priority (to be adjusted from upfront payments) and that the balance unpaid admitted financial debt would be converted into non-convertible redeemable preference shares with specified characteristics. The Tribunal noted the plan's liquidation-value comparison and the commercial structure proposed for recovery and distribution, and approved those treatments as part of the plan.

The plan's distribution architecture, including priority payments, treatment of dissenting creditors and conversion of unpaid debt into preference shares, was accepted and approved.

Commercial wisdom of the Committee of Creditors not subject to judicial interference - Binding nature of an approved resolution plan - The Tribunal held that the CoC's commercial decision is not open to judicial re-appraisal and that, once approved, the resolution plan is binding on the corporate debtor and all stakeholders. - HELD THAT: - Relying on the principle in K. Sashidhar and subsequent authority, the Tribunal observed that the adjudicatory review is limited to statutory parameters and must not trespass upon the business decision of the CoC. The Tribunal therefore declined to disturb the commercial decision reflected in CoC approval. It further directed that upon its approval the resolution plan is binding on the company, creditors, shareholders and other stakeholders, and that the moratorium shall cease to have effect from the date of the order. The Tribunal also recorded ancillary implementation directions flowing from the binding nature of the plan.

CoC's commercial approval stands; the approved resolution plan is binding on all stakeholders and the moratorium ceases from the date of the order.

Forfeiture of performance security on non-compliance/withdrawal of approved resolution plan - The Tribunal rejected unspecified future reliefs sought in the plan and ordered that the performance security may be forfeited in case of non-compliance or withdrawal of the plan. - HELD THAT: - The Tribunal expressly declined to grant reliefs or concessions in the plan that were not specifically identified or which related to future contingencies. It recorded that any reliefs sought but not specifically identified were rejected. The Bench also directed that in the event of non-compliance with the order or withdrawal of the resolution plan, the performance bank guarantee furnished by the resolution applicant would be liable to forfeiture. The Tribunal granted liberty to move further applications necessary for implementation and ordered supervisory directions including handover of records, discharge of the resolution professional subject to implementation duties, and quarterly status filing.

Unspecified or contingent reliefs were rejected and forfeiture of performance security on non-compliance/withdrawal was directed; implementation and supervision directions were issued.

Final Conclusion: Subject to the observations recorded, the Tribunal approved the revised resolution plan under Section 31 as meeting the statutory requirements, held that the CoC's commercial decision is not amenable to judicial interference, declared the approved plan binding on the corporate debtor and stakeholders, directed cessation of moratorium, gave implementation and supervisory directions (including handover of records and discharge of the resolution professional subject to implementation duties), rejected unspecified contingent reliefs, and ordered forfeiture of the performance security upon non-compliance or withdrawal.

Reverse charge mechanism - place of provision of service - business support services - reimbursement of expenses - statutory levy versus taxable service - remand for fresh consideration

Reverse charge mechanism - statutory levy versus taxable service - place of provision of service - Service tax liability on stock exchange fees payable under reverse charge mechanism was upheld. - HELD THAT: - The Tribunal found that the appellant failed to produce documentary evidence to show the stock exchange fees were a statutory levy paid by way of reimbursement. On the material before it, the Singapore Stock Exchange charged the appellant for stock-exchange services and thereby provided a taxable service to the appellant. Consequently, the liability to pay service tax under the reverse charge mechanism, in terms of the statutory scheme invoked in the adjudication, was sustained.

Demand of service tax on stock exchange service is upheld.

Reverse charge mechanism - legal consultancy service - business support services - remand for fresh consideration - Service tax demand on acquisition expenses (legal services) was not finally adjudicated and is remanded to the adjudicating authority for fresh consideration. - HELD THAT: - The Commissioner confirmed demand treating the services as "business support services" because the appellant did not produce documents to establish the services were legal consultancy. The Tribunal noted that similar services from the same provider were accepted elsewhere as legal consultancy and that the appellant failed to produce supporting documentary evidence for the specific items on which demand was confirmed. For these reasons the Tribunal directed a fresh verification of the nature of the services and reconsideration of the demand by the adjudicating authority.

Matter relating to service tax on acquisition expense remanded to the adjudicating authority for re-consideration.

Reimbursement of expenses - place of provision of service - remand for fresh consideration - Service tax demand on administrative services (reimbursements to group company) was not finally adjudicated and is remanded to the adjudicating authority for fresh consideration. - HELD THAT: - The appellant contended the payments to Dishman Europe Ltd. were mere reimbursements and not consideration for services. The Tribunal observed that no source documents were produced to establish the nature of those expenses or whether the payments amounted to provision of services by the group company or by a third party. Accordingly, the Tribunal directed that the adjudicating authority verify the source documents and re-examine whether the transactions attract service tax.

Matter relating to service tax on administrative service remanded to the adjudicating authority for re-consideration.

Final Conclusion: The appeal is disposed: the demand of service tax on stock exchange service is upheld; demands relating to acquisition expenses and administrative services are remitted to the adjudicating authority for fresh consideration in accordance with the Tribunal's directions.

Voluntary Compliance Encouragement Scheme, 2013 - payment in the manner prescribed under the Service Tax Rules, 1994 - deemed date of payment on presentation of cheque subject to realization - effect of administrative Trade Notice refusing cheques on last date

Voluntary Compliance Encouragement Scheme, 2013 - payment in the manner prescribed under the Service Tax Rules, 1994 - deemed date of payment on presentation of cheque subject to realization - Whether part-payment by cheque presented with the VCES declaration on the last date qualifies as payment of 50% of declared tax dues under the Scheme where the cheque was realized after the last date. - HELD THAT: - Rule 6 of the Scheme requires payment in the manner prescribed for payment of service tax under the Service Tax Rules, 1994. Rule 6(2A) of the Service Tax Rules expressly provides that where service tax is deposited by cheque the date of presentation of the cheque to the designated bank shall be deemed to be the date on which service tax has been paid, subject to realization of that cheque. The department, having accepted submission of the declaration with a demand draft and a cheque on the last date, ought to have presented the cheque to the bank; merely obtaining bank details and concluding insufficient funds without presenting the cheque is inadequate to deny payment. Reliance on the decision of the High Court of Delhi, which applied Rule 6(2A) to similar facts and held that realization after presentation does not defeat deeming of the date of presentation, supports this legal position. The administrative Trade Notice prohibiting acceptance of cheques on the very last date does not supplant the statutory deeming provision where a cheque was deposited and subsequently realized; the department's failure to present the cheque precluded a lawful conclusion that the 50% payment was not made.

The rejection of the VCES declaration was unsustainable; the impugned order is set aside and the appeal is allowed with consequential relief, the declaration to be granted accordingly.

Final Conclusion: On the facts, part-payment by cheque deposited with the VCES declaration on the last date, which was subsequently realized, is to be treated as payment on the date of presentation under Rule 6(2A) of the Service Tax Rules, 1994; the lower authority's rejection is set aside and the appeal is allowed.

Exclusion of tax-free and first point tax paid turnover from taxable turnover - deemed sale under the Orissa Sales Tax Act (including inter-departmental hire as sale to self) - remand for fresh consideration by the High Court

Exclusion of tax-free and first point tax paid turnover from taxable turnover - Whether the turnover comprising tax-free goods and goods on which first point tax has been paid should be deleted from taxable turnover was remitted to the High Court for fresh consideration. - HELD THAT: - The Supreme Court found that the High Court's dismissal of the tax revisions was based on brief and cryptic reasons without adequate adjudication on the specific question framed at (b). Given the absence of substantive reasoning on the claim for deletion of tax-free and first point tax paid turnover from taxable turnover, the matter is restored to the High Court for de novo consideration of that question in the pending tax revisions. [Paras 5]

Restored to the High Court for fresh disposal on the question of deletion of tax-free and first point tax paid turnover from taxable turnover; impugned order set aside and appeals allowed on this limited basis.

Deemed sale under the Orissa Sales Tax Act (including inter-departmental hire as sale to self) - Whether receipts of hire charges recovered from contractors fall within the ambit of deemed sales under the Orissa Sales Tax Act was remitted to the High Court for fresh consideration. - HELD THAT: - The High Court did not adequately address the legal question whether hire charges recovered from contractors fall within the statutory concept of deemed sale as framed at (d). The Supreme Court therefore set aside the impugned order and directed that the High Court re-examine and decide this question in the restored tax revisions. [Paras 5]

Restored to the High Court for fresh disposal on whether hire charges recovered from contractors constitute deemed sales; impugned order set aside and appeals allowed on this limited basis.

Deemed sale under the Orissa Sales Tax Act (including inter-departmental hire as sale to self) - Whether receipt of hire charges of machineries from an inter-department of the assessee amounts to a sale to self within the meaning of deemed sale under the Orissa Sales Tax Act was remitted to the High Court for fresh consideration. - HELD THAT: - The Court observed that the High Court's reasons were cryptic and did not resolve the specific question framed at (e) concerning inter-departmental hire being treated as sale to self. Accordingly, the tax revisions were restored for the High Court to decide this question afresh, with direction to endeavour expeditious disposal given the vintage of the proceedings. [Paras 5]

Restored to the High Court for fresh disposal on whether inter-departmental hire charges constitute sale to self under the Act; impugned order set aside and appeals allowed on this limited basis.

Final Conclusion: The appeals are allowed; the impugned High Court order dated 13 February 2019 is set aside and Tax Revision Nos. 1-5 of 2001 are restored to the High Court for fresh and expeditious disposal on the three specified questions (relating to deletion of certain turnover and two aspects of deemed sale). Pending applications stand disposed of.

Power to condone delay under the Limitation Act - Section 29(2) savings-application of Sections 4 to 24 of the Limitation Act - Express exclusion by necessary implication (expressio unius est exclusio alterius) - Subjective satisfaction as to sufficient cause for condonation - Manufacture and value addition as determinative for VAT liability - Common parlance test for identity of goods

Power to condone delay under the Limitation Act - Section 29(2) savings-application of Sections 4 to 24 of the Limitation Act - Express exclusion by necessary implication (expressio unius est exclusio alterius) - High Court's authority to entertain a revision under Section 70 of the Meghalaya VAT Act beyond sixty days by condoning delay - HELD THAT: - The Court held that Section 70 prescribes a sixty day period for filing revision but does not expressly exclude the application of the Limitation Act provisions which permit condonation. Applying Section 29(2) of the Limitation Act, the Court explained that provisions of Sections 4-24 of the Limitation Act apply to a special law except to the extent they are expressly excluded; an exclusion by necessary implication must be obvious. Chapter VII of the Meghalaya VAT Act contains provisions where condonation is expressly provided (e.g., Sections 65, 68, 69) and in one provision an outer limit is fixed (Section 69), but Section 70 contains no express bar or outer limit. Section 110 (confined to Chapter VI) does not operate to exclude Section 5 of the Limitation Act in relation to Section 70. Consequently, there is no basis to read an implied exclusion of the power to condone delay in Section 70 and the High Court may, in its discretion, entertain a revision presented after sixty days if satisfied that sufficient cause is shown. [Paras 24, 25, 26, 27, 32]

Section 70 does not expressly or by necessary implication exclude the Limitation Act; the High Court may condone delay and entertain the revision beyond sixty days.

Subjective satisfaction as to sufficient cause for condonation - Good faith and bona fides in approaching a wrong forum - Whether the petitioner showed sufficient cause for condonation of delay in instituting the revision - HELD THAT: - The Court reiterated that the forum's satisfaction as to sufficiency of cause is essentially subjective but must be guided by established judicial principles. Delay will not be lightly visited where there is no crass negligence or mala fides. The petitioner had erroneously but bona fide approached the Board of Revenue (a forum applicable to undivided Assam) and pursued its remedy with diligence; there was no evidence of deliberate mischief or mala fide conduct. On these facts the Court was satisfied that sufficient cause existed to condone the delay. [Paras 33, 34, 35, 36, 37]

Sufficient cause for condonation of delay was shown and the petition for revision could be entertained.

Manufacture and value addition as determinative for VAT liability - Common parlance test for identity of goods - Whether the product 'rusk' manufactured by the petitioner is 'bread' for the purpose of the VAT exemption - HELD THAT: - On the merits the Court accepted the factual description that the petitioner manufactures bread and thereafter subjects it to a further process (slicing and toasting/drying) to produce rusk. That further process falls within the meaning of 'manufacture' and effects value addition, distinguishing the final product from bread. Applying authorities and the common parlance test-would a buyer asking for bread be supplied rusk-the Court concluded that bread and rusk are distinct in ordinary commercial understanding. Consequently, the VAT exemption applicable to bread does not extend to rusk produced by the petitioner. [Paras 38, 39, 42, 43, 44]

Rusk is not bread for the purpose of the exemption; the appellate order holding rusk taxable is unimpeachable.

Final Conclusion: The High Court may exercise the power to condone delay in filing a revision under Section 70 by applying the Limitation Act; the petitioner demonstrated sufficient cause for the delayed filing but, on the merits, rusk is a distinct manufactured product involving value addition and is not entitled to the VAT exemption applicable to bread-the appellate order is upheld and the revision fails; no order as to costs.

Misuse of declaration Form 'C' for unauthorized concessional purchases - violation of registration certificate conditions for concessional purchases - penalty under section 10A of the Central Sales Tax Act for unauthorized use of Form 'C' - distinction between goods used as raw materials in manufacture and goods used in plant/building construction - judicial modulation of penalty quantum on equitable grounds

Misuse of declaration Form 'C' for unauthorized concessional purchases - violation of registration certificate conditions for concessional purchases - distinction between goods used as raw materials in manufacture and goods used in plant/building construction - Whether levy of penalty under section 10A of the CST Act was justified for purchases of agri film and cement against Form 'C' when those goods were not covered by the dealer's registration certificate and were used in construction of plant/buildings. - HELD THAT: - The court accepted the finding that the petitioner purchased agri film and cement on issuance of Form 'C' though those goods were not included in the Form B registration certificate authorising purchases for use in manufacture. The Tribunal and Registering Authority concluded that such purchases could not be treated as purchases of raw materials used in manufacture merely because the purchased goods were employed in constructing buildings or plant used for manufacture. The Appellate Assistant Commissioner's contrary conclusion that construction using those goods equated to use in manufacture was rejected. On the admitted fact that the goods were not authorised under the registration certificate and were not raw materials in the manufacture of goods, the Court held that the provisions of the Central Sales Tax Act were violated and penalty under section 10A was attracted. [Paras 7, 9, 10]

Penalty under section 10A was rightly levied for misuse of Form 'C' in respect of goods not authorised by the registration certificate; the Tribunal's restoration of the Registering Authority's order is sustained.

Penalty under section 10A of the Central Sales Tax Act for unauthorized use of Form 'C' - judicial modulation of penalty quantum on equitable grounds - Whether the quantum of penalty imposed at 150% of the tax due should be maintained or reduced. - HELD THAT: - While upholding the imposition of penalty, the court exercised its equitable power to moderate the quantum after considering the facts and circumstances. Finding the levy itself justified, the court nevertheless concluded that reducing the penalty from 150% to 100% of the tax due would be fair and just in the circumstances, and accordingly modified the Tribunal's order to that limited extent. [Paras 11]

Quantum of penalty reduced from 150% to 100% of the tax due; otherwise the penalty is sustained.

Final Conclusion: The Tribunal was right in restoring the Registering Authority's finding that the petitioner misused Form 'C' for purchases not authorised by its registration and thus attracted penalty under section 10A; however, the penalty quantum is reduced from 150% to 100% of the tax due, and the writ petition is disposed of accordingly.

Stock discrepancies and sales suppression - interpolations in stock register - reliance on delivery challans - assessment based on inspection and seized documents - appellate interference under Article 226 - maintenance of tribunal's factual findings

Interpolations in stock register - stock discrepancies and sales suppression - Whether the Tribunal correctly found interpolations in the stock register and restored the assessing officer's estimation of suppressed sales. - HELD THAT: - The Tribunal examined the stock book produced by the dealer at the hearing and found interpolations, erasures made by whitener, and an inability on the dealer's part to correlate entries with the inspection findings. On that factual basis the Tribunal concluded that the dealer had acted with malafide intention to evade tax and restored the assessing officer's estimation of suppressed sales. The High Court reviewed the Tribunal's recorded finding (including the Tribunal's para No.9 reproduced in the order) and held that those findings were based on material evidence seized and perused by the Tribunal. As findings of fact supported by the record, they did not warrant interference in writ jurisdiction. [Paras 8, 9]

Tribunal's finding of interpolations and restoration of the assessment was sustained; the finding is a factual conclusion not open to interference under Article 226.

Reliance on delivery challans - assessment based on inspection and seized documents - maintenance of tribunal's factual findings - Whether the High Court should interfere with the Tribunal's assessment that discrepancies in delivery challans and inability to correlate entries justified setting aside the Appellate Assistant Commissioner's order. - HELD THAT: - The Tribunal noted discrepancies between the number of doors recorded in delivery challans and those found on inspection, and recorded that the dealer admitted certain discrepancies. The Tribunal also noted that the appellate authority's acceptance of damaged stock was not tenable in view of the interpolations and the dealer's failure to substantiate inward receipts. The High Court observed that these conclusions were reached after perusal of the stock register and seized documents and were supported by material on record; accordingly, the Court refused to reappraise or substitute its view for the Tribunal's factual determinations in exercise of writ jurisdiction. [Paras 3, 8, 9]

No interference with the Tribunal's conclusion that discrepancies in delivery challans and supporting documents justified setting aside the appellate order.

Final Conclusion: Writ petition dismissed; the Tribunal's order dated 28.02.2007 setting aside the Appellate Assistant Commissioner's order was upheld and the High Court declined to interfere with the Tribunal's factual findings.