TaxTMI Updates e-Newsletter
Mar 23,2021

Refund of IGST on export - mismatch between GST portal and ICEGATE data - amendment of GSTR-1 entries - Circular No.12/2018-Customs transmission procedure - judicial direction to administrative authority to follow specified procedure

Refund of IGST on export - mismatch between GST portal and ICEGATE data - amendment of GSTR-1 entries - Circular No.12/2018-Customs transmission procedure - Direction to respondent No.4 to process and sanction the applicants' pending IGST refund claims arising from export invoices for July 2017 in accordance with the procedure set out in Circular No.12/2018-Customs. - HELD THAT: - The writ applicants paid IGST on exports for July 2017 but could not obtain refunds because of discrepancies between the GST portal records (GSTR-1) and the ICEGATE customs portal caused by errors in outward-supply entries. While 28 invoices were amended on the GST portal, 14 invoices remained unamendable due to a technical portal error. The Central Board's Circular prescribes a remedial transmission procedure involving escalation via the customs Zonal Office to the Customs Policy Wing and GSTN transmission of customs EDI records, followed by the usual refund sanction process. The respondents were afforded an opportunity to consider and implement that procedure; in view of the applicants' inability to amend certain entries and the availability of the prescribed administrative remedy, the Court directed respondent No.4 to immediately act as per the Circular and sanction the refund, in accordance with law, within a specified time. The Court preserved the applicants' right to revive the writ in case of further difficulty and required communication of the order to the concerned authority. [Paras 3, 4, 5, 9, 10]

Respondent No.4 directed to follow the Circular No.12/2018-Customs transmission procedure and sanction the claimed IGST refund for the exports of July 2017 within 12 weeks from receipt of the order; right to revive the writ preserved.

Final Conclusion: Writ petition disposed by directing respondent No.4 to implement the Circular's transmission procedure and grant the applicants' IGST refund claims relating to exports made in July 2017 within 12 weeks; liberty to revive if difficulties persist.

Transitional credit under Section 140(1) of the CGST Act - rectification/revision of FORM GST TRAN-1 - bona fide error in filing TRAN-1 - obligation to provide facility for correction of inadvertent errors - prohibition on retention of tax or credit contrary to Article 265 of the Constitution - direction to enable electronic rectification or accept manual corrections

Transitional credit under Section 140(1) of the CGST Act - bona fide error in filing TRAN-1 - prohibition on retention of tax or credit contrary to Article 265 of the Constitution - The writ applicants are entitled to transitional credit despite having uploaded the carry-forward credit in an incorrect column of FORM GST TRAN-1, where the error was bona fide and procedural remedy for revision was rendered impractical. - HELD THAT: - The Court applied its earlier reasoning in Jakap Metind Pvt. Ltd. v. Union of India to hold that where FORM GST TRAN-1 was filed within time but details were inadvertently entered in the wrong column, the substantive right to claim transitional credit cannot be defeated merely because the deadline for filing a revised TRAN-1 had elapsed. The Court observed that the respondents ought to have provided a facility in the system to rectify clearly bona fide errors and that making such rectification impractical by fixing the deadline for revision to coincide with the last date for filing the return would deny the petitioner their substantive right. Retention of credit which the assessee is otherwise entitled to would amount to collection without legal authority and thus would be vulnerable to Article 265 of the Constitution. Applying these principles to the facts, the petition succeeds on merits and the entitlement to transitional credit is recognized. [Paras 5]

Entitlement to transitional credit recognised despite inadvertent error in TRAN-1; non-grant of such credit is impermissible.

Rectification/revision of FORM GST TRAN-1 - obligation to provide facility for correction of inadvertent errors - direction to enable electronic rectification or accept manual corrections - Respondents are directed to permit rectification of FORM GST TRAN-1 either by reopening the online portal for electronic refiling or by accepting manually filed corrected FORM GST TRAN-1 within the time ordered by the Court. - HELD THAT: - Relying on the operative relief granted in the cited precedent, the Court directed that, in order to give effect to the recognised entitlement to transitional credit, the respondents must either reopen the online portal to enable electronic refiling of a rectified TRAN-1 or accept a manually filed TRAN-1 with necessary corrections. The direction is remedial and seeks to restore the assessees' substantive right to transitional credit by providing a practical mechanism for correction of bona fide errors in filing. [Paras 6]

Respondents ordered to open portal for electronic rectification or accept manual corrections to FORM GST TRAN-1 within the timeframe specified by the Court.

Final Conclusion: Writ petition allowed; respondents directed to permit rectification of FORM GST TRAN-1 (electronically or manually) so that transitional credit claimed under Section 140(1) of the CGST Act may be granted to the writ applicants.

Intelligence-based enforcement action - administrative assignment of taxpayers - continuation of investigation by the initiating authority - interim stay on coercive measures - invasion of privacy - territorial jurisdiction (maintainability)

Intelligence-based enforcement action - administrative assignment of taxpayers - continuation of investigation by the initiating authority - Whether other Intelligence Units were justified in carrying out repeated searches after investigation was commenced by the Gautam Budh Nagar Commissionerate, having regard to the circular dated 05.10.2018. - HELD THAT: - The Court found, on a prima facie view, that the circular dated 05.10.2018 contemplates that once an authority initiates intelligence-based enforcement action, that authority is empowered to complete the entire process and other units ordinarily should not pursue parallel action. Given that the Gautam Budh Nagar Commissionerate had commenced investigation on 19.03.2020 and multiple searches by various Intelligence Units thereafter are recordable, the Court considered it sensible and practical that the other Intelligence Units should have refrained from independent investigative action. The respondents' contention of difference in "subject matter" did not, at this interlocutory stage, displace the plain import of the circular or persuade the Court otherwise. The Court also noted that a relied-upon decision did not refer to the circular and therefore was of limited assistance to respondents. [Paras 9]

Prima facie, other Intelligence Units ought to have held their hands once the Gautam Budh Nagar Commissionerate had initiated investigation; the initiating authority should normally continue the investigation.

Invasion of privacy - interim stay on coercive measures - Whether the searches, including at the proprietor's residence, constituted invasion of privacy warranting protective relief. - HELD THAT: - The petitioner presented material indicating searches at business premises and at the proprietor's residence, and contended that the most recent residential search amounted to invasion of privacy. The Court regarded this contention as making out a prima facie case that the searches, including repeated actions at residential premises, raised concerns about invasion of privacy and oppressive conduct. While not finally adjudicating the grievance, the Court recorded that search officers must ensure that no invasion of privacy occurs in the course of investigations. [Paras 4, 10]

Petitioner made out a prima facie case of invasion of privacy; search officers are directed to ensure that searches do not invade privacy.

Interim stay on coercive measures - territorial jurisdiction (maintainability) - Whether interim relief should be granted and what directions should govern conduct of investigation pending respondents' reply. - HELD THAT: - The Court, noting that respondents had been granted time to file a counter-affidavit but that urgent coercive measures were threatened, exercised its discretion to grant limited interim protection. The protection is conditional: respondents were given two weeks to file their reply; in the interim no coercive measures shall be taken against the petitioner; and if investigative action is necessitated during this period it shall be conducted only by the Gautam Budh Nagar Commissionerate in accordance with the circular dated 05.10.2018. The Court also recorded respondents' earlier statement that they would not object to maintainability before the Allahabad High Court if the petitioner chose to pursue remedies there, but declined to immediately transfer or dispose of forum questions and instead preferred to preserve status quo pending further pleadings. [Paras 7, 10]

Interim relief granted: no coercive measures during the interregnum; respondents to file reply within two weeks; any investigation in the meantime to be conducted only by the Gautam Budh Nagar Commissionerate, ensuring no invasion of privacy.

Final Conclusion: Interim order: petitioner's prima facie case accepted sufficiently to restrain coercive action for the moment; respondents directed to file their reply within two weeks; any investigative action in the meanwhile to be undertaken only by the Gautam Budh Nagar Commissionerate in accordance with the circular dated 05.10.2018 and without invading privacy; matter listed for further consideration.

Principles of natural justice - opportunity of being heard - proviso to Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - limitation under Section 54 of the Central Goods and Services Tax Act, 2017 - writ jurisdiction under Article 226 for breach of natural justice despite alternative statutory remedy

Principles of natural justice - opportunity of being heard - proviso to Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - limitation under Section 54 of the Central Goods and Services Tax Act, 2017 - Validity of the adjudicating authority's rejection of the refund claim without giving the petitioner a fresh opportunity of being heard on the merits after treating the claim as within time. - HELD THAT: - The adjudicating authority initially issued a show cause notice limited to the ground of limitation under Section 54. The petitioner replied and relied on notifications extending limitation, and the authority accepted that explanation and treated the claim as having been filed in time. Thereafter the authority proceeded to determine the claim on merits and rejected it without issuing any fresh show cause notice or affording the petitioner an opportunity to be heard on the merits. The court held that Rule 92(3) read with its proviso and the principles of natural justice require that no order rejecting a claim for refund be passed without giving the claimant an opportunity of being heard. An adjudicatory order must not traverse beyond the proposals in the show cause notice; where it does so, the affected grounds are deemed not to have been the subject of a proper notice. The availability of an alternative statutory appeal does not preclude exercise of writ jurisdiction where there is an alleged violation of natural justice; accordingly the High Court entertained the petition and found the impugned order to be vitiated by denial of hearing. [Paras 8, 10, 11, 12, 15]

Impugned rejection quashed; matter remanded for fresh determination after issuing appropriate show cause notice and affording a reasonable opportunity of hearing to the petitioner.

Final Conclusion: Writ petition allowed; the rejection order is quashed and the matter is remanded to the adjudicating authority to pass a fresh order after putting the petitioner on notice and affording a reasonable opportunity of being heard in accordance with Rule 92(3) and the principles of natural justice.

Summary order. Respondents directed to place on record an affidavit stating whether the GST Council has taken any decision in respect of the aspects referred to in this Court's order dated 19.11.2019; if no decision is taken, the matter will proceed for hearing; respondents to bear in mind and comply with the earlier direction dated 05.02.2020 to implement the order dated 19.11.2019; matter listed on 13.05.2021.

Regular bail under Section 439 Cr.P.C. - arrest under GST laws for wrongful availment of Input Tax Credit - custodial necessity where investigation is complete and challan presented - conditions for grant of bail: personal/surety bond, surrender of passport and travel restriction

Regular bail under Section 439 Cr.P.C. - custodial necessity where investigation is complete and challan presented - arrest under GST laws for wrongful availment of Input Tax Credit - conditions for grant of bail: personal/surety bond, surrender of passport and travel restriction - Grant of regular bail to the petitioner arrested in proceedings under the Central GST Act and Punjab GST Act for alleged wrongful availment of Input Tax Credit. - HELD THAT: - The Court found that the investigation into the alleged wrongful availment of Input Tax Credit has been completed and the challan has been presented. In those circumstances, continued custody was held not to be necessary for the purposes of investigation. The Court distinguished earlier orders refusing bail where investigations remained incomplete and noted that the factual matrix in those cases differed. Exercising the jurisdiction under Section 439 Cr.P.C., the Court directed release on regular bail while imposing conditions to secure attendance and prevent flight. The Court expressly refrained from making any observation on the merits of the underlying tax liability or the vires challenge pending in other proceedings.

Petitioner released on regular bail on execution of adequate personal/surety bond to the satisfaction of the trial Court, subject to surrender of passport and prohibition on leaving India without prior permission of the Court; no comment on merits.

Final Conclusion: The petition under Section 439 Cr.P.C. is allowed: regular bail granted because investigation is complete and the challan is presented; release conditioned on execution of an adequate personal/surety bond, surrender of passport and court permission before leaving India; no expression on the merits of the case.

Condition precedent of recording reasons to believe - inspection, search and seizure under Section 67 of the CGST Act, 2017 - release of perishable goods under Section 67(6) - assessment of tax payable prior to release

Condition precedent of recording reasons to believe - inspection, search and seizure under Section 67 of the CGST Act, 2017 - Record to show whether the respondents had recorded 'reasons to believe' before invoking inspection, search and seizure under Section 67 of the CGST Act, 2017. - HELD THAT: - Petitioners challenged the search order and summons on the ground that the statutory precondition of 'reasons to believe' was not satisfied or recorded before action under Section 67 was taken. Given this challenge, the court directed the respondents to produce the relevant records so that the court may examine whether the condition precedent of recording 'reasons to believe' exists in the instant case. The court did not decide the existence or adequacy of such reasons on merits but required production of the material necessary for that determination.

Respondents directed to produce the record showing whether 'reasons to believe' were recorded; issue remanded to permit judicial scrutiny.

Release of perishable goods under Section 67(6) - assessment of tax payable prior to release - Procedure for securing release of perishable goods alleged to have been seized during inspection/search under Section 67. - HELD THAT: - Petitioners asserted that the goods are perishable and offered to deposit tax to secure release under Section 67(6). The court recorded the parties' positions and directed that the petitioner attend the office of the Deputy Commissioner of GST with all documents so that the authorities may assess the tax liability. The court authorised the administrative step that, if tax payable can be assessed, the petitioner may deposit the assessed tax to secure release of the goods. The direction contemplates assessment and deposit as preconditions to release, leaving the quantification to the respondent authority upon production of documents.

Petitioner permitted to appear before GST authorities with documents on the specified date for assessment; if tax payable is assessed, petitioner may deposit such tax to secure release of perishable goods under Section 67(6).

Final Conclusion: Court directed production of records to enable examination of whether 'reasons to believe' were recorded before invoking Section 67 and, separately, ordered a procedural course for assessment and deposit by the petitioner to facilitate release of perishable goods under Section 67(6); no adjudication on the merits of the legality of the search/seizure was made.

Quashing of FIR under Section 482 Cr.P.C. - Inherent powers of High Court and circumspection in exercise of Section 482 Cr.P.C. - Distinction between lodging of FIR and commencement of prosecution/requirement of sanction - Scope and operation of Section 132(6) of the Central Goods and Services Tax Act in relation to sanction for prosecution - Prima facie sufficiency of FIR to disclose commission of offences

Quashing of FIR under Section 482 Cr.P.C. - Inherent powers of High Court and circumspection in exercise of Section 482 Cr.P.C. - Prima facie sufficiency of FIR to disclose commission of offences - Petition under Section 482 Cr.P.C. seeking quashing of the FIR was dismissed and the FIR was not quashed at the investigation stage. - HELD THAT: - The Court exercised caution in considering the exercise of inherent powers under Section 482 Cr.P.C., noting that investigation was still underway and the final report/charge-sheet under Section 173 Cr.P.C. had not been presented. The FIR prima facie disclosed commission of offences alleged and the correctness or otherwise of allegations was a matter for trial where evidence would be adduced by both parties. Given that prosecution had not commenced and the subject-matter required further investigation, the Court was not justified in embarking on determination of truthfulness of allegations or in quashing the FIR at this stage.

FIR not quashed; petition dismissed.

Distinction between lodging of FIR and commencement of prosecution/requirement of sanction - Scope and operation of Section 132(6) of the Central Goods and Services Tax Act in relation to sanction for prosecution - Lodging of the FIR by the tax officer did not require prior sanction of the Commissioner under Section 132(6) CGST Act; such prior sanction is required at the stage of prosecution (presentation of charge-sheet/cognizance) and not for registration of complaint/FIR and investigation. - HELD THAT: - While Section 132(6) CGST Act provides that a person shall not be prosecuted for offences under that section except with previous sanction of the Commissioner, the Court held that 'prosecution' commences only when a Magistrate or Court takes cognizance upon presentation of a charge-sheet/final report under Section 173 Cr.P.C. Lodging an FIR and initiation of investigation are distinct from prosecution. Therefore, the tax officer's filing of a complaint leading to registration of the FIR could not be characterised as an act requiring prior sanction of the Commissioner, and the officer had not exceeded jurisdiction by initiating investigation.

Requirement of prior sanction under Section 132(6) CGST Act arises at prosecution/cognizance stage and does not invalidate the lodging of FIR or initiation of investigation.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashment of the FIR was dismissed; the High Court declined to intervene at the investigation stage, holding that the FIR prima facie disclosed offences and that the prior sanction under Section 132(6) CGST Act is required only at the stage of prosecution/charge-sheet and not for lodging the FIR.

Provisional attachment - statutory life of provisional attachment - final assessment proceedings - release/defreezing of bank account by interim order

Provisional attachment - statutory life of provisional attachment - final assessment proceedings - Whether the writ petition required adjudication on merits against the provisional attachment of immovable property. - HELD THAT: - The Court observed that the impugned order of provisional attachment in relation to the immovable property had outlived its statutory life and that final assessment proceedings had been concluded. In view of these developments the Court declined to adjudicate the merits of the challenge to the provisional attachment. Consequently the writ petition was not decided on the substantive questions raised about the legality of the attachment, but was disposed of as the subject matter had become functionally spent. [Paras 5, 6]

The petition was not adjudicated on merits and was disposed of because the provisional attachment had outlived its statutory life and final assessment proceedings had concluded.

Release/defreezing of bank account by interim order - provisional attachment - Status of the bank account attachment as affected by the earlier ad-interim order. - HELD THAT: - The Court noted the Coordinate Bench's ad-interim direction to forthwith release/defreeze the petitioner's bank account and recorded that the bank account had been ordered to be released by that interim order. The present Bench observed that the challenge included both immovable property attachment and provisional attachment of the bank account, but the bank account attachment had already been addressed by the earlier ad-interim order. [Paras 2, 4]

The bank account had been directed to be released by the Coordinate Bench's ad-interim order; no further adjudication on that aspect was undertaken.

Final Conclusion: The writ petition was disposed of without adjudication on the merits: the bank account attachment had been released by an earlier ad interim order, and the challenge to the provisional attachment of the immovable property was rendered moot as the attachment had outlived its statutory life and final assessment proceedings were concluded; notice stands discharged.

Estoppel by conduct - classification of goods under tariff chapters - predetermination of adjudicatory outcome - parity of treatment with similarly placed assessees - writ petition maintainability - Article 141 of the Constitution

Estoppel by conduct - Article 141 of the Constitution - The petitioner's earlier choice to be classified under Chapter 21 does not operate as an estoppel barring him from contesting classification or being given parity with other assessees. - HELD THAT: - The Court noted that although the petitioner previously opted for classification under Chapter 21 while other manufacturers litigated the classification, subsequent judicial pronouncements in favour of assessees establish the legal position. The court held that mere past conduct of the petitioner in accepting a classification cannot preclude him from seeking reassessment or a different treatment; past conduct cannot operate as an estoppel to deny the petitioner relief. The Court also observed that the law declared by the Supreme Court is binding under Article 141 of the Constitution and that such legal developments militated against allowing the petitioner's prior choice to be determinative. [Paras 7]

Petitioner's prior acceptance of classification will not operate as an estoppel.

Predetermination of adjudicatory outcome - classification of goods under tariff chapters - parity of treatment with similarly placed assessees - The respondent must not treat the petitioner's past conduct as a basis for predetermining classification or levy; the matter must be considered afresh and the petitioner afforded an opportunity to contest any demand. - HELD THAT: - Although no show cause notice had been issued, the Court regarded the communication dated 08.07.2020 calling for payment as indicative of an element of predetermination by the respondent to classify the petitioner's product under Chapter 21 and levy tax at CGST 9% and SGST 9%. The Court accepted the petitioner's contention that if products such as "Nizam Pakku" and "Crane Pakku" are being taxed at a lower rate, parity ought to be considered. Consequently, the Court directed that the respondent may proceed with assessment or demand but must approach the issue on a clean slate without relying on the petitioner's earlier conduct; the petitioner must be allowed to respond to any show cause or enquiry and parity considerations may be examined. [Paras 5, 6, 7]

Respondent may proceed with demand or adjudication but must not predetermine classification based on past conduct; the matter to be considered afresh with parity and the petitioner's right to be heard respected.

Writ petition maintainability - The writ petition was entertained despite initial doubt as to its maintainability because the impugned communication evidenced predetermination, but ultimately disposed by granting liberty to the respondent to proceed. - HELD THAT: - The Court expressed reservations about maintainability since no adjudicatory order had been passed, but observed that the communication calling for payment manifested an intention by the respondent that justified judicial intervention. Rather than issuing final adjudicatory relief, the Court disposed the petition by directing the respondent to proceed afresh without relying on the petitioner's prior conduct. No costs were awarded. [Paras 5, 7]

Writ petition disposed of with liberty to respondent to proceed; initial maintainability doubts noted but petition entertained due to evidence of predetermination.

Final Conclusion: Writ petition disposed of: the petitioner's prior acceptance of classification cannot be used as an estoppel; the respondent is free to proceed with demand or adjudication but must consider the classification afresh without predetermination, afford the petitioner opportunity to be heard, and examine parity with similarly placed assessees.

Provision for wage arrears as an ascertained liability - accrued liability not converted into a contingent liability by deferral of payment - mercantile system of accounting and allowability of provisions - deduction for estimated expenditure incidental to business

Provision for wage arrears as an ascertained liability - accrued liability not converted into a contingent liability by deferral of payment - mercantile system of accounting and allowability of provisions - Provision for wage arrears of Rs. 5.80 crores is an ascertained liability notwithstanding that the provision was accounted on a cash basis. - HELD THAT: - The High Court applied the ratio of the Supreme Court in Bharat Earth Movers and Calcutta Co. Ltd. and held that where a liability has been incurred under accepted commercial practice and the mercantile system of accounting, the liability is an accrued (ascertained) liability and does not become contingent merely because payment is to be made at a future date. The court noted that the precedents permit deduction of provisions for liabilities incurred and appropriately estimated in the books of account as incidental to the business. Applying those principles to the facts of the case, the Court decided the substantial question of law against the Revenue and in favour of the assessee. [Paras 5]

The question of law is answered in favour of the assessee; the provision for wage arrears is an ascertained liability and the Revenue's appeal is dismissed.

Final Conclusion: Appeal dismissed; following Supreme Court precedents the provision for wage arrears was held to be an ascertained liability under the mercantile system and the decision of the Tribunal in favour of the assessee is upheld.

Taxability of refundable security deposit - capital receipt - distinction between income and continuing liability - perversity in appellate factual findings

Taxability of refundable security deposit - capital receipt - distinction between income and continuing liability - The security deposit received by the assessee from members is a refundable amount and, being a continuing liability, is a capital receipt and not taxable as income. - HELD THAT: - The tribunal found on facts that the security deposit was interest free and refundable to members on cessation of membership or on opting for refund, and that the amount continued to be shown as a liability in the assessee's books. The assessee's membership plan provisions (Articles 2, 3 and the clauses on Security Deposit and Refund of Security Deposit) explicitly characterized the deposit as refundable and non interest bearing. Given these findings, the security deposit did not constitute income of the assessee but remained a liability until paid, and therefore the assessing officer's addition treating the sum as income was not sustainable. The tribunal's reliance on an earlier High Court decision reaching a similar conclusion was applied to the facts of the case and the addition was rightly deleted. [Paras 5]

Addition made by the assessing officer in respect of the refundable security deposit deleted; the amount is a capital receipt and not taxable as income.

Perversity in appellate factual findings - distinction between assessment of fact and question of law - Whether the tribunal's factual finding that the deposit was refundable and continued as a liability was perverse and gave rise to a substantial question of law. - HELD THAT: - The High Court examined the tribunal's factual conclusions and the supporting membership plan provisions and concluded there was no perversity in the tribunal's view. The court held that these were findings of fact - the refundable character of the deposit and its maintenance as a liability in the books - and, absent perversity, did not warrant interference. Consequently, no substantial question of law arose for the Court's consideration in respect of the deletion effected by the tribunal. [Paras 5, 6]

No perversity found in the tribunal's factual findings; no substantial question of law arises and the appeal is dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal, upholding the tribunal's deletion of the addition made in respect of the refundable security deposit for AY 2005-2006, holding the deposit to be a capital receipt and that there was no perversity in the tribunal's factual findings so as to raise a substantial question of law.

Refund under Section 143(1) - Effect of issuance of notice under Section 143(2) on refund - Power to withhold refund under Section 241A - Requirement of reasons in writing and prior approval to withhold refund - Obligation to grant refund with interest where no Section 241A order is shown

Refund under Section 143(1) - Effect of issuance of notice under Section 143(2) on refund - Whether a refund determined by processing a return under Section 143(1) must be remitted notwithstanding issuance of a scrutiny notice under Section 143(2). - HELD THAT: - The Court analysed the scheme of Section 143(1) which requires computation of total income, determination of sum payable or refund (clauses (a) to (d)) and expressly provides that the amount of refund so determined "shall be granted to the assessee" (clause (e)). The mere issuance of a notice under Section 143(2) does not, by itself, operate to withhold or delay the remittance of a refund once the return has been processed and the refund quantified. The power to withhold a refund is governed separately and expressly by Section 241A; therefore, without compliance with Section 241A the statutory obligation under Section 143(1)(e) to grant the refund remains operative. [Paras 11, 12, 14]

Refund determined by processing the return under Section 143(1) is payable even though a notice under Section 143(2) has been issued, unless the conditions of Section 241A are satisfied.

Power to withhold refund under Section 241A - Requirement of reasons in writing and prior approval to withhold refund - Obligation to grant refund with interest where no Section 241A order is shown - Whether the Revenue lawfully withheld the refund in the absence of an order passed under Section 241A and, if not, the remedy to be granted to the assessee. - HELD THAT: - Section 241A permits withholding of a refund for assessment years commencing on or after 1 April 2017 only where the Assessing Officer, having regard to a notice under Section 143(2), records reasons in writing that grant of refund is likely to adversely affect revenue and obtains the previous approval of the Principal Commissioner or Commissioner. The Court found that Revenue placed nothing on record to show that any order under Section 241A had been issued in the present case; no counter-affidavit was filed and no prior approval or reasons were produced. On that basis the statutory conditions to withhold the refund were not satisfied. The Court accordingly directed payment of the refund determined in the intimation dated 02.10.2019 along with interest as payable under the Act, to be released within ten days of receipt of the judgment. [Paras 13, 15, 16, 20]

In the absence of any order under Section 241A showing reasons in writing and prior approval, the Revenue cannot withhold the refund; the quantified refund must be remitted with applicable interest within the time fixed by the Court.

Final Conclusion: Writ petition allowed. The Revenue, having produced no order under Section 241A, is directed to remit the refund determined in the intimation dated 02.10.2019 for AY 2018-2019 together with interest as payable under the Act, within ten days of receipt of this judgment.

Treatment of sale transaction as business income versus capital gains - consistency of Revenue treatment between co-owners - claim for exemption under Section 54F - calculation of capital gains under Section 50C - admissibility of additional evidence / production of co-owner's assessment order - remand to Tribunal for fresh consideration

Treatment of sale transaction as business income versus capital gains - consistency of Revenue treatment between co-owners - calculation of capital gains under Section 50C - Whether the Tribunal was justified in treating the appellant's share of the joint sale transaction as business income when the co-owner's assessment in respect of the same transaction had been accepted by Revenue as capital gains. - HELD THAT: - The Court noted that the co-owner, Shri Narendra Kanhaiyalal Parikh, had an assessment order dated 30.03.2013 permitting computation of capital gains by reference to full value under Section 50C, and that this assessment order was in existence when the Tribunal decided the appellant's appeal but was not placed before the Tribunal. Given that the same joint purchase and subsequent conversion and sale of plots were the subject-matter in both assessments, the disparate treatment of identical transaction merits reconsideration. The Tribunal's conclusion that the appellant intended to exploit commercial potential (based on sale of multiple plots) was recorded, but the Court held that the effect of the co-owner's assessment order granting capital gains treatment is a material aspect which the Tribunal ought to have had the opportunity to consider before finally treating the appellant's income as business income. [Paras 5, 6, 7]

The matter is remanded to the Income Tax Appellate Tribunal to consider the effect of the co-owner's assessment order granting capital gains treatment in relation to the appellant's income from the same transaction and to decide the appeal afresh on merits.

Admissibility of additional evidence / production of co-owner's assessment order - remand to Tribunal for fresh consideration - Whether the appellant may place on record the co-owner's assessment order as additional evidence and whether the Tribunal should be permitted to reconsider the appeal without limitation objections. - HELD THAT: - The Court accepted that the appellant had not placed the co-owner's assessment order before the Tribunal and that the assessment order existed at the time the Tribunal decided the appeal. In the peculiar facts where the co-owner has been granted capital gains treatment by an assessment order accepted by Revenue, the Court held that the appellant should be permitted to place that assessment order on record before the Tribunal. The Court granted liberty to the appellant to raise additional grounds and to place the assessment order dated 30.03.2013 on record for the Tribunal's due consideration, specifically directing that the Tribunal may consider it without going into the question of limitation and that the appeal be decided on its own merits. [Paras 6, 7]

Assessee is permitted to place the co-owner's assessment order on record as additional evidence; the Tribunal is directed to re-consider the appeal allowing additional grounds and to do so without addressing the question of limitation.

Final Conclusion: The Tribunal's order dated 23.11.2017 is set aside and the appeal is remanded to the Income Tax Appellate Tribunal for fresh consideration; the appellant may place on record the co-owner's assessment order and raise additional grounds, and the Tribunal shall decide the appeal on merits (preferably within three months) without going into limitation.

Reason to believe - reopening of assessment under Section 147 of the Income tax Act, 1961 - notice under Section 148 of the Income tax Act, 1961 - escapement of income - Non Filer Monitoring System (NMS) information - requirement of independent application of mind - borrowed satisfaction - disposal of objections to notice

Reason to believe - reopening of assessment under Section 147 of the Income tax Act, 1961 - escapement of income - Validity of reopening the assessment beyond four years for A.Y. 2012-13 on the basis of recorded reasons - HELD THAT: - The Court held that where a return has been processed under Section 143(1) without scrutiny, the statutory trigger for initiation of proceedings under Section 147 is the Assessing Officer's "reason to believe" that income has escaped assessment; the revenue need not establish conclusively at the recording stage that income has in fact escaped assessment. The reasons recorded indicate that NMS information regarding cash deposits led to an inquiry under Section 133(6), the assessee's explanation and materials were examined, and the Assessing Officer was not satisfied with the explanation and documentary support and therefore formed the opinion that income had escaped assessment to the extent indicated. Reliance was placed on authoritative precedents that the function at the reason recording stage is confined to formation of belief on relevant material and not to an adjudication of the ultimate correctness of that belief. Applying these principles to the material on record, the Court concluded that the Assessing Officer had cause or justification to form the belief that income had escaped assessment, and therefore the reopening was valid. [Paras 14, 15, 18, 20, 25]

The reopening of assessment for A.Y. 2012-13 was held valid and not without jurisdiction.

Non Filer Monitoring System (NMS) information - requirement of independent application of mind - borrowed satisfaction - disposal of objections to notice - Whether the Assessing Officer merely relied on NMS information or applied independent mind and properly considered the assessee's explanation and documents when recording reasons and disposing objections - HELD THAT: - The Court examined the reasons which expressly record that the assessee's explanation (that the deposit arose from opening cash balance and prior withdrawals) and documents were scrutinised but found to be unsupported or not sufficiently explained entry wise. The Court noted discrepancies in the bank statements and the absence of produced cash books, and observed that the Assessing Officer reached an adverse inference after verification. Consequently the Court found that the Assessing Officer did not act on "borrowed satisfaction" alone but applied his own mind in forming the belief; the reasons and the reasoned order disposing the objections demonstrate consideration of the assessee's submissions and materials, and therefore did not call for interference. [Paras 16, 17, 18, 21, 24]

The Assessing Officer applied independent mind, adequately considered the assessee's explanation and documents, and the disposal of objections is sustainable.

Final Conclusion: The writ petition is dismissed. The Court held that the Assessing Officer had recorded sufficient reason to believe for reopening the assessment for A.Y. 2012-13, had independently examined the NMS information and the assessee's responses, and the order disposing the objections to the notice did not warrant interference.

Writ jurisdiction under Article 226 vis-a -vis alternative remedy - Binding nature of Dispute Resolution Panel directions and effect under Section 144C(5) - Principles of natural justice in transfer pricing / DRP proceedings - Rule of consistency and independence of assessment years in transfer pricing

Writ jurisdiction under Article 226 vis-a -vis alternative remedy - Maintainability of a writ petition under Article 226 challenging DRP directions prior to issuance of an assessment order where statutory appeal remedies exist - HELD THAT: - The Court held that directions issued by the Dispute Resolution Panel (DRP) under the transfer pricing regime ripen into assessment orders when given effect to by the Assessing Officer and that the assessee has an effective statutory remedy by way of appeal to the Tribunal; consequently, ordinarily a writ under Article 226 is not maintainable when an effective alternative remedy is available. The Court acknowledged exceptional circumstances can warrant interference but observed that such exceptions are narrowly confined and must be shown to exist on the facts. The Court relied on the statutory scheme and the principle that availability of an effective alternate remedy ordinarily precludes writ jurisdiction under Article 226. [Paras 12, 13]

Writ petition is not ordinarily maintainable in view of the effective statutory remedy; exceptional interference not justified on the facts.

Principles of natural justice in transfer pricing / DRP proceedings - Rule of consistency and independence of assessment years in transfer pricing - Binding nature of Dispute Resolution Panel directions and effect under Section 144C(5) - Whether the DRP committed a breach of natural justice or erred in law by failing to follow its earlier directions (rule of consistency) for A.Y. 2015-16 when disposing objections for A.Y. 2016-17 - HELD THAT: - On review of the impugned directions, the Court found that the DRP had considered the petitioner's written submissions including the consistency contention and the factual material. The DRP recorded that it had previously rejected the assessee's plea to adopt TNMM for A.Y. 2015-16 and had upheld the TPO's use of the CUP/other method; it therefore applied its reasoning to A.Y. 2016-17, emphasising that each assessment year is independent and that factual differences may justify different conclusions. The Court noted the DRP gave reasons for rejecting the petitioner's objections and that a hearing had in fact been held. As such, the directions were not 'non-speaking' and no violation of the principles of natural justice was made out which would justify writ relief. The Court emphasised that factual and methodological disputes about ALP are to be tested before the appropriate forum rather than by a writ court. [Paras 13, 14, 15, 16]

DRP directions did not suffer from breach of natural justice nor did the matter disclose an error of jurisdiction on the basis of non-application of mind or failure to follow an earlier panel direction.

Final Conclusion: The petition is dismissed: in the presence of an effective statutory appellate remedy writ jurisdiction is not to be exercised; on the merits the DRP considered the petitioner's submissions, gave reasons and held each assessment year is independent, and no violation of natural justice or jurisdictional error was established.

Jurisdiction under Section 263(1) of the Income Tax Act - Assessing Officer's duty to make proper enquiry and verification - Erroneous and prejudicial to the interests of the revenue - Grant of deduction under Section 80 IB(11-C) - Scope of revision where another view is possible - Previous assessment year treatment as relevant precedent

Jurisdiction under Section 263(1) of the Income Tax Act - Assessing Officer's duty to make proper enquiry and verification - Grant of deduction under Section 80 IB(11-C) - Scope of revision where another view is possible - Previous assessment year treatment as relevant precedent - Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under Section 263(1) to set aside the assessment for allowing deduction under Section 80 IB(11-C). - HELD THAT: - The Tribunal and this Court found on the record that the Assessing Officer had conducted enquiries and verification before allowing the deduction: a detailed questionnaire was issued and answered, summons under Section 131 were issued, and a notice under Section 142(1) was replied to, and the AO examined documents and explanations. The Principal Commissioner's conclusion that the assessment order was erroneous and prejudicial lacked foundation because the material on record showed that verification had been made. The Court reiterated that an assessment order cannot be branded erroneous under Section 263 merely because the revising authority prefers a different view; the order must be shown to have been made without any enquiry or not in accordance with law. The fact that a similar deduction had been allowed in an earlier assessment year was a further factor supporting the validity of the AO's view here. Applying these principles, the exercise of jurisdiction under Section 263 was held to be unwarranted.

The invocation of jurisdiction under Section 263(1) to set aside the assessment allowing deduction under Section 80 IB(11-C) was unjustified and the Tribunal correctly quashed the revisional order.

Final Conclusion: The appeals are dismissed; the Tribunal's order quashing the Principal Commissioner's revisionary order is affirmed and the parties shall bear their own costs.

Remand for de novo adjudication - decision on wrong or unrelated grounds - opportunity of hearing / principles of natural justice - disallowance of interest expenditure - appeal allowed for statistical purposes

Decision on wrong or unrelated grounds - opportunity of hearing / principles of natural justice - Ld. CIT(A) had adjudicated grounds and recorded findings which were not those filed by the assessee in Form No.35, creating an apparent mistake in the appellate order. - HELD THAT: - The Tribunal examined the Form No.35 filed before the Ld. CIT(A) and compared it with the appellate order. It observed that the substantive findings recorded by the Ld. CIT(A) (paras quoted at para 4 of the Tribunal order) relate to issues and factual assertions not raised by the present appellant, and that the signature and name discrepancies in the verification point to an apparent mismatch. In view of this misalignment between the grounds actually filed and the grounds adjudicated, the Tribunal concluded that the Ld. CIT(A) had inadvertently decided issues belonging to another matter rather than the grounds raised by the assessee, thereby necessitating corrective remedial measures rather than affirmation of the impugned order. The Tribunal noted that no sufficient material had been placed on record before the CIT(A) to justify the conclusions set out in that order, reinforcing that the adjudication did not address the appellant's pleaded grounds. [Paras 4, 6]

The Tribunal held that the Ld. CIT(A)'s order contains an apparent mistake in adjudicating grounds not raised by the assessee and that those findings cannot stand.

Remand for de novo adjudication - disallowance of interest expenditure - appeal allowed for statistical purposes - Appropriate remedy and directions where appellate order adjudicates wrong grounds - setting aside and remanding for fresh adjudication with opportunity to produce evidence. - HELD THAT: - Given the identified mistake, the Tribunal set aside the order of the Ld. CIT(A) and restored the matter to him for de novo adjudication on the grounds actually raised in Form No.35 (which include the challenge to the disallowance of interest). The Tribunal directed the Ld. CIT(A) to give the assessee a reasonable opportunity of being heard and to permit filing of relevant documents/evidence on the date of hearing. The remedial direction is consequential to the Tribunal's finding that the impugned appellate order did not decide the appellant's pleaded grounds and that the merits therefore require fresh consideration by the correct forum. [Paras 6, 7]

Order of the Ld. CIT(A) set aside and matter remitted for fresh adjudication after giving the assessee opportunity to file evidence; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal found that the CIT(A) had adjudicated grounds not raised by the assessee, set aside the appellate order, restored the matter to the CIT(A) for de novo adjudication after affording the assessee a reasonable opportunity to file relevant evidence, and allowed the appeal for statistical purposes.

Exemption under Section 11 of the Income-tax Act - registration under Section 12A - intimation under Section 143(1) - prima facie adjustment - Central Processing Centre cannot reject substantiated exemption without affording opportunity - taxing gross receipts without allowing expenditure in processing under Section 143(1) is impermissible

Exemption under Section 11 of the Income-tax Act - registration under Section 12A - intimation under Section 143(1) - prima facie adjustment - Central Processing Centre cannot reject substantiated exemption without affording opportunity - Whether the intimation issued by the Central Processing Centre under Section 143(1) rejecting the assessee's claim of exemption under Section 11, on the ground of a typographical error in the electronic return and absence of a copy of the registration certificate, was justified. - HELD THAT: - The Tribunal found that the rejection arose from a typographical mistake in the electronically filed return where the assessee had inadvertently marked the claim under 10(23C)(iv) instead of Section 11, and that the assessee had furnished the registration number and an affidavit before the appellate authority. The trust had a long-standing history of being allowed exemption from its incorporation up to AY 2016-17, and earlier adverse findings had been overturned by the CIT(A), this Tribunal and the High Court. Section 143(1) operates as a prima facie adjustment based on material available on record and does not permit denial of a claimed exemption without giving the assessee an opportunity to produce requisite documents. The Central Processing Centre, while processing the return under Section 143(1), erred in rejecting the exemption solely for want of a registration certificate and in failing to allow the assessee to cure the typographical error or produce the registration proof. In these circumstances, the CIT(A) ought to have corrected the matter but confirming the CPC intimation was not justified. The Tribunal therefore held that the claim of exemption could not be rejected on the stated grounds and directed appropriate relief. [Paras 7, 8]

The intimation under Section 143(1) rejecting the claim of exemption under Section 11 was not justified and is set aside; the Assessing Officer is directed to grant exemption under Section 11.

Taxing gross receipts without allowing expenditure in processing under Section 143(1) is impermissible - intimation under Section 143(1) - prima facie adjustment - Whether the Central Processing Centre was justified in taxing the entire gross receipts of the assessee without allowing any expenditure while issuing the intimation under Section 143(1). - HELD THAT: - The Tribunal observed that processing under Section 143(1) is confined to prima facie adjustments based on data available and cannot result in assessing gross receipts in full without considering allowable expenditures where material on record or an opportunity to produce documents could substantiate deductions or exemptions. The CPC's action of taxing the entire gross receipts without allowing any expenditure was therefore impermissible in the summary processing exercise under Section 143(1). Given the longstanding grant of exemption and the absence of an opportunity to the assessee to rectify the filing error or to produce supporting documents, the CPC's treatment was set aside and the Assessing Officer was directed to grant exemption and permit proper consideration of expenditures if relevant. [Paras 7, 8]

The CPC's taxation of the entire gross receipts without allowing expenditure while issuing the intimation under Section 143(1) is not justified and is set aside; the Assessing Officer shall grant exemption under Section 11 and deal with expenditures as appropriate.

Final Conclusion: Appeal allowed; the orders below are set aside and the Assessing Officer is directed to grant exemption under Section 11 for Assessment Year 2018-19, with the Central Processing Centre's intimation under Section 143(1) quashed.

Reassessment proceedings under section 147 - reasons recorded for reopening of assessment - application of mind by the Assessing Officer - accommodation entries - unexplained cash credit - prima facie belief - quashing of reopening

Reasons recorded for reopening of assessment - application of mind by the Assessing Officer - prima facie belief - Validity of reopening of assessment under section 147 in light of the reasons recorded by the AO and the material relied upon from the investigation wing. - HELD THAT: - The Tribunal examined the reasons recorded and the seized annexures relied upon by the AO. The reasons reproduced information from the Investigation Wing alleging accommodation entries but did not demonstrate independent application of mind by the AO to the material in his possession. The annexures (A to D) were routine lists or, in the case relied upon (annexure D), showed facts contrary to the AO's assertion (indicating payment from the searched group to the middleman rather than the assessee paying cash to the searched group). There was no specific material found during the search that implicated the assessee, no reference in the recorded reasons to any incriminating material against the assessee, and no evidence that statements or seized material were furnished to or confronted with the assessee. On these facts the Tribunal found that the AO merely accepted the Investigation Wing's conclusion without independent evaluation or enquiry and recorded incorrect facts in the reasons, thereby vitiating the formation of a genuine belief that income had escaped assessment. [Paras 8]

Reopening of the assessment is invalid and is quashed for want of independent application of mind and for reliance on incorrect or non-communicated material.

Accommodation entries - unexplained cash credit - quashing of reopening - Consequences of quashing reopening on the additions made by the AO under the impugned reassessment. - HELD THAT: - Because the reassessment proceedings were quashed as invalid, the additions made in the reassessment order (including the treatment of share application money and certain unsecured loans as unexplained cash credits and the addition on account of commission) could not be sustained. The Tribunal observed that having set aside the reopening, it need not adjudicate the merits of the additions; the deletions follow as a direct consequence of quashing the reassessment. [Paras 8, 10]

All additions made in the reassessment are deleted as a result of quashing the reopening; the appeal is allowed.

Final Conclusion: The reassessment proceedings were quashed for lack of independent application of mind by the Assessing Officer and for reliance on incorrect or non-communicated seized material; consequentially the additions made in the reassessment are deleted and the appeal is allowed.

Tax withholding under section 195 - Taxability of independent professional services under DTAA Article 14 - Business profits and permanent establishment under DTAA Article 7 - Definition of royalties and fees for technical services versus independent services - Disallowance under section 40(a)(i) for failure to deduct TDS - Disallowance under section 40(a)(ia) for failure to deduct TDS under section 194J - Late deduction of TDS cured if made on or before due date of furnishing return under section 139(1)

Tax withholding under section 195 - Taxability of independent professional services under DTAA Article 14 - Business profits and permanent establishment under DTAA Article 7 - Definition of royalties and fees for technical services versus independent services - Disallowance under section 40(a)(i) for failure to deduct TDS - Deletion of additions disallowing professional/legal payments to offshore firms (M/s KL Gates and M/s TWB Pty Ltd.) for non-deduction of tax at source under section 195. - HELD THAT: - On the facts and documents on record the Tribunal found that payments to M/s KL Gates were for independent professional services falling within Article 14 of the DTAA and therefore taxable only in the State of residence unless the firm has a fixed base in India; such services were not royalties or fees for technical services under the domestic definition and hence were outside the scope of section 195. Payments to M/s TWB Pty Ltd., a firm of chartered accountants, were examined under the business profits article (Article 7) and the material established absence of any permanent establishment in India and that the services were rendered outside India in relation to filing statutory returns and liaisoning; the services did not make available technical knowledge, skill or know how to the assessee and thus were not royalties or fees for technical services. For both payments the Tribunal concluded that no withholding obligation under section 195 arose and that the AO and CIT(A) erred in disallowing the expenses under section 40(a)(i). [Paras 7, 8]

Additions disallowing legal and professional charges paid to M/s KL Gates and M/s TWB Pty Ltd. for non-deduction of tax under section 195 are deleted.

Disallowance under section 40(a)(ia) for failure to deduct TDS under section 194J - Late deduction of TDS cured if made on or before due date of furnishing return under section 139(1) - Remand for verification of whether TDS on internet and professional charges was deducted on or before the due date of furnishing return under section 139(1), affecting disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal noted the settled position that payments are not allowable under section 40(a)(ia) if tax has not been deducted; however, where TDS, though not deducted in the relevant year, has subsequently been deducted on or before the due date for filing the return under section 139(1), the disallowance is not warranted. The assessee asserted that TDS on the impugned internet and professional charges was deducted in the subsequent year but before the due date under section 139(1). In view of these contentions and the evidentiary nature of the claim, the Tribunal directed a limited remand to the AO to verify the fact of deduction and payment of TDS on or before the due date of filing the return; if the assessee establishes such deduction/payment, the AO is to delete the disallowance. [Paras 11]

Issue set aside to the file of the AO for limited verification; if TDS was deducted and paid on or before the due date under section 139(1), delete the disallowance under section 40(a)(ia).

Final Conclusion: The Tribunal allowed the appeal in part: deletions directed in respect of professional/legal payments to the two offshore firms for non-deduction under section 195; a limited remand was ordered to verify whether TDS on internet and professional charges was deducted on or before the due date under section 139(1), with deletion of the related disallowance if so proved. Appeal allowed for statistical purposes.

Nexus between expenditure and business operations - deduction under section 37(1) - onus on the assessee to prove genuineness and nexus - temporary null in business and continuity expenditure - remand for verification by the Assessing Officer

Nexus between expenditure and business operations - onus on the assessee to prove genuineness and nexus - temporary null in business and continuity expenditure - remand for verification by the Assessing Officer - Whether the expenditure debited to profit and loss account for AY 2015-16 is allowable as business expenditure or requires disallowance in absence of proved nexus, or whether the matter should be remanded to the AO for verification. - HELD THAT: - The Tribunal accepted the settled principle that deduction under section 37(1) requires proof of nexus between the expenditure claimed and the business, and that the onus on the assessee to prove genuineness and nexus is mandatory. It also recognised that a temporary null in business does not, by itself, disentitle a taxpayer to claim expenditure incurred to maintain continuity of business. In the present case the assessee had earlier revenue from operations up to AY 2014-15 but showed no revenue for AY 2015-16 and has pleaded that the year involved a temporary cessation while continuing business operations and incurring expenses. The Tribunal found that the assessee failed to place on record sufficient evidence to demonstrate the required nexus between expenditure and business operations for the year under consideration. Because the determinative question is factual - whether particular overheads were necessary for maintaining corporate status or were wholly and exclusively for business - the Tribunal refrained from deciding the issue on merits and directed a remand. The matter is set aside to the Assessing Officer to reconsider the explanations and examine the evidences filed; if the AO finds that the expenditures were necessary to maintain corporate status or were incurred wholly and exclusively for business purposes, those expenditures are to be allowed notwithstanding absence of revenue from operations. [Paras 7, 8]

Issue remanded to the Assessing Officer for verification of genuineness and nexus of the expenditures; allow such expenses if found necessary for maintaining corporate status or wholly and exclusively for business.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes and set aside the question of disallowance to the file of the Assessing Officer with directions to verify the evidences and nexus; expenses found necessary for maintaining corporate status or proved to be wholly and exclusively for business shall be allowed.

Onus of proof under section 68 in relation to share sale proceeds - exemption under section 10(38) for long term capital gains - addition as unexplained investment under section 69 - reliance on SEBI ad-interim orders as evidentiary material - requirement of independent enquiry under section 142(2)

Addition as unexplained investment under section 69 - Deletion of addition of Rs. 14 lakhs made as unexplained investment for the year under appeal - HELD THAT: - The Tribunal found that the purchase of 40,000 equity shares through the IPO of HPC Bioscience Ltd occurred in F.Y. 2012-13 (relevant to A.Y. 2013-14) and that the transaction did not pertain to the assessment year under consideration. Consequently, the addition under the provision dealing with unexplained investment was not sustainable for A.Y. 2015-16 and was directed to be deleted. [Paras 5]

Addition of Rs. 14 lakhs under section 69 deleted.

Onus of proof under section 68 in relation to share sale proceeds - exemption under section 10(38) for long term capital gains - reliance on SEBI ad-interim orders as evidentiary material - requirement of independent enquiry under section 142(2) - Whether the addition of Rs. 2,10,23,848 under section 68 could be sustained and whether the declared long term capital gain is entitled to exemption under section 10(38) - HELD THAT: - The Assessing Officer based the addition on SEBI's ex parte ad interim order and investigation reports, treating the share sale proceeds as unexplained credit. The Tribunal held that the appellant's name did not appear in the lists of debarred or implicated entities in the SEBI orders relied upon, and that the AO did not conduct independent enquiries or obtain corroborative material as contemplated by the statutory power to enquire. On the facts and documentary evidence (demat statements, bank payments and sale transactions) the Tribunal concluded that the assessee had discharged the initial onus under section 68 by establishing genuineness of transactions and source of funds. Coordinate-bench precedents and ensuing High Court treatment were found supportive where similar reliance on interim SEBI material without independent verification had been rejected. SEBI orders issued subsequently and prospectively were held irrelevant to sustain the addition for the assessment year in question. [Paras 6, 21]

Addition of Rs. 2,10,23,848 under section 68 deleted and the long term capital gain accepted as exempt under section 10(38).

Final Conclusion: The appeal is allowed: the addition of Rs. 14 lakhs under section 69 is deleted as the purchase related to an earlier year; the addition of Rs. 2,10,23,848 under section 68 is deleted as the assessee discharged the onus and the declared long term capital gain is accepted as exempt under section 10(38).

Short-term capital asset - holding period for capital gains - date of acquisition for capital gains based on right conferred by payment/allotment - scope of "transfer" under section 2(47) including rights conferred without registered conveyance - deduction under section 54 for investment in a new residential asset - possession and practical acquisition as relevant to claiming section 54

Short-term capital asset - holding period for capital gains - date of acquisition for capital gains based on right conferred by payment/allotment - scope of "transfer" under section 2(47) including rights conferred without registered conveyance - Sale of the ground floor constituted long-term capital gain because the assessee held the asset from the date a right was conferred by payment of advance. - HELD THAT: - The Tribunal examined the statutory concept of 'held' for determining short-term/long-term capital asset and the expanded concept of 'transfer' under section 2(47), as interpreted by CBDT circulars and binding High Court authorities. The assessee made advances beginning 28.06.2008 and thus acquired a right in the ground floor which was assignable; subsequent payments and execution of the registered sale deed in 2009 were consequential. Reliance on judicial decisions and CBDT guidance establishes that rights conferred by allotment/payment operate as acquisition for capital gains purposes and the holding period runs from that date. Reckoning the holding period from 28.06.2008 brings the period beyond 36 months prior to the transfer on 24.05.2012, and therefore the gain on the ground floor is long-term. [Paras 5]

The ground floor sale gives rise to long-term capital gains.

Deduction under section 54 for investment in a new residential asset - possession and practical acquisition as relevant to claiming section 54 - date of acquisition for capital gains based on right conferred by payment/allotment - The assessee is entitled to deduction under section 54 as the practical date of acquisition of the new flat (possession handed over in November 2011) falls within the permissible window for investment. - HELD THAT: - The Tribunal considered the statutory window for claiming section 54 (one year before to two years after the date of transfer) and the facts: sale of original asset on 24.05.2012 gives the investment window from 24.05.2011 to 24.05.2014. Although the absolute sale deed was dated 06.04.2011, the builder's certificate and contemporaneous material showed physical completion and handing over of possession in November 2011 (gruhapravesham on 12.03.2012 further corroborates practical acquisition). The Tribunal treated the date of handing over of possession as the operative date for practical acquisition for section 54 purposes and held that this falls within the statutory window, entitling the assessee to the deduction. [Paras 6]

Assessee entitled to deduction under section 54 on the purchase of the new flat.

Final Conclusion: The appeal is partly allowed: the Tribunal holds that the gain on the ground floor is long-term and that the assessee is entitled to deduction under section 54 in respect of the new flat; having decided these merits in favour of the assessee, the Tribunal did not adjudicate the validity of the revisionary order.

Outstanding trade receivables as international transaction - notional interest on delayed receivables - benchmarking of arm's length interest rate - computation of interest for relevant assessment year only

Outstanding trade receivables as international transaction - Outstanding amounts on account of sales/services billed to the associated enterprise are akin to a loan advanced by the assessee and constitute an international transaction. - HELD THAT: - The assessee conceded that outstanding receivables billed to its AE are akin to a loan advanced and the Tribunal accepted this position. The Tribunal referred to authoritative precedent indicating that such outstanding invoices fall within the Explanation to section 92B and therefore attract transfer pricing scrutiny. Having noted the concession and applicable authority, the Tribunal held that a transfer pricing adjustment can be made in respect of notional interest on such receivables and proceeded to remit the matter for determination of the arm's length interest rate and computation. [Paras 24]

Outstanding receivables treated as an international transaction; transfer pricing adjustment in respect of notional interest is maintainable.

Benchmarking of arm's length interest rate - notional interest on delayed receivables - computation of interest for relevant assessment year only - The determination of the appropriate benchmark rate and the period for computing notional interest is remitted to the AO/TPO for fresh consideration. - HELD THAT: - The Tribunal remitted the matter to the file of the AO/TPO for a proper benchmarking exercise. The TPO is directed to benchmark the interest rate in light of the judicial decisions referred to by the parties, to consider the applicable LIBOR or other appropriate benchmark as per the cited authorities, to assess the excess credit period actually enjoyed, and to apply the correct interest rate accordingly. The Tribunal also directed that interest should be computed only for the relevant assessment year after examining the agreements between the assessee and its AEs and determining the precise period of credit to be tested. No final rate or computation was adopted by the Tribunal; instead, the issue was ordered for fresh adjudication by the AO/TPO. [Paras 24]

Matter remitted to AO/TPO to benchmark the arm's length interest rate and to compute notional interest only for the relevant assessment year after considering agreements and applicable precedents.

Final Conclusion: The appeal is partly allowed for statistical purposes: the Tribunal held that outstanding receivables to the AE constitute an international transaction and remitted the question of benchmarking the arm's length interest rate and the computation (limited to the relevant assessment year) to the AO/TPO for fresh determination.

Impleadment as necessary party - natural justice and right to be heard - balance of convenience in impleadment - limitation of impleadment to the petition sought to be amended

Impleadment as necessary party - natural justice and right to be heard - balance of convenience in impleadment - Whether the applicant, being a shareholder, should be impleaded as a respondent in Company Petition No.21/KOB/2020. - HELD THAT: - The Tribunal applied the principle of natural justice which requires hearing parties whose interests may be affected by its orders, and examined whether the applicant is a proper and necessary party for just adjudication. The applicant's averment of shareholding was not disputed, and the petition before the Tribunal alleged mismanagement and diversion of company funds affecting shareholders. The Tribunal held that mere absence of managerial or directorial position does not preclude impleadment where the applicant's interests may be affected. Considering that impleading the applicant would not cause serious prejudice to the petitioners and that his participation is relevant to allegations of mismanagement and oppression, the balance of convenience favoured impleadment. Accordingly, the applicant was held to be a necessary party to CP No.21/KOB/2020 and was impleaded as Additional Respondent No.23. [Paras 6, 7]

CA/23/KOB/2021 allowed; Mr. C. Mohanan Pillai impleaded as Additional Respondent No.23 in Company Petition No.21/KOB/2020; directed to file counter within two weeks.

Limitation of impleadment to the petition sought to be amended - Whether the prayer to implead the applicant in all related interlocutory applications should be allowed. - HELD THAT: - The Tribunal rejected the wider prayer to be impleaded in all related interlocutory applications, observing that impleadment sought by a person must be confined to the specific petition in which impleadment is sought. The Tribunal held that it cannot grant a blanket impleadment across other petitions or interlocutory proceedings which were not the subject of the present application. [Paras 7]

Prayer to implead the applicant in all related interlocutory applications rejected.

Final Conclusion: The appeal is allowed in part: the applicant is impleaded as Additional Respondent No.23 in Company Petition No.21/KOB/2020 and directed to file his counter within two weeks; the request for broad impleadment in all related interlocutory applications is refused.

Scheme of Amalgamation - Dispensation of meetings of shareholders and creditors on consent affidavits - Absence of secured creditors - Notice to statutory authorities at Second Motion with disclosure of PAN - Transfer of proceedings upon amalgamation - Share entitlement / share exchange ratio - Accounting treatment in accordance with Companies Act and accepted accounting principles

Dispensation of meetings of shareholders and creditors on consent affidavits - Absence of secured creditors - Dispensation of convening and holding meetings of equity shareholders, preference shareholders and unsecured creditors of the Applicant Companies and dispensation of calling meetings of secured creditors where none exist. - HELD THAT: - The Tribunal recorded that consent affidavits / no-objection certificates have been filed by the equity shareholders of both Applicant Companies and by the preference shareholder of the Transferee Company. Certificates from chartered accountants and lists on record establish that a requisite number of unsecured creditors of each Applicant Company have given consent by affidavit. The Tribunal, therefore, dispensed with convening meetings of equity shareholders, preference shareholders and unsecured creditors, and observed that there were no secured creditors to call meetings for. The dispensation is conditioned on the applicants complying with Rule 8 obligations in the Second Motion by making the specific prayer for service of notices to statutory authorities. [Paras 28]

First Motion allowed to the extent that meetings are dispensed with in view of the consents on record and no secured creditors exist.

Notice to statutory authorities at Second Motion with disclosure of PAN - Scheme of Amalgamation - Requirement for sending notices to statutory authorities and the procedural direction for the Second Motion petition. - HELD THAT: - Although meetings are dispensed with, Rule 8 requires notices in Form CAA 3 to be sent to relevant statutory authorities. The Tribunal held that, since calling and convening of meetings are dispensed with at this stage, the applicants must make a specific prayer in the Second Motion petition to issue notices to the Central Government (through the Regional Director), Registrar of Companies, the Official Liquidator and the Income Tax Authorities. The Tribunal directed that the Second Motion petition must disclose the PAN numbers of both Applicant Companies in its title to enable the Income Tax Department to have proper opportunity to respond. [Paras 29]

Liberty granted to file the Second Motion with a specific prayer for issuing notices to statutory authorities and with disclosure of PAN in the petition title.

Share entitlement / share exchange ratio - Accounting treatment in accordance with Companies Act and accepted accounting principles - Transfer of proceedings upon amalgamation - Recording of material terms of the Scheme relevant to sanction at later stage (share exchange ratio, treatment of employees, transfer of proceedings, and auditors' certificate on accounting treatment). - HELD THAT: - The Tribunal noted the Share Entitlement Ratio determined by the registered valuer and recorded that the Scheme contains provisions for treatment of staff and for transfer of legal, tax and other proceedings to the Transferee Company upon the Appointed Date. Statutory auditors have certified that the accounting treatment in the Scheme complies with the Companies Act and generally accepted accounting principles. These matters were taken on record as part of the Scheme's material terms to be considered at the Second Motion and final hearing. [Paras 22, 23, 24, 25]

Material terms of the Scheme, including share exchange ratio, employee provisions, transfer of proceedings and auditors' certification of accounting treatment, are recorded for consideration in subsequent proceedings.

Final Conclusion: The First Motion is allowed: meetings of shareholders and creditors are dispensed with in view of consents on record and absence of secured creditors; applicants are granted liberty to file the Second Motion and directed to make a specific prayer for service of statutory notices (Form CAA 3) and to disclose the PANs of both companies in the Second Motion petition to enable responses by the Income Tax Department and other authorities.

Ex-parte interim order - impounding of alleged notional gain - escrow account for disgorgement - opportunity of hearing / show cause notice - attachment before judgment - SEBI's power to pass interim orders - balance of convenience and irreparable injury

Ex-parte interim order - impounding of alleged notional gain - opportunity of hearing / show cause notice - SEBI's power to pass interim orders - Validity of the WTM's ex parte impounding order directing deposit of alleged unlawful loss avoided without affording an opportunity of hearing - HELD THAT: - The Tribunal held that an ex parte order directing pre deposit/impounding of the alleged notional gain cannot be sustained where the matter has not been adjudicated on merits and there is no recorded satisfaction or evidence justifying immediate disgorgement. Reliance was placed on the Tribunal's earlier decisions which emphasise that SEBI's power to pass interim orders must be exercised sparingly and only in extreme urgent cases after considering balance of convenience and irreparable injury. Principles analogous to attachment before judgment under Order 38 CPC apply: an order of this nature requires findings that the respondent is likely to dissipate assets or obstruct recovery. In the absence of such findings and given that only a show cause notice had been issued, the impugned ex parte impounding direction was quashed and set aside at the admission stage.

Impugned ex parte impounding order quashed and set aside except insofar as it operates as a show cause notice; appellants directed to file reply to the show cause notice within four weeks.

Escrow account for disgorgement - attachment before judgment - balance of convenience and irreparable injury - Interim protective measure to be ordered while remitting the matter for adjudication - HELD THAT: - Although the ex parte impounding order was set aside for want of adjudicatory basis, the Tribunal, to safeguard investor interest and market integrity pending final adjudication, directed appellants to deposit the specified amounts (as set out in Table 11 of the impugned order) in an interest bearing escrow account with SEBI within four weeks. The Tribunal retained the show cause notice as the procedural foundation for further adjudication and conditioned its quashing on the deposit of the specified amounts as an interim protective measure.

Appellants to deposit the specified amounts into an interest bearing escrow account with SEBI within four weeks; no costs ordered.

Opportunity of hearing / show cause notice - SEBI's power to pass interim orders - Remand for adjudication after affording hearing - HELD THAT: - The Tribunal directed that upon receipt of the appellants' replies to the show cause notice, SEBI shall decide the matter finally after giving an opportunity of hearing, either physically or by video conference, within six months. The order does not adjudicate merits but remands the matter to SEBI for fresh consideration and quantification, following the procedural protection of hearing and expedition.

Matter remitted to SEBI for final decision after hearing; appellants to file reply within four weeks and SEBI to decide within six months.

Final Conclusion: The Tribunal quashed and set aside the WTM's ex parte impounding order (except as a show cause notice), directed the appellants to deposit the specified amounts in an interest bearing escrow account with SEBI within four weeks, required appellants to file replies to the show cause notice within four weeks, and remitted the matter to SEBI to decide the proceedings on merits after giving a hearing within six months.

Transaction of transfer of title versus taxable service - jurisdictional objection to levy of service tax - ex parte order and violation of principle of natural justice - remand for fresh consideration and opportunity of personal hearing - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - conditional lifting of bank attachment on undertaking

Transaction of transfer of title versus taxable service - jurisdictional objection to levy of service tax - ex parte order and violation of principle of natural justice - Impugned ex parte order set aside and matter remanded for fresh consideration so that petitioner may be afforded an opportunity to reply to show cause notices and a personal hearing on merits, including the jurisdictional objection that the transaction is not a service. - HELD THAT: - The Court noted that the petitioner had not responded to show cause notices and that the impugned order was passed without participation of the petitioner. Although the merits of whether the agreement reflects a taxable service were not adjudicated, the petitioner's contention that the transaction may not constitute a 'service' (being a transfer of title) raises a jurisdictional objection which cannot be finally determined in an ex parte proceeding. In view of this and in order to avoid prejudice to the authority's consideration on merits, the Court set aside the impugned ex parte order and remanded the matter for the authority to permit the petitioner to submit replies to the notices and to afford personal hearing before passing a reasoned order. The Court clarified that its observations were provisional and not conclusive on merits. [Paras 9]

Impugned order set aside and matter remanded for the authority to allow the petitioner to reply to the show cause notices and to afford a personal hearing to decide the merits.

Remand for fresh consideration and opportunity of personal hearing - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Directions for procedural compliance and timeline on remand, and treatment of the petitioner's earlier attempt to avail the Sabka Vishwas scheme. - HELD THAT: - Having set aside the ex parte order, the Court directed the petitioner to appear before the respondent on the specified date and to cooperate without seeking unnecessary adjournments. The Court observed that the petitioner had earlier sought to avail the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 but, due to circumstances including the pandemic, had not completed the process; this background fact was noted but did not determine the merits. The authority was directed to dispose of the proceedings after appearance of the petitioner within 30 days. [Paras 10]

Petitioner to appear on the directed date; authority to dispose proceedings after appearance within 30 days.

Conditional lifting of bank attachment on undertaking - Order directing lifting of attachment of petitioner's bank account subject to petitioner's undertaking not to sell or create encumbrance on the property until conclusion of proceedings. - HELD THAT: - The petitioner gave an undertaking not to sell or create any encumbrance on the property until conclusion of proceedings. The Court directed that the attachment of the petitioner's bank account pursuant to the impugned order be lifted while recording the undertaking, as a concomitant relief arising from the exercise of discretion to set aside the ex parte order and remand the matter for fresh consideration. [Paras 11]

Attachment of bank account lifted on recordal of petitioner's undertaking not to alienate or encumber the property until conclusion of proceedings.

Final Conclusion: Writ petition allowed to the extent that the ex parte impugned order is set aside; the matter is remanded to the assessing authority to permit the petitioner to reply to the show cause notices and to afford a personal hearing, the authority to dispose the proceedings within 30 days after appearance, and the attachment of the petitioner's bank account is ordered lifted on the petitioner's undertaking not to alienate or encumber the property until conclusion of the proceedings.

No coercive recovery during pendency of appeal upon proof of pre-deposit - Validity and application of Board Circulars regarding Section 35F pre-deposit - Illegality of recovery effected after institution of appeal - Requirement of proof of payment of stipulated pre-deposit and copy of appeal memo

No coercive recovery during pendency of appeal upon proof of pre-deposit - Requirement of proof of payment of stipulated pre-deposit and copy of appeal memo - Whether recovery effected after presentation of appeal and deposit of the stipulated pre-deposit was lawful. - HELD THAT: - The Court accepted the petitioner's submission that an appeal was presented on 08.01.2021 with proof of deposit of 10% in Form ST-5 and relied upon the Board Circulars dated 16.09.2014 and 10.03.2017 which provide that no coercive measures for recovery of the balance amount shall be taken during the pendency of appeal where the assessee shows proof of payment of the stipulated pre-deposit and files a copy of the appeal memo, and that recovery may be initiated only after disposal by the appellate authority in favour of the Department. The revenue did not dispute the validity of these circulars but relied on the fact that a recovery notice had been issued earlier and that the bank effectuated payment on 11.01.2021. The Court declined to probe the limitation/communication dispute because the appellate authority had admitted the appeal and rejected the Department's contention regarding earlier service. Given that the appeal was presented within time and the required pre-deposit was made, the Court held that any recovery effected subsequent to presentation of the appeal was contrary to the protections afforded by the cited circulars and therefore illegal. The Court applied the circulars to the admitted facts and concluded that the demand draft received on 11.01.2021 constituted an impermissible recovery made after institution of the appeal. [Paras 6, 9, 10, 11, 12]

Recovery effected on 11.01.2021 after presentation of appeal on 08.01.2021 and deposit of 10% was illegal; such recovery is set aside.

Final Conclusion: The petition is allowed: the recovery made by way of the demand draft dated 11.01.2021 is set aside as illegal; the respondents are directed to refund the recovered amount within four weeks, and any further recovery shall be governed by paragraph 4.3 of the Board Circular dated 16.09.2014.

Works Contract Service - Composition Scheme for payment of service tax - valuation of works contract - inclusion of value of goods supplied under separate contract - prospective effect of amendment to Rule 3 explanation w.e.f. 07.07.2009 - transfer of property in goods and accretion/accession in works contract - extended period of limitation - suppression and wilful misstatement

Works Contract Service - valuation of works contract - inclusion of value of goods supplied under separate contract - prospective effect of amendment to Rule 3 explanation w.e.f. 07.07.2009 - Whether value of materials supplied under a separate supply/sale contract is includible in the gross amount charged for Works Contract Service for contracts executed or payments made on or before 07.07.2009. - HELD THAT: - The Tribunal examined the pre- and post-amendment text of Rule 3 (composition scheme) and the Explanation inserted w.e.f. 07.07.2009 together with CBEC circulars clarifying that the Explanation is prospective and does not apply where execution of the works contract commenced or any payment (other than by way of credit/debit) was made on or before 07.07.2009. On the undisputed facts the 24 disputed contracts were commenced or paid prior to 07.07.2009 and there were separate legally binding supply contracts under which property in the towers/parts passed at the contractor's factory gate. The Tribunal held that where property in goods had passed to the service recipient prior to the execution of the works contract, such value cannot be included in the gross amount of the works contract. The Tribunal also applied settled authorities that parties may legally choose to enter separate contracts and a tender or single bid does not automatically convert legally separate contracts into a single composite contract for tax valuation purposes. Reliance was placed on earlier tribunal decisions (including Essar, Tata Projects, Gammon) with identical facts holding that the post 7.7.2009 amendment could not be applied retrospectively to contracts commenced or paid before that date.

Value of goods supplied under separate supply/sale contracts in respect of the 24 projects (commenced/paid on or before 07.07.2009) is not includible in the gross value of Works Contract Service; the demand based on such inclusion is unsustainable.

Extended period of limitation - suppression and wilful misstatement - Whether the extended period of limitation is invokable on the ground of suppression or wilful misstatement by the respondent. - HELD THAT: - The Tribunal found on the material that the respondent had disclosed the classification and option to pay under the Works Contract composition scheme in ST-3 returns, had furnished contract/invoice details to the jurisdictional authority, and had represented the position to senior authorities including the Chief Commissioner and CBEC. Given the legal controversy surrounding the statutory amendment and a consistent line of tribunal decisions favouring the assessee on identical facts, the Tribunal concluded there was no suppression or wilful misstatement to attract the extended period. Accordingly the adjudicating authority correctly vacated proceedings on limitation grounds.

Extended period of limitation is not invokable; demand was rightly dropped on the ground of limitation.

Final Conclusion: The appeal is dismissed. The impugned order vacating the show cause proceedings is upheld: the value of goods supplied under separate supply/sale contracts (for contracts commenced or paid on or before 07.07.2009) is not includible in the gross value of Works Contract Service, and the extended period of limitation based on alleged suppression is not attracted.

Mega Exemption Notification No.25/2012-ST - Entries No.12(a) and 12(c) - refund under Section 11B of the Central Excise Act, 1944 - time-bar / limitation for refund - relegation to authority for fresh decision

Mega Exemption Notification No.25/2012-ST - Entries No.12(a) and 12(c) - refund under Section 11B of the Central Excise Act, 1944 - time-bar / limitation for refund - The claim that the appellant was entitled to exemption under Entries No.12(a) and 12(c) of the Mega Exemption Notification and the consequence thereof on the limitation prescribed by Section 11B. - HELD THAT: - The Commissioner (Appeals) recorded the appellant's plea that amounts deposited were on activities exempted under the Mega Exemption and that, if so, the time limit in Section 11B would not apply, and also noted that the appellant had placed details and work orders to support the claim. However, the Commissioner (Appeals) did not adjudicate this ground when rejecting the refund on limitation grounds, and the Customs, Excise and Service Tax Appellate Tribunal likewise bypassed the question. The High Court found that the issue as to entitlement to exemption under the specified Entries and the legal consequence on the applicability of Section 11B remained undecided on the materials produced. Given that the validity of the finding on exemption in the order of rejection requires examination, the appropriate course is to set aside the impugned appellate orders and remit the matter to the Commissioner (Appeals) for fresh consideration and decision in accordance with law on whether the appellant is entitled to the Mega Exemption and, if allowed, the effect of such allowance on the limitation under Section 11B.

Orders of the Commissioner (Appeals) and the Tribunal set aside and the matter remitted to the Commissioner (Appeals) for fresh decision on the exemption claim and its effect on limitation.

Final Conclusion: The orders dated 19.06.2019 of the Commissioner (Appeals) and 20.02.2020 of the Customs, Excise and Service Tax Appellate Tribunal are set aside; the matter is remitted to the Commissioner (Appeals) to decide afresh the appellant's claim for exemption under Entries No.12(a) and 12(c) of the Mega Exemption Notification and the consequent applicability (or otherwise) of the limitation in Section 11B, in accordance with law.

Penalty on partner when demand against firm set aside - burden of proof in clandestine removal - evidence required to prove clandestine manufacture and clearance - remand directions binding on adjudicating authority

Burden of proof in clandestine removal - evidence required to prove clandestine manufacture and clearance - remand directions binding on adjudicating authority - Whether the Department established clandestine manufacture and clearance of Acid Slurry so as to sustain the duty demand against the assessee-firm. - HELD THAT: - The Court accepted the Tribunal's factual conclusion that the Department failed to establish clandestine manufacture and clearance with the requisite evidence. The Tribunal had found missing links in the proof: absence of documentary evidence from the principal supplier (TNPL), reliance largely on statements of SWC employees, no proof of receipt of Oleum, lack of storage/transport capacity for the alleged quantities, and mathematical extrapolation of finished goods from raw material ratios without corroboration. The Tribunal's remand directions required the Adjudicating Authority to address technical aspects and corroborative evidence, which were not complied with; the de novo order reiterated a minority view and did not supply the clinching evidence identified as necessary in earlier authorities. On these bases the High Court found the Tribunal's setting aside of the duty demand to be justified and not amenable to interference. [Paras 37, 38, 41, 44, 45]

The duty demand based on clandestine manufacture and clearance was set aside for lack of sufficient and corroborative evidence; the Tribunal's factual findings were upheld.

Penalty on partner when demand against firm set aside - absence of link or clinching evidence to fix liability on partner - Whether penalty could be sustained against the appellant-partner when the duty demand against the assessee-firm was wholly set aside and there was no clinching evidence linking the partner to the alleged offences. - HELD THAT: - The Court held that where the Department has failed to establish clandestine manufacture and removal by the firm, the concomitant imposition of penalty on a partner requires independent and sufficient evidence linking that partner to the alleged contraventions. The record did not contain any clinching material connecting the appellant-partner to the transactions beyond familial or managerial proximity and unsubstantiated control. The Tribunal reduced but did not fully vacate the penalty without assigning reasons; the High Court found this inconsistent with the exoneration of the firm and with authorities holding that penalty on partners cannot subsist where demand against the firm is set aside and no specific culpating acts are shown. [Paras 46, 47, 48, 49, 50]

Penalty imposed on the appellant-partner was set aside; the substantial questions of law raised by the appellant-partner answered in his favour.

Final Conclusion: The Revenue's appeals are dismissed; the appeal of the appellant-partner is allowed and the penalty imposed on him is set aside. No costs.

Refund of duty paid under protest - limitation under Section 11B of the Central Excise Act - departmental Master Circular directing suo moto refund - principle of natural justice

Refund of duty paid under protest - limitation under Section 11B of the Central Excise Act - departmental Master Circular directing suo moto refund - Whether the refund claim filed by the appellant is barred by limitation where the duty was deposited under protest. - HELD THAT: - The Tribunal held that the one year limitation prescribed under Section 11B does not apply to amounts of duty paid under protest. The adjudicatory position is supported by the departmental Master Circular which directs officers to refund amounts (with interest) suo moto where the appellate authority decides in favour of the assessee, within a specified period upon receipt of the refund request, irrespective of departmental challenge. The authorities below misapplied the law by treating appropriation of amounts following adjudication as vacating the protest and thereby making the refund time barred. In view of the statutory provision and the Master Circular, the appellant is entitled to refund with interest and the impugned order rejecting the refund on limitation grounds is unsustainable. [Paras 6, 7, 8]

Impugned order set aside; appellant entitled to refund of the amount paid under protest together with interest.

Final Conclusion: Appeal allowed. The order rejecting the refund claim as barred by limitation is set aside and the refund along with interest is to be sanctioned to the appellant within 30 days of receipt of this order.

Imposition of penalty under Section 72(2) not automatic or mandatory - Judicial discretion in imposing penalty - Requirement of opportunity to show cause before penalty - Ambiguity in classification as a defence to penalty - Revenue neutrality and absence of mala fide intent - Revisional power under Section 64 requires the order to be prejudicial to the interest of the Revenue

Imposition of penalty under Section 72(2) not automatic or mandatory - Judicial discretion in imposing penalty - Requirement of opportunity to show cause before penalty - Imposition of penalty under Section 72(2) of the Karnataka Value Added Tax Act, 2003 - HELD THAT: - Section 72(2) subjects a dealer who understates tax or overstates credit by more than five per cent to a penalty of ten per cent of the understated or overstated amount, but only after the dealer is given an opportunity of showing cause in writing. The provision therefore confers a discretion on the assessing authority to impose penalty after considering the cause shown; the levy is not automatic or mandatory. Reliance on the Supreme Court's decision in ELECTRO OPTICS (P) LTD. establishes that even where a minimum penalty is prescribed, the authority may judicially refuse to impose penalty in peculiar situations, such as where the breach arises from a bona fide belief about classification. Consequently, the assessing authority must exercise judicial discretion after considering all relevant circumstances before imposing penalty under Section 72(2). [Paras 7, 8, 9]

Penalty under Section 72(2) is not automatic; the assessing authority must consider the dealer's show-cause and exercise judicial discretion before imposing penalty.

Ambiguity in classification as a defence to penalty - Revenue neutrality and absence of mala fide intent - Revisional power under Section 64 requires the order to be prejudicial to the interest of the Revenue - Validity of the First Appellate Authority's order setting aside penalty and whether the Additional Commissioner could validly exercise revisional power under Section 64 to revive the penalty order - HELD THAT: - The First Appellate Authority, upon meticulous appreciation of the record, found a scope for ambiguity in classifying the appellant's 'aluminum castings' as 'non ferrous castings' taxable at the lower rate and concluded transactions were revenue neutral, negating mala fide intent. Those findings warranted setting aside the penalty. The condition precedent for invoking revisional powers under Section 64 is that the impugned order be not merely erroneous but prejudicial to the interest of the Revenue. On the facts, neither condition is satisfied: the appellate authority's conclusion was well considered and the tax effect was revenue neutral. Hence the Additional Commissioner erred in invoking Section 64 to disturb the appellate order. [Paras 10, 11]

The Additional Commissioner's revival of the penalty under Section 64 was unsustainable; the First Appellate Authority's order quashing the penalty is restored.

Final Conclusion: The impugned revisional order dated 31.03.2017 is quashed and the First Appellate Authority's order setting aside the penalty is restored; the appeal is allowed.

Retrospective operation of amendment to limitation - period of limitation for reassessment - statutory construction of fiscal statute

Retrospective operation of amendment to limitation - period of limitation for reassessment - Amendment extending the limitation period to eight years applies retrospectively and therefore the reassessment for the tax period April 2006 to March 2007 is not time barred. - HELD THAT: - The Court held that the view taken in W.P. No.51802/2014 (final and unappealed) supports retrospective operation of the amendment extending limitation to eight years. Applying the settled principle that a fiscal provision should be construed by its language, and relying on precedent recognizing that where the statutory language clearly indicates retrospective effect it must be given full operation, the Court concluded that the amendment to Section 40 operates retrospectively and hence the reassessment could validly be made within the extended period. The Karnataka Appellate Tribunal's conclusion that the reassessment was barred by limitation was therefore incorrect and contrary to the binding view expressed by this Court in the earlier writ matter. [Paras 7, 8, 9]

KAT's order setting aside the reassessment as barred by limitation was erroneous; the amendment granting eight years' limitation has retrospective effect and the reassessment is within limitation.

Period of limitation for reassessment - remand for fresh decision - Proceedings remitted for fresh decision on merits by the Assessing Officer treating the assessment as within limitation. - HELD THAT: - Although the Court held the reassessment to be within the extended limitation period, it did not adjudicate the substantive merits (e.g., classification of goods, applicability of notifications). The Court set aside the KAT order and remanded the matter to the Assessing Officer to decide all contested grounds afresh in accordance with law, without being influenced by earlier orders. The parties were directed to appear before the Assessing Officer on the specified date and were permitted to canvass all possible grounds. [Paras 11, 12]

Matter remanded to the Assessing Officer for fresh adjudication on merits treating the reassessment as within limitation.

Final Conclusion: Writ petition allowed; the Karnataka Appellate Tribunal's order of 13.11.2017 in STA No.352/2016 is set aside on the limitation point, the reassessment is within the retrospectively-operating eight-year period, and the matter is remanded to the Assessing Officer to decide the merits afresh in accordance with law.

Abatement of criminal revision on death - discretionary revisional jurisdiction of the High Court - right of legal representative to continue revision limited to sentence of fine - effect of Section 394(2) Cr.P.C. on abatement of appeals and revisions - absence of statutory substitution provision for criminal revision

Abatement of criminal revision on death - absence of statutory substitution provision for criminal revision - discretionary revisional jurisdiction of the High Court - Whether a criminal revision application abates on the death of the convicted applicant and whether the High Court may permit the legal heir to be brought on record. - HELD THAT: - The Court held that the question of abatement in revisional proceedings is not governed by the same statutory substitution rules that apply to appeals. While Section 394(2) Cr.P.C. and Section 431 (dealt with in precedent) provide for substitution in appeals, there is no corresponding statutory provision for substitution in criminal revisions. In view of the settled principle that the High Court's revisional power is discretionary and exercisable in aid of justice, the High Court may, notwithstanding the absence of express statutory provision, decide a pending revision after the death of the petitioner. The High Court may permit continuation by the legal representative where the revision concerns a sentence of fine affecting the estate, and more generally may exercise its discretion to determine whether to entertain or continue a revision petition on the facts of each case. Consequently, the revisional remedy does not automatically abate as a matter of law on the death of the petitioner; the High Court has authority to allow the legal heir to be brought on record and to proceed with the revision to the extent necessary to examine the fine or other matters affecting the deceased's estate. The Court applied these principles and accepted that no prejudice would be caused to the complainant by permitting continuation limited to the fine imposed. [Paras 8, 9, 11]

Revision proceedings do not automatically abate on death; the High Court may in its discretion permit the legal heir to be brought on record and continue the revision, particularly insofar as the sentence of fine affects the estate.

Right of legal representative to continue revision limited to sentence of fine - effect of Section 394(2) Cr.P.C. on abatement of appeals and revisions - Whether the legal heir may be allowed to continue the revision to challenge the imposition of fine. - HELD THAT: - The Court noted that although substitution rules exist for appeals (so that appeals against sentence of fine may survive the death of the appellant), there is no identical statutory scheme for revision petitions. Nevertheless, where a fine has been imposed and that fine affects the property of the deceased, the High Court may, in exercise of its revisional jurisdiction, permit the legal heir to continue the revision insofar as the fine is concerned. The Court observed that examination of the correctness, legality or propriety of the order is permissible even after death, and that allowing the heir to continue limited to the fine would not cause prejudice to the complainant. [Paras 8, 10, 11]

Legal heir permitted to continue the revision to the extent necessary to challenge the sentence of fine which affects the deceased's estate.

Condonation of delay in bringing legal heir on record - procedural amendment of party in revision proceedings - Whether the delay in filing the application to bring the legal heir on record required condonation and whether the application to amend the revision to add the legal heir should be entertained. - HELD THAT: - The Court found that there is no specific provision governing bringing a legal representative on record in revision petitions and therefore the question of condonation of delay in that context does not strictly arise. Having considered the explanation for the delay (death of the applicant, lockdown and resultant communication breakdown), the Court exercised its discretion in the interest of justice to entertain the application to add the legal heir. The Court directed that the revision application be amended by adding the proposed legal heir as applicant within ten days; failing which the revision will be decided on merits. [Paras 12, 13]

Delay in seeking to bring the legal heir on record was excused in the interest of justice and the application to amend the revision to add the legal heir is allowed, subject to amendment within ten days.

Final Conclusion: Both miscellaneous applications were allowed: the High Court exercised its discretion to permit the revision to continue after the death of the applicant, to the extent of examining the sentence of fine and related issues affecting the estate, and ordered that the revision be amended by adding the proposed legal heir within ten days, failing which the revision will be decided on merits.

Quashing of criminal proceedings under Section 482 Cr.P.C. - vicarious liability of directors under Section 141 of the Negotiable Instruments Act, 1881 - necessity of specific averments that the accused was in charge of and responsible for the conduct of the company's business - liability of the signatory of a dishonoured cheque under Section 141

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act, 1881 - necessity of specific averments that the accused was in charge of and responsible for the conduct of the company's business - quashing of criminal proceedings under Section 482 Cr.P.C. - Complaint under Section 138 of the Negotiable Instruments Act insofar as the petitioners (directors) is liable to be quashed for lack of necessary averments making them responsible for conduct of company's business or signatories to the cheque. - HELD THAT: - The petitioners are directors of the company which is the principal accused and the cheque in question bears the signature only of another director. The complaint contains no averment that the present petitioners were in charge of, and responsible for, the conduct of the company's business at the relevant time, nor that they were signatories to the cheque. In the absence of such specific averments, vicarious liability cannot be fastened on directors. The court applied the principle in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (paras 18-19) that a complaint must specifically aver that the person accused was in charge of and responsible for the conduct of the business of the company to attract liability under Section 141; merely being described as a director is insufficient. The complaint therefore fails to satisfy the requirement for prosecuting the petitioners and is liable to be quashed under the inherent powers of the High Court.

The complaint in P.C. No. 271/2015 is quashed insofar as the petitioners (accused Nos.5, 7 and 8) are concerned.

Final Conclusion: The petitions under Section 482 Cr.P.C. are allowed and criminal proceedings in P.C. No.271/2015 are quashed insofar as the petitioners (accused Nos.5, 7 and 8) are concerned for lack of requisite averments to fasten vicarious liability on them.

Arbitrariness in tender process - Administrative discretion in public tendering - Failure to participate disentitles relief - Duty to obtain most advantageous price - Right to reject or accept bids for protection of State finances

Arbitrariness in tender process - Administrative discretion in public tendering - The impugned tender process is not arbitrary or mala fide and does not warrant quashment. - HELD THAT: - The Court found no illegality or arbitrariness in the respondents' decision to finalise the tender in favour of respondent No.4. The respondents issued successive NITs and relaxed conditions after earlier calls attracted no bidders; two bidders submitted bids before the cut-off and their technical bids were found qualified. The Court held that due process of the tender was followed and there was no element of pick-and-choose or malicious exercise of power. Reliance upon precedents permitting cancellation of tenders in public interest does not assist the petitioner, as the facts did not disclose irrationality, ulterior motive or violation of statutory provisions. The protective discretion available to the State in safeguarding public finances and in accepting or rejecting tenders was emphasised as not being exercised arbitrarily in this case. [Paras 10, 11, 12, 16, 17]

The challenge to the tender on grounds of arbitrariness/malafide is rejected and the tender is not quashed on this basis.

Failure to participate disentitles relief - Right to reject or accept bids for protection of State finances - The petitioner is not entitled to relief for alleged prevention from participating in the tender by a GST raid. - HELD THAT: - The Court recorded that the petitioner had the entire window from commencement of the e-tender to the last date to prepare and submit its bid but delayed obtaining the required bank guarantee until near the last date. The raid by the Commercial Tax Department on the last date did not establish that the respondents administering the tender had acted to preclude participation; the raid was by a different department and the respondents cannot be held responsible. Given the petitioner's failure to submit its bid before the cut-off, the petitioner cannot complain that respondents ought to have secured a better price or set aside the process. The petitioner's own choice to delay its preparations was held decisive. [Paras 4, 10, 12, 16]

The petitioner's grievance that it was prevented from participating on account of the GST raid does not justify quashing the tender; the petitioner has no entitlement to relief on this ground.

Final Conclusion: The writ petition is dismissed: no illegality or arbitrariness is found in finalising the tender for respondent No.4, and the petitioner is not entitled to quashment of the revised 3rd call or to a direction for fresh tender on the facts before the Court.