TaxTMI Updates e-Newsletter
Mar 25,2026

Seeking Restoration of GST registration - Cancellation for non-filing of returns - Compliance with the prescribed procedure under proviso to Rule 22(4).

Restoration of GST registration - HELD THAT:- The Court noted that the registration had been cancelled for non-filing of returns, but the materials placed on record showed that the petitioner had already filed the returns up to the date of cancellation and had deposited the penalty amount. Taking note of the course adopted by a Coordinate Bench in Pankaj Mohan [2025 (12) TMI 1452 - GAUHATI HIGH COURT], a similarly situated matter, and there being no objection from the respondents to grant similar relief, the Court directed the petitioner to file an appropriate application before the concerned authorities. On such application, the authorities were directed to verify the compliance and consider restoration of registration in accordance with law. [Paras 7, 8, 9]

The petition was disposed of by directing the petitioner to apply for restoration within the prescribed time, and the authorities were directed to verify the application and restore the GST registration in accordance with law.

Final Conclusion: The writ petition was disposed of with liberty to the petitioner to file an application for restoration of GST registration, and with a direction to the respondent authorities to verify the application and restore the registration in accordance with law within the time fixed by the Court.

Entitlement to an opportunity before the appellate authority to produce a legible copy of the Bill of Lading and other required documents - Violation of Principle of Natural Justice - Rejection of the refund.

Opportunity to produce material documents - HELD THAT: - The appellate authority had allowed the departmental appeal on the ground that the Bill of Lading relied upon by the petitioner was not legible and, therefore, the claim regarding the shipping line could not be substantiated. The Court held that, in the facts of the case, the petitioner should be afforded an opportunity to place a legible copy of the Bill of Lading and any other necessary documents before the appellate authority, so that the matter could be reconsidered afresh on merits. [Paras 6, 7]

The appellate authority was directed to reconsider the appeal after giving the petitioner an opportunity to produce a legible copy of the Bill of Lading and other required documents.

Final Conclusion: The writ petition was disposed of by directing the appellate authority to reconsider the refund appeal on merits after granting the petitioner an opportunity to file a legible copy of the Bill of Lading and other necessary documents.

Validity of the assessment order passed under Section 73(9), when the date of personal hearing was fixed prior to the last date for filing reply to the show cause notice -Effective opportunity of personal hearing - Breach of principles of natural justice

Effective opportunity of personal hearing - HELD THAT:- The Court held that where the personal hearing was fixed before expiry of the time granted for submitting reply to the show cause notice, the hearing afforded could not be treated as an effective opportunity. Since even the Revenue could not dispute that such hearing was ineffective, the procedure adopted resulted in breach of principles of natural justice. On that ground, the assessment order was held unsustainable. [Paras 7, 8]

The assessment order was quashed and the matter was remitted to proceed from the stage of show cause notice, with liberty to the petitioner to file reply and thereafter for a fresh personal hearing to be fixed.

Final Conclusion: The writ petition was disposed of by quashing the assessment order on the ground that the opportunity of hearing was illusory, since the hearing date preceded the last date for filing reply. The matter was remitted to the Assessing Officer for fresh proceedings from the show cause notice stage.

Denial Of Personal hearing - Seeking adjournment - Violation of principles of natural justice - Challenged GST demand orders passed in Form GST DRC-07.

Personal hearing - Violation of principles of natural justice - HELD THAT:- The Court proceeded on the recorded position that replies had been submitted to the show cause notices and a request for personal hearing had been made, but no hearing was afforded before passing the impugned orders. On that limited ground, the orders were held liable to be quashed and the matters were remitted for fresh adjudication on merits in accordance with law, with liberty to the petitioner to file additional written submissions at the time of hearing. [Paras 7, 8, 9]

The impugned orders were quashed for failure to afford hearing and the matters were remanded for de novo adjudication after giving the petitioner an opportunity of personal hearing.

Final Conclusion: The writ petitions were disposed of by setting aside the impugned orders on the limited ground of denial of personal hearing and remitting the matters to the respondent for fresh decision on merits after hearing the petitioner.

Denial of an effective opportunity of hearing - Audi Alteram Partem​​​​​​​ - Principles of natural justice - failure to consider reply to show cause notice.

Principles of natural justice -HELD THAT: - The Court found that the petitioner had submitted a reply dated 25.02.2025 to the show cause notice, but the impugned order proceeded on the footing that no objection had been filed. Since the reply was not considered while passing the order, the adjudication suffered from violation of principles of natural justice. On that procedural defect, the order was set aside and the matter was remitted for fresh consideration after affording hearing to the petitioner, with liberty to file a supplementary reply. [Paras 6, 7]

The impugned order was set aside for non-consideration of the petitioner's reply, and the matter was remitted for fresh decision on merits after hearing the petitioner.

Final Conclusion: The writ petition was disposed of by setting aside the impugned adjudication order on the ground of violation of natural justice arising from non-consideration of the petitioner's reply, and by remitting the matter for fresh adjudication after hearing the petitioner.

Reversal of input tax credit - Retrospective extension of time for availing ITC - prescribed a time limit under Section 16(4) - statutory amendment inserted Section 16(5).

Input tax credit limitation - Retrospective extension of time for availing ITC - HELD THAT:- The Court held that the controversy stood covered by its earlier common order dealing with the effect of the subsequent amendment to Section 16. Proceeding on that basis, it accepted that for the financial years 2017-18 to 2020-21, entitlement to ITC stood preserved where the return under Section 39 had been filed up to 30.11.2021, notwithstanding the bar under Section 16(4). Consequently, the impugned order, to the extent it denied ITC solely on limitation, was unsustainable. The Court, however, left it open to the Department to proceed in accordance with law on other issues such as wrong, excess or fake ITC, if arising independently of limitation. [Paras 2, 5]

The impugned order was quashed insofar as it reversed ITC on the ground of limitation, with consequential protection against recovery on that basis, liberty to seek refund, and reservation of the Department's right to proceed on other legally permissible grounds.

Final Conclusion: The writ petition was allowed by applying the earlier ruling of the Court on the retrospective extension for availing ITC. The impugned order was quashed to the extent it denied ITC on limitation, while preserving the Department's liberty to act on other distinct ITC-related irregularities in accordance with law.

Anti-Profiteering - Obligation to pass on benefit of additional input tax credit - Comparison of input tax credit to purchase value for pre-GST and post-GST - homebuyers in terms of Section 171 - liable to refund the profiteered amount along with interest and from which date - Imposition of penalty under Section 171(3A).

Obligation to pass on benefit of additional input tax credit - HELD THAT:- The Tribunal accepted the DGAP finding that the ratio of input tax credit to purchase value increased by 0.23% post-GST and that this additional benefit should have been passed to recipients at the time of supply. The revised calculations following the Hon'ble Delhi High Court's in the matter of Reckitt Benckiser India Pvt. Ltd [2024 (1) TMI 1248 - DELHI HIGH COURT] observations were treated as determinative of the quantum of benefit that remained unpassed. The respondent conceded the DGAP computation and agreed to refund the computed amount, confirming the finding that the benefit was not passed on in terms of Section 171. [Paras 23]

Respondent derived the benefit of additional input tax credit and such benefit was not passed on to the homebuyers; respondent agreed to refund the amount determined by DGAP.

Interest liability - date of collection under Rule 133(3)(b) - HELD THAT: - Section 171 imposes a mandatory obligation to pass on tax-related benefits at the time of supply. Rule 133(3)(b) authorises return of the unpassed amount with interest at 18% from the date of collection of the higher amount until return. The Tribunal rejected the respondent's submission that interest should be computed only from the date of completion certificate and held that retention of the benefit constitutes excess consideration, attracting compensatory interest from the dates of collection; reliance on methodological aspects in Reckitt Benckiser did not negates the statutory mandate under Rule 133(3)(b). [Paras 24, 25, 26, 28, 29]

Respondent is directed to pay interest at 18% per annum on the unpassed benefit from the respective dates of collection until actual refund; compliance to be reported to the jurisdictional Commissioner with intimation to DGAP.

Penalty under Section 171(3A) - HELD THAT: - Section 171(3A) came into force w.e.f. 01.01.2020. The period of contravention in this case runs from 01.07.2017 to 31.05.2020, which overlaps the date of commencement of Section 171(3A). Therefore, the provision is applicable to the contraventions falling within its effective date and penalty is leviable as stipulated, subject to the proviso concerning deposit within thirty days of the Authority's order. [Paras 30]

Penalty under Section 171(3A) is leviable for the profiteering to the extent it falls within the provision's operative period.

Final Conclusion: The Tribunal upheld the DGAP finding that the respondent derived additional input tax credit which was not passed to homebuyers and directed refund of the unpassed benefit with interest at 18% per annum from the dates of collection; it also held that penalty under Section 171(3A) is leviable for the period insofar as that provision is operative.

Maintainability of advance ruling application - Scope of advance ruling jurisdiction - procedure for generation and validity of e-way bills in bill-to-ship-to and related movement scenarios.

Maintainability of advance ruling application - HELD THAT:- The Authority found that, notwithstanding the manner in which the application was marked, the substance of all three scenarios raised by the applicant concerned only the procedure for generation of e-way bills and their validity. Such questions were held not to fall within any of the categories enumerated for advance ruling jurisdiction under Section 97(2) of the Act. The Authority also noted that the applicant was seeking a decision on procedural matters relating to e-way bills already dealt with under Chapter XVI of the CGST Rules, 2017. On that basis, the application was held not liable to be admitted and liable to rejection under Section 98(2). [Paras 7]

The application was rejected as not maintainable since the questions raised on e-way bill procedure were outside the permissible scope of advance ruling.

Final Conclusion: The Authority rejected the advance ruling application on the ground that the queries raised concerned e-way bill procedure and validity, which do not fall within the statutory scope of questions admissible for advance ruling.

Taxability of services - Electronic commerce operator - exemption for transportation of goods by road - Definition of 'Pure agent’ - requirements of a pure agent -tax collected at source - Whether the applicant satisfies the definition of an “E-commerce operator” or do they satisfy the definition of “Goods Transport Agency”?

Electronic commerce operator - goods transport agency - agent - pure agent - HELD THAT:- The Authority found that the applicant only operates an electronic platform connecting transporters with customers and does not itself undertake transportation of goods, issue consignment notes, or perform ancillary transport activities required for classification as a goods transport agency. Since the supply of transport service is facilitated over a digital platform, the applicant answers the definition of an electronic commerce operator. It was further held that the applicant does not carry on the business of supply or receipt of services on behalf of another so as to qualify as an agent, and, in the absence of a contractual obligation and satisfaction of the conditions under Rule 33, it cannot be treated as a pure agent for collection of freight amounts. [Paras 12, 14, 17, 20, 24]

The applicant is to be treated as an electronic commerce operator and the contrary claim of classification as a goods transport agency, agent, or pure agent was rejected.

Commission income - tax collected at source - specified services under section 9(5) - The applicant's tax liability was held to extend to GST on the commission received from transporters and compliance with tax collection at source provisions, while the special liability applicable to notified services supplied through e-commerce operators was held inapplicable. - HELD THAT: - The Authority held that the applicant is not itself providing the exempt service of transportation of goods by road and therefore cannot claim the exemption meant for such transportation services. It further held that transportation of goods is not one of the notified services for which the e-commerce operator is deemed to be the supplier under specified services under section 9(5). However, the applicant receives commission from transporters for bookings completed through its platform, and GST is payable on that commission. As an electronic commerce operator collecting consideration in the manner stated, it is also required to comply with the statutory scheme of tax collected at source under Section 52 on the net value of taxable supplies made through it. [Paras 18, 19, 21, 23, 24]

GST is payable on the commission earned by the applicant, and the applicant must comply with the tax collection at source provisions; the deeming liability applicable to notified services supplied through e-commerce operators does not apply.

Final Conclusion: The Authority ruled that the applicant is an electronic commerce operator facilitating transport services through a digital platform and not a goods transport agency. The applicant is liable to pay GST on the commission earned from transporters and is also required to comply with the tax collection at source provisions applicable to e-commerce operators.

Classification of the applicant's remediation and waste-disposal services under GST - Exemption for pure services relating to governmental authority in relation to a municipal function - work involved excavation, screening, segregation and scientific disposal of legacy waste, including processing into RDF, compost, grit and inert fractions - Scope of advance ruling jurisdiction.

Waste treatment and disposal services - Site remediation services - HELD THAT:- The Authority found from the scope of work that the applicant was undertaking remediation of waste dump sites together with processing, segregation and scientific disposal of legacy waste. Since the operation involved both site remediation and waste treatment and disposal, it was held to fall broadly under Heading 9994 covering sewage and waste collection, treatment and disposal and other environmental protection services. [Paras 7]

The impugned service was held classifiable under SAC 9994 and chargeable to GST at 18%.

Pure services - Governmental Authority - Functions entrusted to a Municipality - HELD THAT:- The Authority held that the activity did not involve works contract or composite supply and no supply of goods was involved, thereby qualifying it as pure services. It further found that Goa Waste Management Corporation was set up by a State legislation and therefore answered the description of a Governmental Authority under the notification. Since the activity related to solid waste management and bio-remediation, it was treated as falling within functions entrusted to a Municipality under Article 243W. On satisfaction of these conditions, the exemption was held available. [Paras 7]

The service supplied by the applicant to Goa Waste Management Corporation was held exempt under Sl. No. 3 of Notification No. 12/2017-CT dated 28.06.2017, as amended.

Maintainability of advance ruling application - Questions relatable to supply undertaken by the applicant - HELD THAT:- The Authority held that an advance ruling can be given only on questions in relation to the supply being undertaken or proposed to be undertaken by the applicant and within the matters specified in Section 97(2). Since the third query sought a clarification regarding the service recipient as such, and was not a question on the applicant's own supply falling within the permissible clauses, no ruling could be pronounced on that question. [Paras 7]

No advance ruling was given on the third query as it was held to be outside the permissible scope of Section 97(2).

Final Conclusion: The Authority classified the applicant's waste dump remediation service under SAC 9994. It further held that the supply to Goa Waste Management Corporation was exempt as pure services relating to municipal solid waste management, while declining to answer the separate query on the recipient's status as being outside the scope of advance ruling jurisdiction.

Input tax credit on leasing, renting or hiring of motor vehicles - blocked credit provision in section 17(5)(b) - safety and security of women employees - satisfying and fulfilling the eligibility and conditions provided under Section 16 - Extent of admissible credit - Statutory obligation to provide transport to women employees - Time limit for availment of input tax credit - Welfare Measure for Women Employees.

Input tax credit on employee transportation - Employer-obligation proviso - Leasing, renting or hiring of motor vehicles - Tax paid on leasing, renting or hiring of motor vehicles used for transportation of women employees was held eligible for input tax credit where such transport is mandatorily provided under the Tamil Nadu Shops and Establishments law. - HELD THAT:- The Authority held that services of leasing, renting or hiring of motor vehicles ordinarily fall within blocked credit under section 17(5)(b). However, the proviso to that clause applies to the whole of clause (b), as clarified by CBIC Circular No. 172/04/2022, and therefore credit becomes available where the employer is under a legal obligation to provide the facility. Since the State notification requires transport and safety arrangements for women employees working in the specified hours, the applicant was held entitled to ITC on such input services, subject to fulfilment of the conditions under section 16. [Paras 6]

ITC is admissible on the tax paid for hiring transport used to provide the mandated transportation facility to women employees, subject to section 16.

Extent of admissible credit - Transport facility for women employees - Statutory mandate - HELD THAT:- The Authority confined the benefit of the proviso to the extent of the statutory obligation. Since the Tamil Nadu notification made transport obligatory for women employees working in the specified night-shift period, the exception to blocked credit could operate only to that extent. The claim for entire ITC for transport facility in all shifts was therefore not accepted. [Paras 6]

Only the ITC attributable to transport facilities for women employees covered by the statutory night-shift requirement is available.

Commencement of eligibility - Statutory time limit for input tax credit - Section 16 conditions - HELD THAT:- Although the amended section 17(5)(b) came into force from 01.02.2019, the Authority held that the applicant could claim the benefit only from 28.05.2019, when the Tamil Nadu notification first made it obligatory for employers to provide transportation facilities to women employees working in shifts. The plea that credit should still be allowed for earlier or time-barred periods on the footing that the restriction was merely procedural was rejected. The Authority held that section 16(4) prescribes a statutory limitation for availing ITC and cannot be disregarded unless the statute itself provides a relaxation or exception. [Paras 6]

The ITC is available from 28.05.2019 onwards only, and even for that period it must satisfy the conditions and limitation prescribed under section 16.

Final Conclusion: The Authority held that GST paid on hiring transport for women employees is eligible for ITC only to the extent the transport facility is mandatorily provided under the Tamil Nadu Shops and Establishments framework, namely for women employees travelling between 8.00 P.M. and 6.00 A.M. The benefit was held available from 28.05.2019 onwards, subject in every case to the eligibility conditions and statutory time limit under section 16.

Scope of advance ruling - Maintainability of Application - Procedural clarification on utilisation of input tax credit - Whether SGST input tax credit could be utilised towards IGST liability in a particular order of set-off was not maintainable as an advance ruling application.

Scope of advance ruling - Maintainability of application - Procedural clarification on utilisation of input tax credit - HELD THAT:- The Authority held that the query raised did not fall within any of the categories specified in Section 97(2). It was not a question on applicability of any notification, since no notification was referred to in the application, nor did it concern determination of tax liability. The query only sought clarification on the procedure for utilisation of available input tax credit and discharge of an already determined liability, a matter governed by the statutory provisions themselves. Since such procedural guidance lies outside the statutory ambit of advance ruling, the application was not liable to be admitted. [Paras 7]

The query was held to be outside the ambit of advance ruling under Section 97(2), and the application was therefore rejected under Section 98(2).

Final Conclusion: The Authority rejected the application for advance ruling, holding that the applicant's query on the order of utilisation of input tax credit was merely procedural and did not fall within the permissible scope of questions under Section 97(2) of the Act.

Determination of the liability to pay tax on any goods or services or both - Healthcare services - Collection of subscription and provision of services to members, and the organisation of educational seminars and workshops for member doctors - 'business' activities under Section 2(17)(e) - Supply between association and members - Scope of Member subscription fees collected from members -Supply under section 7(1)(aa) - Principle of mutuality under GST - Exemption from GST as per Notification No. 12/2017-Central Tax (Rate) - Whether its activities would be subject to GST under the provisions of the Central Goods and Services Tax Act, 2017.

Activities of associations to members - Subscription-based member services - HELD THAT:- The Authority held that clause (e) of the definition of business specifically covers provision by a club, association or similar body of facilities or benefits to its members for subscription or other consideration. On that basis, the applicant's activities of collecting subscription from members and providing services to them, including seminars and workshops for member doctors, squarely fell within section 2(17)(e). The Authority also noted that other activities such as free health camps and renting of immovable property may fall within business on other clauses, but confined its ruling on this query to the member-related activities covered by clause (e). [Paras 6]

The member-related activities of collection of subscription and provision of services, including educational seminars and workshops for member doctors, were held to be business under section 2(17)(e).

Supply between association and members - Principle of mutuality under GST - Healthcare exemption and distinct taxable supplies - Services provided by the association to its members against subscription, including educational seminars and workshops, and the subscription collected for such member services, constitute supply under section 7(1)(aa), and the principle of mutuality does not exclude them from GST. - HELD THAT: - The Authority held that, by virtue of section 7(1)(aa), inserted with effect from 01.07.2017, activities or transactions by a person other than an individual to its members or constituents for consideration are treated as supply. The Explanation deems the body and its members to be two separate persons notwithstanding any other law or any judgment, decree or order, thereby displacing the plea founded on mutuality. Accordingly, the authorities cited by the applicant on mutuality were held inapplicable for GST purposes. Since membership was available on payment of subscription and services were provided to such members, both the subscription-based services and seminars/workshops for member doctors were held to fall within supply under section 7(1)(aa), and the subscription collected from members was likewise taxable as supply. The Authority further held that exemption for healthcare services did not govern these activities, because the supplies in question were stand-alone supplies to members and the applicant's broader objective of providing healthcare services could not affect their taxability. [Paras 6]

The activities of providing member services against subscription, including seminars and workshops, and the subscription fees collected from members, were held to be supply under section 7(1)(aa); exclusion based on mutuality was rejected, and the healthcare exemption was held inapplicable to these stand-alone member supplies.

Final Conclusion: The Authority ruled that the applicant's collection of subscription and provision of services to its members, including seminars and workshops for member doctors, constitute business and supply under the CGST Act. The plea of mutuality was held unavailable in view of section 7(1)(aa), and the healthcare exemption was held not to extend to these distinct member-related supplies.

Classification of goods - activity of bio-mining of legacy waste and site reclamation - Scope of service supplied to the municipality - Applicability of a Exemption notification under Sl. No. 3 of Notification No. 12/2017-Central Tax dated 28.06.2017 - common parlance - Maintainability of advance ruling - Whether the said services are provided to Central Government, State Government or Union Territory, a local authority or a governmental authority.

Waste treatment and disposal services - Site remediation services - HELD THAT:- On the stated scope of work, the activity was not confined to mere land reclamation. It involved excavation, screening, shredding, segregation, treatment and scientific disposal of legacy waste, along with reclamation of the existing dump yard. The Authority therefore held that the operation broadly comprised both waste treatment and disposal and site remediation services and fell under Heading 9994. [Paras 7]

The services were held classifiable under SAC 9994 and stated to attract GST at 18%.

Pure services - Local authority - Municipal functions under Article 243W - HELD THAT: - The Authority found that no supply of goods was involved and that the work was carried out through manpower and operational execution, and therefore the supply was a pure service and not a works contract or composite supply. Ariyalur Municipality was held to be a local authority within the statutory definition. The activity was further found to relate to public health, sanitation conservancy and solid waste management, which is a function entrusted to a Municipality under Article 243W, and was also consistent with the duty of local authorities under the Solid Waste Management Rules, 2016 to examine and undertake bio-mining or bio-remediation of dumpsites where feasible. Since all the conditions of the exemption entry stood satisfied, the exemption was held available. [Paras 7]

The services provided by the applicant to Ariyalur Municipality were held exempt under Sl. No. 3 of Notification No. 12/2017.

Maintainability of advance ruling - Supply undertaken by the applicant - HELD THAT:- The Authority held that an advance ruling can be rendered only on specified questions arising in relation to the supply of goods or services being undertaken or proposed to be undertaken by the applicant. The query regarding the status of the service recipient sought a clarification concerning the recipient rather than the applicant's own supply, and was therefore outside the permissible scope of advance ruling jurisdiction. It was also found not to fall within any of the categories for which an advance ruling may be sought. [Paras 7]

No ruling was pronounced on the third question.

Final Conclusion: The Authority classified the applicant's activity of bio-mining, waste treatment and site remediation under SAC 9994. It nevertheless held that the services supplied to Ariyalur Municipality were exempt as pure services rendered to a local authority in relation to municipal solid waste management, and declined to answer the separate query on whether the recipient was a Governmental Authority.

Application for advance ruling - Withdrawal of Application -transportation of eggs through GTA services - lease of agricultural land for grazing hens - use of land along with a poultry shed for sheltering birds - Applicability of RCM provisions -Determination of the liability to pay tax on any goods or services or both - Applicability of notification issued under the provisions of this Act - HELD THAT:- From the applicant’s submission, it is understood that the applicant is recipient of the services namely transportation of goods by Road, transportation of goods by Rail, leasing of agricultural land with or without shed or for grazing and sheltering hens. As per Section 95 (a) of the CGST Act, 2017, decision can be provided by the Authority on questions relating to the services being undertaken or proposed to be undertaken by the applicant. In the instant case, the applicant is a recipient of services mentioned in his questions. Therefore, this Authority is not in a legal position to provide decision on the questions raised by the applicant.

Further, vide SI. No. 13 of the application for advance ruling filed by the applicant, the applicant has indicated that the said query falls under the scope of ‘Determination of the liability to pay tax on any goods or services or both’ and ‘Applicability of notification issued under the provisions of this Act’. However, from the submissions made, it is seen that the applicant is recipient of the services mentioned by them in the questions. Therefore, the determination of the liability to pay tax vests with the suppliers of such services and not with the applicant. Accordingly, as the assessment to tax does not relate to the applicant and since they are only a recipient of service, the application is not liable for admission.

Thus, a notice dated 30.10.2025, had been issued to the applicant with a request to offer his reply/comments, as to why their application should not be rejected on the aforesaid grounds.

As the responsibility for assessing and discharging the applicable tax rests with the suppliers, the matter does not fall within the scope of an Advance Ruling application filed them as the recipient. Hence, requested the Hon’ble Advance Ruling Authority to permit them to withdraw the Advance ruling application filed by them.

After due consideration, the aforementioned letter of the applicant, wherein they have requested to permit withdrawal of the Advance ruling application filed by them and as they do not wish to pursue it any further, is taken on record. Hence, their request is considered and the application is allowed to be treated as withdrawn without going into the merits or detailed facts of the case.

The ARA Application received from the applicant on 10.02.2025 is disposed as withdrawn as per the request of the applicant.

Extinguishment of claims on approval of resolution plan under the Insolvency and Bankruptcy Code - power to initiate revision of assessment under Section 263 of the Income tax Act - HC held [2024 (10) TMI 1156 - GUJARAT HIGH COURT] in view of approval of resolution plan, all liabilities of all stakeholders including that of Government/ Statutory Authority shall stand extinguished after approval of the resolution plan.

HELD THAT:- We find no grounds to interfere with the impugned judgment and order of the High Court. Hence, the present Special Leave Petition is dismissed.

Section 142A applicability to the reassessments in cases as they are not saved by section 153A - maintanaibility of appeal on low tax effect

HC held [2011 (3) TMI 1848 - ALLAHABAD HIGH COURT] section 142A could not be applied to the reassessments before it because those reassessments were not saved by section 153A, and therefore the additions based on the Valuation Officer's report could not be sustained

HELD THAT: - As respondent pointed out that the tax effect involved in the present appeal is ₹32,92,472/-. In view of the Circular dated 6th August, 2024 issued by the Central Board of Direct Taxes, the present appeal does not lie before this Court.

n view of the aforesaid fact, the present appeal is dismissed, however, leaving the question of law open.

Disallowance of lease rentals on the computers and accessories -Genuine lease versus colourable device - constructive sale / paper transaction - transfer of ownership as contemplated by Section 54 of the Transfer of Property Act - deductibility of lease rentals - Assessing Officer's power to disallow sham transactions

As held by HC [2011 (4) TMI 108 - MADRAS HIGH COURT] nowhere it is brought to our notice that the computers were transferred from the assessee to the purchaser, but, on the other hand, the assessee brought the computers to his premises by virtue of the lease entered into between the assessee and the purchaser. The computers are intact in the premises of the assessee, who is a seller. Therefore, the sale is not complete as defined under Section 54 of the Transfer of Property Act.

HELD THAT:- The appeal was dismissed, the Court holding that no case for interference with the judgment of the High Court was made out.

Probative value of loose sheets seized in search - Statutory presumption as to seized documents - Telescoping of unexplained cash - Unexplained jewellery as undisclosed investment

Reliance on loose sheets recovered during search - contention of the assessees that the loose sheets recovered from their premises neither contained any signature nor were written by the buyer (assessee) or by the vendor - HELD THAT:- The Court held that the standard applicable in income-tax proceedings differs from that in civil or criminal trials, and that under the scheme of the Act, contemporaneous records and entries recovered during search carry evidentiary value. Though loose sheets may not amount to books of account for the purpose of Section 34 of the Evidence Act in criminal prosecution, they can be acted upon in tax proceedings when they contain contemporaneous transaction details and are fairly corroborated. Since the loose sheets were recovered from the assessees, the statutory presumption operated against them, and their mere plea that the entries were not in their handwriting, coupled with admission that they might have been written by their accountant, was held insufficient to rebut that presumption. In the absence of evidence disproving the entries, the Tribunal was justified in accepting them for determining undisclosed investment. [Paras 26, 28, 29, 30]

The substantial questions relating to reliance on the loose sheets and the burden to disprove their contents were answered in favour of the Department.

Unexplained jewellery as undisclosed investment - Business stock kept at residence - probative value of spiral note book/loose sheets - claim of the jewellery found in excess as the business stock, the assessees failed to provide evidence - whether the assessees are entitled for 'telescoping' their unexplained cash in hand prior to the date of investment in the property and should be given credit before arriving at undisclosed income? - HELD THAT: - The Court held that the claim that the jewellery kept at home formed part of business stock failed on facts, because the accounts maintained by the assessees and the business concerns did not disclose the excess jewellery either as stock-in-trade or in the wealth-tax returns. In that view, the excess jewellery found during search could not be accepted as explained business stock and was liable to be treated as undisclosed investment. [Paras 31]

The challenge to the treatment of excess jewellery as undisclosed income failed.

Telescoping of unexplained cash - theory of telescoping the excess from one head to another head - HELD THAT: - The Court held that telescoping is permissible only where the source of the amount sought to be adjusted is satisfactorily explained. The assessees relied upon a chart of disclosed cash balances, but the Tribunal found that such material could not be accepted unless the source of the cash was established. Since the assessees failed to furnish cogent evidence explaining the source of the cash in hand, their claim to telescope that cash against the investment in property was held impermissible in law. [Paras 32]

The Tribunal's rejection of the plea of telescoping was upheld.

Final Conclusion: The High Court upheld the Tribunal's common order and answered all substantial questions of law in favour of the Department. The additions based on the seized loose sheets and the rejection of telescoping were sustained, and the assessees' appeals were dismissed.

Rejection of application u/s 197 for issuance of Tax Withholding Certificate at ‘Nil’ rate - whether competent authority could not reject the petitioner's application for a tax withholding certificate at Nil rate by disregarding an earlier direction issued by the High Court in the petitioner's own case for the same financial year merely because the Department was contemplating filing an SLP? - HELD THAT: - The Court held that the impugned order was contrary to the earlier order passed by the High Court in the petitioner's own case for the same financial year. A binding direction of the High Court could not be ignored on the ground that the Department was thinking of, or was in the process of, preferring an SLP, particularly when no stay had been obtained. The authority's refusal to follow the Court's direction was therefore unsustainable. [Paras 5, 6, 7, 8]

The impugned order rejecting the application u/s 197 was set aside, and the competent authority was directed to issue the tax withholding certificate at Nil rate within three days.

Final Conclusion: The writ petition was allowed. The Court set aside the rejection of the Nil-rate withholding certificate and directed issuance of the certificate for the financial year 2025-26 within three days.

Territorial jurisdiction of the High Court - doctrine of forum conveniens - Cause of action

Writ petition maintainable in Delhi High Court when the impugned orders were issued by a Delhi-based authority but the substantive events, filings, and underlying dispute arose in Haryana - HELD THAT: - The Court held that the situs of the respondent authority in Delhi, or the passing of the impugned order from Delhi, is not by itself a determinative factor for invoking writ jurisdiction.

The Supreme Court in the case of Kusum Ingots & Alloys Ltd. v. Union of India and Anr [2004 (4) TMI 342 - SUPREME COURT (LB)] has held that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens.

What is material is the substance of the dispute and the place where the dominant, essential and integral facts giving rise to the lis occurred. Since the petitioner's applications concerning recognition, approval and expenditure for its research and development unit were routed through the Haryana unit, the foundational facts arose outside Delhi. Relying on the principle that even where a small part of the cause of action may arise within jurisdiction, the Court may still decline relief on the doctrine of forum conveniens, it held that Delhi was not the appropriate forum. [Paras 6, 9, 10, 11, 12]

The writ petition was dismissed on the ground that this Court should not exercise territorial jurisdiction, with liberty to the petitioner to approach the jurisdictional High Court; all rights and contentions were left open.

Final Conclusion: The Court dismissed the writ petition, holding that Delhi was not the appropriate forum merely because the respondent authority was located there and part of the cause of action could be said to arise there. Liberty was granted to approach the jurisdictional High Court, with all rights and contentions kept open.

Taxability of a State capital investment subsidy received by the Respondent from West Bengal Industrial Development Corporation Ltd. in terms of the 'West Bengal Incentive Scheme 1993' - MAT computation -Addition of corporate tax paid in Saudi Arabia whilst computing book profit under Section 115JB - Deductibility of the expenditure incurred on construction of Jukehi Road at Kymore which belonged to the Government of Madhya Pradesh - Addition of corporate tax paid in Saudi Arabia whilst computing book profit under Section 115JB - Exclude sales tax subsidy/exemption received during the year and included the sales turnover and from the book profit - Computation of long term capital gains in respect of sale of lands at Kaza mines and Nimabur at Kaza South - Addition in respect of provision for bad and doubtful debts in computing the book profits under section 115JB - Addition of deferred revenue expenditure - Addition in respect of provision for bad and doubtful debts in computing the book profits under section 115JB - Addition made in respect of revenue generated from a trial run production in computing book profit under section 115JB -Addition on account of foreign exchange, capital subsidy received towards purchase of assets and state capital investment received from W.B.I.D.C. for computation of Book profit u/s 115JB - Provision for wealth tax in computing book profits u/s 115JB - Provision for additional gratuity in computing book profits under section 115JB - Exclusion of write back of excess provisions made in earlier years in computing book profits under Section 115JB.

Addition made in respect of withdrawal from the Share Premium Account in computation of the book profits - HELD THAT:- According to the Commissioner of Income-tax (Appeals) write back of Share Premium Account was an allowable deduction in view of clause (i) of Explanation to Section 115JB(2). Commissioner of Income-tax (Appeals) deleted the addition following the decision of the Tribunal for Assessment Year 1990-91 as well as the orders of his predecessor for Assessment Years 1997-98 and 1998-99. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) following its order in the Appellant’s own case for the Assessment Years 1990-91 and 1998-99.

Taxability of a State capital investment subsidy - Revenue or capital expenditure - HELD THAT: - Commissioner of Income-tax (Appeals) held it to be a capital receipt as it was received as an incentive for industrialisation. The Commissioner of Income-tax (Appeals) deleted the addition by placing reliance on the decisions in CIT v. P.J. Chemicals Ltd. [1994 (9) TMI 1 - SUPREME COURT], DCIT v. Reliance Industries Ltd. [2003 (10) TMI 255 - ITAT BOMBAY-J] The Tribunal declined to interfere with the order of the Commissioner of Income-tax (Appeals). Before us, both the parties are ad idem that this issue is no more res integra in view of the decision of this Court in Bajaj Auto Ltd [2025 (7) TMI 323 - BOMBAY HIGH COURT] and thus does not give rise to any substantial question of law.

Addition of corporate tax paid in Saudi Arabia whilst computing book profit under Section 115JB - According to the AO the Respondent ought to have offered the gross receipts/ income and therefore added the said amount expended as receipt in computing the book profits under Section 115JB - HELD THAT:- The Apex Court in Apollo Tyres Ltd v CIT [2002 (5) TMI 5 - SUPREME COURT] has held that the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J of the Act. The provisions of Section 115J, which the Supreme Court was considering, are pari materia to Section 115JB reproduced by us above. In these circumstances, the Tribunal has correctly followed the decision of the Apex Court to hold that the Corporate Tax paid in Saudi Arabia does fall in any of the clauses of Explanation 1. Before us, Appellant, was unable to distinguish as to how the ratio of the aforesaid decision of the Apex Court in Apollo Tyres Ltd v CIT (supra) would not apply to the facts of the present case. Thus, this issue also does not give rise to any substantial question of law.

Deductibility of the expenditure incurred on construction of Jukehi Road at Kymore which belonged to the Government of Madhya Pradesh - revenue or capital expenditure - HELD THAT:- Commissioner of Income-tax (Appeals) deleted the addition holding that the expenditure did not result in creation of any asset of an enduring nature to the Appellant since the ownership vests with the Government of Madhya Pradesh. He further directed the Assessing Officer to withdraw the depreciation of 5% allowed by him. The Commissioner of Income tax (Appeals) followed the decision of Associated Cement Companies Ltd. [1988 (5) TMI 2 - SUPREME COURT] and the appellate orders in the Appellant’s own case for other assessment years. The Tribunal after noting the facts the decisions of the Apex Court in Associated Cement Companies Ltd. [1988 (5) TMI 2 - SUPREME COURT] and in L. H. Sugar Factory and Oil Mills (P) Ltd[1980 (8) TMI 1 - SUPREME COURT] declined to interfere with order of the Commissioner of Income-tax (Appeals). We find that the Commissioner of Income-tax (Appeals) and the Tribunal by concurrent orders deleted the addition that the Appellant was not the owner of the asset and that the expenditure had been incurred to facilitate smooth conduct of the business. Also, the Apex Court in the Appellant’s own case (Associated Cement Companies Ltd. (supra)) for the Assessment Year 1959-60 in respect of a similar expenditure at Shahabad had allowed the same as revenue expenditure.

Exclude sales tax subsidy/exemption received during the year and included the sales turnover and from the book profit - HELD THAT:- Both the parties agree that the question as to the inclusion of the sales tax subsidy in computing the book profits have been admitted in the Appellant’s own case for the Assessment Year 2002-03 by this Court in [2019 (3) TMI 399 - BOMBAY HIGH COURT] However, the inclusion of the same in computing total income under the normal provisions would not arise in view of what has been held in paragraph 3 hereinabove. The appeal is therefore admitted on the following reframed question of law:-

“Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in upholding the decision of the Ld. CIT(A) deleting the disallowance on account of Sales Tax subsidy in computation of Book Profit under Section 115JB of the Act?”

Computation of long term capital gains in respect of sale of lands at Kaza mines and Nimabur at Kaza South - HELD THAT:- Commissioner of Income-tax (Appeals) therefore directed the Assessing Officer to recompute the long term capital gain on sale of land by considering the fair market value as on 01-04-1981 as well as the indexed cost of improvement as submitted by the Appellant after verification of the correctness of the facts as well as the registered valuer's report. The Tribunal agreed with the Commissioner of Income-tax (Appeals) that the Appellant was entitled to deduct the cost of acquisition in computing the capital gains. These are all findings of facts. We fail to see that how does a question of law arise from this issue. The same is therefore not entertained.

Addition in respect of provision for bad and doubtful debts in computing the book profits under section 115JB - HELD THAT:- Tribunal declined to interfere with the order of the Commissioner of Income-tax (Appeals). Before us, both the parties agree that the question as to the inclusion of the provision for bad and doubtful debts in computing the book profits under section 115JB of the Act have been admitted in the Appellant’s own case for Assessment Year 2002-03 in Income Tax Appeal No.1658 of 2016 vide order dated 4th March, 2019. The appeal is therefore admitted on the aforesaid question of law.

Addition of deferred revenue expenditure - Commissioner of Income-tax (Appeals) deleted the addition by following the decision of Apollo Tyres [2002 (5) TMI 5 - SUPREME COURT] holding that it does not fall in any of the clauses of Explanation to section 115JB - HELD THAT:- Tribunal confirmed the order of the Commissioner of Income tax (Appeals). Before us, Shri Suresh Kumar, Appellant was unable to distinguish as to how the ratio of the aforesaid decision of the Apex Court in Apollo Tyres Ltd v CIT (supra) would not apply to the facts of the present case. As such, the said question does not give rise to any substantial question of law.

Addition made in respect of revenue generated from a trial run production in computing book profit under section 115JB - HELD THAT:- Before us, both the parties agree that the question as to the inclusion of revenue generated from a trial run production in computing book profit under section 115JB of the Act has been admitted in the Appellant’s own case for Assessment Year 2002- 03 [2019 (3) TMI 399 - BOMBAY HIGH COURT]

Addition on account of foreign exchange, capital subsidy received towards purchase of assets and state capital investment received from W.B.I.D.C. for computation of Book profit u/s 115JB - HELD THAT:- State Capital Investment Subsidy received from WBIDC constituted capital receipt in the hands of the appellant, hence, not taxable and therefore the same could not be added back in computing book profit under Section 115JB of the Act. Tribunal agreed with the findings of the Commissioner of Income-tax (Appeals). As the question deletion of the of addition of sales tax subsidy in computing the book profits under Section 115JB is admitted for the reasons set out in paragraphs 9 and 10 hereinabove [reframed question (iv)], the appeal is admitted on the aforesaid question of law also.

Provision for wealth tax in computing book profits u/s 115JB - Section 115JB of the Act as it was applicable for the year under consideration is reproduced at paragraph 5 hereinabove. In this provision also under the said clause (a) of the Explanation, payment of wealth-tax is not contemplated. No substantial question of law can therefore be said to arise on this issue.

Provision for additional gratuity in computing book profits under section 115JB - Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) following its order in the Appellant’s own case for the Assessment Year 2002-03. The Appellant points out that this is a recurring issue since Assessment Year 1990-91 and that the Department has not filed any appeals for the past years. Further, this issue has been considered by this Court in CIT v Echjay Forgings (P) Ltd [2001 (2) TMI 56 - BOMBAY HIGH COURT] the relevant paragraph of which is reproduced below-

“(III) Whether the net profit was required to be increased by an amount of Rs. 5,00,000 being the provision for gratuity -

8. As stated above, no reasons have been given by the Assessing Officer for adding the said amount to the net profit. The assessee has made the provision for gratuity on the basis of actuarial calculations. Hence, it cannot be said that the provision for gratuity is not an ascertained liability.” In that view of the matter no substantial question of law can said to arise on this issue.

Exclusion of write back of excess provisions made in earlier years in computing book profits under Section 115JB - No fault can be found in the concurrent findings given by the Commissioner of Income-tax (Appeals) and the Tribunal as the reserve was created before 1st day of April, 1997. Hence, no substantial question of law can be said to arise on this issue.

Addition made in respect of withdrawal from the Share Premium Account in computation of the book profits - HELD THAT:- According to the Commissioner of Income-tax (Appeals) write back of Share Premium Account was an allowable deduction in view of clause (i) of Explanation to Section 115JB(2). Commissioner of Income-tax (Appeals) deleted the addition following the decision of the Tribunal for Assessment Year 1990-91 as well as the orders of his predecessor for Assessment Years 1997-98 and 1998-99. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) following its order in the Appellant’s own case for the Assessment Years 1990-91 and 1998-99.

Final Conclusion: The High Court admitted the appeal on the four specified questions relating to computation of book profit under Section 115JB (questions (iv) as reframed, (vi), (ix) and (x)) for Assessment Year 2003-04 and directed that these issues be heard along with Income Tax Appeal No.1658 of 2016 for Assessment Year 2002-03.

Entitlement to carry forward balance additional depreciation - Claim the balance 50% of the additional depreciation for new plant and machinery purchased on a particular assessment year for less than of 180 days -interpretation of proviso restricting first-year depreciation only

HELD THAT: -As decided in M/s.Shri T.P. Textiles Private Limited [2017 (3) TMI 739 - MADRAS HIGH COURT] held that the Memorandum explaining the provision in the Finance Act, 2015, and reasons for the amendment to Section 32, clearly indicate that the Legislature recognized the fact that the manner in which the provision was interpreted prior to the amendment would lead to discrimination in respect to plant and machinery used for less than 180 days and that used for 180 days or more. Thus, the Division Bench opined that in order to maintain parity among assessee’s, they carry forward the benefit to the next assessment year for the balance 50% of the additional depreciation.

Since the additional depreciation is given to encourage purchase of new plant and machinery, as found in the Memorandum, the advantage of granting additional depreciation should be extended to all assessee’s without any discrimination, whether they used the machinery for less than 180 days or more than 180 days in a particular assessment year. If the assessee has used the machinery for less than 180 days in a particular year, the statute provides for 50% of the additional depreciation on that particular assessment year and the remaining 50% shall be allowed to the subsequent assessment year.

Final Conclusion: The Tax Case Appeal is allowed; the assessee is entitled to claim the remaining 50% of additional depreciation in the subsequent assessment year, and the proviso to the depreciation provision limits only the first-year allowance without reducing the total additional depreciation entitlement.

Nature of expenses - Allowability of expenditure on replacement of dies and moulds - capital or revenue expenditure - classification of temporary structural/interior works as current repairs - allowability of weighted deduction for research expenditure on work in progress - deductibility of entry tax despite set off under sales tax law - capital treatment of discount on prepayment of deferred sales tax (NPV) - application of DTAA 'make available' clause to fees for technical services and TDS liability - precedential effect of earlier final orders on taxation of commissions to foreign agents

Allowability of expenditure on replacement of dies and moulds as revenue expenditure - Expenditure on replacement of dies and moulds held to be allowable as revenue expenditure under the relevant provisions and principles applied in the assessee's earlier decision. - HELD THAT: - The Court applied its earlier decision in Commissioner of Income Tax v TVS Motors Limited [2014 (2) TMI 522 - MADRAS HIGH COURT] for AY 2003-04 and authorities considering dies and moulds attached to machinery as parts of plant, concluding that replacement expenditure qualifies under the head of current repairs (Section 31) and is allowable as revenue expenditure rather than capital, noting no successful refutation by Revenue of those factual premises. [Paras 4]

Question answered in favour of the assessee - replacement of dies and moulds allowed as revenue expenditure.

Classification of temporary structural/interior works as current repairs - Expenditure on certain constructions and interior/partition works at area offices held to be temporary in nature and allowable rather than constituting acquisition of enduring assets - HELD THAT: - The detailed order of the CIT(A) categorised the works (electrical, interior partitions, wallpapers) as temporary; the Tribunal confirmed that conclusion and the Court found no justification to depart from the earlier-year decision absent differing facts, accepting the assessee's position that the expenditure did not create enduring assets and thus was not capital in nature. [Paras 6, 8, 10]

Question answered in favour of the assessee; 100% depreciation disallowance set aside and works treated as temporary/current repairs.

Allowability of weighted deduction for research expenditure on work in progress - Weighted deduction under Section 35/35(2AB) in respect of research expenditure on work in progress was held to be allowable. - HELD THAT: - On identical facts and legal position as for AY 2003-04 where the Tribunal had accepted the claim and this Court affirmed reliance on relevant precedent including CIT v Rane Brake Linings Ltd, both parties accepted coverage by the earlier decision and the Court answered the question in favour of the assessee. [Paras 11, 12, 13]

Question answered in favour of the assessee; weighted deduction for R&D work in progress allowed.

Deductibility of entry tax despite set off under sales tax law - Entry tax actually paid by the assessee is deductible under the Income Tax Act even if adjusted as a set off under the Sales Tax law. - HELD THAT: - The Court held that the treatment or adjustment under the Sales Tax Act does not affect the independent question of deductibility under the Income Tax Act; having earlier decided the identical issue in favour of the assessee and with that decision final, the Court rejected Revenue's contention of double benefit and declined to apply Section 43B to negate the deduction for the year under appeal. [Paras 14, 16, 17, 18]

Question answered in favour of the assessee; entry tax allowed as deduction notwithstanding set off under Sales Tax law.

Capital treatment of discount on prepayment of deferred sales tax (NPV) - The discount arising on prepayment of a deferred sales tax loan (computed on NPV basis) is capital in nature and not income. - HELD THAT: - Applying the Supreme Court's reasoning in Balakrishna Industries Ltd and the High Court's analysis, the Court found no remission or cessation of liability by the State; premature payment determined by NPV did not create income under Section 41(1) and, accordingly, the difference was correctly treated as capital and not brought to tax as income. [Paras 19, 23, 26, 28]

Question answered in favour of the assessee; discount on prepayment treated as capital.

Application of DTAA 'make available' clause to fees for technical services and TDS liability - Amounts paid to foreign entities for services in procuring ECBs were not exigible to tax in India under the relevant DTAAs because the 'make available' requirement was not satisfied; consequently, no TDS obligation arose under Section 195/40(a)(i). - HELD THAT: - Although the services were technical in nature, both the UK India and Singapore India DTAAs require that technical knowledge/know how be 'made available' to the payer to attract taxation; since the assessee did not receive such know how enabling it to obtain ECBs independently, the treaty position (being more beneficial under Section 90) applied and the sums were held not taxable in India, reversing the Tribunal's contrary conclusion. [Paras 31, 33, 36, 39, 40]

Question answered in favour of the assessee; amounts not subject to TDS as not taxable under the DTAA 'make available' test.

Precedential effect of earlier final orders on taxation of commissions to foreign agents - Disallowance of commission paid to foreign agents was deleted in light of earlier final Tribunal orders on identical facts; those prior decisions apply to the year under appeal where facts and legal position are not shown to differ. - HELD THAT: - The Tribunal had decided identical issues for assessment years in the 1990s in favour of the assessee and those orders became final; a subsequent challenge for a later year was dismissed by the Court citing that precedent, and in the absence of any material showing variation in facts for the present year, the same ratio was applied to permit deletion of the disallowance. [Paras 41, 42, 43]

Question answered in favour of the assessee; disallowance of commissions to foreign agents deleted following prior final orders.

Final Conclusion: All seven substantial questions of law arising in the appeal for AY 2005 06 were answered in favour of the assessee on the legal bases stated; the tax case (appeal) is dismissed. No costs.

Rejection of books of account - Gross profit estimation - bogus purchases - Unexplained cash deposit - Demonetisation period deposits

Rejection of books of account - Gross profit estimation - Genuineness of purchases - rejection of the assessee's books and estimation of gross profit for AY 2021-22 on the basis of the average gross profit of the preceding two years - HELD THAT: - The Tribunal found that the assessee did not produce supporting bills, vouchers, confirmations from purchase parties, stock records, valuation basis of closing stock, bank support for payments, or other primary material despite opportunities. Enquiries under section 133(6) showed that most purchase parties were non-filers and appeared non-genuine, and material discrepancies also existed between the audit report, profit and loss account and balance sheet figures. In these circumstances, the authorities were justified in treating the accounts as unreliable, rejecting the books, and estimating profits by applying the average gross profit rate of the preceding two years, the assessee having failed to establish the identity and creditworthiness of the parties or the genuineness of the transactions. [Paras 12]

The addition based on estimated gross profit after rejection of books was sustained and the appeal for AY 2021-22 was dismissed.

Unexplained cash deposit - Demonetisation period deposits - Source of cashHELD THAT: - The Tribunal noted that the cash deposit in the bank account during the demonetisation period stood verified from information obtained from the bank, while the assessee did not comply with notices or furnish any supporting material to explain its source. In the absence of any evidence justifying the source of the cash deposit, the addition as unexplained money was held to be proper. [Paras 14]

The addition under section 69A for the demonetisation-period cash deposit was confirmed and the appeal for AY 2017-18 was dismissed.

Final Conclusion: The Tribunal upheld, for AY 2021-22, the rejection of books and estimation of profit on account of unverifiable purchases and unreliable accounts, and, for AY 2017-18, the addition of cash deposited during the demonetisation period as unexplained money. Both appeals were dismissed.

Unexplained cash credit u/s 68 - Bogus Share capital and share allotment - Identity, genuineness and creditworthiness - proof of Source of source in share capital cases

HELD THAT: - The Tribunal found that the shares had in fact been allotted to the shareholders and that most of them were existing shareholders of the company. It noted that summons had been issued to all shareholders; some appeared and gave statements, while those who did not appear had furnished replies with supporting documents. The record before the appellate authority and the Tribunal contained documentary material such as income-tax acknowledgements, bank statements reflecting transfer of funds, identity proof and details of source.

The Assessing Officer had mainly treated the explanation as unsatisfactory because of non-furnishing of some evidence and because cash was found deposited not in the shareholders' own accounts but in the accounts of persons constituting the source of source before funds moved further.

Tribunal noted that material had been produced explaining such upstream sources, including sale receipts or sale deeds, bank statements for fixed deposit maturity, gift declarations, loan confirmations and land records relating to agricultural income. On that factual foundation, and following the binding precedents noticed by the first appellate authority, the Tribunal held that no infirmity was shown in the relief granted by the first appellate authority. [Paras 5]

The Revenue's challenge to the deletion of the addition under section 68 failed.

Final Conclusion: The Tribunal upheld the order of the first appellate authority on the section 68 dispute concerning the share capital received by the assessee and found no infirmity in the relief granted. The Revenue's appeal was accordingly dismissed.

Exemption of leave encashment u/s 10(10AA) - revised threshold limit - CBDT notification revising exemption limit - Judicial consistency

HELD THAT: - The Tribunal found that the controversy was covered by co-ordinate Bench decisions on identical facts, including the decision in Neelam Gupta Proceeding [2025 (4) TMI 1779 - ITAT DELHI] on that basis, and in the absence of any contrary decision or material from the Revenue, it held that where the claimed leave encashment fell within the revised limit notified by the CBDT, the assessee was entitled to exemption to that extent. The matter was decided by following the earlier Tribunal view for the sake of consistency. [Paras 4, 5]

The assessee was held entitled to exemption of leave encashment u/s 10(10AA) within the limit prescribed by CBDT Notification No.31/2023, and the appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal and held that the assessee was entitled to exemption of leave encashment under section 10(10AA) within the revised limit prescribed by CBDT Notification No.31/2023 for the relevant assessment year.

Best judgment profit estimation - applicability of net profit @21.67% on sale - Unexplained money under section 69A - Non-speaking appellate order

Net profit estimation -HELD THAT: - The Tribunal found that the net profit rate applied by the Assessing Officer was not based either on any comparable case of similar business or on the assessee's profit rate of preceding years. It also found no justification for such rate in the orders of the lower authorities and noted that the appellate finding on this aspect was not speaking or well reasoned. On that basis, the issue required fresh adjudication after hearing the assessee. [Paras 6, 8]

Unexplained money u/s 69A - allegation of refusal to admit the additional evidence in relation to the addition under section 69A - HELD THAT: - The Tribunal held that the reasoning given by the Commissioner (Appeals) for not admitting the additional evidence furnished by the assessee was unsatisfactory. In the interest of justice, it directed that such evidence be admitted and that the issue concerning taxability of the bank credits as unexplained money be reconsidered afresh after hearing the assessee, if required. [Paras 7, 8]

The addition under section 69A was not adjudicated on merits and the matter was remanded to the Commissioner (Appeals) to admit the additional evidence and decide the issue afresh after granting reasonable opportunity of hearing.

Final Conclusion: The Tribunal set aside the appellate order on both surviving controversies. The questions relating to profit estimation on the alleged turnover and taxability of the bank credits under section 69A were remanded to the Commissioner (Appeals) for fresh adjudication after admitting the additional evidence and granting reasonable opportunity to the assessee.

Presumptive taxation under section 44AD - AO rejecting the income declared by the assessee u/s 44AD and in estimating the income by applying a rate of 50% by invoking the logic akin to section 44ADA - proof of specified profession as contemplated under section 44ADA

Sole basis for enhancement is that the assessee “should have” declared income at 50%, which has no sanction in law under section 44AD - HELD THAT: - The Tribunal found that the assessee was engaged in business as a Business Correspondent and therefore eligible to avail the presumptive scheme under section 44AD.

It is a settled principle that estimation of income cannot be made on arbitrary basis and must be in accordance with statutory provisions or supported by cogent material. The action of the Assessing Officer in adopting 50% is thus without any legal foundation

The Assessing Officer produced no material to show that the assessee carried on a profession within the scope of section 44ADA, and the nature of the assessee's activity could not be equated with notified professions attracting section 44ADA. The statutory rates u/s 44AD and 44ADA operate in distinct and mutually exclusive fields; substituting the 44AD rate with 50% based on section 44ADA is a misapplication of the statutory scheme.

AO accepted the assessee's gross receipts and did not demonstrate ineligibility for section 44AD, incorrectness of declared gross receipts, or suppression of receipts/inflation of expenses-conditions necessary to justify enhancement. On these grounds the estimation at 50% was held to be legally unfounded and the income declared under section 44AD was accepted. [Paras 19, 21, 23, 24, 25]

Final Conclusion: The appeal is allowed: the income declared by the assessee under section 44AD for Assessment Year 2020-21 is accepted, the addition sustained by the authorities is deleted, and the returned income stands accepted.

Allowability of interest u/s 36(1)(iii) - diversion of interest-bearing funds towards non-interest-bearing capital advances given to third parties

Whether disallowance of interest under section 36(1)(iii) on account of alleged diversion of interest bearing funds towards interest free capital advances is sustainable? - HELD THAT: - The Tribunal applied the settled principle that interest on borrowed funds is allowable only when such funds are used for business purposes and that, where an assessee has sufficient interest free funds, a presumption arises that advances/investments were made from such funds. The Tribunal examined the audited financial statements and found interest free funds (equity and reserves) and internal accruals materially in excess of the capital advances, and noted that the Revenue did not produce material establishing a direct nexus between borrowed funds and the advances. The Assessing Officer's inference, based on the mere existence of borrowings, was held to be contrary to law, and the CIT(A)'s confirmation was found to be without independent reasoning or rebuttal of the statutory presumption recognised in Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] and the principle of commercial expediency in S.A. Builders [2006 (12) TMI 82 - SUPREME COURT]. Applying these principles, the Tribunal accepted the assessee's evidence of sufficiency of interest free funds and internal accruals and held that the Revenue failed to discharge the onus of proving diversion of interest bearing funds. [Paras 19, 20, 21, 22, 23]

Final Conclusion: The appeal is allowed - Disallowance u/s 36(1)(iii) is deleted accepting the assessee's evidence of sufficiency of interest free funds and internal accruals.

Deemed exports - entitlement of Holoflex to duty exemption under the EPCG license - proof of fulfilment of export obligation - Supplies from Domestic Tariff Area to Special Economic Zone - Limited operation of statutory deeming fiction - definition of “export” in Section 2(m)(ii) - Whether the effect of para-8.1 of the FTP would in any way be diluted or eliminated by the SEZ Act or SEZ Rules.

Deemed exports - Supplies from Domestic Tariff Area to Special Economic Zone - HELD THAT: - The Court held that, as the entitlement in question arose under the FTP, the character of the supplies had primarily to be tested on Chapter 8 of the FTP. Para 8.1 treated as deemed exports transactions in which goods supplied do not leave the country, and the Court found that supplies to an SEZ unit satisfied that description. Para 8.2 was not read as exhaustive of all categories of deemed exports, as such a reading would render para 8.1 otiose; in any event, para 8.2 dealt with supplies by contractors or sub-contractors, which was not the case here. The Court further held that Section 2(m)(ii) of the SEZ Act only defined export for the purposes of that Act, and Section 53(1) created a deeming fiction only for undertaking authorised operations; such fiction could not be extended to determine entitlement under the FTP. Rule 23 of the SEZ Rules, far from excluding the claim, recognised eligibility of DTA supplies to an SEZ unit for export benefits under the FTP. [Paras 41, 42, 43, 44, 45]

The Court rejected the contention that supplies to the SEZ were physical exports alone and held that para 5.13(b), and not para 5.13(a), governed proof of fulfilment of export obligation.

Bill of Export as proof of export - Export obligation under EPCG Scheme - HELD THAT: - The Court held that Rule 30 of the SEZ Rules dealt with admission of goods into the SEZ and assessment of Bill of Export, but did not directly prescribe the documents that alone would entitle an EPCG licence holder to the incentive. Once the supplies were found to fall within para 8.1 of the FTP as deemed exports, denial of benefit merely for want of Bills of Export was unjustified when there was ample evidence of actual supply and receipt of remittance. The overriding effect under Section 51 extended only to the SEZ Act and not to the SEZ Rules. Relying also on the principle that export incentives are governed by the FT (D & R) Act, the FTP and the HBP, the Court held that such incentives could not be disallowed by reference to the SEZ Rules where the FTP requirements stood otherwise satisfied. The Court also noticed the subsequent DGFT Policy Circular relaxing the Bill of Export requirement for similar schemes and the Bombay High Court decisions taking the view that collateral evidence of discharge of export obligation was sufficient. [Paras 49, 50, 51, 52, 53]

The Court found no error apparent in the earlier judgment and dismissed the review petition, holding that absence of Bills of Export alone could not defeat the assessee's EPCG claim.

Final Conclusion: The Court held that supplies made by the assessee from the Domestic Tariff Area to the SEZ unit were deemed exports under the FTP and that invoices with bank realisation certificates were sufficient proof of discharge of export obligation. As no ground other than absence of Bills of Export was shown, the review petition was dismissed.

Entitlement to bail - illegal custody - detention without production within twenty-four hours - recovery of narcotic drugs/psychotropic substances - commercial quantity - translations of statutory notices were effected using an AI tool - Requirement to produce detained person before magistrate within statutory period - procedural compliance of notices under Section 50 NDPS Act and Section 102/103 Customs Act- Violation of personal liberty under Article 21 vis-a -vis NDPS statutory embargo.

Requirement to produce detained person before magistrate within statutory period - Detention at the airport and subsequent hospital custody without production before a Magistrate violated the statutory requirement and rendered custody illegal. - HELD THAT: - The Court held that once part-recovery of contraband took place at the airport and the offence stood revealed, the officer was bound to arrest and produce the person before a Magistrate even if further recovery was to be effected. Remanding the person to hospital without magistrate-authorised custody was impermissible; remand for medical procedure could have been sought from the Court or obtained at the hospital by involving the Magistrate. On the facts, the applicant remained in illegal custody from interception until production before the Court. [Paras 16, 25]

Custody from interception at the airport until production before the Court was held to be illegal.

Procedural compliance of notices under Section 50 NDPS Act and Section 102/103 Customs Act - Documentation and translation of statutory notices were deficient and non-compliant with the statutory prescription. - HELD THAT: - The Court found that the translated copies generated through an AI tool were incomplete and did not record the applicant's replies, and that Customs impermissibly added an option (search by a lady officer of Customs) not available under Section 50 NDPS Act, which prescribes search before a Magistrate or Gazetted Officer. These defects made it unclear whether the applicant had been duly apprised of her legal rights in the prescribed manner. [Paras 18, 19, 20, 21, 22]

Notices and their translations were not shown to be in lawful compliance; the AI-generated translation was incomplete and the statutory form was altered contrary to Section 50.

Article 21 considerations can outweigh the statutory embargo under Section 37 NDPS Act when fundamental rights are infringed by procedural violations, warranting bail despite commercial-quantity recovery. - HELD THAT:- As per Nominal Roll of the applicant, she is in custody since the date of her arrest i.e. 07.07.2024 and has no previous involvement in any other case. There is no likelihood of completion of trial in near future. When it comes to somebody’s life and liberty, Article 21 of the Constitution of India must override and prevail over the statutory embargo created under Section 37 of NDPS Act. Reference be made to Rabi Prakash v. State of Odisha [2023 (7) TMI 1459 - SC ORDER].

Relying on precedents and the factual finding of illegal custody and procedural infirmities, the Court held that when liberty is affected by serious procedural violations going to the root of the matter, Article 21 must prevail over the statutory restriction on bail. Considering absence of prior involvement, custodial period since formal arrest, and improbability of trial concluding soon, the Court exercised jurisdiction to grant bail subject to conditions. [Paras 14, 27, 28]

Applicant granted bail on conditions notwithstanding recovery of commercial quantity because Article 21 considerations outweighed the statutory embargo in the circumstances.

Final Conclusion: The Court found serious procedural non-compliance in detention and in the service/translation of statutory notices, concluded that these infringed personal liberty, and granted regular bail subject to specified conditions while preserving that nothing decided bears on the merits of the prosecution.

Fraudulent trading in illiquid scrip - Promoter group - Minimum public shareholding (MPS) norms - proportionality of debarment - low liquidity of the scrip, the large volume of inter se trades among connected persons, and the timing of the trades around the delisting exercise were treated as indicia of a scheme to project the scrip as liquid - principle of preponderance of probability.

Promoter group - minimum public shareholding - HELD THAT: - The Tribunal held that, in the context of a listed company, the statutory definition of promoter group under the ICDR Regulations could not be displaced by the pleaded family arrangement. On the admitted shareholding figures, the common group of promoter shareholders held more than 20% in Stuti and Siwana while also holding more than 20% in the issuer, thereby bringing those entities within the promoter group. The Tribunal further held, on a preponderance of probability, that Vital was controlled by Ganpatraj through his sister's son, having regard to the sequence and matching of fund transfers for its acquisition. Once the holdings of these entities were included, the public shareholding fell below the prescribed threshold, and the company was therefore in breach of MPS norms. [Paras 36, 37, 38]

The finding that MPS norms were violated was upheld.

Fraudulent trading in illiquid scrip - reverse book building - HELD THAT: - The Tribunal accepted SEBI's case that the scrip was inherently illiquid and that a substantial part of the trading during the relevant period was inter se among connected entities. It noted that the admitted trades, particularly the large volume between Creelotex and Ganpatraj and the overall concentration of trades among the connected noticees, did not support a case of genuine market activity. Applying the principle of preponderance of probability, the Tribunal held that trading by connected persons in an illiquid scrip reasonably led to the inference that the trades were undertaken to create an appearance of liquidity and to facilitate the delisting process. [Paras 40, 41, 43]

The finding of fraudulent and illegal trading for the purpose of projecting the scrip as liquid was affirmed.

The Tribunal declined to reduce the consequences for those appellants whose role in the impugned trades was significant, particularly in view of the substantial inter se trading reflected in the record. However, for the remaining connected noticees, it considered the comparatively lower quantity of shares traded and the fact that the delisting had not ultimately taken place. On that basis, limited relief was granted by reducing the period of debarment. [Paras 44, 45]

The debarment period was reduced for specified appellants, while the rest of the impugned findings were left undisturbed.

Final Conclusion: The Tribunal upheld the findings that Riddhi Siddhi had failed to maintain minimum public shareholding and that the connected appellants had engaged in fraudulent trading to project liquidity in the scrip for delisting purposes. The penalty order in one appeal was sustained, the principal directions of the WTM were maintained, and only the period of debarment was reduced for specified appellants on proportionality.

Effect of approval of a resolution plan under Section 31(1) - definition of "claim" under Section 3(6) - clean slate principle - Extinguishment of claims on approval of a resolution plan - principles of strict construction - moratorium under insolvency proceedings - binding effect of resolution plan.

Whether the respondent ought to be allowed to raise the plea of set-off before the Tribunal, having regard to extinguishment of the respondent’s counterclaim for its failure to raise such claim before the Resolution Professional during the CIRP and prior to approval of the resolution plan? -HELD THAT:- The Court held that approval of a resolution plan under Section 31(1) of the IBC renders the plan binding and causes all claims not included in the plan to stand extinguished; this principle, endorsed in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021 (4) TMI 613 - SUPREME COURT], means the respondent cannot pursue affirmative relief by way of a counterclaim that was not part of the approved plan. Examining paragraph 12.4.1 of the resolution plan, the Court observed that while the plan expressly bars payments, settlements and counterclaims for recovery, it does not expressly or impliedly preclude raising a plea of set-off as a defensive measure; applying the maxim expressio unius est exclusio alterius, the Court inferred no clear intention to exclude defensive set-off. Accordingly, the respondent is permitted to rely on the plea of set-off solely as a defence to reduce or defeat the appellant's claim, but not to obtain any positive or affirmative relief or recover any surplus amount; any recoverable balance in favour of the appellant after adjustment remains payable to the appellant, and if the arbitration is withdrawn the counterclaim shall fail. The Court limited this conclusion to the terms of the cited paragraph of the resolution plan and the facts of the case. [Paras 23, 25, 26, 27, 28]

Respondent may plead set-off only defensively in the arbitration; its counterclaim remains extinguished for purposes of affirmative relief, and any adjustment is limited as specified by the Court.

Final Conclusion: The Division Bench's order is modified: while the respondent's counterclaim is extinguished on approval of the resolution plan and cannot yield affirmative relief, the respondent is permitted to raise a plea of set-off only as a defence subject to the limitations and conditions stated by the Court; the appeal is partly allowed.

Corporate Insolvency Resolution Process - Right of appeal under Section 61 - Person aggrieved - locus standi in insolvency appeal - Failure of the Adjudicating Authority to examine statutory ineligibility, suppression of material developments, and exercise of jurisdiction in conformity with Sections 29A, 30 and 31 of the Insolvency and Bankruptcy Code, 2016 - non- consideration of mandatory statutory disqualifications - Suppression of Material Facts - director disqualification under Section 164- new grounds in appellate proceedings - finality of implemented resolution plan.

Person aggrieved - locus standi in insolvency appeal - HELD THAT:- The Tribunal held that the right of appeal under Section 61 is available only to a person whose legal rights or interests are directly affected by the impugned order. Though the expression "person aggrieved" is not to be read rigidly, the appellant must still be a stakeholder in the concerned CIRP. The appellant was neither a creditor, participant, prospective resolution applicant, resolution professional nor any other stakeholder in the CIRP of Afcan Impex Pvt. Ltd.; its status as an operational creditor in the separate CIRP of CAN Enterprises Pvt. Ltd. created only a collateral grievance. The alleged prejudice arising from observations in the impugned order did not establish a direct legal injury in the Afcan Impex CIRP, and the authorities cited by the appellant were held distinguishable on their own statutory and factual settings. [Paras 54, 55, 56, 57, 72]

The appellant was not a stakeholder in the CIRP of Afcan Impex Pvt. Ltd. and therefore could not be treated as a person aggrieved under Section 61.

Eligibility of Respondent No.1 as resolution applicant and to the approval of the resolution plan failed on merits. - HELD THAT: - The Tribunal held that mere association of Respondent No.1 with another company undergoing CIRP did not by itself attract Section 29A. For Section 29A(c), the statute requires an account classified as NPA in accordance with RBI guidelines, and no such material was shown in relation to Respondent No.1 or CAN Enterprises Pvt. Ltd. For Section 29A(e), disqualification under Section 164 of the Companies Act must already exist in law and cannot be presumed; in the absence of any formal declaration by the competent authority, no ineligibility could be inferred. The Tribunal also noted that the resolution professional had carried out due diligence on eligibility. Further, the appellant had not raised these objections before the Adjudicating Authority and could not introduce them for the first time in appeal. The resolution plan had already been implemented, management had changed hands, and the same approval order had also been upheld in earlier appellate proceedings, reinforcing the finality of the completed resolution process. [Paras 68, 69, 70, 71, 72]

Respondent No.1 was not shown to be ineligible under Section 29A, the fresh objections were not entertainable at the appellate stage, and no legal infirmity was found in the approved and implemented resolution plan.

Final Conclusion: The Tribunal dismissed the appeal as not maintainable, holding that the appellant was not a person aggrieved in the CIRP of Afcan Impex Pvt. Ltd. It further held that no ineligibility of Respondent No.1 under Section 29A was established and that the approved resolution plan, already implemented, disclosed no legal infirmity.

Rejection of resolution plan - non-submission of earnest money deposit within the stipulated time - commercial wisdom of the committee of creditors - non-responsive under the request for resolution plan -Locus of dissenting financial creditor - Value maximisation in CIRP - violation of regulation 36B of CIRP regulations, 2016.

Resolution plan responsiveness - Earnest money deposit compliance - HELD THAT:- The Tribunal held that Clause 12 of the RFRP required the earnest money deposit to accompany the resolution plan within the stipulated time. Actual credit of the amount to the corporate debtor's account after the deadline could not be treated as timely submission merely because the bidder's account had been debited on the due date. In the absence of any contrary stipulation in the RFRP, late credit rendered the plan non-responsive. Acceptance of that bid by the Resolution Professional was therefore contrary to the RFRP, and the Resolution Professional's conduct in treating the bid as valid was found to be a serious error. [Paras 20, 21]

The bid of Valentis was held non-responsive and its resolution plan was declared invalid.

Locus of dissenting financial creditor - HELD THAT: - The Tribunal held that a dissenting financial creditor with a stake in the revival of the corporate debtor and in value maximisation is entitled to question the process where, in its perception, the principles of the Code are being violated. The appellant had not raised the objections for the first time before the Adjudicating Authority; the same objections had been raised in the CoC meetings and, on not receiving an effective response, were pursued before the Adjudicating Authority. In those circumstances, the appellant had the locus to maintain the challenge. [Paras 27]

The appellant was held to have the locus to raise the challenge before the Adjudicating Authority.

Value maximisation in CIRP - Duties of resolution professional - HELD THAT: - The Tribunal found that the majority lenders had continued to drive the process of the corporate guarantor even after being assured full recovery under the principal borrower's resolution plan, without demonstrating how such continuation served the objective of value maximisation of the corporate debtor. It also found that the Resolution Professional, being aware of the position in both CIRPs, ought either to have advised the CoC to await finality of the principal borrower's plan or to have sought directions from the Adjudicating Authority. Instead, the process was carried forward without adequate regard to the position of the corporate guarantor and the interests of other stakeholders. In that background, the Tribunal directed a fresh examination of whether the CIRP against the corporate debtor still subsisted in law. [Paras 23, 25, 28]

The Resolution Professional was directed to evaluate the remaining resolution plans and to examine, in accordance with law, whether the CIRP against the corporate debtor still subsisted, and to seek appropriate directions from the Adjudicating Authority.

Final Conclusion: The impugned order was set aside. The resolution plan of Valentis was declared invalid, and the Resolution Professional was directed to evaluate the remaining resolution plans and to examine, in accordance with law, whether the CIRP against the corporate debtor still subsisted and to seek appropriate directions from the Adjudicating Authority.

Seeking withdrawal of section 9 proceedings on settlement - settlement between the operational creditor and the corporate debtor - Initiation of the CIRP -Impleadment by third party in insolvency appeal - Principle of dominus litis.

Withdrawal of section 9 proceedings on settlement - Challenge to admission order becoming infructuous - HELD THAT:- The Appellate Tribunal recorded that the operational creditor, on the basis of the memorandum of understanding, expressed its willingness to withdraw the company petition itself. Once the applicant in the section 9 proceedings sought withdrawal of the petition, nothing survived in the appeal against the admission order initiating CIRP, and the Tribunal held that the merits of the impugned order were no longer required to be examined. [Paras 2, 6, 7]

The appeal was dismissed as withdrawn in terms of the settlement, and the company petition was treated as withdrawn.

Impleadment by third party in insolvency appeal - Dominus litis - HELD THAT: - The Tribunal found that the person seeking audience was neither a party to the original section 9 petition nor had any impleadment application been placed on record or numbered before the Appellate Tribunal. It held that, when the original applicant itself sought withdrawal, no third party could compel impleadment or continue the proceeding in its place. Applying the principle of dominus litis, the Tribunal held that the applicant is master of its own proceedings and no outsider can impose itself as a petitioner after the applicant has elected to withdraw. [Paras 4, 5, 6]

The request of the non-party to intervene or be impleaded was not accepted.

Final Conclusion: Recording the settlement between the operational creditor and the corporate debtor, the Appellate Tribunal held that the appeal against admission of the section 9 petition had become infructuous. It also declined to entertain objections of a non-party seeking impleadment, and dismissed the appeal as withdrawn.

Condonation of delay - belated appeal -Delay in filing an appeal against the liquidator's decision under Section 42 -Limitation under special statute -Applicability of Limitation Act.

Appeal against decision of liquidator - Limitation under special statute - Applicability of Limitation Act - HELD THAT:- The Appellate Tribunal held that Section 42 itself prescribes the remedy, the forum, and the period within which the creditor must challenge acceptance or rejection of its claim, namely fourteen days from receipt of the decision. Section 238A applies the Limitation Act only as far as may be, and therefore cannot be read so as to override a special provision which is complete in itself on limitation and does not provide any scope for extension. The pendency of the separate CIRP appeal was held to have no nexus with proceedings under Section 42, since both operate independently; hence, such pendency could not suspend or enlarge the statutory period. On the admitted receipt of the liquidator's communication, the appeal filed long thereafter was clearly beyond time, and the plea of ignorance of remedy was also rejected. [Paras 14, 15, 17, 18, 19]

The rejection of the Section 42 appeal as barred by limitation was upheld, and condonation beyond the prescribed fourteen days was held impermissible.

Final Conclusion: The Appellate Tribunal held that the limitation under Section 42 of the I&B Code is absolute within the terms of that provision and cannot be extended by resort to Section 238A of the Code read with Section 5 of the Limitation Act. The appeal was accordingly dismissed as devoid of merit and barred by limitation.

Right to be heard as facet of procedural fairness - multiple earlier opportunities were granted and not availed of - Whether the appellants should be afforded a final opportunity to file Counter Affidavits despite earlier opportunities having lapsed.

Right to be heard as facet of procedural fairness - HELD THAT:- It is settled down by the Hon’ble Apex Court in the judgment of Mohinder Singh Gill & Another V The Chief Election Commissioner, New Delhi & Others [1977 (12) TMI 138 - SUPREME COURT], that an opposite party to the proceedings cannot, during the course of argument or by way of a pleading in the shape of counter, can, develop a case which has been not taken into consideration by a Tribunal, while deciding an issue and which was not the ground for deciding the matter. The opposite party to the proceedings will have to confine his argument to the findings which has already been recorded and cannot go beyond it or carve out a new case at an Appellate stage.

Respondents cannot expand the scope of argument beyond the grounds on which the impugned orders were passed; those additional contentions were not accepted as a basis to deny the appellants the final opportunity granted.

The Tribunal recognised that procedural rules are handmaidens of justice and that rigid adherence to time-frames for filing a Counter Affidavit should not be used to defeat a party's ability to mount an effective defence. While noting the appellants' lack of diligence and multiple earlier opportunities not availed, the Tribunal exercised its appellate discretion to balance equities and granted a final limited opportunity to file Counter Affidavits, holding that such relief is appropriate to secure fair adjudication rather than to reopen merits already decided by the NCLT. [Paras 8, 9, 10]

Appellants granted ten days as a last opportunity to file Counter Affidavits; appeals disposed of subject to that opportunity and pending interlocutory applications treated as closed.

Final Conclusion: The Tribunal, while recording the appellants' lack of diligence, granted them a final ten-day opportunity to file Counter Affidavits in the respective company petitions and disposed of the appeals subject to that opportunity; respondents were not permitted to rely on fresh grounds not forming the basis of the impugned orders, and all pending interlocutory applications stand closed.

Validity of demand of service tax, interest and penalty confirmed against the appellant on the basis of CBDT data (Form 26AS/ITR) without any independent verification or corroborative evidence - Suppression with intent to evade - burden of proof - Extended period of limitation.

Reliance on CBDT/Form 26AS data without independent verification - HELD THAT:- The Tribunal held that the Revenue raised and confirmed the demand exclusively by comparing Income Tax return/Form 26AS figures with ST-3 returns, without conducting any independent enquiry to verify the nature of receipts or to demonstrate rendition of taxable services. Mere entries in income tax records cannot, by themselves, establish liability under the Finance Act, 1994; mechanical reliance on such data, absent corroboration, is impermissible and renders the demand unsustainable. [Paras 10, 11, 12]

Demand confirmed solely on the basis of CBDT/Form 26AS data is set aside as unsustainable.

Invocation of extended period of limitation where suppression not established - HELD THAT: - The Tribunal found no independent investigation or evidence of willful suppression; correspondences from the Department during the COVID-19 period did not justify treating the appellant as having suppressed facts. Consequently, the extended limitation proviso was held inapplicable in the facts of the case and could not sustain the confirmed demand. [Paras 13, 14]

Extended period of limitation not invokable; demand is time-barred in the absence of established suppression and independent enquiry.

Consequential extinguishment of interest and penalty where demand is unsustainable - HELD THAT: - Because the primary demand for service tax was set aside for lack of sustainable evidence and for being barred by limitation, the Tribunal held that there was no basis to levy interest or impose penalty consequential to that demand. [Paras 14]

Interest and penalty confirmed in the impugned order are set aside as consequential to the quashed demand.

Final Conclusion: The appeal is allowed; the impugned order confirming the service tax demand, and consequential interest and penalty, is set aside as the demand was confirmed solely on CBDT/Form 26AS data without independent verification and the extended period of limitation was not invocable.

Export of services - Nature of service- activity of trading and import of pharmaceuticals - clinical trials - Intermediary services.

Clinical trial support services - Nature of service - Intermediary services - Export of services - HELD THAT: - The Tribunal found from the agreement that the respondent had no human or infrastructural facilities to conduct clinical trials itself and was only required to identify hospitals and doctors, enter into arrangements with them, and provide support for getting the trials conducted. It noted that, under the regulatory permission, clinical trials were to be conducted by doctors or hospitals, and that the Department's case that the respondent itself rendered clinical trial service had no substance. The plea that the services were intermediary services was also rejected since there was no tripartite agreement between the respondent, its USA principal and the third-party service providers. The Tribunal therefore held that the respondent rendered only support services to its USA principal in connection with clinical trials conducted in India. Though the respondent's alternative contention that even self-conducted clinical trials would qualify as export under Rule 3 was not accepted as such, the appeal nevertheless failed because the very basis of the demand, namely that the respondent itself provided clinical trial service in India, was found unsustainable. [Paras 8, 10]

The demand was held unsustainable as the respondent provided support services to its USA principal and not clinical trial services on its own; the Revenue's appeal was therefore dismissed.

Final Conclusion: The Tribunal upheld the dropping of the proceedings and dismissed the Revenue's appeal. It held that the respondent merely facilitated and supported the conduct of clinical trials by hospitals and doctors for its USA principal, and did not itself render taxable clinical trial service in India.

Activity of digging pits and fitting oil tanks with materials - Classification of Commercial or Industrial Construction Service or as Works Contract Service - demand raised under the former category.

Works contract service - Commercial or industrial construction service - Composite contract -HELD THAT:- The Tribunal found that the show cause notice proceeded on a presumption without first ascertaining the exact nature of the activity undertaken for the oil companies. On the contracts placed on record, the work consisted of digging pits, fitting oil tanks and executing the work with materials, and VAT had also been paid on the entire value as works contract. On these admitted features, the activity was treated as works contract service, and once that was so, the department could not sustain a demand framed under commercial construction services. Following its earlier decision in Yadvinder Singh Contractor [2025 (10) TMI 7 - CESTAT CHANDIGARH], which dealt with an identical controversy, the Tribunal held that a demand proposed under one service category cannot be upheld under another category. [Paras 6, 7, 8, 9]

The demand of service tax raised under commercial or industrial construction service was set aside by applying the ratio in Yadvinder Singh Contractor on the same terms.

Final Conclusion: The Tribunal partly allowed the appeal by holding that the impugned demand, having been raised under commercial or industrial construction service despite the activity being a composite works contract, was not sustainable. The appeal was disposed of on the same terms as in Yadvinder Singh Contractor.

Proportionate reversal of common CENVAT credit -Scope of Rule 6(3A) formula - electricity generated at windmills and sold - Validity of show cause notice- Short reversal of common CENVAT credit attributable to exempted goods/services under Rule 6(3A) of the CENVAT Credit Rules, 2004, read with Rule 14 and Section 11A of the Central Excise Act, 1944​​​​​​​ - Extended period of limitation - Suppression of Facts​​​​​​​ - Penalty in interpretational disputes.

Whether the appellant has correctly applied Rule 6(3A), including determination of common credit and inclusion of electricity and trading turnover in computing proportionate reversal? -HELD THAT: - The Tribunal held that the scheme of Rule 6 permits neutralisation only of credit attributable to exempted goods or exempted services and does not contemplate denial of credit exclusively relatable to dutiable output. The expression total CENVAT credit in Rule 6(3A), read harmoniously with Rule 6(1), was therefore construed as referring only to total common credit, since inclusion of exclusive dutiable credit would convert the machinery provision into a substantive disallowance. On facts, the appellant had identified common input services and reversed proportionate credit on exempted turnover; there was no demonstrated arithmetical defect in the computation. The value of electricity generated and sold, and trading turnover, was relevant only for the denominator in the Rule 6(3A) computation. Once the appellant had opted for proportionate reversal under Rule 6(3A), the department could not substitute that statutory option by demanding payment at 5%/6% under Rule 6(3)(i), the two options being mutually exclusive. [Paras 7]

The demand founded on inclusion of exclusive dutiable credit in the Rule 6(3A) formula, or on compelling payment under Rule 6(3)(i), was held unsustainable.

Adjudication beyond show cause notice - Foundation of show cause notice -HELD THAT:- The Tribunal reiterated that the show cause notice is the foundation of adjudication and defines the permissible scope of the proceedings. In the present case, the notices alleged short reversal under Rule 6(3A), but the adjudicating authority proceeded to reinterpret the formula and, in part, confirmed liability under Rule 6(3)(i) without a specific proposal to that effect. There was no allegation in the notices that credit exclusively used for dutiable goods had been wrongly availed, nor that the option under Rule 6(3A) had been invalidly exercised. By substituting the appellant's chosen option and confirming demand on an alternative basis not put to notice, the adjudicating authority enlarged the case beyond the notices. [Paras 8]

The impugned orders were held legally unsustainable to the extent they travelled beyond the allegations contained in the show cause notices.

Extended period of limitation - Suppression with intent to evade - Interpretational dispute -HELD THAT:- The Tribunal found that the demand arose from scrutiny of ER-1 returns, balance sheets and audit objections, with no allegation or evidence of clandestine removal, falsification of records, wilful misstatement or deliberate suppression. The controversy concerned interpretation of the Rule 6(3A) formula and computation methodology, while the figures relating to electricity generation, trading turnover and credit availed were already available in statutory records. In such circumstances, mere disagreement on the legal interpretation of disclosed facts could not justify invocation of the extended period, which requires a positive element of suppression or misstatement with intent to evade duty. [Paras 9]

The demand beyond the normal period was held barred, the ingredients for invoking the extended period being absent.

Penalty in interpretational disputes - Mens rea for penalty - HELD THAT: - The Tribunal held that penalty under the applicable provisions requires the same essential elements as those needed for invoking the extended period, namely fraud, collusion, wilful misstatement or suppression with intent to evade duty. Having already found that the dispute related to interpretation of Rule 6(3A), and that the demand arose from scrutiny of disclosed records without any evidence of deliberate concealment, the Tribunal found no basis for attributing mens rea to the appellant. The appellant had acted on a plausible interpretation supported by judicial decisions, and therefore the statutory pre-condition for penalty was not satisfied. [Paras 10]

The penalties imposed in both appeals were set aside.

Final Conclusion: The Tribunal set aside the impugned orders and allowed both appeals. It held that only common credit was liable to proportionate reversal under Rule 6(3A), the orders had gone beyond the show cause notices to that extent, the extended period was not invocable, and the penalties were unsustainable.

Refund entitlement - Procedural conditions in exemption notification- area-based excise exemption and refund on fulfilment of the substantive conditions - belated filing of the statement prescribed under Notification No. 01/2010-CE dated 06.02.2010 under Para 4(a) or 5(d).

Whether the statements filed belatedly by the Appellant are in violation of the condition of Para 4(a) or 5(d) of the Notification No. 1/2010-CE dated 06.02.2010 and on that basis, can refund be rejected?​​​​​​​ -HELD THAT:- The Tribunal held that the dispute stood covered by its earlier decisions in the case of M/s Saraswati Agro Chemicals India Ltd [2018 (3) TMI 263 - CESTAT CHANDIGARH] and M/s Kaiser Industries Ltd.[2018 (8) TMI 9 - CESTAT CHANDIGARH], which had treated the requirement of filing the statement within the prescribed time under the notification asprocedural in nature. A delay in such filing was therefore only a procedural lapse and not a fatal breach disentitling the appellant from the exemption-linked refund. Following the same reasoning, the Tribunal found that denial of refund solely on account of belated submission of the statement was unsustainable. [Paras 7, 8, 9]

The impugned appellate order was set aside and the appellant's claim for refund was restored with consequential relief according to law.

Final Conclusion: The Tribunal held that belated filing of the prescribed statement under the notification was only a procedural lapse and could not defeat the refund claim. The order denying the refund on that ground was therefore set aside and the appeal was allowed with consequential relief.

Assessable value - Value of scrap generated during manufacture - Place of removal - Inclusion of scrap value - delivery charges received from the principal manufacturer - Whether the delivery charge and value of the un-returned scrap are additional consideration flowing directly to the Appellant - Whether they are includable in the assessable value of tin containers/bitumen drums manufactured by the Appellant on job work basis.

Job-work valuation - Scrap value - Revenue neutrality - HELD THAT:- The Tribunal found that duty on the drums had been paid after taking into account the entire cost of the metal sheets supplied by the principal manufacturer, and the scrap generated at the job worker's end had itself been cleared on payment of duty. Once duty stood discharged on the finished drums on the adopted cost basis and the scrap was separately cleared on payment of duty, there was no occasion to again load the scrap value into the assessable value of the drums. The Tribunal followed its earlier decision in P R Rolling Mills Pvt Ltd [2009 (3) TMI 444 - CESTAT, BANGALORE], which had taken the view that in such a job-work situation the value of scrap need not be added. [Paras 5, 6, 8]

The demand founded on inclusion of scrap value in the assessable value of the drums was held to be unsustainable.

Place of removal - Transportation charges - Assessable value - HELD THAT: - The Tribunal recorded that the payment in question represented transportation charges paid by the principal manufacturer and that service tax on such transportation was being discharged by it. Relying on Escorts JCB Ltd [2002 (10) TMI 96 - SUPREME COURT], the Tribunal held that where the cost pertains to transportation from the factory gate to the place of delivery, such freight element is not to be included in the assessable value. On the facts found, the delivery charges did not constitute additional consideration for manufacture so as to form part of the value of the drums. [Paras 7, 8]

The demand based on inclusion of delivery charges in the assessable value was set aside.

Final Conclusion: The Tribunal held that neither the value of scrap generated during manufacture nor the delivery charges towards transportation formed part of the assessable value of the drums manufactured on job-work basis. The appeals were accordingly allowed with consequential relief in accordance with law.

Extended period of limitation -evasion of central excise duty - Suppression or clandestine removal - deductions towards pro rata recovery, cash discount, trading turnover, freight and sales tax - determining the assessable value.

Extended period of limitation - HELD THAT:- The Tribunal found that the entire sales were made to KSRTC, a Government undertaking, under proper invoices and through banking channels. In the absence of any allegation or evidence that the goods had been cleared without invoices, the necessary basis for alleging suppression or mis-statement with intent to evade duty was absent. On that footing, the finding of clandestine removal and the demand founded on the extended period were held to be unsustainable. [Paras 16, 20]

The invocation of the extended period and the allegation of clandestine removal were rejected.

Transaction value - Permissible deductions from assessable value - HELD THAT: - The Tribunal held that the adjudicating authority had erred in disallowing the claimed deductions despite the contractual terms and supporting material. Pro-rata recovery could not be denied merely because the recovery was not linked invoice-wise when there was no dispute that the purchase terms provided for such recovery and no dispute as to failure of performance. Cash discount was supported by the letter of intent, purchase orders and payment details showing discount linked to prompt payment. The Tribunal further found that sufficient evidence had been furnished to substantiate deductions relating to trading activity and freight. On that basis, excise duty was held payable only on the transaction value representing the actual consideration received from KSRTC after such eligible deductions, including sales tax. [Paras 17, 18, 19, 20]

The deductions claimed by the appellant were held admissible, and the demand, interest and penalty based on denial of those deductions were set aside.

Final Conclusion: The Tribunal held that neither the extended period nor the allegation of clandestine removal was available to the Revenue on the facts recorded. It further held that duty had to be computed on the actual transaction value after allowing the eligible deductions, and accordingly set aside the demand, interest and penalty with consequential relief.

Validity of the assessee's land, being classified in the revenue records as agricultural land - legal restrictions on construction, constituted "urban land" within Section 2(ea)(v) of the Wealth-tax Act, 1957 - Partition among the family members.

Urban land - Agricultural land -HELD THAT:- The Court held that the definition of urban land has to be read with the statutory exclusion for land on which construction of a building is not permissible under any law for the time being in force. On a combined reading of the Wealth-tax Act and the Town and Country Planning Act, land classified as agricultural in the revenue records cannot be put to any other use, nor can construction be undertaken, unless the classification is changed and permission is obtained. The authorities had ignored the revenue records and the proceedings of the Urban Land Ceiling Authority showing that, on the date of alienation, the property stood classified as agricultural land and was exempt from urban land ceiling provisions. Subsequent conversion for non-agricultural use did not alter its character at the relevant time. The Tribunal therefore erred in treating the land as urban land on a mere location-based approach. [Paras 7, 8, 10, 11, 12]

The land retained its character as agricultural land and did not constitute urban land liable to wealth-tax; the substantial questions of law were answered in favour of the assessee.

Final Conclusion: The appeals were allowed and the Tribunal's view was held to be unsustainable. The land in question was treated as agricultural land falling outside the taxable concept of urban land for the assessment years in issue.

Negotiable Instruments Act, 1881 - Dishonour of cheque - character of a cheque in discharge of debt if a legally enforceable liability exists on the date of presentation - Security cheque - Post-dated or blank/signed cheques - statutory presumption - vicarious liability of directors - Whether the cheque, though originally furnished as a security, could be the basis of a complaint under Section 138 of the Negotiable Instruments Act.

Security cheque matures into cheque in discharge of debt if liability exists on presentation - presumption of issuance in discharge of debt under Sections 118/139 for signed blank cheques - HELD THAT: - In Bir Singh [2019 (2) TMI 547 - SUPREME COURT] the Apex Court held that even a signed blank cheque, if voluntarily handed over, carries a presumption under Sections 118 and 139 of the NI Act that it was issued in discharge of debt or liability. The mere fact that particulars were filled in by the payee, does not invalidate the instrument. The burden squarely lies upon the drawer to rebut the statutory presumption through evidence, at trial.

The Court applied precedents holding that a cheque originally given as security assumes the character of a cheque in discharge of debt if a legally enforceable liability exists on the date of presentation. The determinative factor is existence of a recoverable liability when the cheque is presented, not when it was handed over. The record of emails prima facie acknowledging outstanding amounts and proposed repayment schedules indicated a subsisting liability on presentation; once execution of a signed cheque is admitted, the statutory presumption under Sections 118/139 operates in favour of the payee and the drawer bears the onus to rebut it at trial. Accordingly, the defence that the instrument was merely a security cheque did not warrant quashing of the complaint at the threshold. [Paras 58, 59, 60, 61]

The contention that the cheque was only a security instrument is rejected and is not a ground for quashing the complaint.

Vicarious liability of company directors under Section 141 requires specific averments; managing director/signatory may be liable - HELD THAT: - The Court noted settled law requiring specific averments linking a director to being in charge of and responsible for the company's business at the time of the offence. A managing director and a signatory of the cheque may be held liable; the complaint in this case contained averments that both Directors were actively involved in day-to-day operations and financial affairs and, critically, the Managing Director was the signatory of the dishonoured cheque. On the face of the pleadings, these averments were sufficient to raise a prima facie case and to justify continuation of criminal proceedings; disputes on facts and defenses must be tested at trial. [Paras 70, 71, 72, 73]

The implication of both directors as accused does not warrant interference at the threshold; the Managing Director/signatory is prima facie liable and the non-signatory director is not immune where adequate averments exist.

Final Conclusion: The High Court dismissed the petition, holding that (i) a cheque originally furnished as security can be the subject of prosecution under Section 138 if a legally enforceable liability existed on presentation and the statutory presumption applies, and (ii) the complaint sufficiently averred the directors' responsibility to sustain proceedings, so quashing was not justified.

Scope of the right to privacy and the power of the Law Enforcement Agencies to resort to covert surveillance by tapping the mobile phones to obtain information regarding the commission of an alleged crime - Public emergency and public safety - Mandatory review under Rule 419-A - Use of unlawfully intercepted material

Right to privacy - Telephone interception - Article 21 - HELD THAT: - The Court held that after the development of constitutional doctrine culminating in K.S. Puttaswamy [2017 (8) TMI 938 - SUPREME COURT], the right to privacy stands as an intrinsic part of life and personal liberty under Article 21. Applying People's Union for Civil Liberties [1996 (12) TMI 400 - SUPREME COURT], it held that a telephone conversation in the privacy of one's home or office is a protected facet of privacy, and interception of such conversation is an infringement of Article 21 unless it is backed by law and carried out strictly within the limits of that law. [Paras 32, 33, 34]

Telephone tapping was held to be constitutionally permissible only within the strict confines of law; otherwise it violates Article 21.

Public emergency and public safety - Jurisdiction under Section 5(2) - Application of mind - The interception order did not satisfy the jurisdictional conditions for exercise of power under Section 5(2) of the Telegraph Act. - HELD THAT:- The Court held that under Section 5(2), as interpreted in Hukam Chand Shyam Lal [1975 (12) TMI 168 - SUPREME COURT] and People's Union for Civil Liberties [1996 (12) TMI 400 - SUPREME COURT], interception can be ordered only on the occurrence of a public emergency or in the interest of public safety, and those conditions are sine qua non. Such conditions are not secretive situations and must be apparent to a reasonable person. On examining the impugned order, the Court found that it merely reproduced the statutory language without disclosing any factual basis or real application of mind. The case involved a covert operation for detecting an alleged bribery offence, which by its nature did not answer the statutory requirements of public emergency or public safety. The attempt in the counter affidavit to improve the order by invoking different grounds was impermissible. The Court also declined the request to widen Section 5(2) judicially to cover such cases, holding that the statutory limits on invasion of a fundamental right cannot be expanded by the Court. [Paras 59, 61, 63, 64, 67]

The impugned interception order was held to be without jurisdiction and liable to be quashed for want of the statutory preconditions under Section 5(2).

Mandatory review under Rule 419-A - Procedural safeguards - Destruction and non-use of intercepted material - Failure to place the intercepted material before the Review Committee vitiated the interception, and the material so obtained could not be used. - HELD THAT: - The Court held that the safeguards embodied in Rule 419-A, which incorporate the directions issued in People's Union for Civil Liberties, are mandatory. The admitted position was that the intercepted material was not placed before the Review Committee at all. Relying on the reasoning in Anuradha Bhasin [2020 (1) TMI 1387 - SUPREME COURT], the Court held that where a drastic power is required to be exercised in a prescribed manner, it must be so exercised or not at all. Since the review mechanism under Rule 419-A(17) is an integral check on compliance with Section 5(2), its non-observance was fatal. On the effect of such illegality, the Court stated that it was unnecessary to pronounce broadly on all questions of admissibility of unconstitutionally obtained evidence, because Rule 419-A itself contemplates setting aside of unlawful interception and destruction of intercepted material. Accordingly, the intercepted conversations obtained in violation of Section 5(2) and Rule 419-A(17) were directed not to be used for any purpose whatsoever, while clarifying that independent material collected subsequently would remain unaffected. [Paras 77, 86, 94, 95, 96]

Non-compliance with Rule 419-A was held fatal, and the intercepted material collected pursuant to the unlawful order was directed not to be used for any purpose.

Final Conclusion:

The right to privacy is now an integral part of the right to life and personal liberty guaranteed under Article 21 of The Constitution of India.

Telephone tapping constitutes a violation of the right to privacy unless justified by a procedure established by law. Section 5(2) of the Act authorizes interception of telephones on the occurrence of a public emergency or in the interests of public safety. Both these contingencies are not secretive conditions or situations. Either of the situations would be apparent to a reasonable person. As laid down in paragraph 28 of the decision of the Hon'ble Apex Court in People's Union for Civil Liberties [1996 (12) TMI 400 - SUPREME COURT], it is only when the above two situations exist that the Authority may pass an order directing interception of messages after recording its satisfaction that it is necessary or expedient so to do in the interest of (1) the sovereignty and integrity of India, (2) the security of the State, (3) friendly relations with foreign States, (4) public order or (5) for preventing incitement to the commission of an offence.

In the instant case, the impugned order dated 12.8.2011 does not fall either within the rubric of "public emergency" or "in the interests of public safety" as explained by the Hon'ble Supreme Court in the case of People's Union for Civil Liberties. The facts disclose that it was a covert operation/secretive situation for detection of crime, which would not be apparent to any reasonable person. As the law presently stands, a situation of this nature does not fall within the four corners of Section 5(2) of the Act as expounded by the Hon'ble Supreme Court in the case of People's Union for Civil Liberties, which has been approved by the Constitution Bench of the Hon'ble Supreme Court in K.S. Puttaswamy (Aadhaar-5]) [2018 (9) TMI 1733 - SUPREME COURT].

The respondents have also contravened Rule 419-A(17) of the Rules by failing to place the intercepted material before the Review Committee within the stipulated time to examine as to whether the interception was made in compliance with Section 5(2) of the Act.

As a consequence of (iii) and (iv) above, the impugned order dated 12.8.2011 must necessarily be set aside as unconstitutional and one without jurisdiction. Besides violating Article 21, it is also ultra vires Section 5(2) of the Act besides being in violation of the mandatory provisions of Rule 419-A of the Rules.

It follows that the intercepted conversations collected pursuant to the impugned order dated 12.8.2011 in violation of Section 5(2) of the Act and Rule 419-A(17) of the Rules shall not be used for any purposes whatsoever.

It is, however, made clear that the above direction shall have no bearing on the other material that have been collected by the CBI subsequent to and independent of the intercepted call records, which shall be considered by the Trial Court on its own merits without being influenced by any of the observations made in this order.

In the result, the writ petition is allowed.